- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

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

FORM 10-K

<Table>

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED AUGUST 30, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
</Table>

AMERICAN ACHIEVEMENT CORPORATION
(Exact name of registrant as specified in its charter)

<Table>

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

7211 CIRCLE S ROAD 78745
AUSTIN, TEXAS (Zip Code)
(Address of principal executive offices)
</Table>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(512) 444-0571

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
------------------- -----------------------------------------

None None
</Table>

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X] (Not Applicable)

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [ ] No [X].

809,775 shares of common stock
(Number of shares outstanding as of August 30, 2003)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AMERICAN ACHIEVEMENT CORPORATION

FORM 10-K
FOR THE FISCAL YEAR ENDED AUGUST 30, 2003

INDEX

<Table>
<Caption>
PAGE
----

PART I
Item 1. Business.................................................... 2
Item 2. Properties.................................................. 11
Item 3. Legal Proceedings........................................... 11
Item 4. Submission of Matters to a Vote of Security Holders......... 11

PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters......................................... 11
Item 6. Selected Financial Data..................................... 14
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 15
Item 7A. Quantitative and Qualitative Disclosures About Market
Risks....................................................... 23
Item 8. Financial Statements and Supplementary Data................. 25
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 56
Item 9A. Controls and Procedures..................................... 56

PART III
Item 10. Directors and Executive Officers of the Registrant.......... 57
Item 11. Executive Compensation...................................... 59
Item 12. Security Ownership of Certain Beneficial Owners and
Management.................................................. 63
Item 13. Certain Relationships and Related Transactions.............. 65

PART IV
Item 15. Exhibits, Financial Statement Schedules and Reports on Form
8-K......................................................... 65
Signatures............................................................ 66
</Table>

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This annual report contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934. The words "believe,"
"estimate," "anticipate," "project," "intend," "expect" and similar expressions
are intended to identify forward-looking statements. All forward-looking
statements involve some risks and uncertainties. In light of these risks and
uncertainties, the forward-looking events discussed in this report might not
occur. Factors that may cause actual results or events to differ materially from
those contemplated by the forward-looking statements include, among other
things, the matters discussed under "Item 1. Business" and the following
possibilities:

- future revenues are lower than expected;

- increase in payroll or other costs and/or shortage of an adequate base of
employees;

- loss of significant customers through bankruptcy, industry consolidation
or other factors;

- inability to obtain additional capital due to covenant restrictions or
other factors, and/or increase in debt levels beyond our ability to
support repayment;

- costs or difficulties relating to the integration of businesses that we
acquire are greater than expected;

- expected cost savings or revenues from our acquisitions are not fully
realized or realized within the expected time frame;

- competitive pressures in the industry increase;

- general economic conditions or conditions affecting our industry;

- changes in the interest rate environment, and

You are cautioned not to place undue reliance on forward-looking statements
contained in this report as these speak only as of its date. We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise except as required by
law.

PART I

ITEM 1. BUSINESS

GENERAL

We are one of the leading manufacturers and suppliers of class rings,
yearbooks, graduation products, achievement publications and recognition and
affinity jewelry in the United States. Many of our products have leading market
share positions that have been developed over many years and are marketed under
well-known names such as ArtCarved, Balfour, Keepsake, Taylor Publishing and
Who's Who Among American High School Students. Our Balfour and ArtCarved brand
names, for example, have been identified with class rings for over 90 years and
45 years, respectively, and the Taylor Publishing brand name has been identified
with yearbooks for over 60 years. We distribute our products through various
distribution channels, including directly to students and through college
bookstores, mass merchandisers, approximately 5,000 independent jewelry stores,
many of the nation's largest jewelry chains and direct marketing. Based on the
number of units sold, we believe that we were one of the top three providers of
class rings and yearbooks in the United States during the 2002-2003 school year.

Our two principal business segments are: scholastic products and
recognition and affinity products. Our scholastic products segment consists of
three principal categories: class rings, yearbooks and graduation products, the
last of which includes fine paper products and graduation accessories. The
scholastic products segment serves the high school, college and, to a lesser
extent, the elementary and

junior high school markets and accounted for approximately 87% of our net sales
for the year ended August 30, 2003.

Recognition and affinity products include publications that recognize the
academic achievement of top students at the high school and college levels, as
well as the nation's most inspiring teachers, jewelry commemorating family
events such as the birth of a child, fan affinity jewelry and related products
and professional sports championship rings such as World Series, Super Bowl and
Stanley Cup rings. This segment accounted for approximately 13% of our net sales
for the year ended August 30, 2003.

In December 1996, Castle Harlan, Inc., a leading New York private equity
firm, through its affiliate Castle Harlan Partners II ("CHPII"), acquired
substantially all of the ArtCarved operations of CJC Holdings, Inc. and the
Balfour operations of the L.G. Balfour Company, Inc. Castle Harlan's investment
strategy has focused on building a scale competitor in the commemorative
products industry that can provide an extensive range of products and services.
On June 27, 2000, American Achievement Corporation (formerly known as
Commemorative Brands Holding Corporation) (the "Company") was formed as a
holding company for the Commemorative Brands, Inc. ("CBI") operations and future
acquisitions. Since then, we have made several strategic acquisitions and have
introduced new, complementary products across our brands and product lines to
enhance our market position. The following table summarizes our history and
acquisition rationale.

<Table>
<Caption>
COMPANY ACQUIRED ESTABLISHED ACQUISITION RATIONALE
- ------- ------------- ----------- ---------------------

Balfour................. December 1996 1913 Established a leading position in
the high school and college class
ring markets and in the graduation
products market, with a network of
independent sales representatives
who market products directly
in-school. Also combined with
ArtCarved to provide more efficient
ring manufacturing.
ArtCarved............... December 1996 1954 Combined with Balfour to further
strengthen our position in both the
high school and college class rings
markets and to expand distribution
to retail stores and college
bookstores.
Taylor Publishing....... July 2000 1939 Established a leadership position
as a publisher of scholastic
yearbooks. The addition of Taylor
created a scale competitor to
better capitalize on opportunities
in the scholastic products market
and provided us with significant
cross-selling opportunities.
ECI..................... March 2001 1967 Established a leadership position
in the achievement directory
publishing niche.
Milestone............... July 2002 1993 Reinforces our position as a market
leader in commemorative products,
and brings a complementary line of
clients and products to add to our
pre-existing line in the college
market.
</Table>

BUSINESS SEGMENTS

The following table presents an overview of our business segments,
including the net sales of each segment for the year ended August 30, 2003.

