American Achievement 8-K Regulation FD Disclosure

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): March 4, 2004

AMERICAN ACHIEVEMENT CORPORATION

(Exact name of Registrant as specified in its charter)

Delaware	333-84294	13-4126506
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification Number)

7211 Circle S Road

Austin, Texas 78745

(Address of principal executive offices)(Zip code)

Registrant’s telephone number, including area code: (512) 444-0571

N/A

(former address if changed since last report)

Item 9. Regulation FD Disclosure

As previously announced, on December 24, 2003, American Achievement Corporation (the “Company”) entered into a merger agreement pursuant to which AAC Acquisition Corp. will merge with and into the Company, with the Company continuing as the surviving corporation and a wholly-owned subsidiary of AAC Holding Corp. AAC Acquisition Corp. and AAC Holding Corp. are Delaware corporations formed at the direction of Fenway Partners Capital Fund II, L.P. Upon the consummation of the merger, an investor group led by Fenway Partners Capital Fund II, L.P. will own substantially all of the outstanding common stock of AAC Holding Corp.

Following are portions of the summary historical and pro forma financial information, pro forma condensed consolidated financial data and other information included in the preliminary offering circular, dated March 3, 2004, to be distributed in connection with the Company’s proposed offering under Rule 144A and Regulation S of $150 million principal amount of senior subordinated notes. Throughout this filing, “the Transactions” refer to the merger and related financing transactions, and all references to “we,” “us” and “our” refer to the Company and its consolidated subsidiaries after giving effect to the Transactions.

This report is neither an offer to sell nor a solicitation of an offer to buy any securities of the Company. The information in this Form 8-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. In addition, this information shall not be deemed to be incorporated by reference into any of the Company’s filings with the Securities and Exchange Commission, except as shall be expressly set forth by specific reference in any such filing. Notwithstanding the foregoing, the information in this report shall be incorporated into the offer to purchase circulated in connection with the Company’s previously announced tender offer for its existing 11 ⁵/8% Senior Unsecured Notes due 2007.

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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION

The summary historical consolidated financial and other data should be read in conjunction with our previously filed consolidated financial statements and the related notes thereto. The summary historical consolidated financial and other data set forth below for, and as of the end of, the fiscal years ended August 25, 2001, August 31, 2002 and August 30, 2003 have been derived from our audited consolidated financial statements. The summary historical consolidated financial and other data presented below for, and as of the end of, the three month periods ended November 30, 2002 and November 29, 2003 have been derived from our unaudited condensed consolidated financial statements and have been prepared on the same basis as our previously filed audited consolidated financial statements. Operating results for the three month period ended November 29, 2003 are not necessarily indicative of the results that may be expected for the fiscal year ending August 28, 2004.

The summary unaudited pro forma condensed consolidated financial and other data should be read in conjunction with our pro forma condensed consolidated financial statements included elsewhere herein. The summary unaudited pro forma condensed consolidated financial and other data for, and as of the end of, the twelve months ended November 29, 2003 was derived from our unaudited pro forma condensed consolidated financial statements appearing elsewhere in this offering circular, which, with respect to statement of operations data, give effect to the Transactions and our acquisition of C-B Graduation Announcements, LLC, as if they occurred as of the beginning of each period presented, and with respect to balance sheet data, give effect to the Transactions and such acquisition as if they occurred as of November 29, 2003. The unaudited pro forma condensed consolidated financial and other data does not purport to represent what our results of operations would have been if the Transactions and such acquisition had occurred as of such date indicated or what such results will be for future periods.

