e10vq

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


o		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED February 24, 2007


o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

COMMISSION FILE NUMBERS 333-137067, 333-121479, 333-84294

AMERICAN ACHIEVEMENT GROUP HOLDING CORP.

AAC GROUP HOLDING CORP.

AMERICAN ACHIEVEMENT CORPORATION

(Exact name of registrant as specified in its charter)


DELAWARE DELAWARE DELAWARE (State or other jurisdiction of incorporation or organization)		20-4833998 20-1854833 13-4126506 (I.R.S. Employer Identification Number)

7211 CIRCLE S ROAD
AUSTIN, TEXAS 78745
(Address of principal executive offices) (Zip Code)
REGISTRANTS’ TELEPHONE NUMBER, INCLUDING AREA CODE (512) 444-0571

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes o No þ.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer þ

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Exchange Act). Yes o No þ.

Number of shares outstanding of American Achievement Group Holding Corp. as of February 24, 2007: 505,460 shares of common stock.

Number of shares outstanding of AAC Group Holding Corp. as of February 24, 2007: 100 shares of common stock.

Number of shares of American Achievement Corporation outstanding as of February 24, 2007: 100 shares of common stock.

This Form 10-Q is a combined quarterly report being filed separately by three registrants: American Achievement Group Holding Corp., AAC Group Holding Corp., and American Achievement Corporation. Unless the context indicates otherwise, any reference in this report to “Parent Holdings” refers to American Achievement Group Holding Corp., “Intermediate Holdings” refers to AAC Group Holding Corp., and “AAC” refers to American Achievement Corporation, the indirect wholly-owned operating subsidiary of Intermediate Holdings. The “Company”, “we”, “us”, and “our” refer to American Achievement Group Holding Corp., and AAC Group Holding Corp. together with American Achievement Corporation.

FOR THE QUARTERLY PERIOD ENDED February 24, 2007
INDEX


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

Explanatory Note

This combined Form 10-Q is separately filed by American Achievement Group Holding Corp., AAC Group Holding Corp., and American Achievement Corporation. Each Registrant hereto is filing on its own behalf all of the information contained in this quarterly report that relates to such Registrant. Each Registrant hereto is not filing any information that does not relate to such Registrant, and therefore makes no representation as to any such information.

Unless the context indicates otherwise, any reference in this report to “Parent Holdings” refers to American Achievement Group Holding Corp., “Intermediate Holdings” refers to AAC Group Holding Corp., and “AAC” refers to American Achievement Corporation, the indirect wholly-owned operating subsidiary of Intermediate Holdings. The “Company”, “we”, “us”, and “our” refer to American Achievement Group Holding Corp., and AAC Group Holding Corp. together with American Achievement Corporation.

AMERICAN ACHIEVEMENT GROUP HOLDING CORP.

Condensed Consolidated Balance Sheets

(In thousands, except share data)

(unaudited)


	Parent Holdings
	February 24,			August 26,
	2007			2006
ASSETS
Current assets:
Cash and cash equivalents	$	11,230		$	3,404
Accounts receivable, net		34,669			40,226
Inventories, net		39,526			31,438
Deferred tax asset		10,256			5,582
Prepaid expenses and other current assets, net		21,471			13,944

Total current assets		117,152			94,594
Property, plant and equipment, net		75,060			76,054
Goodwill		184,565			184,565
Other intangible assets, net		141,096			148,595
Other assets		6,190			7,468

Total assets	$	524,063		$	511,276

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current liabilities:
Bank overdraft	$	1,236		$	2,147
Accounts payable		10,434			13,585
Customer deposits		57,522			11,392
Accrued expenses		22,991			23,382
Deferred revenue		3,138			2,617
Accrued interest		5,836			5,997
Current portion of long-term debt		972			1,090

Total current liabilities		102,129			60,210
Long-term debt, net of current portion		520,009			525,734
Mandatory redeemable preferred stock, $.01 par value, 15,000 shares authorized, 7,500 shares issued and outstanding		7,500			7,500
Deferred tax liabilities		19,885			25,760
Other long-term liabilities		7,604			6,858

Total liabilities		657,127			626,062
Commitments and contingencies (Note 6)
Stockholders’ equity (deficit)
Common stock, $.01 par value, 1,250,000 shares authorized, 505,460 shares issued and outstanding		5			5
Additional paid-in capital		(124,045	)		(124,045	)
Accumulated earnings (deficit)		(9,024	)		9,254

Total stockholders’ equity (deficit)		(133,064	)		(114,786	)

Total liabilities and stockholders’ equity (deficit)	$	524,063		$	511,276

The accompanying notes are an integral part of these condensed consolidated financial statements.

AAC GROUP HOLDING CORP.
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)


	Intermediate Holdings
	February 24, 2007		August 26, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	10,950	$	2,904
Accounts receivable, net		34,669		40,226
Inventories, net		39,526		31,438
Deferred tax asset		10,256		5,582
Prepaid expenses and other current assets, net		21,471		13,944

Total current assets		116,872		94,094
Property, plant and equipment, net		75,060		76,054
Goodwill		184,565		184,565
Other intangible assets, net		132,688		139,592
Other assets		6,190		7,468

Total assets	$	515,375	$	501,773

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank overdraft	$	1,236	$	2,147
Accounts payable		10,434		13,585
Customer deposits		57,522		11,392
Accrued expenses		22,967		23,292
Deferred revenue		3,138		2,617
Accrued interest		5,836		5,997
Current portion of long-term debt		972		1,090

Total current liabilities		102,105		60,120
Long-term debt, net of current portion		355,882		371,537
Deferred tax liabilities		24,984		27,523
Other long-term liabilities		5,345		5,879

Total liabilities		488,316		465,059
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding		—		—
Additional paid-in capital		24,144		24,144
Retained earnings		2,915		12,570

Total stockholders’ equity		27,059		36,714

Total liabilities and stockholders’ equity	$	515,375	$	501,773

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMERICAN ACHIEVEMENT CORPORATION
Condensed Consolidated Balance Sheets
(In thousands, except share data)
(unaudited)


	AAC
	February 24, 2007		August 26, 2006
ASSETS
Current assets:
Cash and cash equivalents	$	10,415	$	2,381
Accounts receivable, net		34,669		40,226
Inventories, net		39,526		31,438
Deferred tax asset		10,256		5,582
Prepaid expenses and other current assets, net		21,471		13,944

Total current assets		116,337		93,571
Property, plant and equipment, net		75,060		76,054
Goodwill		184,565		184,565
Other intangible assets, net		130,203		136,884
Other assets		6,190		7,468

Total assets	$	512,355	$	498,542

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank overdraft	$	1,236	$	2,147
Accounts payable		10,434		13,585
Customer deposits		57,522		11,392
Accrued expenses		22,965		23,290
Deferred revenue		3,138		2,617
Accrued interest		5,836		5,997
Current portion of long-term debt		972		1,090

Total current liabilities		102,103		60,118
Long-term debt, net of current portion		243,591		264,720
Deferred tax liabilities		34,307		34,307
Other long-term liabilities		5,317		5,851

Total liabilities		385,318		364,996

Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock, $.01 par value, 1,000 shares authorized, 100 shares issued and outstanding		—		—
Additional paid-in capital		109,046		109,046
Retained earnings		17,991		24,500

Total stockholders’ equity		127,037		133,546


Total liabilities and stockholders’ equity	$	512,355	$	498,542

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMERICAN ACHIEVEMENT GROUP HOLDING CORP.

Condensed Consolidated Statements of Cash Flows

(In thousands)

(unaudited)


	Parent Holdings
	For the six months ended
	February 24, 2007			February 25, 2006
Cash flows from operating activities:
Net loss	$	(18,278	)	$	(6,320	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		12,877			13,015
Deferred income taxes		(10,549	)		(5,139	)
Amortization of debt discount and deferred financing fees		1,746			975
Accretion of interest on 10.25% senior discount notes		5,474			4,954
Accretion of 12.75% PIK notes		9,930			—
Provision for doubtful accounts		(106	)		(339	)
Changes in assets and liabilities:
Accounts receivable		5,663			3,330
Inventories, net		(8,088	)		(13,171	)
Prepaid expenses and other current assets, net		(7,527	)		(846	)
Other assets		1,278			(481	)
Customer deposits		46,130			42,828
Deferred revenue		521			1,033
Accounts payable, accrued expenses, and other long-term liabilities		(3,205	)		(7,808	)

Net cash provided by operating activities		35,866			32,031
Cash flows from investing activities:
Purchases of property, plant and equipment		(5,703	)		(5,442	)

Net cash used in investing activities		(5,703	)		(5,442	)
Cash flows from financing activities:
Payments on revolving credit facility		(24,150	)		(16,050	)
Proceeds from revolving credit facility		14,850			16,050
Payments on term loan		(11,947	)		(16,024	)
Proceeds from stock issuance		—			7,500
Deferred financing fees		(179	)		(269	)
Change in bank overdraft		(911	)		2,540

Net cash used in financing activities		(22,337	)		(6,253	)

Net increase in cash and cash equivalents		7,826			20,336
Cash and cash equivalents, beginning of period		3,404			4,324

Cash and cash equivalents, end of period	$	11,230		$	24,660

Supplemental disclosure
Cash paid during the period for:
Interest	$	10,794		$	11,066

Income taxes	$	178		$	302

The accompanying notes are an integral part of these condensed consolidated financial statements.

AAC GROUP HOLDING CORP.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)


	Intermediate Holdings
	For the six months ended
	February 24, 2007			February 25, 2006
Cash flows from operating activities:
Net loss	$	(9,655	)	$	(6,320	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		12,877			13,015
Deferred income taxes		(7,213	)		(5,139	)
Amortization of debt discount and deferred financing fees		988			975
Accretion of interest on 10.25% senior discount notes		5,474			4,954
Provision for doubtful accounts		(106	)		(339	)
Changes in assets and liabilities:
Accounts receivable		5,663			3,330
Inventories, net		(8,088	)		(13,171	)
Prepaid expenses and other current assets, net		(7,527	)		(846	)
Other assets		1,278			(481	)
Customer deposits		46,130			42,828
Deferred revenue		521			1,033
Accounts payable, accrued expenses, and other long-term liabilities		(4,419	)		(7,808	)

Net cash provided by operating activities		35,923			32,031
Cash flows from investing activities:
Purchases of property, plant and equipment		(5,703	)		(5,442	)

Net cash used in investing activities		(5,703	)		(5,442	)
Cash flows from financing activities:
Payments on revolving credit facility		(24,150	)		(16,050	)
Proceeds from revolving credit facility		14,850			16,050
Payments on term loan		(11,947	)		(16,024	)
Proceeds from stock issuance		—			7,500
Deferred financing fees		(16	)		(269	)
Change in bank overdraft		(911	)		2,540

Net cash used in financing activities		(22,174	)		(6,253	)

Net increase in cash and cash equivalents		8,046			20,336
Cash and cash equivalents, beginning of period		2,904			4,324

Cash and cash equivalents, end of period	$	10,950		$	24,660

Supplemental disclosure
Cash paid during the period for:
Interest	$	10,794		$	11,066

Income taxes	$	178		$	302

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMERICAN ACHIEVEMENT CORPORATION
Condensed Consolidated Statements of Cash Flows
(In thousands)
(unaudited)


	AAC
	For the six months ended
	February 24, 2007			February 25, 2006
Cash flows from operating activities:
Net income loss	$	(6,509	)	$	(3,534	)
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,877			13,015
Deferred income taxes		(4,674	)		(2,651	)
Amortization of debt discount and deferred financing fees		765			748
Provision for doubtful accounts		(106	)		(339	)
Changes in assets and liabilities:
Accounts receivable		5,663			3,330
Inventories, net		(8,088	)		(13,171	)
Prepaid expenses and other current assets, net		(7,527	)		(846	)
Other assets		1,278			(481	)
Customer deposits		46,130			42,828
Deferred revenue		521			1,033
Accounts payable, accrued expenses, and other long-term liabilities		(4,419	)		(7,936	)

Net cash provided by operating activities		35,911			31,996
Cash flows from investing activities:
Purchases of property, plant and equipment		(5,703	)		(5,442	)

Net cash used in investing activities		(5,703	)		(5,442	)
Cash flows from financing activities:
Payments on revolving credit facility		(24,150	)		(16,050	)
Proceeds from revolving credit facility		14,850			16,050
Payments on term loan		(11,947	)		(16,024	)
Deferred financing fees		(16	)		—
Change in bank overdraft		(911	)		2,540

Net cash used in financing activities		(22,174	)		(13,484	)

Net increase in cash and cash equivalents		8,034			13,070
Cash and cash equivalents, beginning of period		2,381			4,093

Cash and cash equivalents, end of period	$	10,415		$	17,163

Supplemental disclosure
Cash paid during the period for:
Interest	$	10,794		$	11,066

Income taxes	$	178		$	302

The accompanying notes are an integral part of these condensed consolidated financial statements.

AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION

Notes to Condensed Consolidated Financial Statements

(Dollars in thousands, unless otherwise stated)

(unaudited)

1. Summary of Organization and Significant Accounting Policies

Registrants

The consolidated financial statements of American Achievement Group Holding Corp. (“Parent Holdings”) include the accounts of its wholly-owned subsidiary, AAC Group Holding Corp. (“Intermediate Holdings”) and its indirect wholly-owned subsidiary, American Achievement Corporation (“AAC”), all of which are separate public reporting companies. The consolidated financial statements of Intermediate Holdings include the accounts of its indirect wholly-owned subsidiary, AAC. Together, Parent Holdings, Intermediate Holdings, and AAC are referred to as the “Company.”

Description of Business

The Company is a manufacturer and marketer of class rings, yearbooks and other graduation-related scholastic products for the high school and college markets and manufactures and markets recognition and affinity jewelry designed to commemorate significant events, achievements and affiliations. The Company also operates a division which sells achievement publications in the specialty directory publishing industry nationwide. The Company markets its products and services primarily in the United States and operates in five reporting segments; class rings, yearbooks, graduation products, achievement publications and other. The Company’s corporate office is located in Austin, Texas and its primary manufacturing facilities are located in Austin and Dallas, Texas and Louisville, Kentucky.

Consolidation

Intermediate Holdings was formed on November 8, 2004. On November 16, 2004, the stockholders of AAC Holding Corp. participated in an exchange, pursuant to which they exchanged their shares of common stock in AAC Holding Corp. for a like amount of shares in Intermediate Holdings. Following the exchange, AAC Holding Corp. became a wholly-owned subsidiary of Intermediate Holdings.

On November 16, 2004, Intermediate Holdings issued $131.5 million aggregate principal amount at maturity of 10.25% senior discount notes due 2012 (the “10.25% Notes”), generating net proceeds of $89.3 million. Intermediate Holdings is the sole obligor of these notes. The net proceeds of this offering were distributed to stockholders through the repurchase of shares of Intermediate Holdings’ common stock from its stockholders. Other than this debt obligation, related deferred debt issuance costs, associated accrued liabilities, and related interest expense, net of taxes, all other significant assets, liabilities, income, expenses and cash flows presented for the quarterly periods represent those of Intermediate Holdings’ wholly-owned indirect subsidiary AAC and the direct and indirect subsidiaries of AAC. Intermediate Holdings’ only direct subsidiary is AAC Holding Corp., whose sole asset is the stock of AAC. All significant intercompany accounts and transactions have been eliminated in consolidation.

Parent Holdings was formed in May of 2006, and the stockholders of Intermediate Holdings participated in an exchange, pursuant to which they exchanged their shares of common stock and preferred stock in Intermediate Holdings for a like kind and amount of shares in Parent Holdings. Following the exchange, Intermediate Holdings became a wholly-owned subsidiary of Parent Holdings. On June 12, 2006, Parent Holdings issued $150.0 million of 12.75% Senior PIK notes due 2012 (the “12.75 PIK Notes”), generating net proceeds of $140.9 million. Parent Holdings is the sole obligor of these notes. The net proceeds of this offering were used to pay a dividend to its stockholders. Other than this debt obligation, related deferred debt issuance costs, associated accrued liabilities, and related interest expense, net of taxes, all other significant assets, liabilities, income expenses and cash flows for the quarterly periods represent those of Parent Holdings’ wholly-owned direct subsidiary Intermediate Holdings. All significant intercompany accounts and transactions have been eliminated in consolidation. AAC, Intermediate Holdings, and Parent Holdings are treated as entities under common control and therefore, the consolidated statements of operations and cash flows presented for Parent Holdings for the three months and six months ended February 25, 2006 are presented to include the results of Intermediate Holdings and AAC for comparative purposes.

AMERICAN ACHIEVEMENT GROUP HOLDING CORP.
AAC GROUP HOLDING CORP.
AMERICAN ACHIEVEMENT CORPORATION
Notes to Condensed Consolidated Financial Statements — (Continued)
(Dollars in thousands, unless otherwise stated)
(unaudited)

The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the financial position and results of operations for the periods presented have been included. Operating results for the three and six months ended February 24, 2007 are not necessarily indicative of the results that may be expected for the fiscal year ending August 25, 2007. Accordingly, the interim condensed consolidated financial statements and accompanying notes included herein should be read in conjunction with the consolidated financial statements for the year ended August 26, 2006 included in the Company’s Report on Form 10-K (File No. 333-84294, 333-121479 and 333-137067) filed on November 22, 2006.

Unless separately stated, the notes herein relate to Parent Holdings, Intermediate Holdings and AAC.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.

2. Inventories, Net


	February 24, 2007			August 26, 2006
Raw materials	$	13,798		$	17,759
Work in process		17,865			6,473
Finished goods		8,735			7,400
Less — reserves		(872	)		(194	)

	$	39,526		$	31,438

The Company’s cost of sales includes depreciation and amortization of $2,674 and $2,428 for the three months ended February 24, 2007 and February 25, 2006, respectively. Cost of sales includes depreciation and amortization of $5,425 and $4,721 for the six months ended February 24, 2007 and February 25, 2006, respectively.

3. Prepaid Expenses and Other Current Assets, Net

Prepaid expenses and other current assets, net include reserves on sales representative advances of $1,422 and $2,055 at February 24, 2007 and August 26, 2006, respectively.

4. Goodwill by Segment and Other Intangible Assets


	February 24, 2007		August 26, 2006
*Goodwill*
Class Rings	$	71,792	$	71,792
Yearbooks		65,241		65,241
Graduation Products		23,781		23,781
Achievement Publications		11,693		11,693
Other		12,058		12,058

Total	$	184,565	$	184,565

Other Intangible Assets


	Estimated		Gross		Accumulated			Net
Parent Holdings	Useful Life		Asset		Amortization			Asset

At February 24, 2007
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		24,263		(6,491	)		17,772
Patents		14 to 17 years		7,317		(1,294	)		6,023
Customer lists and distribution contracts		3 to 12 years		100,516		(33,310	)		67,206

Total			$	182,191	$	(41,095	)	$	141,096


	Estimated		Gross		Accumulated			Net
Parent Holdings	Useful Life		Asset		Amortization			Asset

At August 26, 2006
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		24,084		(4,745	)		19,339
Patents		14 to 17 years		7,317		(1,072	)		6,245
Customer lists and distribution contracts		3 to 12 years		100,516		(27,600	)		72,916

Total			$	182,012	$	(33,417	)	$	148,595


	Estimated		Gross		Accumulated			Net
Intermediate Holdings	Useful Life		Asset		Amortization			Asset

At February 24, 2007
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		14,771		(5,407	)		9,364
Patents		14 to 17 years		7,317		(1,294	)		6,023
Customer lists and distribution contracts		3 to 12 years		100,516		(33,310	)		67,206

Total			$	172,699	$	(40,011	)	$	132,688


	Estimated		Gross		Accumulated			Net
Intermediate Holdings	Useful Life		Asset		Amortization			Asset

At August 26, 2006
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		14,755		(4,419	)		10,336
Patents		14 to 17 years		7,317		(1,072	)		6,245
Customer lists and distribution contracts		3 to 12 years		100,516		(27,600	)		72,916

Total			$	172,683	$	(33,091	)	$	139,592


	Estimated		Gross		Accumulated			Net
AAC	Useful Life		Asset		Amortization			Asset

At February 24, 2007
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		11,263		(4,384	)		6,879
Patents		14 to 17 years		7,317		(1,294	)		6,023
Customer lists and distribution contracts		3 to 12 years		100,516		(33,310	)		67,206

Total			$	169,191	$	(38,988	)	$	130,203


	Estimated		Gross		Accumulated			Net
AAC	Useful Life		Asset		Amortization			Asset

At August 26, 2006
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs		7 to 8 years		11,247		(3,619	)		7,628
Patents		14 to 17 years		7,317		(1,072	)		6,245
Customer lists and distribution contracts		3 to 12 years		100,516		(27,600	)		72,916

Total			$	169,175	$	(32,291	)	$	136,884

For Parent Holdings, total amortization on other intangible assets was $3,841 and $7,678 for the three and six months ended February 24, 2007, respectively, and was $3,456 and $6,908 for the three and six months ended February 25, 2006 of which amortization on deferred financing costs is recorded as interest expense and amortization on patents and customer lists and distribution contracts is recorded as selling, general and administrative expenses. Estimated annual amortization expense is $14,431, $13,334, $13,334, $13,334 and $12,817, respectively, for fiscal years 2007 through 2011.

For Intermediate Holdings, total amortization on other intangible assets was $3,462 and $6,920 for the three and six months ended February 24, 2007, respectively, and was $3,456 and $6,908 for the three and six months ended February 25, 2006 of which amortization on deferred financing costs is recorded as interest expense and amortization on patents and customer lists and distribution contracts is recorded as selling, general and administrative expenses. Estimated annual amortization expense is $12,991, $11,894, $11,894, $11,894 and $11,377, respectively, for fiscal years 2007 through 2011.

For AAC, total amortization on other intangible assets was $3,350 and $6,697 for the three and six months ended February 24, 2007, respectively, and was $3,340 and $6,680 for the three and six months ended February 25, 2006, respectively of which amortization on deferred financing costs is recorded as interest expense and amortization on patents and customer lists and distribution contracts is recorded as selling, general and administrative expenses. Estimated annual amortization expense is $12,545, $11,448, $11,448, $11,448 and $10,931, respectively, for fiscal years 2007 through 2011.