<Table>
<Caption>
BUSINESS SEGMENT PRIMARY PRODUCT LINES AND PRINCIPAL BRAND NAMES
- ---------------- -----------------------------------------------

SCHOLASTIC PRODUCTS ($269.1 million)
Class rings................................ ArtCarved, Balfour, Class Rings, Ltd.,
Keystone, Master Class Rings and R. Johns
middle and high school class rings; ArtCarved,
Balfour, and Milestone college class rings.
Yearbooks.................................. Taylor Publishing yearbooks elementary, middle
and high schools and colleges.
Graduation products........................ ArtCarved and Balfour (high school and college)
graduation products, including customized
graduation announcements, name cards, thank-you
stationery, diplomas, mini-diplomas,
certificates, appreciation gifts, diploma
covers and other fine paper accessory items.
RECOGNITION AND AFFINITY PRODUCTS ($39.3
million)
Achievement publications................... Who's Who Among American High School Students,
The National Dean's List, Who's Who Among
America's Teachers, and Who's Who Among
American High School Students -- Sports
Edition.
Jewelry.................................... Celebrations of Life, Generations of Love and
Namesake personalized family jewelry; Balfour
Sports licensed consumer sports jewelry; and
Balfour and Keepsake professional sports
championship jewelry.
</Table>

OUR SCHOLASTIC PRODUCTS

Our scholastic products business segment consists of three principal
categories: class rings, yearbooks and graduation products, the last of which
includes fine paper products and graduation accessories. Sales in this segment
were approximately $269.1 million and comprised approximately 87% of our total
net sales for the year ended August 30, 2003.

The table below sets forth our principal product lines, brand names and
distribution channels through which we sell our scholastic products.

<Table>
<Caption>
PRODUCT LINES TRADE OR BRAND NAMES DISTRIBUTION CHANNEL
- ------------- -------------------- --------------------

Middle and high school class
rings...................... Balfour In-school
ArtCarved Independent jewelry stores
and jewelry chains
R. Johns Independent jewelry stores
Keystone Mass merchandisers
Class Rings, Ltd.
Master Class Rings
College class rings.......... ArtCarved College bookstores, colleges
Balfour and direct marketing
Milestone
Yearbooks.................... Taylor Publishing In-school
High school graduation
products................... Balfour In-school
College graduation
products................... ArtCarved College bookstores, colleges
Balfour and direct marketing
</Table>

CLASS RINGS

We manufacture class rings for high school and college students and, to a
lesser extent, junior high school students. Our rings are marketed under some of
the most recognized and respected brand names in the industry, including
ArtCarved and Balfour. Our Balfour and ArtCarved brand names have been
identified with class rings for over 90 years and 45 years, respectively. During
the 2002-2003 school year, we sold rings to students at over 5,500 schools.

We offer over 100 styles of class rings ranging from traditional to highly
stylish and fashion-oriented designs. Our rings are available in precious or
nonprecious metal, and most are available with a choice of more than 50
different types of stones in each of several different cuts. More than 400
designs can be placed on or under the stone and emblems of over 100 activities,
sports or achievements can appear on the side of the rings in addition to school
crests and mascots. As a result, students can design highly personal rings to
commemorate their school experience.

We manufacture all of our rings at our own facilities. Each ring is custom
manufactured. We maintain an inventory of more than 650,000 unique proprietary
ring dies that would be expensive and time consuming to replicate. The
production process takes approximately two to eight weeks from receipt of the
customer's order to product shipment, depending on style, option selections and
new or custom tooling requirements. We use computer aided design software to
quickly and cost-effectively convert new custom designs such as school seals,
mascots and activities into physical tools capable of producing rings in large
quantities. Rings are produced only upon the receipt of a customer order and
deposit, which reduces credit risk.

During the 2000-2001 school year, we launched our Balfour Identity high
school class ring line, which is based on contemporary teen tastes and
preferences. This product line also incorporates state-of-the-art tooling into
its production platform, which has significantly reduced unit production costs.
The same design strategy and production process has been extended to the
majority of the Balfour high school product line, with the new designs and
tooling available during the 2002-2003 school year.

We have been a leader in developing various alloys in response to changing
student preferences. In 2002, we developed a proprietary silver/platinum alloy.
Recognizing the strong teen preferences for white metal jewelry. This new metal
alternative ring has proven immensely popular at attractive margins.

YEARBOOKS

We sell yearbooks primarily to high school and college students. We also
publish specialty military yearbooks, which, for example, commemorate naval
tours of duty at sea, and yearbooks for elementary and junior high schools. Our
Taylor Publishing brand name was established in 1939. During the 2002-2003
school year, we sold yearbooks to over 7,300 schools and believe that we are one
of the three largest yearbook publishers in the United States.

We publish yearbooks in our own facilities and believe that we are a
technology leader. Since 1994, we have made significant expenditures on
proprietary software and hardware to support electronic platforms for creating,
transmitting and managing yearbook production and printing technology. We also
offer full production support for off-the-shelf desktop publishing tools such as
PageMaker and Quark Xpress. In addition, by upgrading our printing presses and
further integrating digital technology to, among other things, increase the
speed of output and automatically monitor ink flow and control color
composition, we have been able to enhance print quality and reduce manufacturing
costs. The foregoing technology upgrades and enhancements have enabled us to
reduce manufacturing costs and improve on-time delivery, performance and print
quality.