	Fiscal Year Ended								Three Months Ended					Pro Forma Twelve Months Ended November 29, 2003(3)
	August 25, 2001(1)			August 31, 2002(2)			August 30, 2003(3)		November 30, 2002(3)		November 29, 2003(3)
	(as restated)
	(in thousands)
Statement of Operations Data:
Net sales	$	281,053		$	304,378		$	308,431	$	75,035	$	67,928		$	306,284
Cost of sales		142,164			146,898			139,170		33,817		30,044			137,116
Gross profit		138,889			157,480			169,261		41,218		37,884			169,168
Selling, general and administrative expenses		119,972			129,734			129,423		33,610		32,460			133,171
Loss on extinguishment of debt		—			5,650			—		—		—			—
Operating income		18,917			22,096			39,838		7,608		5,424			35,997
Interest expense		22,846			26,026			28,940		7,372		6,981			22,706
Other expense		—			2,783			—		—		—			—
Income (loss) before income taxes		(3,929	)		(6,713	)		10,898		236		(1,557	)		13,291
Provision (benefit) for income taxes		(1,443	)		(1,171	)		132		18		—			114
Cumulative effect of change in accounting principle—loss		1,835			—			—		—		—			—
Net income (loss)	$	(4,321	)	$	(5,542	)	$	10,766	$	218	$	(1,557	)	$	13,177
Balance Sheet Data (at end of period):
Total assets	$	384,971		$	401,626		$	395,501	$	405,712	$	398,918		$	498,683
Total debt(4)		223,609			242,117			226,710		233,182		217,279			307,000
Total stockholders’ equity		70,828			65,254			71,843		65,172		70,003			118,700

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	Fiscal Year Ended						Three Months Ended				Pro Forma Twelve Months Ended
	August 25, 2001(1)		August 31, 2002(2)		August 30, 2003(3)		November 30, 2002(3)		November 29, 2003(3)		November 29, 2003(3)		January 31, 2004 (3)(5)
	(as restated)
	(in thousands)
Other Data:
EBITDA(6)	$	34,668	$	39,025	$	53,987	$	11,078	$	9,222	$	52,885	$	53,361
Capital expenditures		7,499		14,247		11,243		4,816		6,593		13,020		13,908
Depreciation and amortization		17,586		19,712		14,149		3,470		3,798		16,888		16,897

(1) Includes the results of operations for Educational Communications, Inc., or ECI, from March 30, 2001, the date of our acquisition of ECI. ECI sales are highly seasonal, with most shipments during the first four months of our fiscal year.

In addition, in September 2002, subsequent to the issuance of our financial statements for the year ended August 25, 2001, our management determined that we should have (i) changed our revenue recognition on certain sales to independent sales representatives in order to comply with the provisions of SEC Staff Accounting Bulletin No. 101, effective August 27, 2000, and (ii) recognized an income tax benefit related to a net operating loss carryback attributable to one of our subsidiaries during the year ended August 25, 2001. As a result, the consolidated financial statements for the year ended August 25, 2001 were restated.

(2) Includes the results of operations for Milestone Marketing Incorporated, or Milestone, from July 15, 2002, the date of our acquisition of Milestone.

(3) Beginning in fiscal 2004, ECI’s “Who’s Who Among America’s Teachers” will be produced annually and shipped to customers in August during the fourth quarter of fiscal 2004. In fiscal 2003, this achievement publication generated net sales of $2.8 million and EBITDA of $1.7 million, substantially all of which was generated during the three months ended November 30, 2002. Through fiscal 2003, this achievement publication was produced once every two years and shipped in November. Accordingly, no revenue or EBITDA from this publication is included in our results of operations for the three months ended November 29, 2003, and the twelve months ended November 29, 2003 and January 31, 2004.

(4) Excludes (i) approximately $4.5 million, $4.3 million, $4.9 million, $4.3 million, $3.0 million and $0.0 million of bank overdrafts and (ii) approximately $0.1 million, $0.1 million, $2.2 million, $0.1 million, $4.9 million and $4.9 million of capital lease obligations, in each case, as of August 25, 2001, August 31, 2002, August 30, 2003, November 30, 2002, November 29, 2003 (historical) and November 29, 2003 (pro forma), respectively.

(5) The summary unaudited pro forma condensed consolidated statement of operations data for the twelve months ended January 31, 2004 give effect to the Transactions and our acquisition of C-B Graduation Announcements, LLC, as if they occurred as of the beginning of such period.