5. Long-term Debt


	February 24, 2007			August 26, 2006

Parent Holdings
12.75% Senior PIK Notes (including PIK interest of $14,128 and $4,197, respectively)	$	164,127		$	154,197
10.25% Senior discount notes due 2012 (net of unamortized discount of $19,209 and $24,683, respectively)		112,291			106,817
8.25% Senior subordinated notes due 2012		150,000			150,000
Senior secured credit facility
Revolving credit facility due 2010		—			9,300
Term loan due 2011		94,563			106,510

Total		520,981			526,824
Less current portion of long-term debt		(972	)		(1,090	)

Total long-term debt	$	520,009		$	525,734


	February 24, 2007			August 26, 2006

Intermediate Holdings
10.25% Senior discount notes due 2012 (net of unamortized discount of $19,209 and $24,683, respectively)	$	112,291		$	106,817
8.25% Senior subordinated notes due 2012		150,000			150,000
Senior secured credit facility
Revolving credit facility due 2010		—			9,300
Term loan due 2011		94,563			106,510

Total		356,854			372,627
Less current portion of long-term debt		(972	)		(1,090	)

Total long-term debt	$	355,882		$	371,537


	February 24, 2007			August 26, 2006

AAC
8.25% Senior subordinated notes due 2012	$	150,000		$	150,000
Senior secured credit facility
Revolving credit facility due 2010		—			9,300
Term loan due 2011		94,563			106,510

Total		244,563			265,810
Less current portion of long-term debt		(972	)		(1,090	)

Total long-term debt	$	243,591		$	264,720

12.75% Senior PIK Notes

On June12, 2006, Parent Holdings issued $150 million of 12.75% PIK Notes. The net proceeds of this offering were used to pay a $140.5 million dividend to stockholders. Parent Holdings was formed in May 2006, as the parent of Intermediate Holdings and has no separate operations from its ownership in Intermediate Holdings. Interest accrued on these notes at 12.75% per annum through February 23, 2007. As of February 24, 2007, the rate at which interest accrues increased to 14.75% per annum (as described below). The first interest payment on the 12.75% PIK Notes occurred on October 1, 2006. Through April 1, 2011, interest on the 12.75% PIK Notes will be payable in the form of additional notes semi-annually in arrears on April 1 and October 1. On October 1, 2011, and thereafter, interest will be payable in cash semi-annually in arrears on April 1 and October 1.

The 12.75% PIK Notes mature on October 1, 2012. At maturity, Parent Holdings is required to repay the 12.75% PIK Notes at a repayment price of 103.188% of the aggregate principal amount thereof, plus accrued and unpaid interest and special interest, if any, to the maturity date.

At any time on or after October 1, 2008, Parent Holdings may redeem the 12.75% PIK Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a premium of 9.563%, declining ratably to 3.188%, plus accrued, unpaid, and special interest. At any time prior to October 1, 2008, Parent Holdings may also redeem 100% (but not less than 100%) of the then outstanding notes. The 12.75% PIK Notes are required to be redeemed with the net cash proceeds of certain equity offerings at redemption price equal to the lesser of 109.563% or the then applicable redemption price of the aggregate principal amount, plus accrued, unpaid, and special interest.

For the four quarters ending February 24, 2007, consolidated adjusted EBITDA fell below a certain target level , as specified in the indenture governing the 12.75% PIK Notes, for the period then ended, and therefore, the rate at which interest accrues on the 12.75% PIK Notes increased by 2.00% per annum

commencing on and including February 24, 2007. Additionally, if the consolidated group leverage ratio on August 30, 2008 is greater than 5.0 to 1.0, the rate at which interest accrues on the 12.75% PIK Notes will increase an additional 2.00% per annum commencing on and including August 30, 2008.

If a change in control as defined in the indenture relating to the 12.75% PIK Notes occurs, Parent Holdings must give the holders of the 12.75% Notes the opportunity to sell their 12.75% PIK Notes to Parent Holdings at 101% of the aggregate principal amount outstanding of the 12.75% PIK Notes, plus accrued interest.

Additionally, the terms of the 12.75% PIK Notes limit Parent Holdings’ ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other payments. As of February 24, 2007, Parent Holdings was in compliance with all such provisions.

Mandatory Redeemable Preferred Stock

On January 18, 2006, Intermediate Holdings entered into a Preferred Stock Purchase Agreement (the “Purchase Agreement”) with an investor pursuant to which Intermediate Holdings sold shares of its Series A Mandatory Redeemable Preferred Stock (the “Series A Preferred Stock”). In connection with the Purchase Agreement, the investor was granted (i) registration rights on the capital stock of Intermediate Holdings held by the investor in the event of an initial public offering by Intermediate Holdings, (ii) preemptive rights to purchase additional capital stock of Intermediate Holdings in order to maintain its percentage ownership in Intermediate Holdings upon the sales of additional capital stock and (iii) the right to have an observer seat on the Board of Directors of Intermediate Holdings. Intermediate Holdings issued the investor 7,500 shares of the Series A Preferred Stock for an aggregate purchase price of $7.5 million, which the investor paid to Intermediate Holdings in cash. The holders of the Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 14% per year, when, as and if declared by the Board of Directors of Intermediate Holdings. All undeclared dividends and declared but unpaid dividends shall accrue from the date the stock was issued. Undeclared dividends at February 24, 2007 totaled $1,251 and have been recorded as accrued interest in other long-term liabilities in the financial statements. The Series A Preferred Stock may be redeemed by Intermediate Holdings on or after January 18, 2007 at a price equal to 104% of the Liquidation Preference (as defined in the Amended and Restated Certificate of Incorporation of Intermediate Holdings (the “Certificate of Incorporation”). Such percentage is reduced annually until the purchase price upon redemption to Intermediate Holdings is equal to 100% of the Liquidation Preference.

In addition, the Series A Preferred Stock is subject to mandatory redemption on January 18, 2013 or, at the election of the investor, in the event of a Change in Control or a Public Equity Offering (each as defined in the Certificate of Incorporation). As a result of the mandatory redemption requirements, the Series A Preferred Stock was classified as long-term debt.

The holders of Series A Preferred Stock agreed in May 2006 to exchange their shares of Series A Preferred Stock for new shares of Series A Mandatory Redeemable Preferred Stock of Parent Holdings, the new parent company of Intermediate Holdings. These new shares have the same rights, preferences and privileges as the Series A Preferred Stock of Intermediate Holdings.

10.25% Senior Discount Notes

On November 16, 2004 Intermediate Holdings issued the 10.25% Notes. The net proceeds of this offering were distributed to stockholders through the repurchase of shares of Intermediate Holdings’ common stock from its stockholders. Intermediate Holdings was formed on November 8, 2004 and has no operations separate from its ownership in AAC Holding Corp. and its subsidiary, AAC. Interest accrues on the 10.25% Notes in the form of an increase in the accreted value of the notes prior to October 1, 2008. Thereafter, cash interest on the 10.25% Notes will accrue and be payable semiannually in arrears on April 1 and October 1 of each year, commencing April 1, 2009 at a rate of 10.25% per annum.

At any time on or after October 1, 2008, Intermediate Holdings may redeem the 10.25% Notes, in whole or in part, at a redemption price equal to 100% of the principal amount plus a premium of 5.125%,

declining ratably to par, plus accrued and unpaid interest. At any time on or prior to October 1, 2007, Intermediate Holdings may redeem up to 35% of the aggregate accreted value of the 10.25% Notes with the proceeds of qualified equity offerings at a redemption price equal to 110.25% of the accreted value.

If a change in control as defined in the indenture relating to the 10.25% Notes occurs prior to October 1, 2008, Intermediate Holdings must give the holders of the 10.25% Notes the opportunity to sell their 10.25% Notes to Intermediate Holdings at 101% of the accreted value of the 10.25% Notes, plus accrued interest. If a change in control as defined in the indenture relating to the 10.25% Notes occurs following October 1, 2008, Intermediate Holdings must give the holders of the 10.25% Notes the opportunity to sell their 10.25% Notes to Intermediate Holdings at 101% of the aggregate principal amount at maturity of the 10.25% Notes, plus accrued interest.

Additionally, the terms of the 10.25% Notes limit Intermediate Holdings’ ability to, among other things, incur additional indebtedness, dispose of assets, make acquisitions, make other investments, pay dividends and make various other payments. The terms also include cross-default provisions to the indenture governing the 8.25% Notes and the Senior Credit Facility (as defined below). As of February 24, 2007 Intermediate Holdings was in compliance with all such provisions.

8.25% Senior Subordinated Notes

On March 25, 2004, AAC issued $150 million of the 8.25% Notes. The 8.25% Notes bear interest at a stated rate of 8.25%. The 8.25% Notes are unsecured senior subordinated obligations and are subordinated in right of payment to all of AAC’s existing and future senior indebtedness, including obligations under the Company’s Senior Credit Facility (as defined below), pari passu in right of payment with any of the Company’s future senior subordinated indebtedness and senior in right of payment to any of the Company’s future subordinated indebtedness. The 8.25% Notes are guaranteed by certain of the Company’s existing domestic subsidiaries (non guarantor subsidiaries are minor), and will be guaranteed by certain of the Company’s future domestic subsidiaries. The guarantees are subordinated in right of payment to all existing and future senior indebtedness of the applicable guarantor, pari passu in right of payment with any future senior subordinated debt of such guarantor and senior in right of payment to any future subordinated indebtedness of such guarantor.

The Company may not redeem the 8.25% Notes until on or after April 1, 2008, except that the Company, in connection with certain equity offerings, may redeem up to 35% of the 8.25% Notes before the third anniversary of the issue date of the 8.25% Notes as long as (a) the Company pays a specified percentage of the principal amount of the 8.25% Notes, plus interest, (b) the Company redeems the 8.25% Notes within 90 days of completing a public equity offering and (c) at least 65% of the aggregate principal amount of the 8.25% Notes originally issued remains outstanding afterward.

If a change in control as defined in the indenture relating to the 8.25% Notes occurs, the Company must give the holders of the 8.25% Notes the opportunity to sell their 8.25% Notes to the Company at 101% of the principal amount of the 8.25% Notes, plus accrued interest.

The 8.25% Notes contain customary negative covenants and restrictions on actions by the Company and its subsidiaries including, without limitation, restrictions on additional indebtedness, investments, asset dispositions outside the ordinary course of business, liens, and transactions with affiliates, among other restrictions (as defined in the indenture governing the 8.25% Notes). In addition, the 8.25% Notes contain covenants, which restrict the declaration or payment of dividends by the Company and/or its subsidiaries (as defined in the indenture governing the 8.25% Notes). The Company was in compliance with the 8.25% Notes covenants as of February 24, 2007.

Senior Secured Credit Facility

On March 25, 2004, AAC entered into a $195.0 million senior credit facility (the “Senior Credit Facility”) which includes a $155.0 million term loan and up to $40.0 million available under a revolving credit facility. The Senior Credit Facility is secured by a first priority security interest in all existing and after-acquired assets of AAC, and certain of AAC’s direct and indirect domestic subsidiaries’ existing and after-acquired assets, including, without limitation, real property and all of the capital stock owned by AAC

Holding Corp. and certain of AAC’s direct and indirect domestic subsidiaries (including certain capital stock of their direct foreign subsidiaries only to the extent permitted by applicable law). As of February 24, 2007, assets of AAC subject to lien under the Senior Credit Facility were approximately $327.0 million. All of AAC’s obligations under the Senior Credit Facility are fully and unconditionally guaranteed by AAC Holding Corp. and certain of AAC’s direct and indirect domestic subsidiaries.

On August 17, 2006, some of the terms of the Senior Credit Facility were amended, “Amended Senior Credit Facility,” which added Parent Holdings to the agreement and gave the Company more latitude in some of the restrictions on restricted junior payments, reimbursement of income taxes and corporate operating expenses.

The term loan of the Amended Senior Credit Facility is due in March 2011. Quarterly payments of $243 are made through 2011. The term loan of the Amended Senior Credit Facility has an interest rate based on the prime rate, plus points based on a calculated leverage ratio. The weighted average interest rate on the term loan of the Amended Senior Credit Facility was approximately 7.7% at February 24, 2007.