GRADUATION PRODUCTS

Graduation products include graduation announcements, name cards, thank-you
stationery, memory books, diplomas, certificates, appreciation gifts, diploma
covers and other graduation accessory items. All of our graduation products are
customized in varying degrees and therefore have short production runs and
cycles. Graduation products are manufactured in our own facilities. These
products are offered through our independent high school class ring sales
representatives, college bookstores, colleges and direct mail.

We have enhanced our college website to enable students to order graduation
products on-line. We believe that, over time, this will increase sales of our
graduation products and, in particular, personalized college announcements that
include a student's name, degree and other personal information in the text of
the announcement. We also intend to leverage our existing channels of
distribution and, in particular, our presence in college bookstores to further
increase sales of these products.

OUR RECOGNITION AND INFINITY PRODUCTS

Our recognition and affinity products segment consists of two categories:
achievement publications and recognition and affinity jewelry. The latter
category includes affinity group, personalized family, fan affinity sports and
professional sports championship jewelry. Sales in this segment were
approximately $39.3 million and comprised approximately 13% of our total net
sales for the year ended August 30, 2003. The table below sets forth the
principal product lines and brand names of our recognition and affinity products
and the distribution channels through which we sell these products.

<Table>
<Caption>
PRODUCT LINES TRADE OR BRAND NAMES DISTRIBUTION CHANNEL
- ------------- -------------------- --------------------

Achievement Publications............. Who's Who Among American High Direct marketing
School Students
The National Dean's List
Who's Who Among America's
Teachers
Who's Who Among American High
School Students -- Sports
Edition
Recognition and Affinity Jewelry:
Affinity Group Jewelry............. Keepsake Direct to consumer
R. Johns
Personalized Family Jewelry........ Celebrations of Life Independent jewelry stores
Generations of Love Jewelry chains and mass
merchandisers
Namesake Mass merchandisers
Fan Affinity Sports Jewelry........ Balfour Sports Mass merchandisers and catalog
Professional Sports Championship
Jewelry......................... Balfour Direct to consumer
</Table>

ACHIEVEMENT PUBLICATIONS

We produce the following four publications:

Who's Who Among American High School Students. First published in 1967,
this annual publication is the largest academic achievement publication in the
nation honoring high-achieving high school students. The 1st edition recognized
approximately 13,000 students from approximately 4,000 high schools. The current
36th edition honors approximately 850,000 students, from freshmen through
seniors. Nominees represent over 22,000 of the nation's approximately 24,000
private, public and parochial high schools on the basis of academic achievement,
class rank and extracurricular activities.

The National Dean's List. First published in 1978, this publication is the
largest annual recognition publication in the nation honoring exceptional
college students. The 1st edition recognized over 25,000 students from
approximately 700 universities. The most recent 25th edition honors
approximately 200,000 high-achieving students, representing in excess of 2,500
colleges and universities throughout the country.

Who's Who Among America's Teachers. First published in 1990, this
publication pays tribute to the country's most inspiring teachers, who are
nominated for inclusion by current and/or former Who's Who high school students.
Published every two years, the 7th edition was published in 2002 and honored
approximately 140,000 outstanding teachers.

Who's Who Among American High School Students -- Sports Edition. First
published in August 2002, this publication recognized 20,000 high school
accomplished athletes.

We also sell related products consisting of plaques, certificates, gold and
silver pins and charms, mugs, key chains, paper weights and other items
commemorating a student's or teacher's inclusion in one of our achievement
publications. The primary customer base for our achievement publications and
related products are the students and teachers featured in the publications and
their families.

We have an established network of nomination sources built up over 35
years, which we utilize to recognize students and teachers from the majority of
the private, public and parochial schools in the country. Students and teachers
are not required to purchase publications in order to be included in them.
Printing for our achievement publications is outsourced.

RECOGNITION AND AFFINITY JEWELRY

Recognition and affinity jewelry consist of the following product
categories:

Affinity Group Jewelry. Affinity group jewelry is sold to members of large
groups and associations. The jewelry features emblems of, and otherwise
commemorates accomplishments within, the group. For example, through our
Keepsake brand, we provide affinity ring awards to the American Bowling
Congress, including championship rings for bowlers who score a perfect "300"
game.

Personalized Family Jewelry. Our family jewelry products include rings
commemorating children's birth dates, which feature a level of personalization,
such as birthstones and names, that distinguishes us from our competitors. We
also sell other personalized jewelry, such as necklaces and bracelets, designed
to commemorate family events. We began our family jewelry business in 1997 and,
by 2003, we had grown this business to $8.0 million in net sales by leveraging
these products through our existing channels of distribution. We intend to
further grow our family jewelry business through product extensions, including
baby rings for scrapbooks, grandmother's products such as pins and pendants,
daughter's rings and sweet 16 memorabilia. We provide personalized family
jewelry under our Celebrations of Life, Generations of Love and Namesake brand
names.

Fan Affinity Sports Jewelry. We produce a variety of team affiliation
products. For example, we manufacture Balfour Sports brand National Football
League rings, pendants, paperweights and coasters containing team logos, mascots
and colors.

Professional Sports Championship Jewelry. We provide sports championship
jewelry for professional teams and their members and have, for example, produced
several Super Bowl, Stanley Cup and World Series rings, including the rings for
the New York Yankees in 1996, 1998, 1999 and 2000 and the 1999 Japanese World
Series ring. We provide sports championship jewelry under the Balfour brand.

SALES AND MARKETING

We have over 200 independent high school class ring and over 175
independent yearbook sales representatives, with an average tenure with our
company of approximately 14 and 11 years, respectively. We also have
approximately 25 employee college class ring sales representatives and a number
of part-time employees. We compensate our independent sales representatives on a
commission basis. Most independent sales representatives also receive a monthly
draw against commissions earned, although all expenses, including promotional
materials made available by us, are the responsibility of the representative.
Our independent sales representatives operate under exclusive contracts that
contain non-compete arrangements. Employee sales representatives receive a
combination of salary and sales incentives.