(6) EBITDA represents net income (loss) before interest expense, income taxes, depreciation and amortization. EBITDA does not represent net income or cash flows from operations, as these terms are defined under generally accepted accounting principles, and should not be considered as an alternative to net income as an indicator of our operating performance or to cash flows as a measure of liquidity. We consider EBITDA to be a key indicator of operating performance. We have included information concerning EBITDA because we use such information in our review of the performance of our management, in our review of the performance of our business and is expected to be used in the calculation of our new management fee. EBITDA as presented herein is not necessarily comparable to similarly titled measures reported by other companies. In connection with the Transactions, we expect to enter into a new management agreement with an affiliate of Fenway Partners Capital Fund II, L.P., pursuant to which such affiliate will be paid an annual management fee equal to the greater of $3.0 million or 5% of the previous fiscal year’s EBITDA (as defined in the new management agreement).

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A reconciliation of net income (loss) to EBITDA is included below:

	Fiscal Year Ended								Three Months Ended					Pro Forma Twelve Months Ended
	August 25, 2001			August 31, 2002			August 30, 2003(a)		November 30, 2002(a)		November 29, 2003(a)			November 29, 2003(a)		January 31, 2004(a)
Net income (loss)	$	(4,321	)	$	(5,542	)	$	10,766	$	218	$	(1,557	)	$	13,177	$	13,635
Interest expense, net		22,846			26,026			28,940		7,372		6,981			22,706		22,721
Provision (benefit) for income taxes		(1,443	)		(1,171	)		132		18		—			114		108
Depreciation and amortization expense		17,586			19,712			14,149		3,470		3,798			16,888		16,897
EBITDA	$	34,668		$	39,025		$	53,987	$	11,078	$	9,222		$	52,885	$	53,361

(a) Beginning in fiscal 2004, ECI’s “Who’s Who Among America’s Teachers” will be produced annually and shipped to customers in August during the fourth quarter of fiscal 2004. In fiscal 2003, this achievement publication generated net sales of $2.8 million and EBITDA of $1.7 million, substantially all of which was generated during the three months ended November 30, 2002. Through fiscal 2003, this achievement publication was produced once every two years and shipped in November. Accordingly, no revenue or EBITDA from this publication is included in results of operations for the three months ended November 29, 2003, and the twelve months ended November 29, 2003 and January 31, 2004.

*    *    *    *    *    

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA

The following unaudited pro forma condensed consolidated financial data has been derived by the application of pro forma adjustments to our previously filed historical consolidated financial statements. The unaudited pro forma condensed consolidated balance sheet as of November 29, 2003, gives effect to the Transactions and our acquisition of C-B Graduation Announcements, LLC, or C-B Announcements, consummated on January 30, 2004, as if such events occurred as of November 29, 2003. The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended August 30, 2003, and the three and twelve month periods ended November 29, 2003, give effect to the Transactions and our acquisition of C-B Announcements, as if such events occurred as of the beginning of each period presented. The unaudited pro forma condensed consolidated financial data do not purport to represent what our results of operations or balance sheet would have been if the Transactions and our C-B Announcements acquisition had occurred as of the dates indicated, nor are they indicative of the results for any future periods.

The unaudited pro forma condensed consolidated financial statements account for the Transactions utilizing purchase accounting, which requires that we reset our assets and liabilities to their fair values. Such valuations are based upon available information and certain assumptions that we believe are reasonable. The total purchase price was allocated to our net assets based upon preliminary estimates of fair value. The final purchase price allocation will be based on a formal valuation analysis and may include adjustments to the amounts shown here. The final allocation will also be impacted by any post-closing purchase adjustments pursuant to the merger agreement. A final valuation will be obtained after completion of the Transactions. The result of the final allocation could be materially different from the preliminary allocation set forth in this offering circular.