During the six months ended February 24, 2007, the Company paid down $11.9 million of the term loan of the Amended Senior Credit Facility, of which approximately $0.5 million was mandatory quarterly payments.

The revolving credit facility matures in March 2010. Availability under the revolving credit facility is restricted to a total revolving commitment of $40 million as defined in the credit agreement governing the Amended Senior Credit Facility. Availability under the revolving credit facility as of February 24, 2007 was approximately $37.7 million including $2.3 million in letters of credit outstanding.

Advances under the revolving credit facility may be made as base rate loans or LIBOR loans at AAC’s election (except for the initial loans that were base rate loans). Interest rates payable on advances are based upon the base rate or LIBOR depending on the type of loan AAC chooses, plus an applicable margin based upon a consolidated leverage ratio of certain outstanding indebtedness to EBITDA (net income (loss) before interest expense, income taxes, depreciation and amortization) to be calculated in accordance with the terms specified in the credit agreement governing the Amended Senior Credit Facility.

The Amended Senior Credit Facility and the indenture governing the 8.25% Notes each contain restrictions on the ability of AAC to pay dividends and make certain other payments to Parent Holdings and subsidiaries. Pursuant to each arrangement, AAC may, subject to certain limitations, pay dividends or make such payments in connection with (i) repurchases of certain capital stock of Parent Holdings and (ii) the payment by Parent Holdings of taxes, costs and other expenses required to maintain its legal existence and legal, accounting and other overhead costs in the ordinary course of business.

AAC was in compliance with the Amended Senior Credit Facility’s covenants as of February 24, 2007.

Parent Holdings’ weighted average interest rate on debt outstanding as of February 24, 2007 and August 26, 2006 was 10.7% and 10.0%, respectively.

Intermediate Holdings’ weighted average interest rate on debt outstanding as of February 24, 2007 and August 26, 2006 was 8.7% and 8.7%, respectively.

AAC’s weighted average interest rate on debt outstanding as of February 24, 2007 and August 26, 2006 was 8.1% and 8.1%, respectively.

6. Commitments and Contingencies

Pending Litigation

against Taylor, without prejudice, without any payment or other compensation by Taylor. Mr. Estrada is now deceased. This Seventh Amended Petition now seeks damages for his alleged wrongful death and seeks to avoid the Workers’ Compensation bar to employer liability by pleading gross negligence on the part of Taylor. Taylor filed a timely answer to the lawsuit. A settlement with prejudice has been reached and the settlement documents are currently being prepared for execution. The settlement amount is less than $50 and contains a confidentiality and non disclosure provision.

The Company is not a party to any other pending legal proceedings other than ordinary routine litigation incidental to its business. In management’s opinion, adverse decisions on these ordinary legal proceedings, individually or in the aggregate, would not have a materially adverse impact on the Company’s results of operations, financial condition or cash flow.

Gold Consignment Agreement

Under the Company’s gold consignment financing arrangement, the Company has the ability to have on consignment the lowest of the dollar value of 27,000 troy ounces of gold, $14.2 million or a borrowing base, determined based upon a percentage of gold located at the Company’s facilities and other approved locations, as specified by the agreement. The Company had expensed $6 consignment fees for the three months ended February 24, 2007 and $82 for the three months ended February 25, 2006. The Company had expensed $6 consignment fees for the six months ended February 24, 2007 and $160 for the six months ended February 25, 2006. Under the terms of the consignment arrangement, the Company does not own the consigned gold nor does it have risk of loss related to price variation on such inventory until the money is received by the bank from the Company in payment for the gold purchased. Accordingly, the Company does not include the value of consigned gold in its inventory or the corresponding liability for financial statement purposes. As of February 24, 2007, the Company held 3,482 ounces of consigned gold valued at $2.4 million, while at August 26, 2006, the Company held no gold on consignment. The gold consignment agreement does not have a stated period and it can be terminated by either party upon 60 days written notice.

7. Income Taxes

AAC has recorded a tax benefit at an effective rate of 40% and 39% for the three and six months ended February 24, 2007, respectively, which represents the estimated federal and state income tax rate that will apply to estimated pre-tax earnings for fiscal 2007. Intermediate Holdings has recorded a tax benefit at an effective rate of 42% and 41% for the three and six months ended February 24, 2007, respectively, which represents the estimated federal and state income tax rate, after taking into consideration the non-deductibility of a portion of its interest on high-yield debt, that will apply to pre-tax earnings for fiscal 2007. Parent Holdings has recorded a tax benefit at an effective rate of 34% and 36% for the three and six months ended February 24, 2007, respectively, which represents the estimated federal and state income tax rate that would apply to the three and six months ended February 24, 2007 pre-tax loss. Since the estimated non-deductible interest on its high yield debt is significant in relation to the projected book pre-tax loss for fiscal 2007, there is a high degree of variability on the potential annual effective tax rate.

8. Postretirement Pension and Medical Benefits

Commemorative Brands, Inc. (“CBI”), a wholly-owned subsidiary of AAC, provides certain healthcare and life insurance benefits for former employees of the L.G. Balfour Company, Inc. (“CBI Plan”). Certain hourly employees of Taylor are covered by a defined benefit pension plan (“TPC Plan”) established by Taylor. The benefits under the CBI Plan and TPC Plan are based primarily on the employees’ years of service and compensation near retirement. The funding policies for these plans are consistent with the funding requirements of federal laws and regulations.

The net periodic postretirement benefit cost (income), include the following components:


	For the three months ended						For the three months ended
	February 24, 2007						February 25, 2006
				CBI post-						CBI post-
	Taylor pension			retirement			Taylor pension			retirement
Service costs, benefits attributed to Service during the period	$	20		$	—		$	25		$	—
Interest cost		225			27			211			39
Expected return on assets		(247	)		—			(223	)		—
Amortization of unrecognized net loss (gain)		—			(88	)		—			(78	)
Amortization of unrecognized net prior service costs		—			(37	)		—			(39	)

Net periodic postretirement benefit cost (income)	$	(2	)	$	(98	)	$	13		$	(78	)


	For the six months ended						For the six months ended
	February 24, 2007						February 25, 2006
				CBI post-						CBI post-
	Taylor pension			retirement			Taylor pension			retirement
Service costs, benefits attributed to Service during the period	$	40		$	—		$	49		$	—
Interest cost		450			54			422			77
Expected return on assets		(494	)		—			(446	)		—
Amortization of unrecognized net loss (gain)		—			(176	)		—			(155	)
Amortization of unrecognized net prior service costs		—			(74	)		—			(77	)

Net periodic postretirement benefit cost (income)	$	(4	)	$	(196	)	$	25		$	(155	)

9. Related-Party Transactions

On March 25, 2004, AAC entered into a new management agreement with an affiliate of Fenway Partners pursuant to which AAC, among other things, agreed to pay such affiliate an annual fee equal to the greater of $3,000 or 5% of the previous fiscal year’s EBITDA (as defined in the agreement). Amounts paid under the new management agreement totaled $896 and $1,832 by the Company for the three and six months ended February 24, 2007, respectively, and $750 and $1,500 for the three and six months ended February 25, 2006.

As of February 24, 2007, the Company had prepaid management fees of approximately $361 and accrued expenses of approximately $111, while as of August 26, 2006, the Company had prepaid management fees of approximately $250, and accrued expenses of approximately $90.

10. Business Segments

The Company manufactures, markets and sells class rings, yearbooks and graduation products, which includes fine paper products and graduation accessories, to high school, college and, to a lesser extent, elementary and junior high school markets in the United States. The Company’s class ring segment consists of its on campus class rings and retail class rings operating segments, which have been aggregated into one reporting segment in accordance with paragraph 26.a of FAS 131. The achievement publications segment produces, markets, and sells publications that recognize the achievements of top students at the high school and college levels, as well as the nation’s most inspiring teachers. The other segment consists of jewelry commemorating family events such as the birth of a child, fan affinity jewelry and related products, professional sports championship rings such as World Series rings, and commercial and fine books.


	Parent Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 24, 2007
Net sales	$	31,002	$	2,644		$	15,278	$	580		$	8,173	$	57,677
Segment operating income (loss)		4,836		(3,989	)		3,344		(1,153	)		1,241	$	4,279
Segment assets		212,290		173,965			69,266		33,416			35,126	$	524,063


	Parent Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 25, 2006
Net sales	$	33,681	$	2,684		$	15,598	$	860		$	6,373	$	59,196
Segment operating income (loss)		6,043		(2,553	)		2,468		(876	)		983	$	6,065
Segment assets		216,762		175,601			70,025		38,448			35,663	$	536,499


	Parent Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Six Months Ended February 24, 2007
Net sales	$	64,369	$	13,205		$	18,037	$	1,290		$	13,534	$	110,435
Segment operating income (loss)		8,723		(7,870	)		1,039		(2,027	)		718	$	583
Segment assets		212,290		173,965			69,266		33,416			35,126	$	524,063


	Parent Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications		Other		Total
Six Months Ended February 25, 2006
Net sales	$	66,059	$	15,532		$	18,841	$	7,516	$	9,621	$	117,569
Segment operating income (loss)		10,706		(6,130	)		992		156		177	$	5,901
Segment assets		216,762		175,601			70,025		38,448		35,663	$	536,499


	Intermediate Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 24, 2007
Net sales	$	31,002	$	2,644		$	15,278	$	580		$	8,173	$	57,677
Segment operating income (loss)		4,836		(3,989	)		3,344		(1,153	)		1,241	$	4,279
Segment assets		208,901		170,885			68,168		32,864			34,557	$	515,375


	Intermediate Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 25, 2006
Net sales	$	33,681	$	2,684		$	15,598	$	860		$	6,373	$	59,196
Segment operating income (loss)		6,043		(2,553	)		2,468		(876	)		983	$	6,065
Segment assets		216,762		175,601			70,025		38,448			35,663	$	536,499


	Intermediate Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Six Months Ended February 24, 2007
Net sales	$	64,369	$	13,205		$	18,037	$	1,290		$	13,534	$	110,435
Segment operating income (loss)		8,723		(7,870	)		1,039		(2,027	)		718	$	583
Segment assets		208,901		170,885			68,168		32,864			34,557	$	515,375


	Intermediate Holdings
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications		Other		Total
Six Months Ended February 25, 2006
Net sales	$	66,059	$	15,532		$	18,841	$	7,516	$	9,621	$	117,569
Segment operating income (loss)		10,706		(6,130	)		992		156		177	$	5,901
Segment assets		216,762		175,601			70,025		38,448		35,663	$	536,499


	AAC
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 24, 2007
Net sales	$	31,002	$	2,644		$	15,278	$	580		$	8,173	$	57,677
Segment operating income (loss)		4,836		(3,989	)		3,344		(1,153	)		1,241	$	4,279
Segment assets		207,723		169,815			67,786		32,672			34,359	$	512,355


	AAC
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Three Months Ended February 25, 2006
Net sales	$	33,681	$	2,684		$	15,598	$	860		$	6,373	$	59,196
Segment operating income (loss)		6,043		(2,553	)		2,468		(876	)		983	$	6,065
Segment assets		212,591		171,811			68,675		37,769			34,962	$	525,808


	AAC
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications			Other		Total
Six Months Ended February 24, 2007
Net sales	$	64,369	$	13,205		$	18,037	$	1,290		$	13,534	$	110,435
Segment operating income (loss)		8,723		(7,870	)		1,039		(2,027	)		718	$	583
Segment assets		207,723		169,815			67,786		32,672			34,359	$	512,355


	AAC
	Class					Graduation		Achievement
	Rings		Yearbooks			Products		Publications		Other		Total
Six Months Ended February 25, 2006
Net sales	$	66,059	$	15,532		$	18,841	$	7,516	$	9,621		$	117,569
Segment operating income (loss)		10,706		(6,130	)		992		156		177		$	5,901
Segment assets		212,591		171,811			68,675		37,769		34,962		$	525,808

11. Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN 48 will be effective for the Company beginning with its fiscal year 2008. The Company is currently evaluating the impact this standard will have on its financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“FAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of FAS 157 are effective for the Company with its fiscal year 2009. The Company is currently evaluating the impact this standard will have on its financial position and results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132 (R)” (“FAS 158”). FAS 158 requires the recognition of an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in the statement of financial position, measurement of the funded status of a plan as of the date of its year-end statement of financial position and recognition for changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur as a component of other comprehensive income. The provisions of FAS 158 will be effective for the Company beginning with its fiscal year 2008. The Company is currently evaluating the impact this standard will have on its financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“FAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The accounting provisions of FAS 159 are effective for the Company beginning with its fiscal year 2008. The Company is currently evaluating the impact this standard will have on its financial position and results of operations.