At the high school level, class rings are sold through two channels of
distribution: independent sales representatives selling directly to students and
retail stores, which include independent jewelry stores, jewelry chains and mass
merchandisers. We believe that we are the leading supplier of high school class
rings to retail stores. Our high school class rings are sold by approximately
5,000 independent jewelry retailers, many of the nation's largest jewelry
chains, including Zales, Gordons and Sterling, and by mass merchants, including
Wal-Mart. We sell different brands and product lines in retail stores in order
to enable them to differentiate their products from those sold by us directly to
students at schools. College

rings are sold primarily through college bookstores and colleges by our employee
sales representatives. Historically, college bookstores have been owned and
operated by academic institutions. Over the last several years, an increasing
number of college bookstores have been leased to contract operators, primarily
Barnes and Noble Bookstores and Follett Corporation, with which we have
longstanding relationships. Decisions to include our products are made on a
national basis by the bookstore operator.

Yearbooks are produced under an exclusive contract with the school for the
academic year and are sold directly to students by the school. Under the terms
of the contract, the school agrees to pay us a base price for producing the
yearbook, which often increases before production as a result of enhancements to
the contract specifications, such as additional color pages. Our independent
yearbook sales representatives call on schools at the contract stage.
Thereafter, they coordinate between the school's yearbook committee and our
customer service and plant employees to ensure satisfactory quality and service.

Graduation products are sold directly to students through our network of
independent high school class ring sales representatives and in college
bookstores and colleges through our network of employee sales representatives.
Achievement publications are sold through direct marketing. Other affinity
products are sold through a variety of distribution channels, including team
stores, catalogs and retail stores. These products are sold to wholesale
accounts through employee sales representatives.

INTELLECTUAL PROPERTY

We have trademarks, patents and licenses that in the aggregate are an
important part of our business. However, we do not regard our business as being
materially dependent upon any single trademark, patent or license. We have
trademark registration applications pending and intend to pursue other
registrations as appropriate to establish and preserve our intellectual property
rights.

We market our products under many trademarked brand names, some of which
rank among the most recognized and respected names in the jewelry industry,
including ArtCarved, Balfour, Celebrations of Life, Class Rings, Ltd.,
Generations of Love, Keepsake, Keystone, Master Class Rings, Namesake, R. Johns,
Taylor Publishing, The National Dean's List, Who's Who Among American High
School Students and Who's Who Among America's Teachers. Generally, a trademark
registration will remain in effect so long as the trademark remains in use by
the registered holder and any required renewals are obtained. We also own
several patented ring designs and business process patents. We also have
non-exclusive licensing arrangements with the National Football League and
numerous colleges and universities under which we have the right to use the name
and other trademarks and logos of the NFL and those schools, respectively, on
our products.

COMPETITION

SCHOLASTIC PRODUCTS

The class ring, yearbook and graduation products markets are highly
concentrated and consist primarily of a few large national participants. We
believe that we are one of the three largest competitors nationally within the
scholastic products market (excluding photography). The other two principal
competitors in the class ring market are Jostens, Inc. and Herff Jones, Inc.,
which compete with us nationally across all product lines. Our principal
competitors in the yearbook and graduation products markets are Jostens, Herff
Jones and Walsworth Publishing Company. All competitors in the scholastic
products industry compete primarily on the basis of quality, marketing, customer
service and, to a lesser extent, price.

RECOGNITION AND AFFINITY PRODUCTS

We have limited competition for our student achievement publications, with
only a small percentage of the high school and college students included in our
publications also included in the publications of our competitors. We have no
direct competition in the teacher recognition market. Our affinity group jewelry
9

products, fan affinity sports jewelry and products and our professional sports
championship jewelry businesses compete with Jostens and, to a lesser extent,
with various other companies. Our personalized family jewelry products compete
mainly with A&A Jewelry and Bogarz. We compete with our affinity product
competitors primarily on the basis of quality, marketing, customer service and
price.

RAW MATERIALS AND SUPPLIERS

The principal raw materials that we purchase are gold and precious,
semi-precious and synthetic stones that we use in our class rings and jewelry
and paper and ink that we use in our yearbook and graduation products. Our raw
materials are purchased from multiple suppliers at market prices, except that we
purchase substantially all synthetic and semi-precious stones from a single
supplier with multiple plants, which we believe supplies substantially all of
these types of stones to almost all of the class ring manufacturers in the
United States. Synthetic and semi-precious stones are available from other
suppliers, although switching to these suppliers may result in additional costs
to us.

We periodically reset our prices to reflect the then current prices of raw
materials. In addition, we engage in various hedging transactions to reduce the
effects of fluctuations in the price of gold. We also purchase paper on an
annual commitment basis so that we are able to estimate yearbook costs with
greater certainty.

ENVIRONMENTAL

We are subject to federal, state and local laws, ordinances and regulations
that establish various health and environmental quality standards and provide
penalties for violations of those standards. Past and present manufacturing
operations subject us to environmental laws that regulate the use, handling and
contracting for disposal or recycling of hazardous or toxic substances, the
discharge of particles into the air and the discharge of process wastewaters
into sewers. We believe that we are in substantial compliance with all material
environmental laws. We believe that we have adequate environmental insurance and
indemnities to sufficiently cover any liabilities that may exist and that we do
not currently face environmental liabilities that could have a material adverse
affect on our financial position or results of operations.

BACKLOG

Because of the nature of our business, generally all orders (except
yearbooks) are filled between two and eight weeks after the time of placement.
We enter into yearbook contracts several months prior to delivery. While the
base prices of the yearbooks are established at the time of order, the final
prices of the yearbooks are often not calculated at that time since the content
of the books generally change prior to publication. We estimate (calculated on
the basis of the base price of yearbooks ordered) that the backlog of orders
related to continuing operations was approximately $92.3 million as of August
30, 2003, almost exclusively related to student yearbooks. We expect
substantially all of the backlog at August 30, 2003 to be filled in fiscal 2004.

EMPLOYEES

Given the seasonality of our business, the number of our employees
fluctuates throughout the year, with the number typically being highest during
September through May and lowest from June to August. As of August 30, 2003, we
employed approximately 2,344 employees.