For purposes of preparing the unaudited pro forma condensed consolidated statement of operations for the fiscal year ended August 30, 2003 (our fiscal 2003), we have included the results of operations for C-B Announcements for the year ended December 31, 2003 (its fiscal 2003). We have included these same results of operations in our pro forma results of operations for the twelve months ended November 29, 2003. For purposes of preparing the unaudited pro forma condensed consolidated statement of operations for the three months ended November 29, 2003, we have included a portion of the results of operations of C-B Announcements for the three month period ended November 2003, calculated using the percentage of net sales incurred during those three months.

You should read our unaudited pro forma condensed consolidated financial statements and the related notes thereto in conjunction with our previously filed historical consolidated financial statements and the related notes thereto.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

AS OF NOVEMBER 29, 2003

(Dollars in thousands)

	Historical		Pro Forma Adjustments			Pro Forma
Assets
Current assets
Cash	$	3,234	$	(3,234	)(1)	$	—
Accounts receivable, net		44,306					44,306
Inventories		23,619		2,339	(2)(3)		25,958
Prepaid expense and other assets, net		28,499		(6,378	)(4)		22,121
Total current assets		99,658					92,385
Property, plant and equipment, net		68,676		2,040	(2)(3)		70,716
Trademarks		41,855		4,775	(2)		46,630
Goodwill		162,059		73,867	(2)(3)		235,926
Other assets, net		26,670		26,356	(2)(5)		53,026
Total assets	$	398,918	$	99,765		$	498,683
Liabilities and Equity
Current liabilities
Bank overdraft	$	2,956	$	(2,956	)(1)	$	—
Accounts payable		5,470					5,470
Customer deposits		27,985					27,985
Accrued expenses		27,086		(750	)(6)		26,336
Deferred revenue		7,714					7,714
Accrued interest		10,283		(10,219	)(7)		64
Total current liabilities		81,494					67,569
Long-term debt		217,279		89,721	(8)		307,000
Other long-term liabilities		11,792		(6,378	)(4)		5,414
Total liabilities		310,565					379,983
Redeemable minority interest in subsidiary		18,350		(18,350	)(9)		—
Stockholders’ equity		70,003		48,697	(9)		118,700
Total liabilities and equity	$	398,918	$	99,765		$	498,683

See notes to the unaudited pro forma condensed consolidated balance sheet.

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NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

(1) Subject to limitations set forth in the merger agreement, it is contemplated that the cash on hand will be paid to our existing equity holders and all bank overdrafts will be eliminated prior to closing.

(2) The following table sets forth the calculation and preliminary allocation of excess purchase price with respect to the Transactions (in thousands):

Cash proceeds to existing equity holders(a)	$	154,400
Transaction expenses relating to the merger		30,800
Proceeds to repay existing indebtedness		235,400
Total consideration		420,600
Less: Historical net assets acquired		319,733
Excess purchase price to be allocated	$	100,867
Preliminary allocation:
Inventories	$	1,735
Property, plant and equipment, net		2,000
Trademarks		4,775
Goodwill		69,511
Other assets, net—long-term portion		22,846
Total:	$	100,867

(a) The amount payable under the merger agreement is subject to a working capital adjustment in accordance with the terms of the merger agreement. Assuming the merger is consummated on March 31, 2004, we expect the working capital adjustment to result in a $9 million to $15 million reduction in the amount payable to our existing equity holders.

(3) The maximum purchase price payable in connection with the acquisition of C-B Announcements is approximately $5.9 million in cash, of which approximately $5.0 million was paid at closing (including $1.0 million placed in escrow), with the escrowed amount and balance of the purchase price to be paid pending a post-closing purchase price adjustment. For purposes of preparing this unaudited pro forma condensed consolidated balance sheet, we have assumed that the aggregate purchase price to be paid in connection with this acquisition will be $5.0 million. Of such amount, approximately $0.6 million consists of inventory, $40,000 consists of property, plant and equipment, and $4.4 million consists of goodwill.

