~~Table~~UNITED STATES ofSECURITIES ~~Contents~~AND EXCHANGE COMMISSION

~~UNITED STATES SECURITIES AND EXCHANGE COMMISSION~~WASHINGTON, D.C. 20549

~~WASHINGTON, D.C. 20549~~FORM 10-Q

~~FORM~~þ ~~10-Q~~ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

oFOR THE QUARTERLY ~~REPORT~~PERIOD ~~PURSUANT~~ENDED TOMay ~~SECTION~~30, ~~13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~2009

~~FOR THE QUARTERLY PERIOD ENDED May 27, 2006~~ OR

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

oCOMMISSION FILE ~~TRANSITION~~NUMBERS ~~REPORT~~333-121479 ~~PURSUANT~~AND ~~TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934~~333-84294

~~COMMISSION FILE NUMBER 333-121479~~AAC ~~COMMISSION~~GROUP ~~FILE~~HOLDING ~~NUMBER 333-84294~~CORP.

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

(Exact name of registrant as specified in its charter)

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


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

7211 CIRCLE S ROAD ~~AUSTIN, TEXAS 78745 (Address of principal executive offices) (Zip Code)~~

~~REGISTRANTS’ TELEPHONE NUMBER~~AUSTIN, ~~INCLUDING AREA CODE (512)~~ TEXAS ~~444-0571~~78745

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

~~Indicate~~Registrants’ Telephone ~~by check mark whether the registrant is a large accelerated filer~~Number, anIncluding ~~accelerated~~Area ~~filer, or~~Code ~~a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.~~ (~~Check one~~512): 444-0571

~~Large~~Indicate by ~~accelerated~~check ~~filer~~mark owhether ~~Accelerated~~the ~~filer~~registrants o(1) have ~~Non-accelerated~~filed ~~filer~~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 ⁭ No þ. Although the registrants are not subject to the filing requirements of Section 13 or 15(d) of the Exchange Act, the registrants have filed all reports for the preceding 12 months.

Indicate by check mark whether the ~~registrants~~registrant ~~are~~has ~~shell~~submitted ~~companies~~electronically ~~(as~~and ~~defined~~posted inon its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule ~~12b~~ 405 of Regulation S-2T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the ~~Exchange~~registrant ~~Act~~was required to submit and post such files). Yes o⁭ No þ. ⁭

~~The number~~Indicate ofby ~~shares~~check ~~outstanding~~mark ofwhether ~~AAC~~the ~~Group~~registrant ~~Holding~~is ~~Corp.~~a aslarge ofaccelerated ~~May 27~~filer, ~~2006~~ ~~was 505,460 shares~~an ofaccelerated ~~common stock~~filer, ~~par~~a ~~value~~non-accelerated ~~$.01.~~filer, ~~The~~or ~~number~~a ofsmaller ~~shares~~reporting ~~outstanding~~company. ~~of American Achievement~~See ~~Corporation~~the asdefinitions of ~~May 27~~“large accelerated filer,” ~~2006~~“accelerated ~~was~~filer” ~~100~~and ~~shares~~“smaller reporting ofcompany” ~~common~~in ~~stock,~~Rule 12b-2 ~~par~~of ~~value~~the $Exchange Act.~~01.~~ (Check one):

~~FOR~~Large accelerated ~~THE QUARTERLY PERIOD ENDED MAY 27, 2006~~filer ~~INDEX~~⁭ Accelerated filer ⁭

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements and Notes
Condensed Consolidated Balance Sheets (unaudited) — As of May 27, 2006 and August 27, 2005		3
Condensed Consolidated Statements of Operations (unaudited) — For the Three Months Ended May 27, 2006 and For the Three Months Ended May 28, 2005		4
Condensed Consolidated Statements of Operations (unaudited) — For the Nine Months Ended May 27, 2006 and For the Nine Months Ended May 28, 2005		5
Condensed Consolidated Statements of Cash Flows (unaudited) — For the Nine Months Ended May 27, 2006 and For the Nine Months Ended May 28, 2005		6
Condensed Consolidated Statements of Stockholders’ Equity (unaudited) — For the Nine Months Ended May 27, 2006		7
Notes to Condensed Consolidated Financial Statements (unaudited)		8-20
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		21-32
Item 3. Quantitative and Qualitative Disclosures About Market Risk		33
Item 4. Controls and Procedures		34
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		35
Item 6. Exhibits		35
SIGNATURES		36
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

Non-accelerated filer þ(do not check if smaller reporting company) Smaller reporting company ⁭

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

~~This~~Number ~~Form 10-Q is a combined quarterly report being filed separately by two registrants: AAC Group~~of ~~Holding~~shares ~~Corp.~~outstanding ~~and~~of ~~American Achievement Corporation. Unless the context indicates otherwise, any reference in this report to “Group Holdings” refers to~~ AAC Group Holding Corp. ~~and~~as ~~any reference to “AAC” refers to American Achievement Corporation, the indirect wholly-owned operating subsidiary~~ of ~~Group~~ ~~Holdings.~~June ~~The “Company”~~30, ~~“we”,~~2009: ~~“us”,~~100 ~~and~~shares ~~“our” refer to AAC Group Holding Corp., together with American Achievement Corporation and its consolidated subsidiaries. Each Registrant hereto is filing on its own behalf all~~ of ~~the information contained in this quarterly report that relates to~~ ~~such~~common ~~Registrant~~stock. ~~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.~~

2Number of shares of American Achievement Corporation outstanding as of June 30, 2009: 100 shares of common stock.

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

~~AAC~~FOR ~~GROUP~~THE ~~HOLDING~~QUARTERLY ~~CORP. AMERICAN~~PERIOD ~~ACHIEVEMENT~~ENDED ~~CORPORATION~~ MAY 30, 2009

~~Condensed Consolidated Balance Sheets~~ INDEX

(In thousands) (unaudited)

	PAGE
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements and Notes
Condensed Consolidated Balance Sheets (unaudited) — As of May 30, 2009 and August 30, 2008	3
Condensed Consolidated Statements of Operations (unaudited) — For the Three and Nine Months Ended May 30, 2009 and the Three and Nine Months Ended May 31, 2008	5
Condensed Consolidated Statements of Cash Flows (unaudited) — For the Nine Months Ended May 30, 2009 and the Nine Months Ended May 31, 2008	7
Notes to Condensed Consolidated Financial Statements (unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	31
Item 4. Controls and Procedures	32

PART II. OTHER INFORMATION
Item 1. Legal Proceedings	32
Item 6. Exhibits	33

SIGNATURES	34

Certificate of Amendment of Certificate of Incorporation of AAC Group Holding Corp.
Certificate of Amendment of Certificate of Incorporation of American Achievement Corporation
Certification of CEO Pursuant to Section 302
Certification of CFO Pursuant to Section 302
Certification of CEO Pursuant to Section 906
Certification of CFO Pursuant to Section 906

	AAC Group Holding Corp.						American Achievement Corporation
	May 27, 2006			August 27, 2005			May 27, 2006			August 27, 2005
ASSETS
Current assets:
Cash and cash equivalents	$	6,300		$	4,324		$	5,783		$	4,093
Accounts receivable, net		71,609			39,803			71,609			39,803
Inventories, net		25,353			22,221			25,353			22,221
Deferred tax asset		6,760			6,760			6,760			6,760
Prepaid expenses and other current assets, net		21,476			22,785			21,476			22,785
Total current assets		131,498			95,893			130,981			95,662
Property, plant and equipment, net		76,482			75,943			76,482			75,943
Goodwill		184,565			184,026			184,565			184,026
Other intangible assets, net		143,165			153,265			140,092			150,112
Other assets		4,087			3,809			4,087			3,809
Total assets	$	539,797		$	512,936		$	536,207		$	509,552
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Bank overdraft	$	5,025		$	3,730		$	5,025		$	3,730
Accounts payable		12,764			13,959			12,764			13,959
Customer deposits		38,985			17,762			38,985			17,762
Accrued expenses		38,469			26,263			38,458			26,252
Deferred revenue		623			1,004			623			1,004
Accrued interest		3,726			7,370			3,726			7,370
Current portion of long-term debt		1,090			1,409			1,090			1,409
Total current liabilities		100,682			71,497			100,671			71,486
Long-term debt, net of current portion		367,363			384,367			255,693			287,711
Deferred tax liabilities		31,826			24,877			37,264			27,748
Other long-term liabilities		6,669			8,377			6,240			8,344
Total liabilities		506,540			489,118			399,868			395,289
Commitments and contingencies
Stockholders’ equity:
Common stock		5			5			—			—
Additional paid-in capital		16,491			16,491			109,046			102,046
Accumulated earnings		17,717			8,278			28,249			13,173
Accumulated other comprehensive loss		(956	)		(956	)		(956	)		(956	)
Total stockholders’ equity		33,257			23,818			136,339			114,263
Total liabilities and stockholders’ equity	$	539,797		$	512,936		$	536,207		$	509,552

Explanatory Note

~~The~~This combined ~~accompanying~~Form ~~notes~~10-Q ~~are~~is anseparately ~~integral~~filed ~~part~~by AAC Group Holding Corp. and American Achievement Corporation. Each Registrant hereto is filing on its own behalf all of ~~these~~the ~~condensed~~information ~~consolidated~~contained ~~financial~~in ~~statements~~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.

3Unless the context indicates otherwise, any reference in this report to “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 AAC Group Holding Corp. together with American Achievement Corporation.

~~Table of Contents~~2

~~AAC~~Table ~~GROUP~~of ~~HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION~~ Contents

~~Condensed~~AAC GROUP ~~Consolidated~~HOLDING ~~Statements of Operations~~ CORP.

~~(In~~Condensed ~~thousands) (unaudited)~~Consolidated Balance Sheets

	AAC Group Holding Corp.				American Achievement Corporation
	For the three				For the three
	months ended				months ended
	May 27,		May 28,		May 27,		May 28,
	2006		2005		2006		2005
Net sales	$	140,164	$	137,123	$	140,164	$	137,123
Cost of sales		56,566		56,527		56,566		56,527
Gross profit		83,598		80,596		83,598		80,596
Selling, general and administrative expenses		46,760		43,928		46,760		43,928
Operating income		36,838		36,668		36,838		36,668
Interest expense		8,910		8,776		5,980		6,309
Income before income taxes		27,928		27,892		30,858		30,359
Provision for income taxes		12,169		12,299		12,248		12,144
Net income	$	15,759	$	15,593	$	18,610	$	18,215

(unaudited)

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

	Intermediate Holdings
	May 30, 2009			August 30, 2008
	(Dollars in thousands)
ASSETS
Cash and cash equivalents	$	15,332		$	9,746
Accounts receivable, net of allowances		75,648			36,920
Inventories		18,295			27,411
Deferred tax assets		4,222			12,196
Prepaid expenses and other current assets, net		13,221			19,395
Total current assets		126,718			105,668

Property, plant and equipment, net		61,862			68,477
Goodwill		171,323			171,073
Other intangible assets, net		89,464			97,000
Other assets, net		13,421			12,555
Total assets	$	462,788		$	454,773

LIABILITIES AND STOCKHOLDER'S EQUITY
Book overdraft	$	110		$	61
Accounts payable		10,438			10,900
Customer deposits		25,885			8,102
Accrued expenses		27,705			16,863
Deferred revenue		720			2,750
Accrued interest		4,369			5,722
Current portion of long-term debt		3,123			2,908
Total current liabilities		72,350			47,306

Long-term debt, net of current portion		325,254			352,998
Deferred tax liabilities		48,533			21,595
Other long-term liabilities		2,692			2,703
Total liabilities		448,829			424,602

Commitments and contingencies (Note 7)

Stockholder's equity:
Common stock		-			-
Additional (distributions in excess of) paid-in capital		(2,847	)		24,309
Accumulated earnings		14,317			3,153
Accumulated other comprehensive income		2,489			2,709
Total stockholder's equity		13,959			30,171

Total liabilities and stockholder's equity	$	462,788		$	454,773

4The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~3

~~AAC~~Table ~~GROUP~~of ~~HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION~~ Contents

~~Condensed Consolidated Statements of Operations~~AMERICAN ACHIEVEMENT CORPORATION

~~(In thousands)~~Condensed ~~(unaudited)~~Consolidated Balance Sheets

	AAC Group Holding Corp.				American Achievement Corporation
	For the nine				For the nine
	months ended				months ended
	May 27,		May 28,		May 27,		May 28,
	2006		2005		2006		2005
Net sales	$	257,733	$	259,228	$	257,733	$	259,228
Cost of sales		103,336		106,993		103,336		106,993
Gross profit		154,397		152,235		154,397		152,235
Selling, general and administrative expenses		111,658		115,208		111,658		115,208
Operating income		42,739		37,027		42,739		37,027
Interest expense		25,942		23,066		17,738		17,797
Income before income taxes		16,797		13,961		25,001		19,230
Provision for income taxes		7,358		6,082		9,925		7,692
Net income	$	9,439	$	7,879	$	15,076	$	11,538

(unaudited)

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

	AAC
	May 30, 2009		August 30, 2008
	(Dollars in thousands)
ASSETS
Cash and cash equivalents	$	14,765	$	9,735
Accounts receivable, net of allowances		75,648		36,920
Inventories		18,295		27,411
Deferred tax assets		4,555		14,920
Prepaid expenses and other current assets, net		13,221		18,839
Total current assets		126,484		107,825

Property, plant and equipment, net		61,862		68,477
Goodwill		171,323		171,073
Other intangible assets, net		89,464		97,000
Other assets, net		11,939		10,739
Total assets	$	461,072	$	455,114

LIABILITIES AND STOCKHOLDER'S EQUITY
Book overdraft	$	110	$	61
Accounts payable		10,438		10,900
Customer deposits		25,885		8,102
Accrued expenses		27,836		16,852
Deferred revenue		720		2,750
Accrued interest		2,122		5,722
Current portion of long-term debt		3,123		2,908
Total current liabilities		70,234		47,295

Long-term debt, net of current portion		193,754		222,577
Deferred tax liabilities		66,909		39,580
Other long-term liabilities		2,659		2,675
Total liabilities		333,556		312,127

Commitments and contingencies (Note 7)

Stockholder's equity:
Common stock		-		-
Additional paid-in capital		75,316		109,211
Accumulated earnings		49,711		31,067
Accumulated other comprehensive income		2,489		2,709
Total stockholder's equity		127,516		142,987

Total liabilities and stockholder's equity	$	461,072	$	455,114

5The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~4

~~AAC~~Table ~~GROUP~~of ~~HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION~~ Contents

~~Condensed~~AAC GROUP ~~Consolidated~~HOLDING ~~Statements of Cash Flows~~ CORP.

~~(In~~Condensed ~~thousands) (unaudited)~~Consolidated Statements of Operations

	AAC Group Holding Corp.						American Achievement Corporation
	For the nine months ended						For the nine months ended
	May 27, 2006			May 28, 2005			May 27, 2006			May 28, 2005
Cash flows from operating activities:
Net income	$	9,439		$	7,879		$	15,076		$	11,538
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		19,132			18,975			19,132			18,975
Deferred income taxes		6,949			5,900			9,516			7,510
Amortization of debt discount and deferred financing fees		8,985			6,422			1,122			1,153
Recovery for doubtful accounts		331			574			331			574
Loss on sale of plant, property and equipment		90			—			90			—
Changes in assets and liabilities:
Accounts receivable		(32,137	)		(28,834	)		(32,137	)		(28,834	)
Inventories, net		(3,132	)		299			(3,132	)		299
Prepaid expenses and other current assets, net		1,324			3,621			1,324			3,621
Other assets		(817	)		(606	)		(817	)		(606	)
Customer deposits		21,223			18,054			21,223			18,054
Deferred revenue		(381	)		(5,293	)		(381	)		(5,293	)
Accounts payable, accrued expenses, and other long-term liabilities		5,659			(326	)		5,263			(345	)
Net cash provided by operating activities		36,665			26,665			36,610			26,646
Cash flows from investing activities:
Purchases of property, plant and equipment		(10,878	)		(9,755	)		(10,878	)		(9,755	)
Net cash used in investing activities		(10,878	)		(9,755	)		(10,878	)		(9,755	)
Cash flows from financing activities:
Payments on revolver		(25,250	)		(28,950	)		(25,250	)		(28,950	)
Proceeds from credit facility revolver		25,250			33,450			25,250			33,450
Payments on term loan		(32,337	)		(15,140	)		(32,337	)		(15,140	)
Proceeds from stock issuance		7,500			—			—			—
Deferred financing fees		(269	)		(3,508	)		—			—
Capital contribution from Group Holdings		—			—			7,000			—
Redemption of 11.625% senior notes		—			(6,075	)		—			(6,075	)
Proceeds from 10.25% notes		—			89,269			—			—
Distribution to stockholders		—			(85,550	)		—			—
Change in bank overdraft		1,295			534			1,295			534
Net cash used in financing activities		(23,811	)		(15,970	)		(24,042	)		(16,181	)
Net increase in cash and cash equivalents		1,976			940			1,690			710
Cash and cash equivalents, beginning of period		4,324			3,038			4,093			3,038
Cash and cash equivalents, end of period	$	6,300		$	3,978		$	5,783		$	3,748
Supplemental disclosure
Cash paid during the period for:
Interest	$	20,347		$	20,939		$	20,347		$	20,939
Income taxes	$	368		$	199		$	368		$	199

(unaudited)

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

	Intermediate Holdings
	For the three months ended					For the nine months ended
	May 30, 2009		May 31, 2008			May 30, 2009		May 31, 2008
	(Dollars in thousands)

Net sales	$	144,842	$	157,142		$	250,169	$	269,710
Cost of sales		55,353		62,432			105,511		114,614
Gross profit		89,489		94,710			144,658		155,096
Selling, general and administrative expenses		44,256		50,094			101,775		111,184
Operating income		45,233		44,616			42,883		43,912
Interest expense, net		7,497		8,469			22,783		24,990
Income from continuing operations before income taxes		37,736		36,147			20,100		18,922
Provision for income taxes		16,574		16,846			8,936		9,306
Income from continuing operations		21,162		19,301			11,164		9,616
Discontinued operations:
Loss from discontinued operations before income taxes		-		(72	)		-		(7,200	)
Benefit for income taxes		-		(28	)		-		(2,815	)
Loss from discontinued operations		-		(44	)		-		(4,385	)
Net income	$	21,162	$	19,257		$	11,164	$	5,231

6The accompanying notes are an integral part of these condensed consolidated financial statements.