Some of our production employees are represented by unions. Hourly
production and maintenance employees located at our Austin, Texas manufacturing
facility are represented by the United Brotherhood of Carpenters and Joiners
union. CBI and the United Brotherhood of Carpenters and Joiners Union signed a
collective bargaining agreement that will expire in May, 2006. Some hourly
production employees at our Dallas facility are represented by the Graphics
Communication International Union. Taylor Publishing Company and the Graphics
Communication International Union signed two collective bargaining agreements
that will expire in February 2004 and July 2006, respectively.
10

ITEM 2. PROPERTIES

Our principal headquarters and executive offices are located at 7211 Circle
S Road, Austin, Texas. We believe that our facilities are suitable for their
purpose and adequate to support our business. The extent of utilization of
individual facilities varies due to the seasonal nature of our business.

A summary of the physical properties that we use are as follows:

<Table>
<Caption>
LEASED APPROXIMATE
LOCATION TYPE OF PROPERTY OR OWNED SQUARE FOOTAGE
- -------- ---------------- -------- --------------

Austin, TX.............. Administration (Achievement Leased 6,100
Publications)
Austin, TX.............. Corporate Headquarters Owned 23,000
Austin, TX.............. Jewelry Manufacturing Owned 108,000
Austin, TX.............. Warehouse Facility Leased 30,600
Dallas, TX.............. Yearbook Administration and Owned 320,000
Manufacturing
El Paso, TX............. Jewelry Manufacturing Leased 20,000
El Paso, TX............. Yearbook Pre-Press Leased 52,000
Juarez, Mexico.......... Jewelry Manufacturing Leased 20,000
Louisville, KY.......... Graduation Product Manufacturing Leased 100,000
Malvern, PA............. Yearbook Press, Bindery Leased 41,000
San Angelo, TX.......... Yearbook Pre-Press, Press, Bindery Leased 55,000
</Table>

ITEM 3. LEGAL PROCEEDINGS

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

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

There is no established public trading market for the Company's common
stock, par value $0.01 per share. At August 30, 2003, there were 21 holders of
record of the common stock.

The Company has never declared dividends on its common stock. The Company
is restricted from paying dividends by certain of its bank debt covenants and
the indenture pursuant to which its senior subordinated notes were issued (see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources") and by provisions of the
Company's outstanding class of preferred stock. The Company intends to retain
any earnings for internal investment and debt reduction, and does not intend to
declare dividends on its common stock in the foreseeable future.

DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 1,250,000 shares of common stock,
par value $0.01 per share, of which 809,775 shares are issued and outstanding,
and 1,250,000 shares of preferred stock, par value $0.01 per share. Of the
amount of authorized preferred stock, 1,200,000 shares of our preferred stock
are designated series A preferred stock and 1,007,366 shares are issued and
outstanding.

COMMON STOCK

The holders of our common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders, including the election of
directors, and vote together as a class with the holders of the series A
preferred stock. Dividends may be paid on the common stock, when declared by our
board of directors. We do not expect to pay dividends on the common stock in the
foreseeable future.

PREFERRED STOCK

Our Board of Directors has the authority, by adopting resolutions, to issue
shares of preferred stock in one or more series, with the designations and
preferences for each series set forth in the adopting resolutions. Our
certificate of incorporation authorizes our Board of Directors to determine,
among other things, the rights, preferences and limitations pertaining to each
series of preferred stock.

SERIES A PREFERRED STOCK

Ranking. The series A preferred stock is senior to all of our capital
stock as to dividend payments and distributions upon liquidation, dissolution or
winding up.

Dividends. Dividends on the series A preferred stock are payable in cash,
when, as and if declared by our board of directors. All such declared dividends
are paid pro rata to the holders of series A preferred stock. Accrued and unpaid
dividends on the series A preferred stock do not bear interest or dividends.

Redemption. We do not have the right to redeem the series A preferred
stock.

Liquidation. Upon the liquidation, dissolution or winding up of the
Company, the holders of the series A preferred stock are entitled to receive
payment at a liquidation value of $100 per share plus all accrued and unpaid
dividends on the series A preferred stock, prior to the payment of any
distributions to the holders of our common stock.

Restrictions on Payment of Other Dividends. So long as any share of the
series A preferred stock remains outstanding, we may not declare, pay or set
aside for payment dividends or other distributions with respect to any other
shares of our capital stock ranking, as to dividend rights and rights upon
liquidation, dissolution or winding up, junior to the series A preferred stock,
other than dividends payable in common stock or in another stock ranking junior
to the series A preferred stock as to dividend rights and rights on liquidation,
dissolution and winding up.

Voting. The holders of our series A preferred stock are entitled to one
vote per share of series A preferred stock on all matters submitted to a vote of
stockholders, including the election of directors, and vote together as a class
with the holders of the common stock. We are not permitted to amend, alter or
repeal any of the provisions of our certificate of incorporation or bylaws, or
merge with or into or consolidate with any other entity, as to affect adversely
any of the preferences, rights, powers or privileges of the series A preferred
stock or its holders, without first obtaining the approval of at least a
majority of the outstanding shares of series A preferred stock voting separately
as one class.

WARRANTS

We have outstanding warrants to purchase 21,405 shares of our common stock
at an exercise price of $6.67 per share. The warrants expire on January 31, 2008
and if exercised in full represent less than 2.3% of our common stock on a fully
diluted basis. Of this amount, warrants to purchase 19,820 shares of common
stock are held by CHPIII and warrants to purchase 1,585 shares of common stock
are held by Deutsche Banc Alex. Brown Inc., formerly Deutsche Bank Securities,
Inc.

CBI SERIES A PREFERRED STOCK

Of CBI's authorized preferred stock, 100,000 shares of preferred stock are
designated series A preferred stock, which is referred to as the "CBI A
Preferred", all of which are issued and outstanding and held by CHPIII.

Ranking. The CBI A Preferred is senior to all other capital stock of CBI
as to dividend payments and distribution upon liquidation, dissolution or
winding up.