(4) Reflects our estimate of the impact of the preliminary purchase price allocation on our deferred taxes. The total deferred tax adjustment has been offset by a corresponding adjustment to long-term deferred tax liability.

(5) Also reflects the following adjustment with respect to our deferred financing costs (in thousands):

Write-off of deferred financing costs related to existing debt	$	(6,490	)
Deferred financing costs relating to the Transactions		10,000
Total adjustment	$	3,510

(6) Reflects the elimination of accrued management fees payable to our existing stockholder.

(7) Reflects the elimination of accrued interest on our existing indebtedness to be repaid in connection with the Transactions.

(8) Reflects (i) the issuance of an aggregate of $307.0 million of indebtedness, consisting of $150.0 million of notes offered hereby, and a $155.0 million term loan and $2.0 million revolving loan,

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each in connection with our new senior secured credit facility, and (ii) the elimination of an aggregate of $217.3 million of existing indebtedness, consisting of $175.9 million of existing senior unsecured notes and $41.4 million of existing subordinated notes. We have commenced a debt tender offer to acquire all of our existing senior unsecured notes and to eliminate substantially all of the restrictive covenants associated with such notes. The debt tender offer will be conditioned upon, among other things, at least two-thirds of the aggregate principal amount of such outstanding notes being tendered. For purposes of preparing this unaudited pro forma condensed consolidated balance sheet, we have assumed that all such notes will be tendered, however, we may not acquire all such notes in the debt tender offer. To the extent that any of such notes are outstanding after the closing of the debt tender offer, we expect that the amount of the term loan we borrow pursuant to our new senior secured credit facility will be reduced on a dollar-for-dollar basis. In addition, with respect to each existing senior unsecured note not tendered, we will retain an amount in cash equal to the amount offered for such note in the tender offer, less the principal amount of such note.

(9) Reflects the elimination of our pre-Transactions stockholders’ equity, including the elimination of the redeemable minority preferred interests of our existing stockholder in one of our subsidiaries, and the issuance of new equity securities by us to our parent following its contribution to us of an aggregate of $118.7 million, which proceeds will be received pursuant to an equity investment in our parent to be made by an investor group led by Fenway Partners Capital Fund II, L.P. As described above, assuming the closing occurs on March 31, 2004, the purchase price adjustment set forth in the merger agreement is expected to result in a $9 million to $15 million reduction in the proceeds payable to our existing equity holders. In such event, there will be a corresponding reduction in the aggregate cash equity investment in our parent by such investor group.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE FISCAL YEAR ENDED AUGUST 30, 2003

(Dollars in thousands)

	Historical		Pro Forma Adjustments			Pro Forma
Net sales	$	308,431	$	4,960	(1)	$	313,391
Cost of sales		139,170		1,780	(2)		140,950
Gross profit		169,261					172,441
Selling, general and administrative expense		129,423		4,983	(3)		134,406
Operating income		39,838					38,035
Interest expense		28,940		(6,268	)(4)		22,672
Income before taxes		10,898					15,363
Income tax expense		132					132
Net income		10,766					15,231
Preferred dividends		1,200		(1,200	)(5)		—
Net income applicable to common stockholders	$	9,566	$	5,665		$	15,231

See notes to the unaudited pro forma condensed consolidated statements of operations.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE THREE MONTHS ENDED NOVEMBER 29, 2003

(Dollars in thousands)

	Historical			Pro Forma Adjustments			Pro Forma
Net sales	$	67,928		$	694	(1)	$	68,622
Cost of sales		30,044			334	(2)		30,378
Gross profit		37,884						38,244
Selling, general and administrative expense		32,460			895	(3)		33,355
Operating income		5,424						4,889
Interest expense		6,981			(1,364	)(4)		5,617
Loss before taxes		(1,557	)					(728	)
Income tax expense		—						—
Net loss		(1,557	)					(728	)
Preferred dividends		300			(300	)(5)		—
Net loss applicable to common stockholders	$	(1,857	)	$	1,129		$	(728	)

See notes to the unaudited pro forma condensed consolidated statements of operations.