~~Table of Contents~~5

~~AAC~~Table ~~GROUP~~of ~~HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION~~ Contents

~~Condensed Consolidated Statements of Stockholders’ Equity~~AMERICAN ACHIEVEMENT CORPORATION

~~(In~~Condensed Consolidated ~~thousands,~~Statements ~~except~~of ~~share data) (unaudited)~~Operations

									Accumulated
					Additional				other
	Common Stock				paid-in		Accumulated		comprehensive
	Shares		Amount		capital		earnings		income (loss)			Total
AAC Group Holding Corp.	(Dollars in thousands)
Balance, August 27, 2005		505,460	$	5	$	16,491	$	8,278	$	(956	)	$	23,818
Net income		—		—		—		9,439		—			9,439
Balance, May 27, 2006		505,460	$	5	$	16,491	$	17,717	$	(956	)	$	33,257

(unaudited)

											Accumulate
	AAC
						Additional					Other
	For the three months ended					For the nine months ended
	Common Stock					paid-in		Accumulated			comprehensive
	May 30, 2009		May 31, 2008			May 30, 2009		May 31, 2008
	Shares		Amount			capital		earnings			income (loss)			Total
	(Dollars in thousands)
American Achievement Corporation	(Dollars in thousands)
Net sales	$	144,842	$	157,142		$	250,169	$	269,710
Balance, August 27, 2005		100	$	—		$	102,046	$	13,173		$	(956	)	$	114,263
Cost of sales		55,353		62,432			105,511		114,614
Capital contribution from Group Holdings		—		—			7,000		—			—			7,000
Gross profit		89,489		94,710			144,658		155,096
Net income		—		—			—		15,076			—			15,076
Selling, general and administrative expenses		44,256		50,094			101,775		111,184
Balance, May 27, 2006		100	$	—		$	109,046	$	28,249		$	(956	)	$	136,339
Operating income		45,233		44,616			42,883		43,912
Interest expense, net		4,022		5,022			12,390		15,303
Income from continuing operations before income taxes		41,211		39,594			30,493		28,609
Provision for income taxes		15,969		16,012			11,849		11,664
Income from continuing operations		25,242		23,582			18,644		16,945
Discontinued operations:
Loss from discontinued operations before income taxes		-		(72	)		-		(7,200	)
Benefit for income taxes		-		(28	)		-		(2,815	)
Loss from discontinued operations		-		(44	)		-		(4,385	)
Net income	$	25,242	$	23,538		$	18,644	$	12,560

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

7 6

Table of Contents

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

~~Notes to~~ Condensed Consolidated ~~Financial~~ Statements of Cash Flows

(~~Dollars in thousands, unless otherwise stated) (~~unaudited)

1. Summary of Significant Accounting Policies

	Intermediate Holdings
	For the nine months ended
	May 30, 2009			May 31, 2008
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	11,164		$	5,231
Adjustments to reconcile net income to net cash provided by operating activities:
Other charges		-			5,542
Depreciation and amortization		19,189			18,393
Deferred income taxes		7,493			5,033
Amortization of deferred financing fees		1,502			1,481
Accretion of interest on 10.25% senior discount notes		1,079			9,369
Loss (gain) on disposal of property, plant and equipment		8			(12	)
Allowance for doubtful accounts		234			736
Changes in assets and liabilities:
Accounts receivable		(38,962	)		(33,003	)
Inventories		9,154			10,539
Prepaid expenses and other current assets, net		6,174			2,750
Other assets, net		(1,591	)		2,198
Customer deposits		17,783			13,639
Deferred revenue		(2,030	)		(3,964	)
Accounts payable, accrued expenses, accrued interest and other long-term liabilities		8,338			8,091
Net cash provided by operating activities		39,535			46,023
Cash flows from investing activities:
Purchases of property, plant and equipment		(4,311	)		(11,037	)
Proceeds from sales of property, plant and equipment		-			61
Business acquisition, purchase price adjustment		(83	)		-
Net cash used in investing activities		(4,394	)		(10,976	)
Cash flows from financing activities:
Payments on revolving credit facility		(6,000	)		(21,905	)
Proceeds from revolving credit facility		6,000			14,100
Payments on term loan		(28,608	)		(11,395	)
Deferred financing fees		(1,396	)		-
Contribution of capital		400			-
Change in book overdraft		49			(3,419	)
Net cash used in financing activities		(29,555	)		(22,619	)
Net increase in cash and cash equivalents		5,586			12,428
Cash and cash equivalents, beginning of period		9,746			1,168
Cash and cash equivalents, end of period	$	15,332		$	13,596

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	21,575		$	17,475
Income taxes	$	945		$	914

Supplemental non-cash investing and financing activities disclosure:
Additions to property, plant and equipment included in accounts payable	$	286		$	74
Increase in goodwill for purchase price adjustment included in accounts payable and other long-term liabilities	$	167		$	-
Non-cash distribution of net operating loss deferred tax asset to American Achievement Group Holding Corp.	$	27,556		$	-

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

The unaudited condensed consolidated financial statements of AAC Group Holding Corp. (“Group Holdings”) include the accounts of its wholly-owned subsidiary, American Achievement Corporation (“AAC,” a separate public reporting company, together with Group Holdings, the “Company”). Group 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 Group Holdings. Following the exchange, AAC Holding Corp. became a wholly-owned subsidiary of Group Holdings. 7

OnTable ~~November 16, 2004, Group 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. Group Holdings is the sole obligor of these notes. The net proceeds of this offering were used as a distribution to stockholders through the repurchase of shares of Group Holdings’ common stock from its stockholders. On January 18, 2006, Group Holdings entered into a Preferred Stock Purchase Agreement with an investor pursuant to which Group Holdings sold shares of its Series A Mandatory Redeemable Preferred Stock (“Series A Preferred Stock”). In connection with this transaction, Group 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 Group 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 Group Holdings. Contents

~~Other than the 10.25% Notes, the Series A Preferred Stock, related deferred~~AMERICAN ~~issuance~~ACHIEVEMENT costs and associated accrued liabilities, and related interest expense, net of taxes, all other assets, liabilities, income, expenses and cash flows presented for all periods represent those of Group Holdings’ wholly-owned indirect subsidiary AAC and the direct and indirect subsidiaries of AAC. Group Holdings’ only direct subsidiary is AAC Holding Corp., whose sole asset is AAC. All significant intercompany accounts and transactions have been eliminated in consolidation. AAC and Group Holdings are treated as entities under common control and therefore, the statements of operations and cash flows presented for Group Holdings combine the results of AAC to the beginning of the period presented. CORPORATION

~~On March 25, 2004, AAC Acquisition Corp., a wholly owned subsidiary of AAC Holding Corp., merged~~Condensed ~~with~~Consolidated ~~and~~Statements ~~into AAC (the “Merger”), with AAC continuing as the surviving corporation and a wholly-owned subsidiary~~ of ~~AAC~~Cash 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 $150.0 million aggregate principal amount of AAC’s 8.25% senior subordinated notes due 2012 (the “8.25% Notes”). Flows

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~~unaudited) 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 nine months ended May 27, 2006 are not necessarily indicative

	AAC
	For the nine months ended
	May 30, 2009			May 31, 2008
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	18,644		$	12,560
Adjustments to reconcile net income to net cash provided by operating activities:
Other charges		-			5,542
Depreciation and amortization		19,189			18,393
Deferred income taxes		10,275			7,391
Amortization of deferred financing fees		1,168			1,147
Loss (gain) on disposal of property, plant and equipment		8			(12	)
Allowance for doubtful accounts		234			736
Changes in assets and liabilities:
Accounts receivable		(38,962	)		(33,003	)
Inventories		9,154			10,539
Prepaid expenses and other current assets, net		5,618			2,750
Other assets, net		(1,591	)		2,198
Customer deposits		17,783			13,639
Deferred revenue		(2,030	)		(3,964	)
Accounts payable, accrued expenses, accrued interest and other long-term liabilities		6,228			8,091
Net cash provided by operating activities		45,718			46,007
Cash flows from investing activities:
Purchases of property, plant and equipment		(4,311	)		(11,037	)
Proceeds from sales of property, plant and equipment		-			61
Business acquisition, purchase price adjustment		(83	)		-
Net cash used in investing activities		(4,394	)		(10,976	)
Cash flows from financing activities:
Payments on revolving credit facility		(6,000	)		(21,905	)
Proceeds from revolving credit facility		6,000			14,100
Payments on term loan		(28,608	)		(11,395	)
Deferred financing fees		(1,396	)		-
Distribution to Intermediate Holdings		(6,739	)		-
Contribution of capital		400			-
Change in book overdraft		49			(3,419	)
Net cash used in financing activities		(36,294	)		(22,619	)
Net increase in cash and cash equivalents		5,030			12,412
Cash and cash equivalents, beginning of period		9,735			620
Cash and cash equivalents, end of period	$	14,765		$	13,032

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest	$	14,836		$	17,475
Income taxes	$	945		$	914
Supplemental non-cash investing and financing activities disclosure:
Additions to property, plant and equipment included in accounts payable	$	286		$	74
Increase in goodwill for purchase price adjustment included in accounts payable and other long-term liabilities	$	167		$	-
Non-cash distribution of net operating loss deferred tax asset to Intermediate Holdings	$	27,556		$	-

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

~~AAC GROUP HOLDING CORP. AMERICAN ACHIEVEMENT CORPORATION Notes to Condensed Consolidated Financial Statements — (Continued) (Dollars in thousands, unless otherwise stated) (unaudited)~~ 8

Table of the results that may be expected for the fiscal year ending August 26, 2006. 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 27, 2005 included in the Company’s Report on Form 10-K/A (File No. 333-84294 and 333-121479). Contents

~~Unless~~AAC GROUP ~~separately~~HOLDING ~~stated, the notes herein relate to both Group Holdings and AAC~~CORP.

~~The Company is a manufacturer and supplier of class rings, yearbooks and other graduation-related~~AMERICAN ~~scholastic~~ACHIEVEMENT ~~products~~CORPORATION 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 offices and primary manufacturing facilities are located in Austin and Dallas, Texas.

~~Use~~Notes ~~of Estimates~~to Condensed Consolidated Financial Statements

~~The preparation of financial statements in conformity with accounting principles generally accepted~~(Dollars 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 statementsthousands, asunless ~~well~~otherwise asstated) ~~the reported amounts of revenues and expenses during the reporting period. Actual results may differ from these estimates.~~

~~Stock-Based Compensation~~(unaudited)

~~In the first quarter of fiscal 2006, the Company adopted SFAS No~~1. ~~123~~ ~~(Revised~~Summary ~~2004), “Share-Based Payment: an Amendment~~ of ~~FASB~~Organization ~~Statement No. 123~~ and ~~95”~~Significant ~~(“FAS 123R”). FAS 123R sets accounting~~Accounting requirements for share-based compensation to employees, requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation issued to employees and disallows the use of the intrinsic value method of accounting for stock compensation, which the Company previously followed. The adoption of FAS 123R did not have an impact on the financial statements since the Company does not currently have any stock-based compensation plans. Policies

~~2. Comprehensive Income (Loss)~~ Organization

~~Unrecognized~~The consolidated ~~losses~~financial onstatements ~~accrued~~of ~~minimum~~AAC ~~pension~~Group ~~liabilities~~Holding ~~are~~Corp. ~~included~~(“Intermediate Holdings”) ininclude ~~other~~the ~~comprehensive~~accounts of its indirect wholly-owned subsidiary, ~~income~~American Achievement Corporation (~~loss~~“AAC”)., ~~There~~each ~~were~~of nowhich ~~changes~~are inseparate ~~the~~public reporting ~~accrued~~companies. Intermediate ~~minimum~~Holdings ~~pension~~is ~~liabilities~~a ~~for~~wholly-owned subsidiary ~~the~~of ~~periods presented,~~American soAchievement ~~the~~Group ~~comprehensive~~Holding ~~income~~Corp. (~~loss~~“Parent Holdings”). ~~for~~On ~~all~~June ~~periods~~2, ~~presented~~2009, ~~was~~Intermediate ~~the~~Holdings ~~same~~became asa ~~the~~wholly-owned ~~reported~~subsidiary ~~net~~of ~~income~~American ~~(loss).~~Achievement Intermediate Holding Corp, a newly formed wholly-owned subsidiary of Parent Holdings.

3Intermediate Holdings and AAC are treated as entities under common control. Intermediate ~~Inventories~~Holdings and AAC together with their consolidated subsidiaries are referred to as the “Company.” Unless separately stated, ~~Net~~the notes herein relate to Intermediate Holdings and AAC.

~~AAC Group Holding Corp.~~Description ~~American~~of ~~Achievement Corporation~~ Business

	May 27, 2006			August 27, 2005
Raw materials	$	11,011		$	9,022
Work in process		9,315			6,306
Finished goods		5,961			7,098
Less — Reserves		(934	)		(205	)
	$	25,353		$	22,221

The Company is a manufacturer and supplier of class rings, yearbooks and other graduation-related scholastic products for the high school, college, junior high school and elementary school markets and of recognition products, such as letter jackets, and affinity jewelry designed to commemorate significant events, achievements and affiliations. The Company markets its products and services primarily in the United States and operates in four reporting segments: class rings, yearbooks, graduation products and other. The Company’s corporate office is located in Austin, Texas and its manufacturing facilities are located in Austin, Dallas, El Paso and Waco, Texas; Louisville, Kentucky; Manhattan, Kansas; and Juarez, Mexico.

9As described in Note 3, during the first quarter of fiscal year 2008, the Company decided to shut down its achievement publications segment. This segment sold achievement publications in the specialty directory publishing industry nationwide.

~~Table of Contents~~Consolidation

~~AAC~~The consolidated ~~GROUP~~financial ~~HOLDING~~statements ~~CORP. AMERICAN~~include ~~ACHIEVEMENT~~the ~~CORPORATION Notes~~accounts toof ~~Condensed~~the ~~Consolidated~~Company ~~Financial~~and ~~Statements~~its majority —owned ~~(Continued)~~subsidiaries. All significant intercompany accounts ~~(Dollars~~and intransactions ~~thousands,~~have ~~unless~~been ~~otherwise~~eliminated ~~stated) (unaudited)~~ in consolidation.

~~Cost~~Intermediate Holdings conducts all of ~~sales~~its ~~includes~~business ~~depreciation~~indirectly through AAC and ~~amortization~~its subsidiaries. The consolidated financial statements of ~~$2,354~~Intermediate ~~and~~Holdings include $2the accounts of its indirect wholly-owned subsidiary,~~213~~ ~~for~~AAC. ~~the~~Intermediate Holdings’ ~~three~~consolidated ~~months~~financial statements are substantially identical to AAC’s ~~ended~~consolidated ~~May 27~~financial statements, ~~2006~~with ~~and~~the ~~May 28,~~exception ~~2005,~~of ~~respectively~~the 10.25% ~~Cost~~senior discount ofnotes, ~~sales~~additional ~~includes~~interest ~~depreciation~~expense ~~and~~related to the 10.25% senior discount notes, amortization of ~~$7,075~~deferred ~~and~~financing $6costs,~~996~~ ~~for~~interest ~~the~~income ~~nine~~on ~~months~~its cash ~~ended~~balances ~~May 27,~~and ~~2006~~the ~~and~~related ~~May 28,~~income ~~2005, respectively~~taxes.

4The accompanying unaudited condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. ~~Prepaid~~Certain ~~Expenses~~information and ~~Other~~footnote ~~Current~~disclosures ~~Assets~~normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, ~~Net~~although the Company believes the disclosures are adequate to make the information presented not misleading. In the opinion of management, all 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 nine months ended May 30, 2009 are not necessarily indicative of the results that may be expected for the fiscal year ending August 29, 2009. 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 30, 2008 included in the Company’s Report on Form 10-K (File No. 333-84294, 333-121479 and 333-137067) filed on November 25, 2008.

~~Prepaid expenses and other current assets, net include reserves on sales representative advances of $3,333 and $2,536 at May 27, 2006 and August 27, 2005, respectively.~~ 9

5.Table ~~Goodwill~~of ~~and Other Intangible Assets~~ Contents

~~Goodwill~~AAC GROUP HOLDING CORP.

~~AAC Group Holding Corp.~~AMERICAN ~~American~~ACHIEVEMENT ~~Achievement~~CORPORATION ~~Corporation~~

	May 27, 2006		August 27, 2005
Class Rings	$	71,792	$	71,792
Yearbooks		65,241		65,241
Graduation Products		23,781		23,242
Achievement Publications		11,693		11,693
Other		12,058		12,058
Total	$	184,565	$	184,026

Notes to Condensed Consolidated Financial Statements

~~The increase~~ (Dollars in ~~goodwill was the result of the final payment to C-B Graduation Announcements~~thousands, ~~LLC,~~ aunless ~~producer~~otherwise ofstated) personalized graduation announcements and related accessories, for achieving certain financial targets through January 2006. AAC acquired the assets of C-B Graduation Announcements, LLC effective January 30, 2004.

~~Other Intangible Assets~~(unaudited)

~~For Group Holdings, other intangible assets consisted~~ Use of ~~the following:~~ Estimates

	Estimated		Gross		Accumulated			Net
	Useful Life		Asset		Amortization			Asset
At May 27, 2006
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs and other		7 to 8 years		14,889		(3,946	)		10,943
Patents		14 to 17 years		7,317		(961	)		6,356
Customer lists and distribution contracts		3 to 12 years		100,516		(24,745	)		75,771
			$	172,817	$	(29,652	)	$	143,165
At August 27, 2005
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs and other		7 to 8 years		14,620		(2,475	)		12,145
Patents		14 to 17 years		7,317		(629	)		6,688
Customer lists and distribution contracts		3 to 12 years		100,516		(16,179	)		84,337
			$	172,548	$	(19,283	)	$	153,265

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.

~~For Group Holdings, total amortization on other intangible assets was $3,461 and $10,369 for~~Recent ~~the~~Accounting ~~three and nine months ended May 27, 2006, respectively, and $3,452 and $10,266 for the three and nine months~~ Pronouncements

10In May 2009, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standard (“SFAS”) No. 165, “Subsequent Events” (“SFAS 165”). SFAS 165 establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date. The provisions of SFAS 165 are effective for the Company beginning with the fourth quarter of its fiscal year 2009. The Company does not expect the adoption of the standard to have a material impact on its financial position and results of operations.

~~Table~~In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157”), which defines fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 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 ~~Contents~~SFAS 157 are effective for the Company beginning with its fiscal year 2009. The adoption of the standard did not have a material impact on the Company’s financial position and results of operations.

~~AAC~~In September 2006, ~~GROUP~~the ~~HOLDING~~FASB ~~CORP~~issued SFAS No. ~~AMERICAN~~ 158, ~~ACHIEVEMENT~~“Employers’ ~~CORPORATION~~Accounting ~~Notes~~for toDefined ~~Condensed~~Benefit ~~Consolidated~~Pension ~~Financial~~and ~~Statements~~Other Postretirement Plans — An Amendment of FASB Statements No. 87, 88, 106 and 132 (~~Continued~~R) ” (~~Dollars~~“SFAS 158”). SFAS 158 requires an employer to recognize the funded status of defined benefit postretirement plans as an asset or liability in ~~thousands~~the balance sheet and to recognize changes in that funded status in the year in which changes occur through comprehensive income. Additionally, ~~unless~~SFAS ~~otherwise~~158 ~~stated)~~requires an employer to ~~(unaudited)~~measure the funded status of each of its plans as of the date of its year-end statement of financial position. The Company adopted the recognition and disclosure provisions of SFAS 158 in fiscal 2007. The measurement date provisions of SFAS 158 are effective for the Company beginning with its fiscal year 2009 and the Company will use a measurement date as of the end of its fiscal year for its defined benefit postretirement plans in fiscal 2009.

~~ended~~In February ~~May 28~~2007, ~~2005,~~the ~~respectively~~FASB issued SFAS No. ~~Amortization~~159, on“The ~~deferred~~Fair ~~financing~~Value ~~costs~~Option isfor ~~recorded~~Financial asAssets ~~interest~~and ~~expense~~Financial ~~using~~Liabilities” ~~the~~(“SFAS ~~effective~~159”). SFAS ~~interest~~159 ~~rate~~permits entities ~~method~~to measure many financial assets and ~~amortization~~financial onliabilities ~~patents~~at fair value. Unrealized gains and ~~customer~~losses ~~lists~~on ~~and~~items ~~distribution~~for which the fair value ~~contracts~~option ishas ~~recorded~~been aselected ~~amortization~~are ~~expense~~reported in earnings. SFAS ~~Estimated~~159 ~~annual~~is ~~amortization~~effective for ~~expense~~the Company for fiscal ~~year~~ ~~ended~~years ~~2006~~beginning iswith ~~approximately~~its ~~$13~~fiscal year 2009.~~8 million~~ The standard ~~declining~~did tonot ~~approximately~~have ~~$11.9 million~~a ~~for~~material ~~fiscal~~impact on the Company’s financial position and ~~year~~results ~~ended~~of ~~2010~~operations.