Dividends. Dividends on the CBI A Preferred are payable in cash, when and
if declared by the board of directors of CBI on a quarterly basis. Dividends
accrue from the date of issuance, which was December 16, 1996 or the last date
to which dividends have been paid at a rate of 12% per annum, whether or not
such dividends have been declared and whether or not there shall be funds
legally available for the payment of such dividends. Any dividends which are
declared are payable pro rata to the holders. No dividends or interest accrue on
any accrued and unpaid dividends. The notes and our credit facility each
restrict CBI's ability to pay dividends on the CBI A Preferred.

Redemption. The CBI A Preferred is not subject to mandatory redemption but
is redeemable at any time at the option of CBI; however, the notes offered
hereby and our new credit facility will each restrict CBI's ability to redeem
the CBI A Preferred.

Liquidation. Upon the liquidation, dissolution or winding up of CBI, the
holders of the CBI A Preferred are entitled to receive payment at a liquidation
value of $100 per share plus all accrued and unpaid dividends on the CBI A
Preferred, prior to the payment of any distributions to the holders of CBI's
other capital stock.

Restrictions on Payment of Other Dividends. So long as any share of the
CBI A Preferred remains outstanding, CBI may not declare, pay or set aside for
payment dividends or other distributions with respect to any other shares of its
capital stock ranking, as to dividend rights and rights upon liquidation,
dissolution or winding up, junior to the CBI A Preferred, other than dividends
payable in common stock or in another stock ranking junior to the CBI A
Preferred as to dividend rights and rights on liquidation, dissolution and
winding up.

Voting. Generally, the holders of the CBI A Preferred are not entitled to
any voting rights. However, CBI is not permitted to amend, alter or repeal any
of the provisions of its certificate of incorporation or bylaws, or merge with
or into or consolidate with any other entity, as to affect adversely any of the
preferences, rights, powers or privileges of the CBI A Preferred or its holders,
without first obtaining the approval of at least a majority of the outstanding
shares of CBI A Preferred voting separately as one class.

ITEM 6. SELECTED FINANCIAL DATA

The following table presents summary historical financial and other data
for the Company and should be read in conjunction with the financial statements
of the Company and the notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included in Item 7 herein.

<Table>
<Caption>
FOR THE YEAR ENDED
--------------------------------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25, AUGUST 26, AUGUST 28,
2003 2002(5) 2001(4) 2000(3) 1999
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)

STATEMENT OF OPERATIONS DATA:
Net sales....................... $308,431 $304,378 $281,053 $182,285 $168,865
Cost of sales................... 139,170 146,898 142,164 80,929 73,268
-------- -------- -------- -------- --------
Gross profit.................. 169,261 157,480 138,889 101,356 95,597
Selling, general and
administrative expenses....... 129,423 129,734 119,972 85,559 85,075
Gain (loss) on early
extinguishment of debt........ -- (5,650) -- 6,695 --
-------- -------- -------- -------- --------
Operating income.............. 39,838 22,096 18,917 22,492 10,522
Income (loss) before income
taxes......................... 10,898 (6,713) (3,929) 6,801 (4,072)
(Provision) benefit for income
taxes......................... (132) 1,171 1,443 (333) (120)
Cumulative effect of change in
accounting principle.......... -- -- (1,835) -- --
Net income (loss)............... 10,766 (5,542) (4,321) 6,468 (4,192)
OTHER DATA:
EBITDA(1)....................... $ 53,987 $ 47,458 $ 36,503 $ 24,897 $ 17,698
Interest expense................ 28,940 26,026 22,846 15,691 14,594
Depreciation and amortization... 14,149 19,712 17,586 9,100 7,176
Capital expenditures............ 11,243 14,247 7,499 5,087 9,785
BALANCE SHEET DATA (AT END OF
PERIOD):
Total assets.................... $395,501 $401,626 $384,971 $326,553 $209,845
Total debt(2)................... 226,710 242,117 223,609 191,253 134,410
Total stockholders' equity...... 71,843 65,254 70,828 63,098 37,830
</Table>

- ---------------

(1) EBITDA represents earnings before interest expense, taxes, depreciation and
amortization and excludes extraordinary gains and losses and other expense
related to interest rate swaps. 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 have included information concerning EBITDA because
we use such information as a method of assessing our cash flow and ability
to service debt. The EBITDA measure presented herein is not necessarily
comparable to similarly titled measures reported by other companies.

Reconciliation of operating income to EBITDA for the year ended:

<Table>
<Caption>
AUGUST 30, AUGUST 31, AUGUST 25, AUGUST 26, AUGUST 28,
2003 2002 2001 2000 1999
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)

Operating income................. $39,838 $22,096 $18,917 $22,492 $10,522
Add: Depreciation and
amortization................... 14,149 19,712 17,586 9,100 7,176
Gain (loss) on early
extinguishment of debt...... -- (5,650) -- 6,695 --
------- ------- ------- ------- -------
EBITDA........................... $53,987 $47,458 $36,503 $24,897 $17,698
======= ======= ======= ======= =======
</Table>

(2) Excludes bank overdraft.

(3) Includes the results of operations for Taylor Publishing, from its
acquisition on July 27, 2000.

(4) Includes the results of operations for ECI, from its acquisition on March
30, 2001. ECI sales are highly seasonal with most shipments generally
occurring in the first four months of our fiscal year.

(5) Includes the results of operations of Milestone Marketing, from its
acquisition on July 15, 2002.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion of our consolidated financial condition and
results of operations should be read in conjunction with the information
contained in our consolidated financial statements and the notes thereto. The
following discussion includes forward-looking statements that involve certain
risks and uncertainties. See "Special Note Regarding Forward-Looking
Statements."