12. Subsequent Event

In April 2007, CBI announced that it acquired Powers Embroidery Inc. (“Powers”). Powers is a producer of quality letter jackets, chenille patches and other school spirit embroidery merchandise, located in Waco, Texas. The purchase price paid in connection with this acquisition is approximately $7.5 million, of which $6.0 million was paid at closing and the remainder to be paid upon achieving certain financial goals through August 2010.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our condensed consolidated financial condition and results of operations should be read in conjunction with the information contained in our condensed consolidated financial statements and the notes thereto. The consolidated financial statements, and the notes thereto, have been prepared in accordance with U.S. GAAP. The following discussion includes forward-looking statements that involve certain risks and uncertainties. See “Disclosure Regarding Forward-Looking Statements.”

Basis of Presentation

We present financial information relating to Parent Holdings, Intermediate Holdings, and AAC and its subsidiaries in this discussion and analysis. Parent Holdings owns 100% of the shares of common stock of Intermediate Holdings. Intermediate Holdings owns 100% of the shares of common stock of AAC Holding Corp., which is the holder of 100% of the shares of common stock of AAC.

Intermediate Holdings conducts all of its business indirectly through AAC and its subsidiaries. The consolidated financial statements of Intermediate Holdings include the accounts of its indirect wholly-owned subsidiary, AAC. Intermediate Holdings’ consolidated financial statements are substantially identical to AAC’s consolidated financial statements, with the exception of additional interest expense related to the 10.25% senior discount notes, amortization of deferred financing costs and the effective income tax rate.

Parent Holdings conducts all of its business through Intermediate Holdings and AAC and its subsidiaries. The consolidated financial statements of Parent Holdings include the accounts of its direct wholly-owned subsidiary, Intermediate Holdings, and its indirect wholly-owned subsidiary, AAC. Parent Holdings’ consolidated financial statements are substantially identical to Intermediate Holdings’ consolidated financial statements, with the exception of additional interest expense related to its 12.75% senior PIK notes, amortization of deferred financing costs and the effective income tax rate.

Parent Holdings was formed in May 2006, and the stockholders of Intermediate Holdings participated in an exchange on May 30, 2006, pursuant to which they exchanged their shares of common stock and preferred stock in Intermediate Holdings for a like kind and amount of shares in Parent Holdings. Following the exchange, Intermediate Holdings became a wholly-owned subsidiary of Parent Holdings.

Fiscal Year End

We use a 52/53-week fiscal year ending on the last Saturday of August.

General

We are one of the leading manufacturers and marketers of class rings, yearbooks, graduation products, achievement publications and recognition and affinity jewelry in the United States. We serve the high school, college and, to a lesser extent, elementary and junior high school markets. We market and sell yearbooks in all of the markets we serve. We primarily sell our class rings and graduation products, which include fine paper products and graduation accessories, in the high school, college and junior high school markets. Our achievement publications segment produces, markets, and sells publications that recognize the achievements of top students at the high school and college levels, as well as the nation’s most inspiring teachers. It consists of various titles including the Who’s Who brand and The National Dean’s List. Our other segment consists primarily of jewelry commemorating family events such as the birth of a child, fan affinity jewelry and related products, professional sports championship rings such as World Series rings and commercial printing.

Our ability to meet our debt service and other obligations depends in significant part on how successful we are in maintaining our business and further implementing our business strategy. Our business plan envisions several long-term growth initiatives, including the development of new products. The components of our strategy are subject to significant business, economic and competitive uncertainties and contingencies.

Numerous raw materials are used in the manufacture of our products. Gold, steel, precious, semiprecious and synthetic stones, paper products and ink comprise the bulk of the raw materials we utilize in the largest

segments of our business. Prices of these materials, especially gold, continually fluctuate. We purchase all of our gold from a single supplier, The Bank of Nova Scotia, through our existing gold consignment agreement. We may consign a portion of our gold and pay for gold as our products are shipped to customers. We also purchase the majority of our semi-precious stones from a single supplier in Germany. The prices for these products are denominated in Euros. We generally are able to pass on price increases in gold and stones to our customers as such increases are realized by us, however, this may not always be the case. Gold prices were unstable and the U.S. dollar declined compared to the Euro during the first two quarters of our fiscal year 2007.

We face strong competition for most of our principal products. The class ring and yearbook markets are highly concentrated and consist primarily of a few national manufacturers (of which we are one) and, to a significantly lesser extent, small regional competitors. Our achievement publication products compete with one national manufacturer and, to a lesser extent, with various other companies. We believe that it would be costly and time-consuming for new competitors to replicate the production and distribution capabilities necessary to compete effectively in this market, and as a result, there have been no major new competitors in the last 60 years.

We experience seasonal fluctuations in our net sales tied primarily to the school year. We recorded 44% of our fiscal year 2006 net sales in our third quarter. Class ring sales are highest during October through December, with most orders made for delivery to students before the winter holiday season. Graduation product sales are predominantly made during February through April prior to the April through June graduation season. Yearbook sales are highest during the months of April through June, as yearbooks are typically shipped prior to each school’s summer break. We have experienced operating losses during our first and fourth fiscal quarters, which include the beginning of the school year and the summer months when school is not in session, thus reducing related shipment of products. In addition, our working capital requirements tend to exceed our operating cash flows from May through September.

We also have exposure to market risk relating to changes in interest rates on our variable rate debt. Our senior secured credit facility (revolver and term loan) and existing gold consignment agreement are variable rate arrangements. The interest rates are based on a floating benchmark rate (such as LIBOR or the Federal Funds rate) plus a fixed spread.

Historically, growth in the class rings, yearbooks and graduation products market has been driven primarily by demographics. The U.S. Department of Education projects that the number of high school and college graduates will grow by an average of 2.2% and 2.5% per year, respectively, from 2002 to 2008. Additionally, the U.S. Census Bureau projects that the total U.S. population will increase by 9.5% between 2000 and 2010. Both the increased population, and the increased number of high school and college graduates should expand the market for our products.

Company Background

Our business was founded when the operations of ArtCarved, which were previously owned by CJC Holdings, Inc., and the operations of Balfour, which were previously owned by L. G. Balfour Company, Inc., were combined through various asset purchase agreements in December 1996. AAC was formed in June 2000 to serve as a holding company for these operations as well as any future acquisitions. In June 2000, we acquired the Taylor Senior Holding Company, the parent company of Taylor Publishing, whose primary business was designing and printing student yearbooks. In March 2001, AAC acquired all of the capital stock of Educational Communications, Inc. (“ECI”), which publishes achievement publications. In July 2002, AAC acquired all the outstanding stock and warrants of Milestone Marketing, a marketer of class rings and other graduation products to the college market. In January 2004, AAC acquired C-B Graduation Announcements, a marketer of graduation products to the college market.

On March 25, 2004, AAC Acquisition Corp., a wholly owned subsidiary of AAC Holding Corp., merged with and into AAC (the “Merger”), with AAC continuing as the surviving corporation and a wholly-owned subsidiary of AAC Holding Corp. The Merger was financed by a cash equity investment by an investor group led by Fenway Partners Capital Fund II, L.P., borrowings under AAC’s senior secured credit facility and the issuance of AAC’s 8.25% senior subordinated notes due 2012. In November 2004, AAC Holding Corp. underwent a recapitalization transaction pursuant to which its stockholders exchanged their shares of AAC Holding Corp. common stock for shares of Intermediate Holdings common stock and, as a result, AAC Holding Corp became a wholly owned subsidiary of Intermediate Holdings.

million. Intermediate Holdings is the sole obligor of these notes. The net proceeds of this offering were distributed to stockholders through the repurchase of shares of Intermediate Holdings’ common stock from its stockholders.

On January 18, 2006, Intermediate Holdings entered into a Preferred Stock Purchase Agreement with an investor pursuant to which Intermediate Holdings sold shares of its Series A Mandatory Redeemable Preferred Stock (“Series A Preferred Stock”). In connection with this transaction, Intermediate Holdings issued the investor 7,500 shares of the Series A Preferred Stock for an aggregate purchase price of $7.5 million, which the investor paid to Intermediate Holdings in cash. The holders of the Series A Preferred Stock are entitled to receive cumulative dividends at a rate of 14% per year, when, as and if declared by the Board of Directors of Intermediate Holdings.

On May 8, 2006, the holders of outstanding stock of Intermediate Holdings, agreed to form a new holding company for Intermediate Holdings, and on May 30, 2006, reached agreement for their new company, American Achievement Group Holding Corp., to affect a stock exchange with Intermediate Holdings. Pursuant to that agreement, each holder of common stock of Intermediate Holdings contributed each share of such stock then held to Parent Holdings in exchange for a new share of common stock of Parent Holdings and each holder of Series A Preferred Stock of Intermediate Holdings contributed each share of such stock then held to Parent Holdings in exchange for a new share of series A mandatory redeemable preferred stock of Parent Holdings. Each new share of capital stock received in such contribution and exchange had the same rights, preferences and privileges as the corresponding share of stock of Intermediate Holdings that was contributed to Parent Holdings. As a result of the foregoing recapitalization, Intermediate Holdings became a wholly owned subsidiary of Parent Holdings.

On June 12, 2006, Parent Holdings issued $150.0 million principal amount of 12.75% senior PIK notes due October 1, 2012. The net proceeds of the 12.75% senior PIK notes were approximately $140.5 million and were distributed to the stockholders of Parent Holdings as a dividend. The 12.75% senior PIK notes are the unsecured senior obligation of Parent Holdings and are not guaranteed by Intermediate Holdings or any of its subsidiaries. Interest accrued on these notes at 12.75% per annum through February 23, 2007. As of February 24, 2007, the rate at which interest accrues increased to 14.75% per annum.