~~For AAC, other intangible assets consisted of the following:~~ 10

	Estimated		Gross		Accumulated			Net
	Useful Life		Asset		Amortization			Asset
At May 27, 2006
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs and other		7 to 8 years		11,112		(3,242	)		7,870
Patents		14 to 17 years		7,317		(961	)		6,356
Customer lists and distribution contracts		3 to 12 years		100,516		(24,745	)		75,771
			$	169,040	$	(28,948	)	$	140,092
At August 27, 2005
Trademarks	Indefinite		$	50,095	$	—		$	50,095
Deferred financing costs and other		7 to 8 years		11,112		(2,120	)		8,992
Patents		14 to 17 years		7,317		(629	)		6,688
Customer lists and distribution contracts		3 to 12 years		100,516		(16,179	)		84,337
			$	169,040	$	(18,928	)	$	150,112

Table of Contents

~~For~~ AAC~~, total amortization on other intangible assets was $3,340 and $10,020 for the three~~ ~~and~~GROUP ~~nine~~HOLDING ~~months ended May 27, 2006, respectively, and $3,341 and $10,022 for the three and nine months ended May 28, 2005, respectively~~CORP. Amortization on deferred financing costs is recorded as interest expense using the effective interest rate method and amortization on patents and customer lists and distribution contracts is recorded as amortization expense. Estimated annual amortization expense for fiscal year ended 2006 is approximately $13.4 million declining to approximately $11.4 million for fiscal year ended 2010.

6.AMERICAN ACHIEVEMENT ~~Long-term~~CORPORATION ~~Debt~~

~~Long-term~~Notes ~~debt~~to Condensed ~~consisted~~Consolidated ofFinancial ~~the~~Statements ~~following:~~

~~AAC~~(Dollars in ~~Group~~thousands, ~~Holding~~unless ~~Corp.~~ otherwise stated)

	May 27, 2006			August 27, 2005
10.25% Senior discount notes due 2012 (net of unamortized discount of $27,330 and $34,844)	$	104,170		$	96,656
Mandatory redeemable preferred stock		7,500			—
8.25% Senior subordinated notes due 2012		150,000			150,000
Senior secured credit facility:
Revolving credit facility due 2010		—			—
Term loan due 2011		106,783			139,120
Total		368,453			385,776
Less current portion of long-term debt		(1,090	)		(1,409	)
Total long-term debt	$	367,363		$	384,367

(unaudited)

112. Comprehensive Income

~~Table~~The following ofamounts ~~Contents~~were included in determining comprehensive income for the three and nine months ended May 30, 2009 and May 31, 2008.

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

	For the three months ended							For the nine months ended
	May 30, 2009			May 31, 2008				May 30, 2009				May 31, 2008
Intermediate Holdings
Net income	$	21,162			$	19,257			$	11,164			$	5,231
Amortization of net actuarial gain and prior service costs - pension and postretirement plans, net of tax		(72	)			(73	)			(220	)			(223	)
Total comprehensive income	$	21,090			$	19,184			$	10,944			$	5,008

	For the three months ended							For the nine months ended
	May 30, 2009			May 31, 2008				May 30, 2009				May 31, 2008
AAC
Net income	$	25,242			$	23,538			$	18,644			$	12,560
Amortization of net actuarial gain and prior service costs - pension and postretirement plans, net of tax		(72	)			(73	)			(220	)			(223	)
Total comprehensive income	$	25,170			$	23,465			$	18,424			$	12,337

~~American Achievement Corporation~~3. Discontinued Operations

	May 27, 2006			August 27, 2005
8.25% Senior subordinated notes due 2012	$	150,000		$	150,000
Senior secured credit facility:
Revolving credit facility due 2010		—			—
Term loan due 2011		106,783			139,120
Total		256,783			289,120
Less current portion of long-term debt		(1,090	)		(1,409	)
Total long-term debt	$	255,693		$	287,711

On October 26, 2007, the Company announced a planned shutdown of the achievement publications segment. Operations of this segment have ceased and have been eliminated from the ongoing operations of the Company as a result of the shutdown. All activities in connection with the shutdown were completed prior to May 31, 2008, and the Company has not had any significant continuing involvement in this segment since then.

10The results of operations of the achievement publications business are reported as discontinued operations in the condensed consolidated statements of operations for the three and nine months ended May 31, 2008.~~25%~~ Prior ~~Senior~~to ~~Discount~~the shutdown, ~~Notes~~the achievement publications business was included as the Company’s achievement publications reporting segment. Net sales and loss from discontinued operations for the three and nine months ended May 31, 2008 are as follows:

On November 16, 2004 Group Holdings issued the 10.25% Notes. The net proceeds of this offering were used as a distribution to stockholders through the repurchase of shares of Group Holdings’ common stock from its stockholders. Group Holdings was formed on November 8, 2004 and has no operations separate from its ownership in 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. Group Holdings has no operating assets or liabilities other than its investment in AAC.

	For the three months ended			For the nine months ended
	May 31, 2008			May 31, 2008
Discontinued operations:
Net sales	$	-		$	1,758

Operating loss	$	(72	)	$	(7,200	)
Benefit for income taxes		(28	)		(2,815	)
Loss from discontinued operations	$	(44	)	$	(4,385	)

AtThe Company ~~any~~recognized ~~time~~charges onof or$5.5 ~~after~~million ~~October 1,~~during ~~2008,~~the ~~Group~~nine ~~Holdings~~months ~~may~~ended ~~redeem~~May ~~the 10.25% Notes~~31, 2008 inprimarily ~~whole~~related orto ~~in part,~~the atwrite-off aof ~~redemption~~the ~~price~~remaining ~~equal~~carrying tovalue ~~100%~~ of tangible ~~the~~and ~~principal~~intangible ~~amount~~assets ~~plus~~upon ashutdown ~~premium,~~of ~~declining~~the ~~ratably~~achievement publications tosegment. These ~~par,~~charges ~~plus~~are ~~accrued~~included ~~and~~in ~~unpaid~~the ~~interest.~~loss Atfrom ~~any~~discontinued operations ~~time~~in onthe orcondensed ~~prior~~consolidated tostatements ~~October 1,~~of ~~2007,~~operations ~~Group~~and in other ~~Holdings~~charges ~~may~~in ~~redeem~~the upcondensed toconsolidated ~~35%~~statements of ~~the~~cash ~~aggregate~~flows. Also included ~~accreted~~in ~~value~~loss offrom discontinued operations for the ~~10.25%~~nine ~~Notes~~months ~~with~~ended ~~the~~May ~~proceeds~~31, 2008, are $0.7 million of ~~qualified~~costs ~~equity~~incurred ~~offerings~~for atcontract atermination ~~redemption~~and ~~price~~employee termination ~~equal~~costs related to ~~110~~the shutdown.~~25%~~ All ofsuch ~~the~~costs ~~accreted~~have ~~value.~~been paid.

If a Change in Control (as defined in the indenture relating to the 10.25% Notes) occurs prior to October 1, 2008, Group Holdings must give the holders of the 10.25% Notes the opportunity to sell their 10.25% Notes to Group 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, Group Holdings must give the holders of the 10.25% Notes the opportunity to sell their 10.25% Notes to Group Holdings at 101% of the aggregate principal amount at maturity of the 10.25% Notes, plus accrued interest. 11

~~Additionally,~~Table ~~the terms~~ of the 10.25% Notes limit Group 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 May 27, 2006, Group Holdings was in compliance with all such provisions. Contents

~~Mandatory~~AAC GROUP ~~Redeemable~~HOLDING ~~Preferred~~CORP. ~~Stock~~

~~On January 18, 2006, Group Holdings entered into a Preferred Stock Purchase Agreement (the~~AMERICAN ~~“Purchase~~ACHIEVEMENT ~~Agreement”)~~CORPORATION with an investor pursuant to which Group 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 Group Holdings held by the investor in the event of an initial public offering by Group Holdings, (ii) preemptive rights to purchase additional capital stock of Group Holdings in order to maintain its percentage ownership in Holdings upon the sales of additional capital stock and (iii) the right to have an observer seat on the Board of Directors of Group Holdings. Group Holdings issued the investor 7,500 shares of the Series A Preferred Stock for an aggregate purchase

12Notes to Condensed Consolidated Financial Statements

~~Table~~(Dollars in ofthousands, ~~Contents~~unless otherwise stated)

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

~~price of $7~~4.~~5 million, which the~~ investor paid to Group 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 Group Holdings. All undeclared dividends and declared but unpaid dividends shall accrue from the date the stock was issued. Undeclared dividends for the three and nine months ended May 27, 2006 totaled $268 and $396, respectively. The Series A Preferred Stock may be redeemed by Group 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 Group Holdings (the “Certificate of Incorporation”). Such percentage is reduced annually until the purchase price upon redemption to Group 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 has been classified as long-term debt. Inventories

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 Redeemable Preferred Stock of American Achievement Group Holding Corp., the new parent company of Group Holdings. These new shares have the same rights, preferences and privileges as the Series A Preferred Stock. See Note 13.

	May 30, 2009			August 30, 2008

Raw materials	$	8,658		$	15,840
Work in process		5,057			5,431
Finished goods		5,422			6,540
Less—Reserves		(842	)		(400	)
	$	18,295		$	27,411

The Company’s cost of sales includes depreciation of $4.6 million and $4.0 million for the three months ended May 30, 2009 and May 31, 2008, respectively, and $8.~~25%~~7 ~~Senior~~million ~~Subordinated~~and ~~Notes~~$7.7 million for the nine months then ended, respectively.

~~On March 25, 2004, AAC issued $150 million of the 8~~5.~~25% Notes. The 8.25% Notes bear interest at a~~ ~~stated~~Goodwill ~~rate of 8.25%. The 8.25% Notes are unsecured senior subordinated obligations~~ and ~~are subordinated~~Other inIntangible 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. Assets

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. Goodwill

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.

Segment:	May 30, 2009		August 30, 2008
Class Rings	$	67,092	$	67,092
Yearbooks		65,241		65,241
Graduation Products		23,781		23,781
Other		15,209		14,959
Total	$	171,323	$	171,073

~~The~~On January ~~indenture~~6, ~~governing~~2009, ~~the~~Commemorative 8Brands, Inc.~~25%~~ ~~Notes~~(“CBI”), ~~contains~~a ~~restrictions~~wholly onowned ~~the ability~~ subsidiary of AAC, entered tointo ~~pay dividends~~an ~~and~~amendment ~~make~~to ~~certain~~the ~~other~~stock ~~payments~~purchase agreement related to ~~AAC~~the ~~Holding~~acquisition ~~Corp.~~of ~~Pursuant~~Powers toEmbroidery ~~the~~Inc. ~~arrangement,~~in ~~AAC~~fiscal 2007. The ~~may,~~amended ~~subject~~agreement toprovides ~~certain~~for ~~limitations,~~$0.3 ~~pay~~million ~~dividends~~of oradditional ~~make~~purchase price instead ~~such~~of the ~~payments~~provision in ~~connection~~the ~~with~~original ~~(i)~~agreement that provided ~~repurchases~~for ofup ~~certain~~to ~~capital~~$1.5 ~~stock~~million ofadditional ~~AAC~~purchase ~~Holding~~price ~~Corp.~~payment ~~and~~that ~~(ii)~~ was contingent upon the ~~payment~~acquired bybusiness ~~AAC~~achieving ~~Holding~~certain ~~Corp.~~financial goals through August of2010. The ~~taxes,~~$0.3 ~~costs~~million ~~and~~of ~~other~~additional ~~expenses~~purchase ~~required~~price is to ~~maintain~~be ~~its~~paid ~~legal~~over three ~~existence~~years ~~and~~beginning ~~legal~~January 2009, ~~accounting and~~of ~~other~~which $0.1 ~~overhead~~million ~~costs~~was inpaid during the ~~ordinary~~nine ~~course~~months ofended ~~business~~May 30, 2009.

The 8.25% Notes contain other customary negative covenants and restrictions on actions by the Company and its subsidiaries including, without limitation, restrictions on additional indebtedness, investments, asset 12

13 Table of Contents

~~Table~~AAC GROUP ofHOLDING ~~Contents~~CORP.

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

~~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~~to ~~payment~~Condensed ofConsolidated ~~dividends~~Financial byStatements ~~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 May 27, 2006.~~

~~Senior~~(Dollars in ~~Secured~~thousands, ~~Credit~~unless ~~Facility~~ otherwise stated)

~~In conjunction with the consummation of the Merger, on March 25, 2004, AAC entered into a $195.0 million senior secured credit facility~~ (~~the “Senior Credit Facility”~~unaudited) ~~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 May 27, 2006, assets of AAC subject to lien under the Senior Credit Facility were approximately $349.9 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.

~~The term loan of the Senior Credit Facility is due in March 2011. Quarterly payments of $318 were~~Other ~~reduced~~Intangible to $273 as a result of voluntary prepayments and will be made through 2011. Quarterly payments are based on the total amount outstanding on the term loan; and therefore, are reduced as prepayments on the term loan are made. The term loan of the 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 Senior Credit Facility was approximately 7.6% and 6.0% at May 27, 2006 and August 27, 2005, respectively. Assets

During the nine months ended May 27, 2006, the Company paid down $32.3 million of the term loan of the Senior Credit Facility.

	May 30, 2009
	Estimated	Gross		Accumulated				Net
	Useful Life	Asset		Amortization				Asset
Trademarks	Indefinite	$	36,826		$	-			$	36,826
Patents	14 to 17 years		7,317			(2,290	)			5,027
Customer lists and distribution contracts	3 to 12 years		98,340			(50,729	)			47,611

Total		$	142,483		$	(53,019	)		$	89,464

	August 30, 2008
	Estimated	Gross		Accumulated				Net
	Useful Life	Asset		Amortization				Asset
Trademarks	Indefinite	$	36,826		$	-			$	36,826
Patents	14 to 17 years		7,317			(1,960	)			5,357
Customer lists and distribution contracts	3 to 12 years		97,740			(42,923	)			54,817

Total		$	141,883		$	(44,883	)		$	97,000

~~The~~Under ~~revolving~~the provisions ~~credit~~of ~~facility~~SFAS ~~matures~~No. in142, ~~March 2010.~~“Goodwill ~~Availability~~and ~~under~~Other Intangible Assets” (“SFAS 142”), the ~~revolving~~Company ~~credit~~tests goodwill and indefinite-lived intangibles for impairment on an ~~facility~~annual isbasis ~~restricted~~or tomore afrequently ~~total~~if ~~revolving~~impairment ~~commitment~~indicators occur. If the fair value of ~~$40.0 million~~each asreporting ~~defined~~unit inexceeds ~~the~~its ~~credit agreement~~carrying ~~governing~~value, ~~the~~goodwill ~~Senior~~is not ~~Credit~~considered ~~Facility~~to be impaired. The ~~Availability~~Company ~~under~~determines the ~~revolving~~fair ~~credit~~value of ~~facility~~each asreporting unit using a discounted cash flow analysis to measure the present value of ~~May 27,~~anticipated ~~2006~~future ~~was~~net ~~approximately~~cash ~~$38.0 million~~flows ~~with~~of $2the reporting unit.~~0 million~~ Significant injudgments ~~letters~~and ofassumptions ~~credit~~including ~~outstanding.~~projecting ~~Availability~~future ~~under~~cash ~~the~~flows, ~~revolving~~determining ~~credit~~appropriate ~~facility~~discount asrates ofand ~~August 27,~~other ~~2005~~assumptions are ~~was~~inherent ~~approximately~~in ~~$38~~the discounted cash flow analysis.1 Actual results may ~~million~~vary ~~with~~from ~~$1.9 million~~the assumptions used in ~~letters~~the ofCompany’s ~~credit~~fair ~~outstanding~~value calculations.

~~Advances~~The recent ~~under~~and ~~the~~current ~~revolving~~weak ~~credit~~economic ~~facility~~conditions ~~may~~have behad ~~made~~an asunfavorable ~~base~~impact ~~rate~~on the ~~loans~~Company’s orsales ~~LIBOR~~and ~~loans~~results atof ~~AAC’s election~~operations, ~~(except~~which ~~for~~is expected to continue for the ~~initial~~rest ~~loans~~of ~~which~~this ~~were~~fiscal ~~base~~year ~~rate~~and ~~loans).~~into ~~Interest~~next ~~rates~~year. This ~~payable~~change ~~upon~~in the ~~advances~~Company’s ~~are~~forecasts ~~based~~constituted ~~upon~~a ~~the~~triggering ~~base~~event ~~rate~~requiring oran ~~LIBOR~~interim impairment ~~depending~~analysis onas of February 28, 2009. At February 28, 2009, the ~~type~~estimated fair value of ~~loan~~each ~~AAC~~of ~~chooses,~~the ~~plus~~Company’s anreporting units exceeded its ~~applicable~~carrying ~~margin~~value, ~~based~~thus ~~upon~~indicating athat ~~consolidated~~no ~~leverage~~impairment ~~ratio~~existed as of ~~certain~~that date. Significant ~~outstanding~~judgments ~~indebtedness~~were ~~to EBITDA~~required ~~(net~~in ~~income~~the ~~(loss) before~~preparation ~~interest~~of ~~expense,~~the forecasts. ~~income~~Unforeseen ~~taxes,~~future ~~depreciation~~events ~~and~~could ~~amortization)~~adversely toaffect such forecasts and bethereby ~~calculated~~the inreported ~~accordance~~value ~~with~~of ~~the~~goodwill ~~terms~~and ~~specified~~trademarks in the future. There ~~credit~~have ~~agreement~~been ~~governing~~no ~~the~~material ~~Senior~~changes or triggering events ~~Credit~~since ~~Facility~~the date of this interim impairment analysis.

~~The~~Total amortization ~~Senior Credit Facility contains restrictions~~ on ~~the~~other ~~ability~~intangible ofassets ~~AAC~~was to$2.7 ~~pay~~million ~~dividends~~ and ~~make certain other payments to AAC Holding Corp~~$3.2 ~~Pursuant~~million to for the ~~arrangement,~~three ~~AAC~~months ~~may,~~ended ~~subject~~May ~~to certain limitations~~30, ~~pay~~2009 ~~dividends~~and orMay ~~make~~31, ~~such~~2008, ~~payments~~respectively, inand ~~connection~~was ~~with (i) repurchases of~~$8.1 ~~certain~~million ~~capital~~and ~~stock of AAC Holding Corp~~$8.4 ~~and (ii)~~million for the ~~payment~~nine bymonths ~~AAC~~ended ~~Holding~~May ~~Corp. of taxes~~30, ~~costs~~ 2009 and ~~other~~May ~~expenses~~31, 2008, ~~required~~respectively, toand ~~maintain~~is ~~its~~recorded ~~legal~~as ~~existence and legal~~selling, ~~accounting~~general and ~~other~~administrative ~~overhead~~expenses. ~~costs~~Estimated inannual ~~the~~amortization ~~ordinary~~expense ~~course~~is ofas ~~business.~~ follows:

AAC was in compliance with the Senior Credit Facility’s covenants as of May 27, 2006.

Year	Amount
2009	$	10,849
2010		10,249
2011		10,249
2012		9,816
2013		9,220

14 13

Table of Contents

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

~~Group Holdings’ weighted average interest rate on debt outstanding as of May 27, 2006 and August~~AMERICAN ~~27,~~ACHIEVEMENT ~~2005~~CORPORATION ~~was 8.4% and 7.7%, respectively.~~

~~AAC’s~~Notes ~~weighted average interest rate on debt outstanding as of May 27, 2006 and August 27, 2005 was~~to ~~7.9%~~Condensed ~~and~~Consolidated ~~6.9%,~~Financial ~~respectively.~~ Statements

~~AAC’s management believes the carrying amount of long-term debt approximates fair value as of May~~(Dollars ~~27,~~in ~~2006 and August 27~~thousands, ~~2005,~~unless ~~based~~otherwise ~~upon~~stated) ~~current rates offered for debt with the same or similar debt terms.~~

~~7. Commitments and Contingencies~~(unaudited)

~~Pending Litigation~~6. Long-term Debt

On February 11, 2004, Frederick Goldman, Inc. (the “Licensee”) filed an arbitration claim against AAC’s subsidiary, Commemorative Brands, Inc. (“CBI”), for an unspecified monetary amount alleging, among other things, that CBI had improperly attempted to convert an exclusive license CBI granted to the Licensee to a non-exclusive license. The arbitration proceedings have concluded with the arbitrator ruling that the Licensee has an exclusive license. In addition, on February 10, 2004, the Licensee commenced a lawsuit in federal district court in New York against CBI alleging that CBI breached the license agreement by granting third parties rights in violation of the Licensee’s exclusive rights under the license agreement. CBI has settled the lawsuit brought against it by Frederick Goldman, Inc. Pursuant to the settlement, among other things, CBI and Frederick Goldman, Inc. entered into a new licensing agreement and CBI agreed to pay Frederick Goldman, Inc. $1.0 million in cash. This payment was made on May 18, 2006.