OVERVIEW

We are one of the leading manufacturers and suppliers of class rings,
yearbooks, graduation products, academic achievement publications and
recognition and affinity jewelry in the United States. Our two principal
business segments are: scholastic products and recognition and affinity
products. The scholastic products segment serves the high school, college and,
to a lesser extent, the elementary and junior high school markets and accounted
for approximately 87% of our net sales for the year ended August 30, 2003. Our
scholastic products segment consists of three principal categories: class rings,
yearbooks and graduation products, the last of which includes fine paper
products and graduation accessories.

The recognition and affinity products segment accounted for approximately
13% of our net sales for the year ended August 30, 2003. This segment provides,
among other things, publications that recognize the academic achievement of top
students at the high school and college levels, as well as the nation's most
inspiring teachers, jewelry commemorating family events such as the birth of a
child, fan affinity jewelry and related products and professional sports
championship rings such as World Series rings.

COMPANY BACKGROUND

CBI was initially formed by CHPII, a private equity investment fund, in
March 1996 for the purpose of acquiring substantially all of the ArtCarved
operations of CJC Holdings, Inc. and the Balfour operations of L. G. Balfour
Company, Inc. These acquisitions were consummated on December 16, 1996. Until
such date, CBI engaged in no business activities other than in connection with
the completion of the acquisitions and the financing thereof.

Our Company was formed on June 27, 2000 to serve as a holding company for
the CBI operations and future acquisitions. Upon formation, each share of CBI's
issued and outstanding common stock was converted into one share of our common
stock, and each share of CBI's issued and outstanding series B preferred stock
was converted into one share of our Series A Preferred Stock. The original
holders of CBI's series A preferred stock continued to hold such shares. We
changed our name from Commemorative Brands Holding Corporation to American
Achievement Corporation on January 23, 2002.

Taylor Acquisition. On February 11, 2000, Castle Harlan Partners III, L.P.
("CHPIII"), one of our stockholders and an affiliate of CHPII, acquired Taylor
for a purchase price of approximately $30.0 million, whose primary business is
the designing and printing of student yearbooks. On July 27, 2000, we acquired
all issued and outstanding shares of Taylor Senior Holding Corp ("TSHC"),
Taylor's parent, through the issuance of 320,929 shares of our common stock and
393,482 shares of our series A preferred stock (the "Taylor Acquisition"). The
Taylor Acquisition was accounted for under the purchase method of accounting. As
a result of this transaction, our consolidated financial statement for 2000
include the results of operations for Taylor for the period from February 11,
2000 to August 26, 2000.

ECI Acquisition. On March 30, 2001, we acquired all of the capital stock
of ECI for a purchase price of approximately $58.7 million (the "ECI
Acquisition"). ECI has been in the academic achievement publication business
since 1967 and publishes such well-known titles as, Who's Who Among American
High School Students, The National Dean's List and Who's Who Among America's
Teachers. The ECI Acquisition was accounted for under the purchase method of
accounting. As a result of this transaction, our consolidated financial
statements for 2001 include the results of operations for ECI for the period
from March 30, 2001 to August 25, 2001.

Milestone Acquisition. Effective July 15, 2002, we acquired all the
outstanding stock and warrants of Milestone for a total purchase price of $16.3
million (the "Milestone Acquisition"). The Milestone Acquisition was accounted
for using the purchase method of accounting. Milestone is a specialty marketer
of class rings and other graduation products to the college market. Goodwill and
trademarks related to Milestone are not amortized in accordance with SFAS No.
142. As a result of this transaction, our consolidated financial statements for
2002 include the results of operations for Milestone for the period from July
15, 2002 to August 31, 2002.

Effective December 31, 2002, Milestone merged into CBI, with CBI as the
surviving entity. In conjunction with the merger, for each share of Milestone
common stock held by us, we received one share of CBI common stock. The existing
common stock and warrants of Milestone were cancelled in connection with this
transaction.

CRITICAL ACCOUNTING POLICIES

We prepare our consolidated 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:

Revenue Recognition. We recognize revenue when the earnings process is
complete, evidenced by an agreement between the customer and us, delivery and
acceptance has occurred, collectibility is reasonably assured and pricing is
fixed and determinable. In accordance with the Securities and Exchange
Commissions Staff Accounting Bulletin No. 101, the recognition of revenue and
related gross profit on sales to independent sales representatives, along with
commissions to independent sales representatives that are directly related to
the revenue, are deferred until the independent sales representative delivers
the product and title passes to our end customer. Provisions for sales returns
and warranty costs are recorded at the time of sale based on historical
information and current trends.

Sales Returns and Allowances. We make estimates of potential future
product returns related to current period product revenue. We analyze historical
returns, current economic trends and changes in customer demand and acceptance
of our products when evaluating the adequacy of 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. Material differences could result in the amount and timing of
our revenue for any period if we made different judgments or utilized different
estimates.
16

Allowance 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 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. We believe the results could be materially
different if historical trends do not reflect actual results or if economic
conditions worsened.

Goodwill and Other Intangible Assets. On September 1, 2002, we adopted
SFAS No. 142, "Goodwill and Other Intangible Assets," which addresses the
initial recognition and measurement of intangible assets acquired outside of a
business combination and the accounting for goodwill and other intangible assets
subsequent to their acquisition. SFAS No. 142 also provides that intangible
assets with finite useful lives be amortized and that goodwill and intangible
assets with indefinite lives will not be amortized, but will rather be tested
for impairment upon adoption and on an annual basis thereafter. We completed the
initial impairment test and concluded that goodwill was not impaired as of
August 30, 2003. The adoption of SFAS No. 142 during the fiscal year ended 2003
did not have a material impact on our consolidated balance sheets or our
statements of operations, shareholders' equity or cash flows.

RESULTS OF OPERATIONS

The following table sets forth selected information from our consolidated
statements of operations expressed on an actual basis and as a percentage of net
sales.