Results of Operations

Three Months Ended February 24, 2007 Compared to Three Months Ended February 25, 2006

The following tables set forth selected information for Parent Holdings, Intermediate Holdings, and AAC from our condensed consolidated statements of operations expressed on an actual basis and as a percentage of net sales (dollars in thousands):


	Parent Holdings
	For the Three			% of			For the Three			% of
	Months Ended			Net			Months Ended			Net
	February 24, 2007			Sales			February 25, 2006			Sales
Net sales	$	57,677			100.0	%	$	59,196			100.0	%
Cost of sales		21,706			37.6	%		21,731			36.7	%

Gross profit		35,971			62.4	%		37,465			63.3	%
Selling, general and administrative expenses		31,692			55.0	%		31,400			53.0	%

Operating income		4,279			7.4	%		6,065			10.3	%
Interest expense		14,350			24.9	%		8,481			14.3	%

Loss before income taxes		(10,071	)		(17.5	)%		(2,416	)		(4.0	)%
Benefit for income taxes		(3,451	)		(6.0	)%		(1,069	)		(1.8	)%

Net loss	$	(6,620	)		(11.5	)%	$	(1,347	)		(2.2	)%


	Intermediate Holdings
	For the Three			% of			For the Three			% of
	Months Ended			Net			Months Ended			Net
	February 24, 2007			Sales			February 25, 2006			Sales
Net sales	$	57,677			100.0	%	$	59,196			100.0	%
Cost of sales		21,706			37.6	%		21,731			36.7	%

Gross profit		35,971			62.4	%		37,465			63.3	%
Selling, general and administrative expenses		31,692			55.0	%		31,400			53.0	%

Operating income		4,279			7.4	%		6,065			10.3	%
Interest expense		8,298			14.4	%		8,481			14.3	%

Loss before income taxes		(4,019	)		(7.0	)%		(2,416	)		(4.0	)%
Benefit for income taxes		(1,676	)		(2.9	)%		(1,069	)		(1.8	)%

Net loss	$	(2,343	)		(4.1	)%	$	(1,347	)		(2.2	)%


	AAC
	For the Three			% of			For the Three		% of
	Months Ended			Net			Months Ended		Net
	February 24, 2007			Sales			February 25, 2006		Sales
Net sales	$	57,677			100.0	%	$	59,196		100.0	%
Cost of sales		21,706			37.6	%		21,731		36.7	%

Gross profit		35,971			62.4	%		37,465		63.3	%
Selling, general and administrative expenses		31,692			55.0	%		31,400		53.0	%

Operating income		4,279			7.4	%		6,065		10.3	%
Interest expense		5,409			9.4	%		5,752		9.8	%

Income (loss) before income taxes		(1,130	)		(2.0	)%		313		0.5	%
Provision (benefit) for income taxes		(447	)		(0.8	)%		122		0.2	%

Net income (loss)	$	(683	)		(1.2	)%	$	191		0.3	%

Net Sales. Net sales consist of product sales and are net of product returns and promotional discounts. Net sales decreased $1.5 million, or 2.6%, to $57.7 million for the three months ended February 24, 2007 from $59.2 million for the three months ended February 25, 2006.

The following details the changes in net sales during such periods by business segment.

Class Rings. Net sales decreased $2.7 million to $31.0 million for the three months ended February 24, 2007 from $33.7 million for the three months ended February 25, 2006. The decrease in net sales was the result of decreases of $1.8 million in high school ring sales and $0.9 million in college class ring sales. The decline in high school ring sales is partially due to the delivery of on-campus ring shipments. Deferred revenue was $3.1 million as of February 24, 2007 compared to $2.0 million as of February 25, 2006. The

remaining decline in class rings is due to a decline in class rings sold at retail stores. The decline in college rings is a result of shipment timing.

Yearbooks. Net sales decreased $0.1 million to $2.6 million for the three months ended February 24, 2007 from $2.7 million for the three months ended February 25, 2006.

Graduation Products. Net sales decreased $0.3 million to $15.3 million for the three months ended February 24, 2007 from $15.6 million for the three months ended February 25, 2006. The decrease in net sales was the result of timing of shipments that will occur in the third and fourth quarters of fiscal year 2007.

Achievement Publications. Net sales decreased $0.3 million to $0.6 million for the three months ended February 24, 2007 from $0.9 million for the three months ended February 25, 2006. The decrease in net sales was the result of a decline in collateral product sales.

Other. Net sales increased $1.8 million to $8.2 million for the three months ended February 24, 2007 from $6.4 million for the three months ended February 25, 2006. The increase in net sales was mainly related to an increase in affinity jewelry sales at retail stores and through e-commerce channels.

Gross Profit. Gross margin represents gross profit as a percentage of net sales. Gross margin was 62.4% for the three months ended February 24, 2007, a 0.9 percentage point decrease from 63.3% for the three months ended February 25, 2006. Overall, gross profit decreased $1.4 million. The decline in gross profit mainly consisted of a decline directly related to the revenue shortfall during the quarter. In addition, the decline was related to product mix changes in class rings and personalized fashion jewelry, partially offset by an increase related to product mix change in graduation products.

Selling, General and Administrative Expenses. Selling, general and administrative expenses increased $0.3 million, or 0.9%, to $31.7 million for the three months ended February 24, 2007 from $31.4 million for the three months ended February 25, 2006. Included in selling, general and administrative expenses are two sub-categories: selling and marketing expenses and general and administrative expenses. Selling and marketing expenses increased $0.4 million to $21.3 million or 36.9% of net sales, for the three months ended February 24, 2007 from $20.9 million or 35.3% of net sales, for the three months ended February 25, 2006. The increase in selling and marketing expenses mainly related to the timing of our national yearbook sales conference. General and administrative expenses decreased $0.1 million to $10.4 million or 18.0% of net sales, for the three months ended February 24, 2007 from $10.5 million or 17.7% of net sales, for the three months ended February 25, 2006.

Operating Income (Loss). As a result of the foregoing, operating income was $4.3 million, or 7.4% of net sales, for the three months ended February 24, 2007 as compared with operating income of $6.1 million, or 10.3% of net sales, for the three months ended February 25, 2006. The class rings segment reported operating income of $4.8 million for the three months ended February 24, 2007 as compared with operating income of $6.0 million for the three months ended February 25, 2006. The yearbooks segment reported operating loss of $4.0 million for the three months ended February 24, 2007 as compared with operating loss of $2.6 million for the three months ended February 25, 2006. The graduation products segment reported operating income of $3.4 million for the three months ended February 24, 2007 as compared with operating income of $2.5 million for the three months ended February 25, 2006. The achievement publications segment reported an operating loss of $1.2 million for the three months ended February 24, 2007 as compared with an operating loss of $0.9 million for the three months ended February 25, 2006. The other segment reported operating income of $1.2 million for the three months ended February 24, 2007 as compared with operating income of $1.0 million for the three months ended February 25, 2006.

Interest Expense, Net. For Parent Holdings, net interest expense was $14.4 million for the three months ended February 24, 2007 and $8.5 million for the three months ended February 25, 2006. The average debt outstanding of Parent Holdings for the three months ended February 24, 2007 and the three months ended February 25, 2006 was $535 million and $388 million, respectively. The weighted average interest rate on debt outstanding of Parent Holdings for the three months ended February 24, 2007 and the three months ended February 25, 2006 was 9.9% and 8.5%, respectively.

For Intermediate Holdings, net interest expense was $8.3 million for the three months ended February 24, 2007 and $8.5 million for the three months ended February 25, 2006. The average debt outstanding of Intermediate Holdings for the three months ended February 24, 2007 and the three months ended February 25, 2006 was $366 million and $388 million, respectively. The weighted average interest rate on debt outstanding of Intermediate Holdings for the three months ended February 24, 2007 and the three months ended February 25, 2006 was 8.5% and 8.5%, respectively.

For AAC, net interest expense was $5.4 million for the three months ended February 24, 2007 and $5.8 million for the three months ended February 25, 2006. The average debt outstanding of AAC for the

three months ended February 24, 2007 and the three months ended February 25, 2006 was $255 million and $287 million, respectively. The weighted average interest rate on debt outstanding of AAC for the three months ended February 24, 2007 and the three months ended February 25, 2006 was 7.8% and 7.9%, respectively.

Provision (benefit) for Income Taxes. For the three months ended February 24, 2007, Parent Holdings recorded an income tax benefit of $3.5 million and $1.1 million, respectively, which represents an effective tax rate of 34% and 44% for each period. The effective rate differs from normal statutory rates due to the non-deductibility of a portion of its interest on high-yield debt. Additional high-yield debt was added in June 2006 at Parent Holdings, which has caused the effective tax rate in fiscal 2007 to be different than fiscal 2006.

For the three months ended February 24, 2007 and February 25, 2006, Intermediate Holdings recorded an income tax benefit of $1.7 million and $1.1 million, respectively, which represents an effective tax rate of 42% and 44% for each period. Intermediate Holdings’ effective rates for the three months ended February 24, 2007 and February 25, 2006 represent an estimate of the annual federal and state income tax rate after considering the non-deductibility of a portion of its interest on high-yield debt.

For the three months ended February 24, 2007 and February 25, 2006, AAC recorded an income tax benefit and provision of $0.4 million and $0.1 million, respectively, which represents an effective tax rate of 40% and 39% for each period. AAC’s effective rates for the three months ended February 24, 2007 and February 25, 2006 represent an estimate of the annual federal and state income tax rate.

Net Income (Loss). As a result of the foregoing, Parent Holdings reported a net loss of $6.6 million for the three months ended February 24, 2007 as compared to a net loss of $1.3 million for the three months ended February 25, 2006.

As a result of the foregoing, Intermediate Holdings reported a net loss of $2.3 million for the three months ended February 24, 2007 as compared to a net loss of $1.3 million for the three months ended February 25, 2006.

As a result of the foregoing, AAC reported a net loss of $0.7 million for the three months ended February 24, 2007 as compared to a net income of $0.2 million for the three months ended February 25, 2006.

Six Months Ended February 24, 2007 Compared to Six Months Ended February 25, 2006


	Parent Holdings
	For the Six			% of			For the Six			% of
	Months Ended			Net			Months Ended			Net
	February 24, 2007			Sales			February 25, 2006			Sales
Net sales	$	110,435			100.0	%	$	117,569			100.0	%
Cost of sales		49,240			44.6	%		46,770			39.8	%

Gross profit		61,195			55.4	%		70,799			60.2	%
Selling, general and administrative expenses		60,612			54.9	%		64,898			55.2	%

Operating income		583			0.5	%		5,901			5.0	%
Interest expense		28,971			26.2	%		17,032			14.5	%

Loss before income taxes		(28,388	)		(25.7	)%		(11,131	)		(9.5	)%
Benefit for income taxes		(10,110	)		(9.1	)%		(4,811	)		(4.1	)%

Net loss	$	(18,278	)		(16.6	)%	$	(6,320	)		(5.4	)%


	Intermediate Holdings
	For the Six			% of			For the Six			% of
	Months Ended			Net			Months Ended			Net
	February 24, 2007			Sales			February 25, 2006			Sales
Net sales	$	110,435			100.0	%	$	117,569			100.0	%
Cost of sales		49,240			44.6	%		46,770			39.8	%

Gross profit		61,195			55.4	%		70,779			60.2	%
Selling, general and administrative expenses		60,612			54.9	%		64,898			55.2	%

Operating income		583			0.5	%		5,901			5.0	%
Interest expense		17,012			15.4	%		17,032			14.5	%

Loss before income taxes		(16,429	)		(14.9	)%		(11,131	)		(9.5	)%
Benefit for income taxes		(6,774	)		(6.2	)%		(4,811	)		(4.1	)%

Net loss	$	(9,655	)		(8.7	)%	$	(6,320	)		(5.4	)%


	AAC
	For the Six			% of			For the Six			% of
	Months Ended			Net			Months Ended			Net
	February 24, 2007			Sales			February 25, 2006			Sales
Net sales	$	110,435			100.0	%	$	117,569			100.0	%
Cost of sales		49,240			44.6	%		46,770			39.8	%

Gross profit		61,195			55.4	%		70,799			60.2	%
Selling, general and administrative expenses		60,612			54.9	%		64,898			55.2	%

Operating income		583			0.5	%		5,901			5.0	%
Interest expense		11,327			10.2	%		11,758			10.0	%

Loss before income taxes		(10,744	)		(9.7	)%		(5,857	)		(5.0	)%
Benefit for income taxes		(4,235	)		(3.8	)%		(2,323	)		(2.0	)%

Net loss	$	(6,509	)		(5.9	)%	$	(3,534	)		(3.0	)%

Net Sales. Net sales consist of product sales and are net of product returns and promotional discounts. Net sales decreased $7.2 million, or 6.1%, to $110.4 million for the six months ended February 24, 2007 from $117.6 million for the six months ended February 25, 2006.