	May 30, 2009				August 30, 2008
Intermediate Holdings
10.25% Senior discount notes due October 1, 2012 (net of unamortized discount of $0 and $1,079, respectively)		$	131,500		$	130,421
8.25% Senior subordinated notes due April 1, 2012			150,000			150,000
Senior secured credit facility:
Revolving credit facility due 2011			-			-
Term loan due 2011			46,877			75,485
Total			328,377			355,906
Less current portion of long-term debt			(3,123	)		(2,908	)
Total long-term debt		$	325,254		$	352,998

	May 30, 2009				August 30, 2008
AAC
8.25% Senior subordinated notes due April 1, 2012		$	150,000		$	150,000
Senior secured credit facility:
Revolving credit facility due 2011			-			-
Term loan due 2011			46,877			75,485
Total			196,877			225,485
Less current portion of long-term debt			(3,123	)		(2,908	)
Total long-term debt		$	193,754		$	222,577

~~The Company is not a party to any pending legal proceedings other than ordinary routine litigation~~Senior ~~incidental~~Secured toCredit 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. Facility

~~Gold~~On ~~Consignment~~May 20, ~~Agreement~~2009, the Company executed an amendment (the “Second Amendment”) to the senior secured credit facility (as amended, the “Amended Senior Credit Facility”). Among other things, the Second Amendment: (i) modified the existing $40 million revolving facility to a $25 million revolving facility available through March 25, 2011 and eliminated incremental facilities of up to $75 million available under the original agreement, (ii) increased interest rates, term loan quarterly amortization, and revolving commitment fees paid to lenders, (iii) modified the limitations on restricted payments, dividends or distributions, and permitted acquisitions, and (iv) modified those covenants relating to the maintenance of a maximum leverage ratio and minimum interest coverage ratio to be less restrictive for fiscal quarters beginning August 30, 2009.

~~Under the Company’s gold consignment financing arrangement, it has the ability to have on~~In ~~consignment~~connection ~~the~~with ~~lowest of~~ the ~~dollar~~Second ~~value of 27~~Amendment,~~000~~ ~~troy~~the ~~ounces~~Company ofincurred ~~gold,~~costs totaling $~~14.~~2 ~~million or a~~.5 ~~borrowing base~~million, ~~determined based upon a percentage~~ of ~~gold~~which ~~located~~$1.1 atmillion ~~the~~was ~~Company’s~~recorded ~~facilities~~as ~~and other approved locations~~selling, asgeneral ~~specified by the agreement. The Company expensed consignment fees of~~and ~~$82~~administrative ~~and~~expense ~~$90~~during ~~for~~ the three months ended May ~~27,~~ ~~2006 and May 28~~30, ~~2005~~2009, ~~respectively. The Company expensed consignment fees of $242~~ and $~~264 for the nine months ended May 27, 2006 and May 28, 2005, respectively~~1. ~~Under the terms of the consignment arrangement, the Company does not own the~~4 ~~consigned~~million ~~gold~~are ~~nor~~included ~~does it have risk of loss related to such inventory until the money is received by the bank from the Company~~ in ~~payment~~other ~~for~~assets ~~the~~and ~~gold~~will ~~purchased.~~be ~~Accordingly,~~amortized ~~the~~over ~~Company does not include~~ the ~~value of consigned gold in its inventory or the corresponding liability for financial~~remaining ~~statement~~term ~~purposes. As~~ of ~~May 27, 2006 and August 27, 2005,~~ the ~~Company~~Amended ~~held~~Senior ~~approximately~~Credit ~~9,560 ounces and 17,070 ounces, respectively, of gold valued at $6~~Facility.~~1 million and $7.5 million, respectively, 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.~~

~~Plant~~The ~~Closure~~term loan of the Amended Senior Credit Facility is due in March 2011. Quarterly payments of $1.0 million are required beginning August 30, 2009 through February 28, 2011. The term loan of the Amended Senior Credit Facility has an interest rate based on the higher of the prime rate or 2.0%, plus points based on a calculated leverage ratio as defined in the agreement. The interest rate on the term loan of the Amended Senior Credit Facility was 6.25% at May 30, 2009. During the nine months ended May 30, 2009 and May 31, 2008, the Company paid down $28.6 million and $11.4 million of the term loan of the Amended Senior Credit Facility, of which $2.6 million and $0.9 million, respectively, were mandatory payments.

In April 2006, AAC announced the closure of its yearbook facility in San Angelo, Texas. The Company determined to relocate this facility to its Dallas, Texas yearbook facility, in order to take advantage of that facility’s enhanced technology and service delivery. The closure and relocation is expected to be completed by the end of August 2006. For the three month period ended May 27, 2006 AAC recorded $601 in one time termination benefits to employees and $89 in impairment of assets. These costs were recorded in cost of sales and related solely to the Company’s yearbook segment. As of May 27, 2006, the Company had $372 accrued related to one time termination costs that will be paid out in the fourth quarter. 14

8.Table ~~Income~~of ~~Taxes~~ Contents

AAC ~~has recorded a tax provision at an effective rate of 40% for the three and nine months ended~~ ~~May 27,~~GROUP ~~2006,~~HOLDING ~~which represents the estimated federal and state income tax rate that will apply to estimated pre-tax earnings for fiscal 2006~~CORP. Group Holdings has recorded a tax provision at an effective rate of 44% for the three and nine months ended May 27, 2006, 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. Texas has recently enacted legislation that may impact the effective tax rate beginning in the

15AMERICAN ACHIEVEMENT CORPORATION

~~Table~~Notes ofto Condensed ~~Contents~~Consolidated Financial Statements

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

~~first quarter of fiscal year~~(unaudited) ending August, 2007. No adjustment has been made in the third quarter and no adjustment is expected for the fourth quarter since the tax does not apply to this fiscal year and any impact on deferred taxes is expected to be immaterial.

9The revolving credit facility matures in March 2011. ~~Postretirement~~Availability ~~Pension~~under ~~and~~the revolving ~~Medical~~credit ~~Benefits~~facility is restricted to a total revolving commitment of $25.0 million as defined in the credit agreement governing the Amended Senior Credit Facility. Availability under the revolving credit facility as of May 30, 2009 was approximately $23.3 million with $1.7 million in letters of credit outstanding.

~~CBI~~Advances under ~~provides~~the ~~certain~~revolving ~~healthcare~~credit ~~and~~facility ~~life~~may ~~insurance~~be ~~benefits~~made ~~for~~as ~~former~~base ~~employees~~rate ofloans ~~the~~or ~~L.G.~~LIBOR ~~Balfour~~loans ~~Company~~at ~~who~~AAC’s ~~retired~~election. ~~prior~~Interest torates ~~December 31,~~payable ~~1990.~~upon ~~Certain~~advances ~~hourly~~are ~~employees~~based ofupon ~~AAC’s~~the ~~subsidiary,~~higher ~~Taylor~~of ~~Publishing Co~~3.0% ~~(“Taylor”)~~or ~~are~~the ~~covered~~base byrate, awhich ~~defined~~is ~~benefit~~derived ~~pension~~from ~~plan~~the ~~(“TPC Plan”)~~Prime ~~established~~Rate byor ~~Taylor.~~Federal Funds ~~The~~Effective ~~benefits~~Rate ~~under~~as ~~the~~defined ~~CBI~~in ~~and~~the ~~TPC~~credit ~~Plans~~agreement, ~~are~~or ~~based~~the ~~primarily~~higher onof ~~the~~2.0% ~~employees’~~or ~~years~~LIBOR ofdepending ~~service~~on ~~and~~the ~~compensation~~type ~~near~~of ~~retirement.~~loan ~~The~~AAC ~~funding~~chooses, ~~policies~~plus ~~for~~an ~~these~~applicable ~~plans~~margin ~~are~~based ~~consistent~~on ~~with~~a ~~the~~calculated ~~funding~~leverage ~~requirements~~ratio ofas ~~federal~~defined ~~laws~~in ~~and~~the ~~regulations~~agreement.

The Amended ~~net~~Senior ~~periodic~~Credit ~~postretirement~~Facility ~~benefit~~contains ~~cost~~restrictions on the ability of AAC to pay dividends and make certain other payments to Parent Holdings and its subsidiaries. Pursuant to each arrangement, AAC may, subject to certain limitations, pay dividends or make such payments in connection with (~~income~~i) repurchases of certain capital stock of Parent Holdings and (ii) the payment by Parent Holdings of taxes, ~~include~~costs and other expenses required to maintain its legal existence and legal, accounting and other overhead costs in the ~~following~~ordinary course ~~components:~~of business, (iii) the payment by Intermediate Holdings of interest on the 10.25% senior discount notes, and (iv) repayment, redemption or repurchase of indebtedness of Parent Holdings and Intermediate Holdings in an amount not to exceed $15.0 million.

	For the three months ended						For the three months ended
	May 27, 2006						May 28, 2005
				CBI post-						CBI post-
	Taylor pension			retirement			Taylor pension			retirement
Service costs, benefits attributed to Service during the period	$	25		$	—		$	19		$	—
Interest cost		211			32			209			37
Expected return on assets		(223	)		—			(208	)		—
Amortization of unrecognized net loss (gain)		—			(80	)		—			(74	)
Amortization of unrecognized net prior service costs		—			(25	)		—			—
Net periodic postretirement benefit cost (income)	$	13		$	(73	)	$	20		$	(37	)

AAC was in compliance with the Amended Senior Credit Facility’s covenants as of May 30, 2009.

	For the nine months ended						For the nine months ended
	May 27, 2006						May 28, 2005
				CBI post-						CBI post-
	Taylor pension			retirement			Taylor pension			retirement
Service costs, benefits attributed to Service during the period	$	74		$	—		$	57		$	—
Interest cost		633			110			627			111
Expected return on assets		(669	)		—			(624	)		—
Amortization of unrecognized net loss (gain)		—			(235	)		—			(222	)
Amortization of unrecognized net prior service costs		—			(25	)		—			—
Net periodic postretirement benefit cost (income)	$	38		$	(150	)	$	60		$	(111	)

10.25% Senior Discount Notes

Interest accrued on the 10.25% ~~Related-Party~~senior ~~Transactions~~discount notes in the form of an increase in the accreted value of the notes through October 1, 2008. Thereafter, cash interest on the 10.25% senior discount notes accrues and is payable semiannually in arrears on April 1 and October 1 of each year, at a rate of 10.25% per annum. The initial interest payment of $6.7 million was funded by AAC on April 1, 2009, and was accounted for as a capital distribution from AAC and reflected as a reduction of AAC’s additional paid-in capital.

~~On March 25, 2004, upon consummation of the Merger, AAC entered into a management agreement with an~~The ~~affiliate~~following oftable ~~Fenway~~represents ~~Partners pursuant to which AAC, among other things, agreed to pay such affiliate an annual fee equal to~~ the ~~greater~~amount of ~~$3.0 million~~interest orincome 5%included ~~of the previous fiscal year’s EBITDA (as defined~~ in ~~the agreement). Amounts paid under the new management agreement totaled $750~~interest ~~and~~expense, $2net,~~250~~ for the three and nine months ended May ~~27,~~ ~~2006~~30, ~~respectively,~~2009 and ~~$1,000 and $2,500 for the three and nine months ended~~ May ~~28,~~ ~~2005~~31, ~~respectively. As of May 27, 2006 and August 27,~~ ~~2005, AAC had net prepaid management fee balances of $250 and $250, respectively.~~ 2008:

	For the three months ended				For the nine months ended
	May 30, 2009		May 31, 2008		May 30, 2009		May 31, 2008
Intermediate Holdings	$	48	$	143	$	271	$	491
AAC		48		140		271		475

~~Table~~7. Commitments ofand ~~Contents~~Contingencies

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

11The Company currently is not a party to any pending legal proceedings other than ordinary routine litigation incidental to its business. ~~Business~~In ~~Segments~~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 flows.

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. 15

	AAC Group Holding Corp.
			Segment
			Operating
			Income			Segment
Three Months Ended May 27, 2006	Net Sales		(Loss)			Assets
Class Rings	$	37,656	$	6,644		$	206,331
Yearbooks		70,858		25,155			192,674
Graduation Products		23,800		5,860			67,336
Achievement Publications		1,145		(635	)		38,657
Other		6,705		(186	)		34,799
Total	$	140,164	$	36,838		$	539,797

Table of Contents

	American Achievement Corporation
			Segment
			Operating
			Income			Segment
Three Months Ended May 27, 2006	Net Sales		(Loss)			Assets
Class Rings	$	37,656	$	6,644		$	204,930
Yearbooks		70,858		25,155			191,401
Graduation Products		23,800		5,860			66,883
Achievement Publications		1,145		(635	)		38,429
Other		6,705		(186	)		34,564
Total	$	140,164	$	36,838		$	536,207

AAC GROUP HOLDING CORP.

17AMERICAN ACHIEVEMENT CORPORATION

~~Table~~Notes ofto Condensed ~~Contents~~Consolidated Financial Statements

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

	AAC Group Holding Corp.
			Segment
			Operating
			Income			Segment
Three Months Ended May 28, 2005	Net Sales		(Loss)			Assets
Class Rings	$	35,411	$	5,998		$	213,082
Yearbooks		73,362		25,353			193,480
Graduation Products		19,724		4,700			68,982
Achievement Publications		780		(674	)		38,465
Other		7,846		1,291			35,784
Total	$	137,123	$	36,668		$	549,793

(unaudited)

	American Achievement Corporation
			Segment
			Operating
			Income			Segment
Three Months Ended May 28, 2005	Net Sales		(Loss)			Assets
Class Rings	$	35,411	$	5,998		$	211,718
Yearbooks		73,362		25,353			192,242
Graduation Products		19,724		4,700			68,541
Achievement Publications		780		(674	)		38,243
Other		7,846		1,291			35,555
Total	$	137,123	$	36,668		$	546,299

8. Income Taxes

	AAC Group Holding Corp.
			Segment
			Operating
			Income			Segment
Nine Months Ended May 27, 2006	Net Sales		(Loss)			Assets
Class Rings	$	103,715	$	17,350		$	206,331
Yearbooks		86,390		19,025			192,674
Graduation Products		42,641		6,852			67,336
Achievement Publications		8,661		(479	)		38,657
Other		16,326		(9	)		34,799
Total	$	257,733	$	42,739		$	539,797

The Company had recorded a deferred tax benefit related to net operating losses with the expectation that the net operating loss carryforward would be used to offset future earnings at AAC. During the quarter ended February 28, 2009, $27.6 million of this deferred tax benefit was transferred from AAC to Intermediate Holdings to Parent Holdings to be utilized to offset income generated by Parent Holdings in the consolidated income tax return. This transfer has been accounted for as a distribution by the Company to Parent Holdings and was reflected as a reduction to additional paid-in capital and a reduction of deferred tax assets.

	American Achievement Corporation
			Segment
			Operating
			Income			Segment
Nine Months Ended May 27, 2006	Net Sales		(Loss)			Assets
Class Rings	$	103,715	$	17,350		$	204,930
Yearbooks		86,390		19,025			191,401
Graduation Products		42,641		6,852			66,883
Achievement Publications		8,661		(479	)		38,429
Other		16,326		(9	)		34,564
Total	$	257,733	$	42,739		$	536,207

9. Postretirement Pension and Medical Benefits

18CBI provides certain healthcare and life insurance benefits for former employees of L.G. Balfour Company, Inc. (“CBI Plan”). Certain hourly employees of Taylor Publishing Company (“Taylor”), a wholly owned subsidiary of AAC, 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 CBI Plan was frozen to new entrants effective January 1991. Effective September 2003, the TPC Plan is open for enrollment only for certain hourly employees of Taylor. The funding policies for these plans are consistent with the funding requirements of federal laws and regulations.

~~Table~~For fiscal 2008, the measurement date for the CBI Plan was August 30, 2008, and the measurement date for the TPC Plan was June 30, 2008. The Company will use a measurement date as of ~~Contents~~the end of its fiscal year for both plans in fiscal 2009.

~~AAC~~The ~~GROUP HOLDING CORP.~~net ~~AMERICAN~~periodic ~~ACHIEVEMENT~~postretirement ~~CORPORATION Notes~~benefit toincome ~~Condensed~~includes ~~Consolidated~~the ~~Financial Statements — (Continued)~~following ~~(Dollars in thousands, unless otherwise stated) (unaudited)~~ components:

	AAC Group Holding Corp.
	For the three months ended
					Segment
	May 30, 2009								May 31, 2008
					Operating
					CBI post-								CBI post-
					Income				Segment
	Taylor pension				retirement				Taylor pension				retirement
Nine Months Ended May 28, 2005	Net Sales				(Loss)				Assets
Service costs, benefits attributed to service during the period		$	18			$	-			$	21			$	-
Class Rings	$	102,913			$	14,784			$	213,082
Interest cost			220				23				229				27
Yearbooks		89,291				14,565				193,480
Expected return on assets			(264	)			-				(292	)			-
Graduation Products		39,043				5,816				68,982
Amortization of unrecognized net gain			(7	)			(76	)			(9	)			(77	)
Achievement Publications		10,074				829				38,465
Amortization of unrecognized net prior service costs			-				(38	)			-				(38	)
Other		17,907				1,033				35,784
Net periodic postretirement benefit income		$	(33	)		$	(91	)		$	(51	)		$	(88	)
Total	$	259,228			$	37,027			$	549,793
	For the nine months ended
	May 30, 2009								May 31, 2008
					CBI post-								CBI post-
	Taylor pension				retirement				Taylor pension				retirement
Service costs, benefits attributed to service during the period		$	54			$	-			$	65			$	-
Interest cost			659				68				686				81
Expected return on assets			(793	)			-				(876	)			-
Amortization of unrecognized net gain			(19	)			(227	)			(27	)			(232	)
Amortization of unrecognized net prior service costs			-				(112	)			-				(112	)
Net periodic postretirement benefit income		$	(99	)		$	(271	)		$	(152	)		$	(263	)

	American Achievement Corporation
			Segment
			Operating
			Income		Segment
Nine Months Ended May 28, 2005	Net Sales		(Loss)		Assets
Class Rings	$	102,913	$	14,784	$	211,718
Yearbooks		89,291		14,565		192,242
Graduation Products		39,043		5,816		68,541
Achievement Publications		10,074		829		38,243
Other		17,907		1,033		35,555
Total	$	259,228	$	37,027	$	546,299

~~12.~~Table ~~Recent~~of ~~Accounting Pronouncements~~ Contents

~~In November 2004, FASB issued SFAS No. 151 “Inventory Costs, an Amendment of ARB No. 43 Chapter 4”~~AAC ~~(“FAS~~GROUP ~~151”).~~HOLDING FAS 151 requires that items such as idle facility expense, excessive spoilage, double freight, and rehandling be recognized as current-period charges rather than being included in inventory regardless of whether the costs meet the criterion of abnormal as defined in ARB 43CORP. FAS 151 is applicable for inventory costs incurred during fiscal years beginning after June 15, 2005. The Company adopted this standard beginning the first quarter of fiscal year 2006 and its adoption did not have a material impact on its financial statements as such costs have historically been expensed as incurred.