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UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE TWELVE MONTHS ENDED NOVEMBER 29, 2003

(Dollars in thousands)

	Historical		Pro Forma Adjustments			Pro Forma
Net sales	$	301,324	$	4,960	(1)	$	306,284
Cost of sales		135,397		1,719	(2)		137,116
Gross profit		165,927					169,168
Selling, general and administrative expense		128,273		4,898	(3)		133,171
Operating income		37,654					35,997
Interest expense		28,549		(5,843	)(4)		22,706
Income before taxes		9,105					13,291
Income tax expense		114					114
Net income		8,991					13,177
Preferred dividends		1,200		(1,200	)(5)		—
Net income available to common stockholders	$	7,791	$	5,386		$	13,177

See notes to the unaudited pro forma condensed consolidated statements of operations.

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NOTES TO UNAUDITED PRO FORMA CONDENSED

CONSOLIDATED STATEMENTS OF OPERATIONS

(1) According to its unaudited financial statements for the year ended December 31, 2003 (its fiscal 2003), C-B Announcements had net sales of approximately $5.0 million during such period, with approximately $0.7 million of such sales occurring during the three month period ended November 2003.

(2) Includes approximately $0.8 million, $0.2 million and $0.7 million in adjustments to depreciation expense for fiscal 2003, and the three months and twelve months ended November 29, 2003, respectively, as a result of the write-up of property, plant and equipment in connection with the preliminary purchase price allocation. Also includes approximately $1.0 million, $0.1 million and $1.0 million in additional cost of sales for fiscal 2003, and the three months and twelve months ended November 29, 2003, respectively, relating to C-B Announcements.

(3) Includes approximately $1.8 million, $0.4 million and $1.8 million in adjustments to amortization expense for fiscal 2003, and the three months and twelve months ended November 29, 2003, respectively, as a result of the write-up of certain of our intangible assets in connection with the preliminary purchase price allocation. Also includes approximately $3.2 million, $0.4 million and $3.2 million in additional selling, general and administrative expense for fiscal 2003, and the three months and twelve months ended November 29, 2003, respectively, relating to C-B Announcements.

(4) Reflects the change in interest expense as a result of the new financing arrangements to be entered into in connection with the Transactions, which is calculated as follows (in thousands):

	Fiscal Year Ended August 30, 2003			Three Months Ended November 29, 2003			Twelve Months Ended November 29, 2003
Interest on new borrowings(a)	$	20,560		$	5,140		$	20,560
Historical interest on other debt assumed net(b)		779			144			813
Total cash interest from the debt requirements of the Transactions		21,339			5,284			21,373
Amortization of deferred financing costs		1,333			333			1,333
Total pro forma interest expense		22,672			5,617			22,706
Less: Historical interest expense		28,940			6,981			28,549
Net adjustment to interest expense	$	(6,268	)	$	(1,364	)	$	(5,843	)

(a) Represents pro forma interest expense calculated using assumed interest rates on (i) the new $155.0 million term loan under our new senior secured credit facility, (ii) an assumed average amount of revolving loans expected to be outstanding on our new senior secured credit facility, (iii) an assumed average amount of outstanding letters of credit and (iv) the $150.0 million of notes offered hereby. Each quarter point change in interest rates would result in a $0.4 million change in annual interest expense on the term loan and, assuming the entire revolving loan were drawn, a $0.1 million change in annual interest expense on the revolving loan.

(b) Represents interest on the capital leases to be assumed in connection with the Transactions and other interest, including interest with respect to our gold consignment agreement, net of interest income.

(5) Represents the elimination of dividends on the redeemable minority interest in one of our subsidiaries.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, American Achievement Corporation has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

AMERICAN ACHIEVEMENT CORPORATION (Registrant)
By:	/s/ David G. Fiore
	Name:   David G. Fiore Title:     President and Chief Executive Officer

Date: March 4, 2004

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