The following details the changes in net sales during such periods by business segment.

Class Rings. Net sales decreased $1.7 million to $64.4 million for the six months ended February 24, 2007 from $66.1 million for the six months ended February 25, 2006. The decrease in net sales was the result of a decrease of $2.4 million in high school ring shipments, partially offset by an increase of $0.7 million in college class ring shipments. The decline in high school ring sales is partially due to the timing of the delivery of on campus ring shipments. Deferred revenue was $3.1 million as of February 24, 2007 compared to $2.0 million as of February 25, 2006. The remaining decline in high school ring units is due to

a decline in class rings sold in retail stores. The increase in college class ring sales is mainly attributable to the increase in average price of college class rings.

Yearbooks. Net sales decreased $2.3 million to $13.2 million for the six months ended February 24, 2007 from $15.5 million for the six months ended February 25, 2006. The decrease in net sales was the result of timing in shipments of yearbooks and a decrease in the average price per contract due to product mix.

Graduation Products. Net sales decreased $0.8 million to $18.0 million for the six months ended February 24, 2007 from $18.8 million for the six months ended February 25, 2006. The decrease in net sales was the result of timing of shipments that will occur in the third and fourth quarters of fiscal year 2007.

Achievement Publications. Net sales decreased $6.2 million to $1.3 million for the six months ended February 24, 2007 from $7.5 million for the six months ended February 25, 2006. The primary decrease in sales was due to not shipping a Who’s Who Among American High School Students publication in the six months ended February 24, 2007. In the six months ended February 25, 2006, the publication was shipped and accounted for $5.5 million of net sales. In fiscal year 2006, two editions of Who’s Who Among American High School Students were shipped, one in October 2005 and one in August 2006, while in fiscal year 2007, this publication will only ship in August 2007. Thus, total fiscal year 2007 net sales for achievement publications will be lower than total fiscal year 2006 net sales.

Other. Net sales increased $3.9 million to $13.5 million for the six months ended February 24, 2007 from $9.6 million for the six months ended February 25, 2006. The increase in net sales was mainly related to an increase in affinity jewelry sales at retail stores and through e-commerce channels.

Gross Profit. Gross margin represents gross profit as a percentage of net sales. Gross margin was 55.4% for the six months ended February 24, 2007, a 4.8 percentage point decrease from 60.2% for the six months ended February 25, 2006. Overall, gross profit decreased $9.6 million, of which $5.2 million related to the decline in achievement publications segment. The majority of the remaining $4.4 million decline was made up of a $1.8 million decline as a result of the revenue shortfall, a decline of $1.6 million related to the timing of shipments and the product mix of yearbook shipments, a $1.4 million decline due to class ring product mix changes and increased gold and labor costs and $0.7 million of additional depreciation expenses. These declines were partially offset by the increase in affinity jewelry sales.

Selling, General and Administrative Expenses. Selling, general and administrative expenses decreased $4.3 million, or 6.6%, to $60.6 million for the six months ended February 24, 2007 from $64.9 million for the six months ended February 25, 2006. Included in selling, general and administrative expenses are two sub-categories: selling and marketing expenses and general and administrative expenses. Selling and marketing expenses decreased $2.4 million to $40.0 million or 36.2% of net sales, for the six months ended February 24, 2007 from $42.4 million or 36.0% of net sales, for the six months ended February 25, 2006. The decrease in selling and marketing expenses was primarily the result of not publishing the Who’s Who Among American High School Students publication in the six months ended February 24, 2007. General and administrative expenses for the six months ended February 24, 2007 were $20.6 million, or 18.7% of net sales, as compared to $22.5 million, or 19.2% of net sales, for the six months ended February 25, 2006. The decrease in general and administrative expenses was primarily the result of non-recurring professional services incurred in the six months ended February 25, 2006.

Operating Income (Loss). As a result of the foregoing, operating income was $0.6 million, or 0.5% of net sales, for the six months ended February 24, 2007 as compared with operating income of $5.9 million, or 5.0% of net sales, for the six months ended February 25, 2006. The class rings segment reported operating income of $8.7 million for the six months ended February 24, 2007 as compared with operating income of $10.7 million for the six months ended February 25, 2006. The yearbooks segment reported an operating loss of $7.9 million for the six months ended February 24, 2007 as compared with an operating loss of $6.1 million for the six months ended February 25, 2006. The graduation products segment reported operating income of $1.0 million for the six months ended February 24, 2007 as compared with operating income of $1.0 million for the six months ended February 25, 2006. The achievement publications segment reported an operating loss of $2.0 million for the six months ended February 24, 2007 as compared with operating income of $0.2 million for the six months ended February 25, 2006. The other segment reported a operating income of $0.7 million for the six months ended February 24, 2007 as compared with operating income of $0.2 million for the six months ended February 25, 2006.

Interest Expense, Net. For Parent Holdings, net interest expense was $29.0 million for the six months ended February 24, 2007 and $17.0 million for the six months ended February 25, 2006. The average debt outstanding of Parent Holdings for the six months ended February 24, 2007 and the six months ended February 25, 2006 was $540 million and $394 million, respectively. The weighted average interest rate on

debt outstanding of Parent Holdings for the six months ended February 24, 2007 and the six months ended February 25, 2006 was 9.9% and 8.5%, respectively.

For Intermediate Holdings, net interest expense was $17.0 million for the six months ended February 24, 2007 and $17.0 million for the six months ended February 25, 2006. The average debt outstanding of Intermediate Holdings for the six months ended February 24, 2007 and the six months ended February 25, 2006 was $374 million and $394 million, respectively. The weighted average interest rate on debt outstanding of Intermediate Holdings for the six months ended February 24, 2007 and the six months ended February 25, 2006 was 8.6% and 8.5%, respectively.

For AAC, net interest expense was $11.3 million for the six months ended February 24, 2007 and $11.8 million for the six months ended February 25, 2006. The average debt outstanding of AAC for the six months ended February 24, 2007 and the six months ended February 25, 2006 was $264 million and $295 million, respectively. The weighted average interest rate on debt outstanding of AAC for the six months ended February 24, 2007 and the six months ended February 25, 2006 was 7.9% and 7.9%, respectively.

Income Taxes. For the six months ended February 24, 2007 and February 25, 2006, Parent Holdings recorded an income tax benefit of $10.1 million and $4.8 million, respectively, which represents an effective tax rate of 36% and 43% for each period. The effective rate differs from normal statutory rates due to the non-deductibility of a portion of its interest on high-yield debt. Additional high-yield debt was added in June 2006 at Parent Holdings, which has caused the effective tax rate in fiscal 2007 to be different than fiscal 2006.

For the six months ended February 24, 2007 and February 25, 2006, Intermediate Holdings recorded an income tax benefit of $6.8 million and $4.8 million, respectively, which represents an effective tax rate of 41% and 43% for each period. Intermediate Holdings’ effective rates for the six months ended February 24, 2007 and February 25, 2006 represent an estimate of the annual federal and state income tax rate after considering the non-deductibility of a portion of its interest on high-yield debt.

For the six months ended February 24, 2007 and February 25, 2006, AAC recorded an income tax benefit of $4.2 million and $2.3 million, respectively, which represents an effective tax rate of 39% and 40% for each period. AAC’s effective rates for the six months ended February 24, 2007 and February 25, 2006 represent an estimate of the annual federal and state income tax rate.

Net Loss. As a result of the foregoing, Parent Holdings reported a net loss of $18.3 million for the six months ended February 24, 2007 as compared to a net loss of $6.3 million for the six months ended February 25, 2006.

As a result of the foregoing, Intermediate Holdings reported a net loss of $9.7 million for the six months ended February 24, 2007 as compared to a net loss of $6.3 million for the six months ended February 25, 2006.

As a result of the foregoing, AAC reported a net loss of $6.5 million for the six months ended February 24, 2007 as compared to net loss of $3.5 million for the six months ended February 25, 2006.

Liquidity and Capital Resources

Operating Activities

Operating activities provided $35.9 million of cash for the six months ended February 24, 2007 compared to cash provided of $32.0 million for the six month ended February 25, 2006. The $3.9 million increase in cash provided by operating activities was mainly attributable to lower working capital requirements, partially offset by lower operating results.

Investing Activities

Capital expenditures for the six months ended February 24, 2007 were $5.7 million compared to capital expenditures of $5.4 million for the six months ended February 25, 2006. Our projected capital expenditures for the entire fiscal year 2007 are expected to be approximately $14.0 million.

Financing Activities

For Parent Holdings, net cash used in financing activities was $22.3 million for the six months ended February 24, 2007 compared to cash used of $6.3 million for the six months February 25, 2006. During the six months ended February 24, 2007, the Company paid down $9.3 million of the revolver and $11.9 million of its term loan.

For Intermediate Holdings, financing activities used cash of $22.2 million for the six months ended February 24, 2007 compared to cash used of $6.3 million for the six months ended February 25, 2006. During the six months ended February 24, 2007, the Company paid down $9.3 million of the revolver and $11.9 million of its term loan.

For AAC, financing activities used cash of $22.2 million for the six months ended February 24, 2007 compared to cash used of $13.5 million for the six months ended February 25, 2006. . During the six months ended February 24, 2007, the Company paid down $9.3 million of the revolver and $11.9 million of its term loan.

Capital Resources. In connection with the Merger, AAC entered into its existing $195.0 million senior secured credit facility and issued $150.0 million of the 8.25% senior subordinated notes. Certain provisions of these financing arrangements are described below.

The senior secured credit facility, as amended, provides a $155.0 million term loan, maturing in 2011, and up to $40.0 million in available revolving loan borrowings, maturing in 2010. As of February 24, 2007, $0 was outstanding on the revolving loan and we had commitments for $2.3 million on letters of credit outstanding. The senior secured credit facility, as amended, imposes certain restrictions on AAC, including restrictions on its ability to incur indebtedness, pay dividends, make investments, grant liens, sell assets and engage in certain other activities. In addition, the senior secured credit facility, as amended, contains financial covenants and maintenance tests, including a minimum interest coverage test and a maximum total leverage test, and restrictive covenants, including restrictions on its ability to make capital expenditures. The senior secured credit facility, as amended, is secured by substantially all of the assets of AAC, is guaranteed by and secured by the assets of some of its existing and future domestic subsidiaries, if any, and by a pledge of all of the capital stock of some of its existing and future domestic subsidiaries, if any. The senior secured credit facility, as amended, is also guaranteed by AAC Holding Corp.

AAC is required to pay cash interest on the 8.25% notes semi-annually in arrears on April 1 and October 1 of each year. The 8.25% notes have no scheduled amortization and mature on April 1, 2012. The indenture governing the 8.25% notes contains certain restrictions on AAC, including restrictions on its ability to incur indebtedness, pay dividends, make investments, grant liens, sell its assets and engage in certain other activities. The 8.25% notes are guaranteed by certain of AAC’s existing and future domestic subsidiaries.