~~In December 2004, FASB issued SFAS No. 153, “Exchanges of Nonmonetary Assets-an amendment of APB~~AMERICAN ~~Opinion~~ACHIEVEMENT ~~No. 29”~~CORPORATION (“FAS 153”) which addresses the measurement of exchanges of nonmonetary assets and eliminates the exception from fair value accounting nonmonetary exchanges of similar productive assets and replaces it with an exception for exchanges that do not have commercial substance. FAS 153 specifies that a nonmonetary exchange has commercial substance if the future cash flows of an entity are expected to change significantly as a result of the exchange. The Company adopted this statement beginning the first quarter of fiscal year 2006 and its adoption did not have a significant impact on its financial statements.

InNotes March 2005, the FASB issued FASB Interpretation No. 47 “Accounting for Conditional Retirement Obligations” (“FIN 47”), which clarifies the term “conditional asset retirement obligation,” as used in FASB Statement No. 143, “Accounting for Asset retirement Obligations.” FIN 47 clarifies that an entity is required to ~~recognize a liability for a legal obligation to perform asset~~ ~~retirement~~Condensed ~~activities~~Consolidated ~~when~~Financial ~~the~~Statements retirement is conditional on a future event and if the liability’s fair value can be reasonably estimated. If the liability’s fair value cannot be reasonably estimated, then the entity must disclose a description of the obligation, the fact that a liability has not been recognized, and the reasons why the liability cannot be

19(Dollars in thousands, unless otherwise stated)

~~Table of Contents~~(unaudited)

~~AAC~~Amounts recognized ~~GROUP~~in ~~HOLDING~~accumulated ~~CORP. AMERICAN~~other ~~ACHIEVEMENT~~comprehensive ~~CORPORATION~~ income consist of:

Notes to Condensed Consolidated Financial Statements — (Continued) (Dollars in thousands, unless otherwise stated) (unaudited)

	May 30, 2009						August 30, 2008
	Taylor pension			CBI post-retirement			Taylor pension			CBI post-retirement
Net actuarial gain	$	(1,708	)	$	(1,729	)	$	(1,727	)	$	(1,956	)
Prior service cost		-			(595	)		-			(707	)
	$	(1,708	)	$	(2,324	)	$	(1,727	)	$	(2,663	)

~~reasonably~~ The estimated. ~~The~~net ~~Company~~gain ~~must~~for ~~adopt~~the ~~this~~TPC ~~Interpretation~~Plan that will be amortized from accumulated other comprehensive income into net periodic benefit cost in ~~the~~fiscal ~~fourth~~year ~~quarter~~2009 ofis $25 ~~2006~~thousand. The estimated net gain and estimated prior service iscredit ~~currently~~for ~~studying~~the ~~its~~CBI ~~provisions~~Plan tothat ~~determine~~will ~~the~~be ~~impact,~~amortized iffrom ~~any,~~accumulated onother comprehensive ~~its~~income ~~financial~~into ~~statements.~~net periodic postretirement benefit cost in fiscal year 2009 are $0.3 million and $0.1 million, respectively.

1310. ~~Subsequent Event~~ Related-Party Transactions

On ~~May~~March 3025, ~~2006~~2004, ~~the~~AAC ~~holders~~entered ofinto ~~outstanding capital stock agreed to form~~ a ~~new~~management ~~holding~~agreement ~~company~~with ~~for~~an affiliate ~~Group~~of ~~Holdings~~Fenway ~~called~~Partners ~~American~~pursuant ~~Achievement Group Holding Corp. Pursuant~~ to ~~that~~which ~~agreement~~AAC, ~~each holder~~among ofother ~~Common~~things, ~~Stock~~agreed ofto ~~Group~~pay ~~Holdings contributed each share of~~ such affiliate ~~stock~~an ~~then~~annual ~~held~~fee equal to the ~~new parent~~greater ~~company~~of in$3.0 million ~~exchange~~or ~~for~~5% ~~a new share~~ of ~~Common Stock of~~ the ~~new parent company and each~~ ~~holder~~previous offiscal ~~Series A~~year’s ~~Preferred~~EBITDA ~~Stock~~(as ofdefined ~~Group~~in ~~Holdings~~the ~~contributed~~agreement). ~~each~~Amounts ~~share~~expensed ofby the ~~such~~Company ~~stock~~related ~~then held~~ to the ~~new~~management ~~parent~~agreement ~~company~~totaled in$0.9 ~~exchange~~million for ~~a new share of Series A Redeemable Preferred Stock of~~ the ~~new~~three ~~parent~~months ~~company.~~ended ~~Each~~May ~~new~~30, ~~share~~2009 ~~of capital stock received in such contribution~~ and ~~exchange~~May ~~had the same rights~~31, ~~preferences~~2008 and ~~privileges as the corresponding share of stock of Group Holdings that was contributed to the new parent company~~$2.5 Asmillion afor ~~result of~~ the ~~foregoing recapitalization,~~nine ~~Group~~months ~~Holdings~~ended ~~became~~May a30, ~~wholly~~2009 ~~owned~~and ~~subsidiary~~May of31, ~~American Achievement Group Holding Corp~~2008.

OnAs ~~June 5,~~of ~~2006~~May 30, ~~AAC~~2009 and ~~Group~~August Holdings announced that American Achievement Group Holding Corp. expected to commence an offering under Rule 144A and Regulation S of $150.0 million aggregate gross proceeds of senior notes. The offering was completed June 1230, ~~2006. Pursuant to such offering~~2008, ~~American~~ ~~Achievement~~the ~~Group~~Company ~~Holding~~had ~~Corp.~~prepaid ~~issued~~management ~~$150.0 million~~fees ~~principal amount~~ of ~~12.75% Senior~~ ~~PIK Notes due October 1, 2012. The net proceeds of these new notes were~~ approximately $~~144~~0.~~8 million~~2 ~~and were distributed to the stockholders of American Achievement Group Holding Corp~~million. ~~as well as used to pay related transactions costs and expenses.~~

~~The new senior notes mature on October 1, 2012~~11. ~~At maturity, American Achievement Group Holding~~ ~~Corp.~~Business is required to repay the notes at a repayment price of 103.188% of the aggregate principal amount thereof, plus accrued and unpaid interest. Interest on the new senior notes will accrue at a rate of 12.75% per annum, which amount is subject to upward adjustment in the event that certain financial performance targets are not achieved. The first interest payment will occur on October 1, 2006. Through April 1, 2011, interest on the new senior notes will be payable in the form of additional notes semi-annually in arrears on April 1 and October 1. Beginning on October 1, 2011 and thereafter, interest will be payable in cash semi-annually in arrears on April 1, and October 1. The new senior notes are the unsecured senior obligation of American Achievement Group Holding Corp. and are not guaranteed by Group Holdings or any of its subsidiaries. Segments

20The Company is a manufacturer and supplier of class rings, yearbooks and other graduation-related scholastic products for the high school, college, junior high school and elementary school markets and of recognition products, such as letter jackets, and affinity jewelry designed to commemorate significant events, achievements and affiliations. The Company markets its products and services primarily in the United States and operates in four reporting segments: class rings, yearbooks, graduation products and other.

~~Table~~The Company’s operating segments, on-campus class rings and retail class rings, have been aggregated into one reporting segment, class rings, in accordance with paragraph 26.a. of ~~Contents~~SFAS 131. The other segment consists primarily of jewelry commemorating family events such as the birth of a child, military and fan affinity jewelry and related products, professional sports championship rings, commercial printing and recognition products such as letter jackets.

~~ITEM~~As discussed 2in Note 3, the achievement publications business was shut down during the first quarter of fiscal year 2008. This ~~MANAGEMENT’S~~business ~~DISCUSSION~~historically ~~AND~~was included ~~ANALYSIS~~as OFan ~~FINANCIAL~~additional ~~CONDITION~~reporting ~~AND~~segment. As ~~RESULTS~~all OFof ~~OPERATIONS~~the results of operations of the achievement publications business are included in discontinued operations, they are not presented in the tables below.

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.” 17

~~Basis~~Table of ~~Presentation~~ Contents

~~We present financial information relating to Group Holdings and~~ AAC ~~and its subsidiaries in this~~ ~~discussion~~GROUP ~~and~~HOLDING ~~analysis~~CORP. Group 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. Group Holdings conducts all of its business through AAC and its subsidiaries. The consolidated financial statements of Group Holdings include the accounts of its indirect wholly-owned subsidiary, AAC. Group Holdings’ condensed consolidated financial statements are substantially identical to AAC’s condensed consolidated financial statements, with the exception of additional interest related to its 10.25% senior discount notes and mandatory redeemable preferred stock, amortization of deferred financing costs and the effective income tax rate. Group 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 Group Holdings. Following the exchange, AAC Holding Corp. became a wholly-owned subsidiary of Group Holdings.

~~Fiscal~~AMERICAN ACHIEVEMENT ~~Year~~CORPORATION ~~End~~

WeNotes ~~use~~to Condensed aConsolidated ~~52/53-week~~Financial ~~fiscal~~Statements ~~year ending on the last Saturday of August.~~

~~General~~(Dollars in thousands, unless otherwise stated)

~~We are one of the leading manufacturers and suppliers of class rings, yearbooks, graduation~~(unaudited) 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 and fine books.

~~Our~~Assets not ~~ability~~allocated to ~~meet~~the ~~our~~operating ~~debt~~segments ~~service~~as ~~and~~of ~~other~~August ~~obligations~~30, ~~depends~~2008 ~~in significant part on how~~represent ~~successful~~affiliate wereceivables ~~are~~from inParent ~~maintaining~~Holdings ~~our business~~ and ~~further~~are ~~implementing~~presented ~~our~~in ~~business strategy. Our business plan envisions several long-term growth initiatives, including~~ the ~~development of new~~tables ~~products~~below. The ~~components~~affiliate ofreceivables ~~our~~were ~~strategy~~fully ~~are~~repaid ~~subject~~prior to ~~significant~~February ~~business~~28, ~~economic and~~ ~~competitive uncertainties and contingencies~~2009.

Numerous raw materials are used in the manufacture of our products. Gold and other metals, 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 consign the majority 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. Historically we have been 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 have increased and the U.S. dollar has slightly decreased as compared to the Euro during

	Class				Graduation
	Rings		Yearbooks		Products		Other			Total
Three Months Ended May 30, 2009
Net sales	$	35,605	$	79,298	$	21,653	$	8,286		$	144,842
Segment operating income		6,212		34,106		4,649		266			45,233

Three Months Ended May 31, 2008
Net sales	$	40,339	$	80,675	$	25,645	$	10,483		$	157,142
Segment operating income (loss)		4,812		33,874		5,961		(31	)		44,616

Nine Months Ended May 30, 2009
Net sales	$	95,411	$	89,372	$	40,728	$	24,658		$	250,169
Segment operating income (loss)		11,144		25,500		6,632		(393	)		42,883

Nine Months Ended May 31, 2008
Net sales	$	105,855	$	92,630	$	44,587	$	26,638		$	269,710
Segment operating income (loss)		11,351		25,081		8,014		(534	)		43,912

	Intermediate Holdings
	Class				Graduation				Assets not
	Rings		Yearbooks		Products		Other		Allocated		Total
Segment assets
May 30, 2009	$	173,670	$	185,391	$	59,930	$	43,797	$	-	$	462,788
August 30, 2008		189,633		162,727		55,377		44,703		2,333		454,773

	AAC
	Class				Graduation				Assets not
	Rings		Yearbooks		Products		Other		Allocated		Total
Segment assets
May 30, 2009	$	172,938	$	184,863	$	59,778	$	43,493	$	-	$	461,072
August 30, 2008		189,939		163,139		55,541		44,718		1,777		455,114

~~Table of Contents~~18

~~the~~Table ~~first three quarters~~ of ~~our fiscal year 2006. We expect these trends to continue at least through the end of our fiscal year 2006, and perhaps thereafter.~~ Contents

WeITEM ~~face strong competition for most of our principal products~~2. ~~The~~MANAGEMENT’S ~~class~~DISCUSSION ~~ring~~AND ~~and~~ANALYSIS ~~yearbook~~OF ~~markets~~FINANCIAL ~~are~~CONDITION ~~highly~~AND ~~concentrated~~RESULTS ~~and~~OF consist primarily of a few national manufacturers (of which we are one) and, to a significantly lesser extent, small regional competitors. We believe that it would be costly and time-consuming for new competitors in our class ring and yearbook markets 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. Our achievement publication products compete with one national manufacturer and, to a lesser extent, with various other companies. OPERATIONS

WeThe following ~~experience~~discussion ~~seasonal~~of ~~fluctuations in~~ our ~~net~~condensed ~~sales~~consolidated ~~tied~~financial ~~primarily~~condition toand results ~~the~~of ~~school~~operations ~~year.~~should Webe ~~recorded 44%~~read ofin ~~our~~conjunction ~~fiscal~~with ~~year~~the ~~2005~~information contained ~~net sales~~ in our ~~third~~condensed ~~quarter.~~consolidated ~~Class~~financial ~~ring~~statements ~~sales~~and ~~are highest during~~accompanying ~~October~~notes ~~through~~included ~~December,~~elsewhere ~~with~~in ~~most~~this ~~orders~~report. ~~made~~The ~~for~~condensed ~~delivery~~consolidated tofinancial statements ~~students~~and ~~before~~ the ~~winter~~notes ~~holiday season.~~thereto ~~Graduation~~have ~~product~~been ~~sales~~prepared ~~are~~pursuant ~~predominantly~~to ~~made~~the ~~during~~rules ~~February~~and regulations ~~through~~of ~~April prior to~~ the ~~April~~ ~~through~~Securities ~~June~~and ~~graduation~~Exchange ~~season~~Commission. ~~Yearbook~~Certain ~~sales~~information ~~are~~and footnote ~~highest~~disclosures ~~during~~normally ~~the~~included ~~months~~in offinancial ~~April~~statements ~~through~~prepared in ~~June,~~accordance aswith ~~yearbooks~~generally ~~are~~accepted ~~typically~~accounting ~~shipped~~principles ~~prior~~have tobeen ~~each~~condensed ~~school’s summer break. We have historically~~or ~~experienced~~omitted ~~operating~~pursuant ~~losses~~to ~~during~~such ~~our~~rules ~~fourth~~and ~~fiscal~~regulations ~~quarter,~~(see ~~which~~Note ~~includes~~1 ~~the~~in ~~summer~~our ~~months~~condensed ~~when~~consolidated ~~school~~financial ~~is not in session, thus reducing related shipment of products~~statements). InThe ~~addition,~~following ~~our~~discussion ~~working~~includes forward ~~capital~~looking ~~requirements~~statements ~~tend~~that toinvolve ~~exceed~~certain ~~our~~risks ~~operating~~and ~~cash~~uncertainties. ~~flows~~See ~~from~~“Disclosure Regarding ~~April~~Forward ~~through~~Looking ~~August~~Statements. ”

~~We also have exposure to market risk relating to changes in interest rates on our variable rate~~DISCLOSURE ~~debt.~~REGARDING ~~Our~~FORWARD ~~senior~~LOOKING 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. STATEMENTS

~~Historically,~~This report ~~growth~~contains in“forward ~~the~~looking ~~class~~statements.” ~~rings,~~All ~~yearbooks~~statements ~~and~~other ~~graduation~~than statements ~~products~~of ~~market~~historical ~~has~~facts ~~been~~included ~~driven primarily~~in bythis ~~demographics.~~report ~~The~~that ~~U.S.~~address ~~Department~~activities, events ofor ~~Education~~developments ~~projects~~ that ~~the~~we ~~number~~expect, ofbelieve ~~high~~or ~~school and~~anticipate ~~college~~will ~~graduates~~or ~~will~~may ~~grow~~occur in bythe anfuture ~~average~~are offorward 2looking statements.2% ~~and~~Forward ~~2.5%~~looking ~~per~~statements ~~year,~~give our ~~respectively,~~current ~~from~~expectations ~~2002~~and projections relating to the financial condition, ~~2008.~~results ~~Additionally~~of operations, ~~the~~plans, Uobjectives, future performance and business of our company.S. ~~Census~~You ~~Bureau~~can ~~projects~~identify ~~that~~these statements by the ~~total~~fact ~~U.S.~~that ~~population~~they ~~will~~do ~~increase~~not byrelate ~~9.5%~~strictly ~~between~~to ~~2000~~historical ~~and~~or ~~2010~~current facts. ~~Both~~These ~~the~~statements ~~increased~~may ~~population~~include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe” and ~~the~~other ~~increased~~words ~~number~~and terms of ~~high~~similar ~~school and~~meaning ~~college~~in ~~graduates~~connection ~~should~~with ~~expand~~any discussion of the ~~market~~timing ~~for~~or ~~our~~nature ~~products.~~of future operating or financial performance or other events.

~~Company~~These forward ~~Background~~looking statements are based on our expectations and beliefs concerning future events affecting us. They are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control. Although we believe that the expectations reflected in our forward looking statements are reasonable, we do not know whether our expectations will prove correct. They can be affected by inaccurate assumptions we might make or by known or unknown risks and uncertainties.

~~Our~~Although management ~~business~~believes ~~was~~that ~~founded when~~ the ~~operations~~expectations ofreflected ~~ArtCarved,~~in ~~which~~such ~~were~~forward ~~previously owned by CJC~~looking ~~Holdings,~~statements ~~Inc.,~~are ~~and~~based ~~the~~upon ~~operations~~reasonable ~~of Balfour~~assumptions, ~~which~~we ~~were~~can ~~previously~~give ~~owned~~no byassurance ~~L. G. Balfour~~that ~~Company,~~these ~~Inc.,~~expectations ~~were~~will ~~combined~~be ~~in December 1996~~achieved. ~~AAC~~Any ~~was~~change ~~formed~~ in ~~June 2000~~or toadverse ~~serve as a holding company for these operations as well as any future acquisitions. In June 2000~~development, ~~we acquired the~~ ~~Taylor~~including ~~Senior Holding Company,~~ the ~~parent~~following ~~company of Taylor Publishing~~factors, ~~whose~~may ~~primary~~impact ~~business was designing and printing student yearbooks. In March 2001, AAC acquired all of~~ the ~~capital~~achievement ~~stock~~ of ~~Educational~~ ~~Communications,~~results ~~Inc.~~in ~~(“ECI”), which publishes achievement publications. In July 2002,~~or ~~AAC~~accuracy ~~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~~forward-~~B Graduation~~looking ~~Announcements, a marketer of graduation products to the college market.~~ statements:

On· ~~March 25,~~the ~~2004,~~price ~~AAC Acquisition Corp., a wholly owned subsidiary~~ of ~~AAC~~gold ~~Holding Corp., merged with~~ and ~~into AAC (the “Merger”)~~precious, ~~with~~semiprecious ~~AAC continuing as the surviving corporation~~ and ~~a wholly-owned~~synthetic subsidiary of AAC Holding Corp. AAC Holding Corp. is a wholly owned subsidiary of Group Holdings. 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. stones;

On· ~~November 16,~~our ~~2004,~~access ~~Group~~to ~~Holdings~~students ~~issued~~and ~~$131.5 million~~consumers ~~aggregate~~in principal amount at maturity of 10.25% senior discount notes due 2012 (the “10.25% Notes”), generating net proceeds of $89.3 million. Group Holdings is the sole obligor of these notes. The net proceeds of this offering were used as a schools;

22 · the seasonality of our business;

~~Table~~· ofregulatory ~~Contents~~and accounting rules;

~~distribution~~· toour ~~stockholders~~relationship ~~through~~with ~~the~~its ~~repurchase~~independent ofsales ~~shares of Group Holdings’ common stock from its stockholders.~~ representatives;

On· ~~January 18,~~fashion 2006, Group Holdings entered into a Preferred Stock Purchase Agreement with an investor pursuant to which Group Holdings sold shares of its Series A Redeemable Preferred Stock. In connection with this transaction, Group 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 Group 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 ifdemographic ~~declared by the Board of Directors of Group Holdings.~~ trends;

~~Subsequent~~· ~~Event~~ general economic, business, and market trends and events, especially during peak buying seasons for our products;

~~On May 30,~~· ~~2006,~~our ~~the~~ability ~~holders of outstanding capital stock agreed~~ to ~~form~~respond ~~a new holding company for Group Holdings called American Achievement Group Holding Corp. Pursuant~~ to ~~that~~customer ~~agreement,~~change ~~each holder~~orders ~~of Common Stock of Group Holdings contributed each share of such stock then held to the new parent company in exchange for a new share of Common Stock of the new parent company~~ and ~~each holder~~delivery of Series A Preferred Stock of Group Holdings contributed each share of such stock then held to the new parent company in exchange for a new share of Series A Redeemable Preferred Stock of the new parent company. 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 Group Holdings that was contributed to the new parent company. As a result of the foregoing recapitalization, Group Holdings became a wholly owned subsidiary of American Achievement Group Holding Corp. schedules;

On· ~~June 5,~~development ~~2006, AAC~~ and ~~Group~~operating Holdings announced that American Achievement Group Holding Corp. expected to commence an offering under Rule 144A and Regulation S of $150.0 million aggregate gross proceeds of senior notes. The offering was completed June 12, 2006. Pursuant to such offering, American Achievement Group Holding Corp. issued $150.0 million principal amount of 12.75% Senior PIK Notes due October 1, 2012. The net proceeds of these new notes were approximately $144.8 million and were distributed to the stockholders of American Achievement Group Holding Corp. as well as used to pay related transactions costs ~~and expenses.~~ ;

~~The~~· ~~new~~competitive ~~senior~~pricing notes mature on October 1, 2012. At maturity, American Achievement Group Holding Corp. is required to repay the notes at a repayment price of 103.188% of the aggregate principal amount thereof, plus accrued and unpaid interest. Interest on the new senior notes will accrue at a rate of 12.75% per annum, which amount is subject to upward adjustment in the event that certain financial performance targets are not achieved. The first interest payment will occur on October 1, 2006. Through April 1, 2011, interest on the new senior notes will be payable in the form of additional notes semi-annually in arrears on April 1 and October 1. Beginning on October 1, 2011 and thereafter, interest will be payable in cash semi-annually in arrears on April 1, and October 1. The new senior notes are the unsecured senior obligation of American Achievement Group Holding Corp. and are not guaranteed by Group Holdings or any of its subsidiaries. changes;

~~Critical~~· ~~Accounting~~successful ~~Policies~~ completion of management initiatives designed to achieve operating efficiencies;

We· ~~prepare~~ our ~~condensed~~cash ~~consolidated~~flows; ~~financial statements in conformity with accounting principles generally accepted in the United States of America. As such, we are required to make certain estimates, judgments~~ and assumptions that we believe are reasonable based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the periods presented. The significant accounting policies which we believe are the most critical to aid in fully understanding and evaluating our reported financial results include the following:

~~Sales~~· ~~Returns~~our ~~and~~ability ~~Allowances. We make estimates of potential future product returns related~~ to ~~current~~ ~~period~~draw ~~product~~down ~~revenue.~~funds Weunder ~~analyze~~its ~~the previous five years’ average historical returns,~~ current ~~economic~~bank ~~trends~~financings and ~~changes~~to inenter ~~customer~~into ~~demand~~new ~~and~~bank ~~acceptance of our products when evaluating the adequacy of~~ financings.

23The foregoing factors are not exhaustive. New factors may emerge or changes may occur that impact our operations and businesses. Forward-looking statements herein are expressly qualified by the foregoing or such other factors as may be applicable.

~~Table~~You should ofconsider ~~Contents~~the risks described in our Form 10-K filed with the Securities and Exchange Commission on November 25, 2008 as you review this quarterly report.

the sales returns and allowances. Significant management judgments and estimates must be made and used in connection with establishing the sales returns and allowances in any accounting period. Product returns as a percentage of net sales have been 1.9%, 1.8% and 1.9% for the fiscal years ended 2005, 2004 and 2003, respectively. Product warranty costs as a percentage of net sales have been 0.3%, 0.3% and 0.2% for the fiscal years ended 2005, 2004 and 2003, respectively. A ten percent increase in product returns and product warranty costs would result in a reduction of annual net sales of approximately $0.6 million and $0.1 million, respectively, based on fiscal year end 2005 rates. Material differences could result in the amount and timing of our revenue for any period if we made different judgments or utilized different estimates. 19

~~Allowance~~Table ~~for Doubtful Accounts and Reserve on Sales Representative Advances. We make estimates~~ of ~~potentially~~ uncollectible customer accounts receivable and receivables arising from sales representative draws paid in excess of earned commissions. Our reserves are based on an analysis of individual customer and salesperson accounts and historical write-off experience. Our analysis includes the age of the receivable, customer or salesperson creditworthiness and general economic conditions. Write-offs of doubtful accounts as a percentage of net sales have been 0.4%, 0.6% and 0.5% for the fiscal years ended 2005, 2004 and 2003, respectively. Write-offs of sales representative advances as a percentage of net sales have been 0.5%, 0.7% and 0.9% for the fiscal years ended 2005, 2004 and 2003, respectively. A ten percent increase in write-offs of doubtful accounts and sales representative advances would result in a reduction of annual net sales of approximately $0.2 million and $0.2 million, respectively, based on fiscal year ended 2005 rates. We believe that our results could be materially different if historical trends do not reflect actual results or if economic conditions worsened. Contents

Goodwill and Other Intangible Assets. We account for our long-lived assets with indefinite lives under SFAS No. 142, “Goodwill and Other Intangible Assets” (“FAS 142”). Under FAS 142 we are required to test goodwill and intangible assets with indefinite lives for impairment annually, or more frequently if impairment indicators occur. The impairment test requires management to make judgments in connection with identifying reporting units, assigning assets and liabilities to reporting units and determining fair value of each reporting unit. Significant judgments required to estimate the fair value of reporting units include projecting future cash flows, determining appropriate discount rates and other assumptions. The projections are based on historical performance and future estimated results. As of August 27, 2005, a third party valuation, among other factors, was used by management in its impairment analysis of other intangible assets values and the residual goodwill. We believe that we had no impairment as of May 27, 2006; however, unforeseen future events could adversely affect the reported value of goodwill and indefinite-lived intangible assets. General

~~Long-lived Tangible and Intangible Assets with Definite Lives.~~ We ~~test our long-lived tangible and~~are ~~intangible~~one ~~assets~~of ~~with~~the ~~definite~~leading ~~lives~~manufacturers ~~for~~and ~~impairment~~suppliers ~~under~~of ~~FAS~~class ~~144~~rings, ~~“Accounting for the Impairment~~yearbooks, orgraduation ~~Disposal of Long-Lived Assets~~products,” ~~which~~and ~~requires~~recognition usproducts ~~to review long-lived tangible~~ and ~~intangible assets~~affinity ~~with~~jewelry ~~definite lives whenever events or changes~~ in ~~circumstances indicate~~ the ~~carrying amount~~United ~~of an asset may not be recoverable~~States. ~~Recoverability~~We ofmarket ~~these~~and ~~assets~~sell isyearbooks ~~measured by comparison of its carrying amount~~ to the ~~future~~college, ~~undiscounted~~high ~~cash flows the assets are expected to generate. If long-lived assets are considered to be impaired~~school, ~~the~~junior ~~impairment to be recognized equals the amount~~high byschool ~~which the carrying value of the assets exceeds its fair market value~~ and iselementary ~~recorded~~school ~~in the period the determination is made~~markets. InWe ~~applying~~primarily ~~this~~sell ~~standard,~~our ~~assets~~class ~~are~~rings ~~grouped~~ and ~~evaluated at~~ ~~the~~graduation ~~lowest~~products, ~~level for~~ which ~~there~~include ~~are~~fine ~~identifiable~~paper ~~cash~~products ~~flows that are largely independent of the cash flows of other groups of assets. We consider historical performance~~ and ~~future estimated~~graduation ~~results~~accessories, in ~~evaluation of impairment. If~~ the ~~carrying~~high ~~amount of the asset exceeds expected undiscounted future cash flows~~school, wecollege ~~measure~~and ~~the~~junior ~~amount~~high ofschool ~~impairment~~markets. byWe ~~comparing the carrying~~also ~~amount~~sell ofjewelry ~~the~~commemorating ~~asset~~family toevents ~~its~~such ~~fair~~as ~~value, generally measured by discounting expected future cash flows at~~ the ~~rate~~birth ~~we utilize to evaluate potential investments. As~~ of ~~August 27,~~a ~~2005~~child, ~~a third party~~military ~~valuation,~~and ~~among~~fan ~~other~~affinity ~~factors,~~jewelry ~~was used in its impairment analysis of long-lived tangible~~ and ~~intangible~~ ~~assets~~related ~~with~~products, ~~definite~~professional ~~lives.~~sports ~~We believe that we had no impairment as of May 27, 2006;~~championship ~~however~~rings, ~~unforeseen~~commercial ~~future~~printing ~~events could adversely affect the reported value of long-lived tangible~~ and ~~intangible~~recognition ~~assets~~products ~~with~~such ~~definite~~as ~~lives.~~letter jackets.

24Our ability to meet our debt service and other obligations depends in significant part on how successful we are in maintaining our core businesses 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.

~~Table~~Numerous raw materials are used in the manufacture of ~~Contents~~our products. Gold and other metals, precious, semi-precious 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 a majority of our gold from a single supplier. We also purchase the majority of our precious, semi-precious and synthetic stones from a single supplier in Germany. 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.

~~Revenue~~We ~~Recognition~~face competition for most of our principal products. While ~~Our~~the ~~revenues~~class ~~from~~ring, graduation ~~product~~products ~~sales~~and ~~are~~yearbook ~~generally~~markets ~~recognized~~were atonce ~~the~~highly ~~time~~concentrated ~~the~~and ~~product~~consisted isprimarily ~~shipped,~~of ~~the~~a ~~risks~~few ~~and~~large ~~rewards~~national manufacturers (of ~~ownership~~which ~~have~~we ~~passed~~were toone) advances ~~the~~in ~~customer~~technology and the emergence of international manufacturing have ~~collectibility~~significantly islowered ~~reasonably~~the ~~assured~~costs of entry. Major ~~Our~~domestic ~~stated~~mass merchant ~~shipping~~and ~~terms~~jewelry ~~are~~chain ~~FOB~~retailers ~~shipping~~now ~~point.~~effectively ~~Provisions~~compete in the class ring ~~for~~business ~~sales~~and ~~returns,~~the ~~warranty~~traditional ~~costs~~yearbook and ~~rebate~~graduation ~~expenses~~products ~~are~~businesses ~~recorded~~now face atconsiderable ~~the~~competition ~~time~~from ofregional ~~sale~~and ~~based~~local ~~upon~~printers and ~~historical~~internet-based ~~information~~purveyors of yearbook and ~~current~~alternative ~~trends~~web-based virtual products. Competition from alternative sales channels is robust in virtually all market categories.

~~Our~~We experience ~~accounting~~seasonal ~~method~~fluctuations ~~for~~in ~~recognizing~~our ~~revenue~~net ~~and~~sales ~~related~~tied ~~gross~~primarily ~~profit~~to onthe ~~class~~school year. ~~ring~~We recorded 50% of our fiscal year 2008 net sales ~~through~~in our third quarter. ~~independent~~Class ring sales ~~representatives,~~are ~~along~~highest during October through December and early spring, with ~~commissions~~many orders made for delivery to ~~independent~~students ~~sales~~before ~~representatives~~the ~~that~~winter holiday season. Graduation product sales are ~~directly~~predominantly ~~related~~made during February through April prior to the ~~revenue~~April through June graduation season. Yearbook sales are highest during the months of April through June, isas yearbooks are typically shipped prior to ~~defer~~each school’s summer break. Our recognition ~~until~~and ~~the~~affinity ~~independent~~product line sales are seasonal. The recognition and affinity product line sales are highest ~~representative~~during ~~delivers~~the winter holiday season and in the ~~product~~period leading up to Mother’s Day. We have experienced operating losses during our ~~end~~first ~~customer~~and fourth fiscal quarters, which includes 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 ~~recognize~~also have ~~revenues~~exposure to market risk relating to changes in interest rates on our variable ~~publishing~~rate ~~operations~~debt. ~~based~~Our ~~upon~~senior ~~the~~secured ~~completed~~credit ~~contract~~facility ~~method,~~(revolver ~~when~~and term loan) ~~the~~is ~~products~~a ~~are~~variable ~~shipped~~rate arrangement.

~~Results~~Historically, growth in the class rings, yearbooks and graduation products market has been driven primarily by demographics. The U.S. Department of ~~Operations~~Education projects that the number of high school and college graduates will increase by an average of 6% and 16% nationally, respectively, over the time period from 2004 to 2017. Additionally, the U.S. Census Bureau projects that the total U.S. population will increase by 6% over the time period from 2007 to 2015. Both the increased population and the increased number of high school and college graduates should expand the market for our products.

~~Three Months Ended May 27, 2006 Compared to Three Months Ended May 28, 2005 The following table~~Company ~~sets forth selected information for Group Holdings and AAC from our condensed consolidated statements of operations expressed on an actual basis and as a percentage of net sales:~~ Background

	AAC Group Holding Corp.										American Achievement Corporation
	For the Three		% of			For the Three		% of			For the Three		% of			For the Three		% of
	Months Ended		Net			Months Ended		Net			Months Ended		Net			Months Ended		Net
	May 27, 2006		Sales			May 28, 2005		Sales			May 27, 2006		Sales			May 28, 2005		Sales
Net sales	$	140,164		100.0	%	$	137,123		100.0	%	$	140,164		100.0	%	$	137,123		100.0	%
Cost of sales		56,566		40.4	%		56,527		41.2	%		56,566		40.4	%		56,527		41.2	%
Gross profit		83,598		59.6	%		80,596		58.8	%		83,598		59.6	%		80,596		58.8	%
Selling, general and administrative expenses		46,760		33.3	%		43,928		32.0	%		46,760		33.3	%		43,928		32.0	%
Operating income		36,838		26.3	%		36,668		26.8	%		36,838		26.3	%		36,668		26.8	%
Interest expense		8,910		6.4	%		8,776		6.4	%		5,980		4.3	%		6,309		4.6	%
Income before income taxes		27,928		19.9	%		27,892		20.4	%		30,858		22.0	%		30,359		22.2	%
Provision for income taxes		12,169		8.7	%		12,299		9.0	%		12,248		8.7	%		12,144		8.8	%
Net income	$	15,759		11.2	%	$	15,593		11.4	%	$	18,610		13.3	%	$	18,215		13.4	%

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 Company (“Taylor”), whose primary business is designing and printing student yearbooks. 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. In April 2007, Commemorative Brands, Inc. (“CBI”), a wholly-owned subsidiary of AAC, acquired all of the outstanding stock of BFJ Holdings, Inc. and its wholly owned subsidiary, Powers Embroidery, Inc. (“Powers”). Powers is a producer of quality letter jackets, chenille patches and other school spirit embroidery merchandise.

Net Sales. Net sales consist of product sales and are net of product returns and promotional discounts. Net sales increased $3.1 million, or 2.2%, to $140.2 million for the three months ended May 27, 2006 from $137.1 million for the three months ended May 28, 2005. The following details the changes in net sales during such periods by business segment. 20

25 Table of Contents

~~Table~~As fully described under the “Significant Developments” section of ~~Contents~~Management’s Discussion and Analysis of Financial Condition and Results of Operations, during the first quarter of fiscal year 2008, we decided to shut down the operations of its achievement publications segment, which produced, marketed and sold publications that recognize the achievements of top students at the high school and college levels, as well as the nation’s most inspiring teachers. All shutdown activities were substantially complete prior to November 24, 2007 and were fully complete by May 31, 2008.

~~Class Rings. Net sales increased $2.3 million to $37.7 million for the three months ended~~Basis ~~May 27, 2006 from $35.4 million for the three months ended May 28, 2005. The increase in net sales was the result~~ of ~~an increase of $1.1 million in high school ring shipments and an increase of $1.2 million in college class rings.~~ Presentation

~~Yearbooks.~~We present ~~Net~~financial ~~sales~~information ~~decreased~~relating ~~$2.5 million~~ to ~~$70.9 million~~Intermediate ~~for~~Holdings, ~~the~~AAC ~~three~~and ~~months ended May~~its ~~27,~~subsidiaries ~~2006~~in ~~from~~this ~~$73.4 million~~discussion ~~for~~and ~~the three months ended May 28, 2005~~analysis. Intermediate ~~The decrease in net~~Holdings ~~sales~~owns ~~was~~100% of the ~~result~~shares of ~~later~~common ~~copy~~stock ~~receipt~~of ~~from~~AAC ~~customers~~Holding asCorp., ~~compared~~which tois the holder ~~prior~~of ~~year, which~~100% ~~impacted~~of the ~~timing~~shares of ~~yearbook~~common ~~shipments~~stock of AAC.

~~Graduation~~Other than ~~Products.~~debt ~~Net~~obligations, ~~sales~~cash, ~~increased~~interest ~~$4.1 million~~expense related to ~~$23.8 million for~~ the ~~three~~debt ~~months~~obligations, ~~ended~~amortization ~~May 27~~of deferred financing costs, ~~2006~~interest ~~from~~income ~~$19.7 million~~on ~~for~~cash balances, and the ~~three~~related ~~months~~income ~~ended~~taxes, ~~May 28~~all other assets, ~~2005.~~liabilities, ~~The~~income, ~~increase~~expenses and incash ~~net~~flows ~~sales~~presented ~~was~~for ~~the~~all ~~result~~periods represent those of ~~later~~Intermediate ~~order~~Holdings’ wholly-owned ~~receipts~~indirect ofsubsidiary ~~high~~AAC ~~school~~and ~~graduation~~the ~~products~~direct inand indirect subsidiaries of ~~the~~AAC. ~~second~~Intermediate ~~quarter,~~Holdings’ ~~which~~only ~~shipped~~direct ~~out~~subsidiary inis AAC Holding Corp., whose sole asset is the ~~third~~stock ~~quarter~~of ~~and~~AAC. anAAC ~~increase~~and inIntermediate ~~sales~~Holdings ~~due~~are totreated as ~~increased~~entities ~~volume~~under ~~and~~common ~~pricing~~control.

~~Achievement~~We ~~Publications.~~use ~~Net sales increased $0.3 million to $1.1 million for the three~~a ~~months~~52/53-week ~~ended~~fiscal ~~May 27,~~year ~~2006~~ending ~~from~~on ~~$0.8 million for~~ the ~~three~~last ~~months~~Saturday ~~ended May 28, 2005. The increase in sales was due to increased sales~~ of ~~other achievement products~~August.

~~Other. Net sales decreased $1.1 million to $6.7 million for the three months ended May 27,~~Critical ~~2006~~Accounting ~~from $7.8 million for the three months ended May 28, 2005. The decrease in net sales was related to a decrease in affinity jewelry sales.~~ Policies

~~Gross~~As ~~Profit.~~of ~~Gross~~May 30, ~~margin~~2009, ~~represents~~there ~~gross~~have ~~profit~~been asno asignificant ~~percentage~~changes ofwith ~~net~~regard ~~sales.~~to ~~Gross~~the ~~margin was~~critical ~~59.6%~~accounting ~~for~~policies ~~the~~disclosed ~~three~~in ~~months~~our ~~ended~~Annual ~~May 27,~~Reports ~~2006,~~on aForm ~~0.8 percentage~~10-K ~~point increase from 58.8%~~ for the ~~three~~ ~~months~~ year ended ~~May 28,~~August ~~2005. Overall~~30, ~~gross profit increased $3~~2008.~~0 million.~~ The ~~increase~~policies ~~in gross~~disclosed ~~margin~~included ~~was~~allowance ~~mainly~~for product areturns, ~~result~~allowance offor ~~continued~~doubtful ~~efficiency~~accounts ~~gains in our ring, yearbook~~ and ~~graduation products~~reserve ~~facilities.~~on ~~These efficiencies were directly related to the closure of a ring~~independent ~~manufacturing~~sales ~~facility~~representative advances, ~~capital~~goodwill ~~investments in printing equipment~~ and ~~technology~~other inintangible ~~our~~assets, ~~yearbook~~long-lived ~~operations~~tangible and ~~continued~~intangible ~~lean~~assets ~~manufacturing~~with ~~improvements~~definite ~~in all facilities~~lives, ~~offset~~revenue byrecognition ~~approximately~~and ~~$0.7 million~~income ~~of costs associated with the closure of a yearbook manufacturing facility~~taxes.