In November 2004, Intermediate Holdings issued $89.3 million (net proceeds) of 10.25% senior discount notes due 2012. The notes accrete to $131.5 million aggregate principal amount at maturity. Interest accrues on the notes in the form of an increase in the accreted value of such notes prior to October 1, 2008. Thereafter, cash interest on the notes will accrue and be payable semiannually in arrears on April 1 and October 1 of each year, commencing April 1, 2009, at a rate of 10.25% per annum. The notes are Intermediate Holdings’ unsecured obligation and rank equally with all of its future senior obligations and senior to its future subordinated indebtedness. The 10.25% notes are effectively subordinated to Intermediate Holdings’ future secured indebtedness to the extent of the assets securing that

indebtedness and are structurally subordinated to all indebtedness and other obligations of Intermediate Holdings’ subsidiaries, including AAC.

In June 2006, Parent Holdings issued $150.0 million 12.75% senior PIK notes. Interest accrued on these notes at 12.75% per annum through February 23, 2007. As of February 24, 2007, the rate at which interest accrues increased to 14.75% per annum. The first interest payment on the notes occurred on October 1, 2006. Through April 1, 2011, interest on the notes will be payable in the form of additional notes semi-annually in arrears on April 1 and October 1. On October 1, 2011, and thereafter, interest will be payable in cash semi-annually in arrears on April 1 and October 1. The notes mature on October 1, 2012. At maturity, we are required to repay the notes at a repayment price of 103.188% of the aggregate principal amount thereof, plus accrued and unpaid interest and special interest, if any, to the maturity date. The notes are Parent Holdings’ unsecured obligation and rank equally with all of its future senior obligations and senior to its future subordinated indebtedness. The notes are effectively subordinated to Parent Holdings’ future secured indebtedness to the extent of the assets securing that indebtedness and are structurally subordinated to all indebtedness and other obligations of Parent Holdings’ subsidiaries, including Intermediate Holdings and AAC.

We are currently in compliance with financial covenants in all of the agreements governing our outstanding indebtedness.

We have a significant amount of indebtedness. On February 24, 2007, Parent Holdings had total indebtedness of $530.5 million (of which $164.1 million was 12.75% senior PIK notes, $112.3 million was 10.25% senior discount notes, $150.0 million was 8.25% senior subordinated notes, $94.6 million was indebtedness under the existing senior secured credit facility, $7.5 million was of our mandatory redeemable series A preferred stock and the balance of which consisted of AAC’s capital lease obligations and bank overdraft).

We expect that cash generated from operating activities and availability under the senior secured credit facility will be our principal sources of liquidity. Based on our current level of operations and anticipated cost savings and operational improvements, we believe our cash flow from operations, available cash and available borrowings under the senior secured credit facility will be adequate to meet our liquidity needs for at least the next twelve months.

Off Balance-Sheet Obligations

Gold Consignment Agreement. On March 25, 2004, we signed the First Amended and Restated Letter Agreement for Fee Consignment and Purchase of Gold with The Bank of Nova Scotia. Under this agreement, we have an ability to have on consignment gold with aggregate value less than or equal to the lowest of: (i) the dollar value of 27,000 troy ounces of gold, (ii) $14.2 million and (iii) a borrowing base, calculated based on a percentage of the value of gold held at our facilities and other approved locations, as specified by the agreement. Under the terms of this arrangement, we do not own the consigned gold nor do we have risk of loss related to price variance on such inventory until we pay The Bank of Nova Scotia for quantities purchased. Accordingly, we do not reflect the value of consigned gold in our inventory, nor do we reflect the corresponding liability for financial statement purposes. As of February 24, 2007, we held 3,482 ounces of consigned gold with a value of $2.4 million.

The agreement can be terminated by either us or The Bank of Nova Scotia with 60 days prior written notice to the other party.

Seasonality

The seasonal nature of our various businesses tends to be tempered by our broad product mix. Class ring sales are highest during October through December, with most orders made for delivery to students before the winter holiday season. Graduation product sales are predominantly made during February through April prior to the April through June graduation season. Yearbook sales are highest during the months of April through June, as yearbooks are typically shipped prior to each school’s summer break. Our recognition and affinity product line sales are also seasonal. The majority of our achievement publications are shipped in August of each year. The remaining recognition and affinity product line sales are highest during the winter holiday season and in the period leading up to Mother’s Day.

As a result of the foregoing, we have experienced operating losses during our first and fourth fiscal quarters, which include the beginning of the school year and the summer months when school is not in session, thus reducing related shipment of products. In addition, our working capital requirements tend to exceed our operating cash flows from May through September.

Recent Accounting Pronouncements

In July 2006, the Financial Accounting Standards Board (“FASB”) FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes” (“FIN 48”), which prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on derecognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The accounting provisions of FIN 48 will be effective for us beginning with our fiscal year 2008. We are currently evaluating the impact this standard will have on our financial position and results of operations.

In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“FAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. FAS 157 applies under other accounting pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of FAS 157 are effective for us with our fiscal year 2009. We are currently evaluating the impact this standard will have on our financial position and results of operations.

In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132 (R)” (“FAS 158”). FAS 158 requires the recognition of an asset for a plan’s overfunded status or a liability for a plan’s underfunded status in the statement of financial position, measurement of the funded status of a plan as of the date of its year-end statement of financial position and recognition for changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur as a component of other comprehensive income. The provisions of FAS 158 will be effective for us beginning with our fiscal year 2008. We are currently evaluating the impact this standard will have on our financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities—Including an amendment of FASB Statement No. 115” (“FAS 159”), which permits entities to choose to measure many financial instruments and certain other items at fair value. The accounting provisions of FAS 159 are effective for us beginning with our fiscal year 2008. We are currently evaluating the impact this standard will have on our financial position and results of operations.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rate Risk. We have exposure to market risk relating to changes in interest rates on our variable rate debt. Our policy is to manage interest rate exposure through the use of a combination of fixed and floating rate debt instruments. Our senior secured credit facility (revolver and term loan) and existing gold consignment agreement are variable rate arrangements. The interest rates are based on a floating benchmark rate (such as LIBOR or the Federal Funds rate) plus a fixed spread. Our other financial instruments subject to interest rate risk consist of long-term debt and notional amount under the gold consignment agreement. With respect to the senior secured credit facility, which bears interest at variable rates, each quarter point change in interest rates would result in a $0.4 million change in annual interest expense, assuming the entire revolving loan was drawn.

Semi-Precious Stones. We purchase the majority of our semi-precious stones from a single supplier in Germany. We believe that all of our major competitors purchase their semi-precious stones from this same supplier. Each ten percent change in the Euro exchange rate would result in a $0.5 million change in cost of goods sold, assuming stone purchase levels approximate the levels of fiscal 2006. In order to hedge market risk, we have from time-to-time purchased forward foreign currency exchange contracts. During the three and six months ended February 24, 2007 and fiscal 2006, we did not purchase any forward foreign currency contracts and did not have any such contracts outstanding.

Gold. We purchase a majority of our gold from The Bank of Nova Scotia through our existing gold consignment agreement described above. We pay for consigned gold as our related products are shipped to customers. Each ten percent change in the price of gold would result in a $2.3 million change in cost of goods sold, assuming gold purchase levels approximate the levels in fiscal 2006.

ITEM 4. CONTROLS AND PROCEDURES

As of the date of this report, we carried out an evaluation, under the supervision and with the participation of our management, including our President and Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the year. The evaluation was conducted based on the framework established by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control — Integrated Framework. Based upon that evaluation, our President and Chief Executive Officer and our Chief Financial Officer concluded that these disclosure controls and procedures are effective.

Additionally, our President and Chief Executive Officer and Chief Financial Officer determined, as of the date of this report that during the second quarter of fiscal 2007 there was no change in our internal control over financial reporting that has materially affected, or is likely to materially affect, our internal control over financial reporting.

DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Although management believes that the expectations reflected in such forward looking statements are based upon reasonable assumptions, the Company can give no assurance that these expectations will be achieved. Any change in or adverse development, including the following factors, may impact the achievement of results in or accuracy of forward-looking statements: the price of gold and precious, semiprecious and synthetic stones; the Company’s access to students and consumers in schools; the seasonality of the Company’s business; regulatory and accounting rules; the Company’s relationship with its independent sales representatives; fashion and demographic trends; general economic, business, and market trends and events, especially during peak buying seasons for the Company’s products; the Company’s ability to respond to customer change orders and delivery schedules; development and operating costs; competitive pricing changes; successful completion of management initiatives designed to achieve operating efficiencies; the Company’s cash flows; and the Company’s ability to draw down funds under its current bank financings and to enter into new bank financings. The foregoing factors are not exhaustive. New factors may emerge or changes may occur that impact the Company’s operations and businesses. Forward-looking statements herein are expressly qualified on the foregoing or such other factors as may be applicable.

You should consider the risks described in the Company’s Form 10-K filed with the Securities and Exchange Commission on November 22, 2006 as you review this quarterly report.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

In the normal course of business, we may be a party to lawsuits and administrative proceedings before various courts and government agencies. These lawsuits and proceedings may involve personal injury, contractual issues and other matters. We cannot predict the ultimate outcome of any pending or threatened litigation or of actual claims or possible claims. However, we believe resulting liabilities, if any, will not have a material adverse impact upon our results of operations, financial condition or cash flows.

On July 17, 2006, in the 128^th Judicial District Court of Orange County, Texas a Seventh Amended Petition (naming over 100 defendants) was filed by the estate of John Estrada and Nancy Estrada adding Taylor Publishing Company back into a long outstanding multi-party toxic tort suit. Taylor was originally brought into this lawsuit in September of 2004 when Mr. Estrada, a former Taylor-San Angelo employee and his wife, filed their Fifth Amended Petition seeking damages for personal injuries allegedly caused by Mr. Estrada’s exposure to benzene in the workplace. On June 21, 2005, the Estrada’s dismissed their case against Taylor, without prejudice, without any payment or other compensation by Taylor. Mr. Estrada is now deceased. This Seventh Amended Petition now seeks damages for his alleged wrongful death and seeks to avoid the Workers’ Compensation bar to employer liability by pleading gross negligence on the part of Taylor. Taylor filed a timely answer to the lawsuit. A settlement with prejudice has been reached and the settlement documents are currently being prepared for execution. The settlement amount is less than $50,000 and contains a confidentiality and non disclosure provision.

ITEM 6. EXHIBITS
(a) Exhibits


EXHIBIT
NUMBER		DESIGNATION
31.1		CEO Certification Accompanying Period Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		CFO Certification Accompanying Period Report Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		CEO Certification Accompanying Period Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

32.2		CFO Certification Accompanying Period Report Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002


	AMERICAN ACHIEVEMENT GROUP HOLDING CORP. AAC GROUP HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION
	By:	/s/ DONALD J. PERCENTI
		Donald J. Percenti
		CHIEF EXECUTIVE OFFICER (principal executive officer)



	By:	/s/ SHERICE P. BENCH
		Sherice P. Bench
		CHIEF FINANCIAL OFFICER (principal financial officer)

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	For the three months ended						For the six months ended
	February 24,			February 25,			February 24,			February 25,
	2007			2006			2007			2006
Net sales	$	57,677		$	59,196		$	110,435		$	117,569
Cost of sales		21,706			21,731			49,240			46,770

Gross profit		35,971			37,465			61,195			70,799
Selling, general and administrative expenses		31,692			31,400			60,612			64,898

Operating income		4,279			6,065			583			5,901
Interest expense, net of interest income		14,350			8,481			28,971			17,032

Loss before benefit for income taxes		(10,071	)		(2,416	)		(28,388	)		(11,131	)
Benefit for income taxes		(3,451	)		(1,069	)		(10,110	)		(4,811	)

Net loss	$	(6,620	)	$	(1,347	)	$	(18,278	)	$	(6,320	)