~~Selling, General and Administrative Expenses. Selling, general and administrative expenses~~Significant increased $2.9 million, or 6.6%, to $46.8 million for the three months ended May 27, 2006 from $43.9 million for the three months ended May 28, 2005. 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 $2.6 million to $36.0 million or 25.7% of net sales, for the three months ended May 27, 2006 from $33.4 million or 24.4% of net sales, for the three months ended May 28, 2005. The increase in selling and marketing expenses was primarily the result of commissions related to increased class rings and graduation product sales. Developments

~~General~~Amendment ~~and~~of Senior ~~administrative~~Secured ~~expenses~~Credit ~~for~~Facilities. As described in Note 6 in the ~~three~~Notes ~~months~~to Condensed ~~ended~~Consolidated ~~May 27~~Financial Statements, ~~2006~~on May ~~were~~20, ~~$10.8 million~~2009, orwe executed ~~7.7%~~an ofamendment ~~net~~(the ~~sales~~“Second Amendment”), asto ~~compared~~our tosenior ~~$10.5 million~~secured credit facility (as amended, orthe 7“Amended Senior Credit Facility”).6% ofAmong ~~net~~other ~~sales~~things, ~~for~~ the ~~three~~Second Amendment: ~~months~~(i) ~~ended May 28,~~modified ~~2005.~~the ~~The~~existing $~~0.3~~ 40 million ~~unfavorability~~revolving ~~was~~facility ~~due~~ to a $~~1.0~~ 25 million ~~legal~~revolving ~~settlement~~facility ~~paid~~available tothrough March 25, 2011 and eliminated ~~Frederick~~incremental ~~Goldman~~facilities of up to $75 million available under the agreement, ~~Inc.~~(ii) increased ininterest ~~May 2006~~rates, ~~partially~~term ~~offset~~loan byquarterly ~~reduced~~amortization, ~~legal~~and revolving commitment fees paid to lenders, ~~medical~~(iii) ~~costs~~modified the limitations on restricted payments, dividends or distributions, and permitted acquisitions, and (iv) ~~other~~modified ~~administrative~~those ~~savings.~~covenants relating to the maintenance of a maximum leverage ratio and minimum interest coverage ratio to be less restrictive for fiscal quarters beginning August 30, 2009.

~~Operating Income (Loss). As a result of the foregoing, operating income was $36.8 million, or 26.3%~~In ofconnection ~~net~~with ~~sales, for~~ the ~~three~~Second ~~months ended May 27~~Amendment, ~~2006~~we asincurred ~~compared~~costs ~~with~~totaling ~~operating income of~~ $362.7 5 million, ~~or 26.8% of net sales, for the three months ended May 28, 2005. The class rings segment~~ ~~reported operating income~~ of which $61.6 1 million ~~for~~was ~~the~~recorded ~~three~~as ~~months ended May 27~~selling, ~~2006~~general asand ~~compared with~~administrative ~~operating~~expense ~~income~~during ~~of $6.0 million for~~ the three months ended May 28 30, ~~2005. The yearbooks segment reported operating income of $25.2 million for the three months ended May 27~~2009, ~~2006~~and ~~as compared with operating income of~~ $251.4 ~~million~~ ~~for the three months ended May~~million ~~28,~~is included ~~2005.~~in ~~The~~other ~~graduation~~assets ~~products~~and ~~segment reported~~will ~~operating~~be ~~income~~amortized ofover ~~$5.9 million for~~ the ~~three~~remaining ~~months~~term ~~ended May 27, 2006 as compared with operating income~~ of ~~$4.7 million for~~ the Amended ~~three~~Senior ~~months~~Credit ~~ended May 28, 2005~~Facility. ~~The achievement publications segment~~

26Termination of Gold Consignment Agreement. On March 4, 2009, we received notice from The Bank of Nova Scotia electing to terminate the First Amended and Restated Agreement for Fee Consignment and Purchase of Gold dated March 25, 2004. The termination is pursuant to a provision in the agreement allowing either party to terminate the agreement upon 60 days written notice without cause. The termination was effective May 5, 2009. We do not anticipate replacing the agreement at this time and instead may use availability under our revolving credit facility as necessary to finance purchases of gold going forward.

~~Table of Contents~~21

~~reported an~~Table ~~operating loss~~ of $0.6 million for the three months ended May 27, 2006 as compared with an operating loss of $0.7 million for the three months ended May 28, 2005. The other segment reported an operating loss of $0.2 million for the three months ended May 27, 2006 as compared with operating income of $1.3 million for the three months ended May 28, 2005. Contents

~~Interest~~Discontinued Operations. In ~~Expense,~~the ~~Net.~~first ~~For~~quarter ~~AAC~~of fiscal 2008, ~~net~~we ~~interest~~recorded charges ~~expense~~of ~~was~~approximately $65.0 5 million ~~for~~primarily related to the ~~three~~write-off ~~months~~of ~~ended~~the ~~May 27,~~remaining ~~2006~~carrying value of tangible and ~~$6.3 million~~intangible ~~for~~assets of the ~~three~~achievement publications ~~months~~segment ~~ended~~and ~~May 28,~~incurred ~~2005~~approximately $0.7 ~~The~~million ~~average~~related ~~debt~~to ~~outstanding~~contract oftermination ~~AAC~~and ~~for~~employee ~~the~~severance ~~three~~costs ~~months~~as ~~ended~~a ~~May 27,~~consequence ~~2006~~of ~~and~~ the ~~three~~decision ~~months~~in October ~~ended~~2007 ~~May 28,~~to ~~2005~~shutdown ~~was~~the ~~$262 million~~achievement ~~and~~publications ~~$299 million, respectively~~business. ~~The~~These ~~weighted~~charges are ~~average~~included ~~interest~~in ~~rate~~loss onfrom ~~debt~~discontinued ~~outstanding~~operations ~~of AAC~~ for the ~~three~~nine months ended May 27 31, ~~2006~~2008 in ~~and~~ the ~~three~~accompanying ~~months~~condensed ~~ended~~consolidated ~~May 28,~~statements ~~2005 was 8.5% and~~of 7operations.~~9%, respectively.~~

~~For Group Holdings, net interest expense was $8.9 million for the three months ended May 27, 2006~~The ~~and~~results ~~$8.8 million~~of ~~for~~operations ~~the three months ended May 28, 2005. The average debt outstanding~~ of ~~Group Holdings for~~ the ~~three~~achievement ~~months~~publications ~~ended~~business ~~May 27,~~are ~~2006~~reported ~~and the three months ended May 28, 2005 was $373~~as ~~million~~discontinued ~~and~~operations ~~$392 million,~~in ~~respectively.~~the ~~The~~condensed ~~weighted~~consolidated ~~average~~statements ~~interest rate on debt outstanding~~ of ~~Group~~ ~~Holdings~~ operations for ~~the~~all ~~three~~periods ~~months ended May 27, 2006 and the three months ended May 28, 2005 was 9~~presented.~~1% and 8.4%, respectively.~~

~~Provision~~Parent ~~for Income Taxes~~Holdings Transactions. The following ~~For~~are ~~the~~transactions ~~three~~of ~~months~~American ~~ended~~Achievement ~~May 27,~~Group ~~2006~~Holdings ~~and~~Corp. ~~May 28~~(“Parent Holdings”), ~~2005,~~the ~~AAC~~parent ~~recorded an~~company ~~income tax provision~~ of ~~$12.2 million~~Intermediate ~~and~~Holdings ~~$12~~.~~1 million, respectively, which represents an~~ These ~~effective~~transactions ~~tax~~are ~~rate~~not ofreflected ~~40%~~in ~~for each period. AAC’s effective rates for~~ the ~~three~~accompanying ~~months~~condensed ~~ended May~~consolidated ~~27,~~financial ~~2006~~statements and ~~May 28,~~had ~~2005~~no ~~represent~~impact anon ~~estimated~~our ~~federal~~financial position and ~~state~~results ~~income tax rate that will apply~~of tooperations, ~~estimated~~except ~~pre-tax~~as ~~earnings~~specifically ~~for~~referenced ~~fiscal 2006~~below.

~~For~~· ~~the~~On ~~three~~December ~~months~~5, ~~ended May 27~~2008, ~~2006~~Parent Holdings and ~~May 28~~Herff Jones, ~~2005~~Inc., ~~Group~~together ~~Holdings~~with ~~recorded~~the anequity ~~income~~holders ~~tax provision~~ of ~~$12.2 million~~Parent ~~and $12.3 million~~Holdings, ~~respectively,~~announced ~~which~~that ~~represents~~such anparties ~~effective~~had ~~tax~~terminated ~~rate of~~the ~~44%~~proposed ~~for~~transaction ~~each~~pursuant ~~period.~~to ~~Group~~which Parent Holdings’ ~~effective~~would ~~rates~~be ~~for~~sold ~~the~~to ~~three~~Herff ~~months ended May 27~~Jones, ~~2006~~Inc. ~~and May 28,~~Parent ~~2005~~Holdings ~~represent~~received anproceeds ~~estimated~~in ~~federal~~connection ~~and~~with ~~state~~that ~~income~~termination ~~tax rate~~ that, ~~will~~after ~~apply~~considering totransaction ~~estimated pre-tax~~related ~~earnings~~costs ~~for~~incurred ~~fiscal~~by ~~2006~~Parent ~~and~~Holdings, ~~the~~amounted ~~non-deductibility~~to ofnet aproceeds ~~portion~~ of ~~its~~approximately ~~interest~~$26.5 ~~on high-yield debt~~million.

~~Net~~· ~~Income~~On February 25, 2009, Parent Holdings repurchased $104.3 Asmillion aaggregate ~~result~~principal amount of ~~the~~its ~~foregoing~~outstanding 12.75% Senior PIK Notes due October 1, ~~AAC~~2012 ~~reported~~(the ~~net~~“Parent ~~income~~Holdings Notes”) for an aggregate purchase price of $1824.6 0 million. ~~for~~This repurchase was funded from the ~~three months~~net ~~ended~~proceeds ~~May 27~~received by Parent Holdings in connection with the aforementioned settlement. For no additional consideration, ~~2006~~the assellers ~~compared~~of tothe ~~net~~Parent ~~income~~Holdings Notes, representing a majority in principal amount of ~~$18.2 million~~the ~~for~~Parent Holdings Notes, consented to a second supplemental indenture (“the ~~three~~Second ~~months~~Supplemental ~~ended~~Indenture”), ~~May 28~~which was entered into on February 25, ~~2005~~2009, by Parent Holdings and the trustee under the indenture. AsThe aSecond ~~result~~Supplemental Indenture removed substantially all of the ~~foregoing~~restrictive and reporting covenants set forth in such indenture, ~~Group~~as ~~Holdings~~well ~~reported~~as ~~net~~certain ~~income~~events of ~~$15~~default and related provisions.~~8 million~~ ~~for~~Accordingly, Parent Holdings is no longer obligated to file reports with the ~~three~~ ~~months~~Securities ~~ended~~and Exchange Commission. As of May 27 30, ~~2006~~2009 asthere ~~compared~~was toapproximately $15113.6 1 million ~~for~~aggregate principal amount of Parent Holdings Notes outstanding. Deferred tax benefits of net operating losses generated by AAC that will be utilized by Parent Holdings in the ~~three~~2009 ~~months~~consolidated ~~ended~~tax ~~May 28, 2005~~return to offset the income generated from the aforementioned settlement and repurchase transactions were transferred from AAC to Parent Holdings in the second quarter of 2009. This transfer was accounted for as a distribution by AAC to Intermediate Holdings to Parent Holdings which is reflected as a reduction to paid in capital and a reduction of a deferred tax asset at AAC and Intermediate Holdings.

27 · On June 4, 2009, Parent Holdings commenced a tender offer to purchase any and all of the outstanding Parent Holdings Notes. The tender offer will expire at 11:59 p.m., New York City time, on July 17, 2009, unless further extended or earlier terminated. Parent Holdings intends to fund payment for the notes that are purchased in the tender offer with a combination of one or more of (i) cash borrowed by AAC under the Amended Senior Credit Facility and distributed to Parent Holdings, (ii) proceeds of the sale of new preferred stock by a newly formed subsidiary American Achievement Intermediate Holding Corp. and (iii) cash on hand. American Achievement Intermediate Holding Corp. is a subsidiary of Parent Holdings and the new parent company of Intermediate Holdings. Any preferred stock issued by American Achievement Intermediate Holding Corp. will be structurally senior to any remaining Parent Holdings Notes.

~~Table~~· On June 4, 2009, Parent Holdings and American Achievement Intermediate Holding Corp. entered into a Securities Purchase Agreement with the Purchasers party thereto with respect to the issuance of ~~Contents~~shares of new preferred stock and warrants to purchase Parent Holdings’ common stock. Certain investors have already deposited proceeds for the issuance of preferred stock into escrow and may deposit additional proceeds in the future. The Purchase Agreement pursuant to which the new preferred stock will be issued contains restrictions on the ability of American Achievement Intermediate Holding Corp and its subsidiaries, including the Company, to incur additional debt or issue preferred stock; pay dividends or distributions on its capital stock, or redeem or repurchase its capital stock or subordinated debt; make certain investments; enter into sale and leaseback transactions; engage in transactions with affiliates; create liens on assets to secure debt; transfer or sell assets; guarantee debt; restrict dividend or other payments to the issuer; in the case of the issuer, consolidate, merge or transfer all or substantially all of its assets and the assets of its subsidiaries; and engage in unrelated businesses.

~~Nine Months Ended May 27, 2006 Compared to Nine Months Ended May 28, 2005~~ 22

~~The~~Table ~~following table sets forth selected information for Group Holdings and AAC from our condensed consolidated statements~~ of ~~operations expressed on an actual basis and as a percentage of net sales:~~ Contents

	AAC Group Holding Corp.										American Achievement Corporation
	For the Nine		% of			For the Nine		% of			For the Nine		% of			For the Nine		% of
	Months Ended		Net			Months Ended		Net			Months Ended		Net			Months Ended		Net
	May 27, 2006		Sales			May 28, 2005		Sales			May 27, 2006		Sales			May 28, 2005		Sales
Net sales	$	257,733		100.0	%	$	259,228		100.0	%	$	257,733		100.0	%	$	259,228		100.0	%
Cost of sales		103,336		40.1	%		106,993		41.3	%		103,336		40.1	%		106,993		41.3	%
Gross profit		154,397		59.9	%		152,235		58.7	%		154,397		59.9	%		152,235		58.7	%
Selling, general and administrative expenses		111,658		43.3	%		115,208		44.4	%		111,658		43.3	%		115,208		44.4	%
Operating income		42,739		16.6	%		37,027		14.3	%		42,739		16.6	%		37,027		14.3	%
Interest expense		25,942		10.1	%		23,066		8.9	%		17,738		6.9	%		17,797		6.9	%
Income before income taxes		16,797		6.5	%		13,961		5.4	%		25,001		9.7	%		19,230		7.4	%
Provision for income taxes		7,358		2.8	%		6,082		2.4	%		9,925		3.8	%		7,692		3.0	%
Net income	$	9,439		3.7	%	$	7,879		3.0	%	$	15,076		5.9	%	$	11,538		4.4	%

Results of Operations

~~Net Sales. Net sales consist of product sales and are net of product returns and promotional~~Three ~~discounts.~~Months ~~Net~~Ended ~~sales~~May ~~decreased $1.5 million~~30, or2009 ~~0.6%,~~Compared to ~~$257.7 million~~Three ~~for~~Months ~~the~~Ended ~~nine months ended~~ May ~~27,~~ ~~2006 from $259.2 million for the nine months ended May 28~~31, ~~2005. The following details the~~ ~~changes in net sales during such periods by business segment.~~ 2008

~~Class Rings.~~The following ~~Net~~tables ~~sales~~set ~~increased~~forth ~~$0.7 million~~selected toinformation ~~$103.7 million~~ for ~~the~~Intermediate ~~nine~~Holdings ~~months ended~~and ~~May 27,~~AAC ~~2006~~ from ~~$103.0 million~~our ~~for~~condensed ~~the~~consolidated ~~nine~~statements ~~months~~of ~~ended~~operations ~~May 28,~~expressed ~~2005.~~on ~~The increase was~~an ~~comprised~~actual ofbasis ~~an increase of $0.2 million in college class rings~~ and as a ~~$0.5 million~~percentage inof ~~high school~~net ~~class rings.~~ sales:

Yearbooks. Net sales decreased $2.9 million to $86.4 million for the nine months ended May 27, 2006 from $89.3 million for the nine months ended May 28, 2005. The decrease in net sales was the result of later copy receipt from customers, which impacted the timing of yearbook shipments.

	Intermediate Holdings
	For the Three		% of			For the Three			% of
(in thousands)	Months Ended		Net			Months Ended			Net
	May 30, 2009		Sales			May 31, 2008			Sales				Change
Net sales	$	144,842		100.0	%	$	157,142			100.0		%	$	(12,300	)
Cost of sales		55,353		38.2	%		62,432			39.7		%		(7,079	)
Gross profit		89,489		61.8	%		94,710			60.3		%		(5,221	)
Selling, general & administrative expenses		44,256		30.6	%		50,094			31.9		%		(5,838	)
Operating income		45,233		31.2	%		44,616			28.4		%		617
Interest expense, net		7,497		5.2	%		8,469			5.4		%		(972	)
Income from continuing operations before income taxes		37,736		26.0	%		36,147			23.0		%		1,589
Provision for income taxes		16,574		11.4	%		16,846			10.7		%		(272	)
Income from continuing operations		21,162		14.6	%		19,301			12.3		%		1,861
Discontinued operations:
Loss from discontinued operations before income taxes		-		-	%		(72	)		(0.0	)	%		72
Benefit for income taxes		-		-	%		(28	)		(0.0	)	%		28
Loss from discontinued operations		-		-	%		(44	)		(0.0	)	%		44
Net income	$	21,162		14.6	%	$	19,257			12.3		%	$	1,905

Graduation Products. Net sales increased $3.6 million to $42.6 million for the nine months ended May 27, 2006 from $39.0 million for the nine months ended May 28, 2005. The increase in net sales was the result of an increase in sales due to increased volume and pricing.

	AAC
	For the Three		% of				For the Three			% of
(in thousands)	Months Ended		Net				Months Ended			Net
	May 30, 2009		Sales				May 31, 2008			Sales				Change
Net sales	$	144,842		100.0		%	$	157,142			100.0		%	$	(12,300	)
Cost of sales		55,353		38.2		%		62,432			39.7		%		(7,079	)
Gross profit		89,489		61.8		%		94,710			60.3		%		(5,221	)
Selling, general & administrative expenses		44,256		30.6		%		50,094			31.9		%		(5,838	)
Operating income		45,233		31.2		%		44,616			28.4		%		617
Interest expense, net		4,022		2.8		%		5,022			3.2		%		(1,000	)
Income from continuing operations before income taxes		41,211		28.4		%		39,594			25.2		%		1,617
Provision for income taxes		15,969		(11.0	)	%		16,012			10.2		%		(43	)
Income from continuing operations		25,242		17.4		%		23,582			15.0		%		1,660
Discontinued operations:
Loss from discontinued operations before income taxes		-		-		%		(72	)		(0.0	)	%		72
Benefit for income taxes		-		-		%		(28	)		(0.0	)	%		28
Loss from discontinued operations		-		-		%		(44	)		(0.0	)	%		44
Net income	$	25,242		17.4		%	$	23,538			15.0		%	$	1,704

~~Achievement Publications. Net sales decreased $1.4 million to $8.7 million for the nine months ended May 27, 2006 from $10.1 million for the nine months ended May 28, 2005. The decrease in~~ 23

28 Table of Contents

~~Table~~We use a 52/53 week fiscal year. Fiscal year 2009 will consist of ~~Contents~~52 weeks, whereas fiscal year 2008 consisted of 53 weeks. The additional week in fiscal year 2008 was included in the third quarter; therefore the three month period ended May 31, 2008 consisted of fourteen weeks as compared to the three month period ended May 30, 2009, which consisted of thirteen weeks. As a result, the current reporting period reflects one week less of net sales, expenses and operating income as compared to the same period of the prior fiscal year.

Net Sales. Net sales consist ~~was~~of ~~due~~product tosales aand ~~decline~~are innet ~~the~~of product returns and promotional discounts. Net sales ofdecreased $12.3 million, or 7.8%, to $144.8 million for the ~~Who’s~~three ~~Who~~months ~~Among~~ended ~~American~~May ~~High~~30, 2009 from $157.1 million for the three ~~School~~months ~~Students~~ended ~~publication~~May 31, 2008. The following details the changes in net sales during such periods by business segment.

~~Other~~Class Rings. Net sales decreased $14.67 million to $1635.36 million for the ~~nine~~three months ended May ~~27,~~ ~~2006~~30, 2009 from $1740.9 3 million for the ~~nine~~three months ended May 28 31, ~~2005~~2008. The decrease in net sales ~~was~~ ~~related~~in toclass aring ~~decline~~sales inwas ~~affinity~~primarily ~~jewelry~~a result of lower sales volumes and achange ~~slight~~in ~~decline~~product inmix ~~commercial~~from gold to other metals with lower selling ~~printing~~prices due to softness in the economy.

~~Gross Profit~~Yearbooks. ~~Gross~~Net ~~margin represents gross profit as a percentage of net~~ sales decreased $1.4 million ~~Gross~~to ~~margin was 59~~$79.9%3 million for the ~~nine~~three months ended May 27 30, ~~2006,~~2009 ~~a 1.2 percentage point increase~~ from 58$80.7% million for the ~~nine~~ three months ended May ~~28,~~ ~~2005. Overall~~31, ~~gross profit increased $2~~2008.~~2 million.~~ The decrease ~~increase~~ in ~~gross margin~~net sales was ~~mainly~~primarily athe result of ~~continued~~lower ~~efficiency~~contract ~~gains~~volume ~~in our ring, yearbook~~ and ~~graduation products facilities. These efficiencies were directly related to the closure of~~ a ~~ring~~ ~~manufacturing~~decrease ~~facility, capital investments~~ in ~~printing~~the ~~equipment~~average ~~and~~contract ~~technology~~value infrom ~~our~~the ~~yearbook operations~~third ~~and~~quarter ~~continued~~of ~~lean~~fiscal ~~manufacturing~~2008 ~~improvements in all facilities. The favorable gross~~due ~~margin~~to ~~was~~softness ~~slightly offset by the revenue decline~~ in the ~~“Who’s Who Among American High School Students” publication and approximately $0~~economy.~~7 million of costs associated with a closure of a yearbook manufacturing facility.~~

~~Selling,~~Graduation ~~General and Administrative Expenses~~Products. ~~Selling, general and administrative expenses~~Net sales decreased $34.50 million, ~~or 3.1%,~~ to $~~111~~21.~~7 million~~6 ~~for the nine months ended May 27, 2006 from $115.2~~ million for the ~~nine~~three months ended May ~~28,~~ ~~2005. Included in selling~~30, ~~general~~2009 ~~and administrative~~from ~~expenses are two sub-categories: selling and marketing expenses and general and administrative expenses. Selling and marketing expenses decreased~~ $325.~~1 million~~6 ~~to $78.4~~ million ~~or 30.4% of net sales,~~ for the ~~nine~~three months ended May ~~27,~~ ~~2006 from $81.5 million or~~ 31~~.5% of net sales~~, ~~for the nine months ended May 28, 2005~~2008. The decrease in ~~selling~~net ~~and~~sales ~~marketing expenses~~ was primarily ~~the~~a result of ~~decreased~~lower ~~selling~~sales ~~and~~volume ~~marketing~~due ~~expenses~~to softness in ~~yearbooks~~the aseconomy and a result of ~~the costs~~timing ~~in the prior year~~ of ~~launching~~shipments between the ~~official yearbook program and a decrease in ring and~~second ~~recognition~~ and ~~affinity~~third ~~marketing~~quarters ~~expenses as a result~~ of ~~our~~fiscal ~~lean~~2009 ~~transformation,~~compared ~~partially offset~~to bythe ~~increases~~comparable inquarters ~~class rings and graduation product commission expenses as a result~~ of ~~the~~fiscal ~~increase in sales~~2008.

~~General~~Other. ~~and~~Net ~~administrative~~sales ~~expenses for the nine months ended May~~decreased $2.2 ~~27,~~million ~~2006~~to ~~were~~ $338.3 million, ~~or 12.9%~~for ofthe ~~net~~three ~~sales,~~months asended ~~compared~~May to30, 2009 from $3310.75 million, ~~or 13.0% of net sales,~~ for the ~~nine~~three months ended May 28 31, ~~2005~~2008. The decrease in net ~~general~~sales ~~and administrative expenses of $0.4 million~~ was primarily ~~due~~ related to ~~reduced~~a ~~legal~~decline ~~fees,~~in ~~medical~~sales ~~expenses,~~of ~~other~~personalized ~~general and~~family ~~administration~~jewelry ~~expenses~~ and ~~the~~a ~~one-time~~change ~~bonus of $2.2 million~~ in ~~the~~product ~~nine~~mix ~~months~~from ~~ended~~gold ~~May 28,~~to ~~2005.~~other ~~These items~~metals ~~were~~due ~~partially~~to ~~offset~~softness ~~by an increase of one-time severance costs, professional fees and the~~in ~~$1.0 million~~the ~~settlement paid to Frederick Goldman, Inc~~economy.

~~Operating Income (Loss)~~Gross Profit. ~~As a result of the foregoing, operating income was $42.7 million, or 16.6%~~Gross ofmargin ~~net~~represents ~~sales,~~gross ~~for~~profit ~~the nine months ended May 27, 2006~~ as ~~compared~~a ~~with~~percentage ~~operating income~~ of ~~$37.0 million, or 14.3% of~~ net sales~~, for the nine months ended May 28, 2005~~. ~~The~~Gross ~~class~~margin ~~rings segment~~was ~~reported operating income of $17~~61.~~4 million~~8% for the ~~nine~~three months ended May 27 30, ~~2006 as compared with operating income of $14.7 million for the nine months ended May 28~~2009, ~~2005.~~a ~~The yearbooks segment reported operating income of $19~~1.~~0 million~~5 ~~for~~percentage ~~the~~point ~~nine months ended May 27, 2006 as compared with~~increase ~~operating~~from ~~income of $14~~60.~~6 million~~3% for the ~~nine~~three months ended May 28 31, ~~2005~~2008. ~~The graduation products segment reported operating income of $6.9 million for the nine months ended May 27~~Overall, ~~2006~~gross asprofit ~~compared~~decreased ~~with operating income of~~ $5.~~8 million~~2 ~~for the nine months ended May 28, 2005~~million. The ~~achievement~~ ~~publications~~decrease ~~segment~~in ~~reported~~gross anprofit ~~operating~~was ~~loss~~primarily ofa ~~$0.5 million~~result ~~for the nine months ended May 27, 2006 as compared with operating income~~ of ~~$0.8 million for~~ the ~~nine~~sales ~~months~~declines ~~ended~~and ~~May 28,~~higher ~~2005.~~cost ~~The other segment reported an operating loss~~ of ~~$0.0 million for the nine months ended May 27~~gold, ~~2006~~partially asoffset ~~compared~~by ~~with~~cost ~~operating~~savings ~~income~~from ofour ~~$1.0 million~~manufacturing ~~for~~processes ~~the~~and ~~nine~~other ~~months~~cost ~~ended~~reduction ~~May 28, 2005~~measures.

~~Interest Expense~~Selling, ~~Net.~~General and ~~For~~Administrative ~~AAC~~Expenses. Selling, ~~net~~general ~~interest~~and administrative ~~expense~~expenses ~~was~~decreased $175.78 million, ~~for~~or ~~the nine months ended May 27~~11.6%, ~~2006 and~~ to $1744.83 million for the ~~nine~~three months ended May 28 30, ~~2005.~~2009 ~~The average debt outstanding~~from of$50.1 million ~~AAC~~ for the ~~nine~~three months ended May 27 31, ~~2006~~2008. ~~and~~Included ~~the~~in ~~nine months ended May 28~~selling, ~~2005 was $286~~ ~~million~~general and ~~$317 million,~~administrative ~~respectively.~~expenses ~~The~~are ~~weighted~~two ~~average~~sub-categories: ~~interest~~selling ~~rate on debt outstanding of~~and ~~AAC~~marketing ~~for~~expenses ~~the~~and ~~nine~~general ~~months ended May 27, 2006~~ and ~~the~~administrative ~~nine months ended May 28, 2005 was 7~~expenses.~~7% and 6.9%, respectively.~~

29Selling and marketing expenses decreased $4.0 million to $34.0 million or 23.5% of net sales, for the three months ended May 30, 2009 from $38.0 million or 24.2% of net sales, for the three months ended May 31, 2008 due to a decrease in commissions as a result of lower sales and due to decreased marketing expenditures.

~~Table~~General and administrative expenses for the three months ended May 30, 2009 were $10.3 million, or 7.1% of ~~Contents~~net sales, as compared to $12.1 million, or 7.7% of net sales, for the three months ended May 31, 2008. The decrease in general and administrative expenses is a result of reductions in spending including consulting and professional fees, partially offset by expenses incurred to amend our credit facility.

For Group Holdings, net interest expense was $25.9 million for the nine months ended May 27, 2006 and $23.1 million for the nine months ended May 28, 2005. The average debt outstanding of Group Holdings for the nine months ended May 27, 2006 and the nine months ended May 28, 2005 was $390 million and $384 million, respectively. The weighted average interest rate on debt outstanding of Group Holdings for the nine months ended May 27, 2006 and the nine months ended May 28, 2005 was 8.4% and 7.5%, respectively. 24

~~Provision~~Table ~~for Income Taxes. For the nine months ended May 27, 2006 and May 28, 2005, AAC recorded an income tax provision~~ of $9.9 million and $7.7 million, respectively, which represents an effective tax rate of 40% for each period. AAC’s effective rates for the nine months ended May 27, 2006 and May 28, 2005 represent an estimated federal and state income tax rate that will apply to estimated pre-tax earnings for fiscal 2006. Contents

~~For~~Operating Income. As ~~the~~a ~~nine~~result ~~months~~of ~~ended May 27~~the foregoing, ~~2006~~operating ~~and May 28, 2005, Group Holdings recorded an~~ income ~~tax provision~~was of $745.~~4 million~~2 ~~and $6.1~~ million, ~~respectively,~~or ~~which~~31.2% ~~represents an effective tax rate~~ of ~~44%~~ ~~for~~net ~~each~~sales, ~~period. Group Holdings’ effective rates~~ for the three ~~nine~~ months ended May ~~27,~~ ~~2006 and May 28~~30, ~~2005~~2009 ~~represent~~as ancompared ~~estimated~~with ~~federal~~operating ~~and state~~ income ~~tax~~of $44.6 million, ~~rate~~or ~~that~~28.4% ~~will~~of ~~apply~~net tosales, ~~estimated pre-tax earnings~~ for ~~fiscal 2006 and~~ the ~~non-deductibility~~three ofmonths aended ~~portion~~May ~~of its interest on~~31, ~~high-yield debt~~2008.

~~Net~~The ~~Income~~class rings segment reported operating income of $6.2 million Asfor athe ~~result~~three months ended May 30, 2009 as compared with operating income of $4.8 million for the ~~foregoing~~three months ended May 31, ~~AAC~~2008. ~~reported~~The ~~net~~yearbooks segment reported operating income of $1534.1 million for the ~~nine~~ three months ended May 27 30, ~~2006~~ 2009 as compared towith operating income of $1133.59 million for the three months ended May 31, 2008. The graduation products segment reported operating income of $4.6 million for the ~~nine~~three months ended May 28 30, ~~2005.~~2009 Asas acompared with ~~result~~operating income of $6.0 million for the ~~foregoing~~three months ended May 31, ~~Group~~2008. The ~~Holdings~~other segment reported ~~net~~operating income of $90.4 3 million for the ~~nine~~three months ended May 27 30, ~~2006~~2009 as compared towith an operating loss of $70.9 1 million for the three ~~nine~~ months ended May 28 31, ~~2005~~2008.

~~Liquidity~~Interest Expense, Net. For Intermediate Holdings, net interest expense was $7.5 million for the three months ended May 30, 2009 and ~~Capital~~$8.5 million ~~Resources~~for the three months ended May 31, 2008. The average debt outstanding of Intermediate Holdings for the three months ended May 30, 2009 and the three months ended May 31, 2008 was $328 million and $349 million, respectively. The weighted average interest rate on debt outstanding of Intermediate Holdings for the three months ended May 30, 2009 and the three months ended May 31, 2008 was 8.4%.

~~Operating~~For ~~Activities~~AAC, net interest expense was $4.0 million for the three months ended May 30, 2009 and $5.0 million for the three months ended May 31, 2008. The average debt outstanding of AAC for the three months ended May 30, 2009 and the three months ended May 31, 2008 was $197 million and $227 million, respectively. The weighted average interest rate on debt outstanding of AAC for the three months ended May 30, 2009 and the three months ended May 31, 2008 was 7.1% and 7.5%, respectively.

~~For~~Provision ~~AAC,~~for ~~operating~~Income Taxes. ~~activities~~For ~~provided~~the three ~~cash~~months ofended ~~$36.6 million~~May ~~for~~30, ~~the~~2009 ~~nine~~and ~~months~~May ~~ended~~31, ~~May 27~~2008, ~~2006~~Intermediate Holdings recorded ~~compared~~an toincome ~~cash~~tax ~~provided~~provision of $2616.6 million and $16.8 million, ~~for~~respectively, which ~~the~~represents ~~nine~~an ~~months~~effective ~~ended~~tax ~~May 28~~rate of 44% and 47%, ~~2005~~respectively. The ~~$10.0~~ ~~million~~effective ~~increase~~tax rates invary ~~cash~~from ~~provided~~the bystatutory ~~operating~~federal ~~activities~~rate ~~was~~due ~~mainly attributable~~ to ~~increased~~the ~~net~~impact of state income taxes and anthe ~~increase~~non-deductibility inof ~~accounts~~a ~~payable~~portion of interest on high-yield debt. Intermediate Holdings’ effective rates for the three months ended May 30, 2009 and ~~accrued~~May ~~expenses~~31, ~~along~~2008 ~~with~~represent aan ~~reduction~~estimate inof ~~deferred~~the annual federal ~~revenue~~and state income tax rate.

For ~~Group~~the three ~~Holdings~~months ended May 30, ~~operating~~2009 ~~activities~~and ~~provided~~May ~~cash~~31, 2008, AAC recorded an income tax provision of $3616.7 0 million ~~for~~and ~~the~~$16.0 ~~nine~~million, ~~months ended May 27~~respectively, ~~2006~~which ~~compared~~represents toan effective ~~cash~~tax ~~provided~~rate of ~~$26~~39% and 40%, respectively.7 The effective tax ~~million~~rates ~~for~~vary from the ~~nine~~statutory ~~months~~federal ~~ended~~rate ~~May 28,~~due ~~2005.~~to ~~The~~the impact of state ~~$10~~income taxes.0 ~~million~~AAC’s ~~increase~~effective inrates ~~cash~~for ~~provided~~the bythree ~~operating~~months ~~activities~~ended ~~was~~May ~~mainly~~30, ~~attributable to~~2009 ~~increased~~and ~~net~~May ~~income~~31, ~~and~~2008 represent an ~~increase~~estimate inof ~~accounts~~the ~~payable~~annual federal and ~~accrued~~state ~~expenses along with a~~income ~~reduction~~tax ~~in deferred revenue~~rate.

~~Investing~~Loss ~~Activities~~from Discontinued Operations. As described in “Significant Developments”, the results of operations of the achievement publications business are reported as discontinued operations. Loss from discontinued operations before income taxes during the three months ended May 31, 2008 was $0.1 million.

Capital expenditures for the nine months ended May 27, 2006 were $10.9 million compared to capital expenditures of $9.8 million for the nine months ended May 28, 2005. Our projected capital expenditures for the entire fiscal year 2006 are expected to be approximately $14.0 million. 25

~~Financing~~Table ~~Activities~~ of Contents

~~For AAC, financing activities used cash of $24.0 million for the nine months ended May 27, 2006~~Nine ~~compared~~Months toEnded ~~cash used of $16.2 million for the nine months ended~~ May ~~28,~~ ~~2005. During the nine months ended May 27~~30, ~~2006,~~2009 ~~AAC~~Compared ~~paid~~to ~~down~~Nine ~~$32.3 million~~Months ofEnded ~~the~~May ~~term loan of the Senior Credit Facility of which $~~31~~.0 million were prepayments. During the nine months ended May 27~~, ~~2006, AAC received a capital~~ ~~contribution from Group Holdings of $7,000, which was used to pay down the term loan.~~ 2008

~~For~~The following ~~Group~~tables ~~Holdings,~~set ~~financing~~forth ~~activities~~selected ~~used~~information ~~cash~~Intermediate ofHoldings ~~$23.8 million~~and ~~for the nine months ended May~~AAC ~~27,~~from ~~2006~~our ~~compared~~condensed toconsolidated ~~cash~~statements ~~used~~ of ~~$16.0 million~~operations ~~for~~expressed ~~the~~on ~~nine~~an ~~months ended May 28, 2005. During the~~actual ~~nine~~basis ~~months~~and ~~ended~~as ~~May 27,~~a ~~2006,~~percentage ~~the Company paid down $32.3 million~~ of ~~the~~net ~~term loan of the Senior Credit~~ sales:

	Intermediate Holdings
	For the Nine		% of			For the Nine			% of
(in thousands)	Months Ended		Net			Months Ended			Net
	May 30, 2009		Sales			May 31, 2008			Sales				Change
Net sales	$	250,169		100.0	%	$	269,710			100.0		%	$	(19,541	)
Cost of sales		105,511		42.2	%		114,614			42.5		%		(9,103	)
Gross profit		144,658		57.8	%		155,096			57.5		%		(10,438	)
Selling, general & administrative expenses		101,775		40.7	%		111,184			41.2		%		(9,409	)
Operating income		42,883		17.1	%		43,912			16.3		%		(1,029	)
Interest expense, net		22,783		9.1	%		24,990			9.3		%		(2,207	)
Income from continuing operations before income taxes		20,100		8.0	%		18,922			7.0		%		1,178
Provision for income taxes		8,936		3.5	%		9,306			3.4		%		(370	)
Income from continuing operations		11,164		4.5	%		9,616			3.6		%		1,548
Discontinued operations:
Loss from discontinued operations before income taxes		-		-	%		(7,200	)		(2.7	)	%		7,200
Benefit for income taxes		-		-	%		(2,815	)		(1.0	)	%		2,815
Loss from discontinued operations		-		-	%		(4,385	)		(1.7	)	%		4,385
Net income	$	11,164		4.5	%	$	5,231			1.9		%	$	5,933

AAC

For the Nine

% of

Filing Compare · AAC Group Holding Corp.