<Table>
<Caption>
FOR THE YEAR ENDED
---------------------------------------------------------------
AUGUST 30, 2003 AUGUST 31, 2002 AUGUST 25, 2001
------------------- ------------------- -------------------
% OF NET % OF NET % OF NET
ACTUAL SALES ACTUAL SALES ACTUAL SALES
-------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)

Net sales................. $308,431 100.0% $304,378 100.0% $281,053 100.0%
Cost of sales............. 139,170 45.1 146,898 48.3 142,164 50.6
-------- ----- -------- ----- -------- -----
Gross profit............ 169,261 54.9 157,480 51.7 138,889 49.4
Selling, general and
administrative
expenses................ 129,423 42.0 129,734 42.6 119,972 42.7
Loss on extinguishment of
debt.................... -- -- (5,650) (1.8) -- --
-------- ----- -------- ----- -------- -----
Operating income........ 39,838 12.9 22,096 7.3 18,917 6.7
Interest expense, net..... 28,940 9.4 26,026 8.6 22,846 8.1
Other expense............. -- -- 2,783 0.9 -- --
-------- ----- -------- ----- -------- -----
Income (loss) before
income taxes......... 10,898 3.5 (6,713) (2.2) (3,929) (1.4)
(Provision) benefit for
income taxes............ (132) -- 1,171 0.4 1,443 0.5
Cumulative effect of
change in accounting
principle............... -- -- -- -- (1,835) (0.6)
-------- ----- -------- ----- -------- -----
Net income (loss)....... $ 10,766 3.5% $ (5,542) (1.8)% $ (4,321) (1.5)%
======== ===== ======== ===== ======== =====
</Table>

The following table sets forth sales by business segment expressed on an
actual basis and as a percentage of net sales.

Scholastic Products....... $269,146 87.3% $269,362 88.5% $258,435 92.0%
Recognition and Affinity
Products................ 39,285 12.7 35,016 11.5 22,618 8.0
-------- ----- -------- ----- -------- -----
Net sales................. $308,431 100.0% $304,378 100.0% $281,053 100.0%
======== ===== ======== ===== ======== =====
</Table>

YEAR ENDED AUGUST 30, 2003 COMPARED TO YEAR ENDED AUGUST 31, 2002

Net Sales. Net sales increased $4.0 million, or 1.3%, to $308.4 million in
2003, from $304.4 million in 2002. This increase was due primarily to the
inclusion of $5.4 million of net sales from Milestone in 2003, which was
acquired effective July 15, 2002, as compared to $1.0 million in 2002 and an
increase in sales of $3.9 million from ECI, mainly as a result of the bi-annual
publication of the Who's Who Among America's Teachers in 2003. These increases
were partially offset by a decrease in yearbook sales of $3.9 million, as a
result of the fourth quarter of fiscal year 2002 containing an extra week of
heavy shipping volumes.

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

Scholastic Products. Net sales decreased slightly to $269.1 million
in 2003 from $269.4 million in 2002. Of this decrease, $3.9 million was due
to decreased yearbook contracts and $1.4 million decrease due to a decline
in unit volumes of high school and college class rings. These decreases
were offset by a $4.4 million increase in Milestone net sales and a $0.7
million increase in graduation products.

Recognition and Affinity Products. Net sales increased $4.3 million
to $39.3 million in 2003 from $35.0 million in 2002. The increase was
primarily the result of $3.9 million increased net sales attributable to
ECI and $2.8 million increased sales of specialty products, partially
offset by $2.2 million decrease resulting from the discontinuation of
reunion services in fiscal year 2002.

Gross Profit. Gross margin was 54.9% in 2003, a 3.2 percentage point
increase from 51.7% in 2002. The gross margin increase in 2003 was the
result of an increase in margins of our yearbooks associated with the
implementation of new technology and our class rings due to increased labor
efficiencies and the introduction of the new white metal, partially offset
by the discontinuation of reunion services in fiscal year 2002.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $0.3 million to $129.4 million in 2003
from $129.7 million in 2002. As a percentage of net sales, selling, general
and administrative expenses decreased 0.6 percentage points in 2003
compared to 2002. 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 $5.9
million to $96.5 million, or 31.3% of net sales, in 2003 from $90.6
million, or 29.8% of net sales, in 2002. The increase in selling and
marketing expenses as a percentage of net sales was largely a result of
increased marketing efforts in class rings, yearbooks and graduation
products, an increase of $2.7 million as a result of the Milestone
Acquisition, and increased marketing costs related to ECI's bi-annual
teachers publication. General and administrative expenses in 2003 were
$33.0 million, or 10.7% of net sales, as compared to $39.1 million, or
12.9% of net sales, in 2002. The decrease in general and administrative
expenses as a percentage of revenue was primarily the result of a $5.6
million decrease related to the adoption of SFAS No. 142, in which goodwill
and trademarks are no longer amortized.

Loss on Extinguishment of Debt. In conjunction with the issuance of
the Unsecured Notes and the Senior Secured Credit Facility on February 20,
2002, the Company paid off the then outstanding term loans and revolver
under the former credit facility and bridge notes to affiliates. As a
result, a loss of $5.7 million was recognized relating to the write-off of
unamortized deferred financing costs.

Operating Income. As a result of the foregoing, operating income was
$39.8 million, or 12.9% of net sales, in 2003 as compared with $22.1
million, or 7.3% of net sales, in 2002. The scholastic products segment
reported operating income of $30.3 million and the recognition and affinity
products segment reported operating income of $9.5 million for 2003. The
adoption of SFAS No. 145 required us to reclassify the $5.7 million loss
from extinguishment of debt from extraordinary items into operating
expenses for 2002. Without this reclassification the operating income for
2002 would have been $27.7 million, consisting of $23.2 million operating
income from the scholastic products segment and $4.5 million operating
income from the recognition and affinity products segment for 2002.

Interest Expense, Net. Net interest expense was $28.9 million in 2003
and $26.0 million in 2002. The average debt outstanding in 2003 and in 2002
was $235.9 million and $225.7 million, respectively. The weighted average
interest rate of debt outstanding in 2003 and in 2002 was 12.3% and 11.5%
respectively.

Other Expense. Other expense was $0 for 2003 and $2.8 million for
2002. Out of the $2.8 million in 2002, $2.6 million was a result of the
termination and reclassification of interest rate swaps that occurred in
conjunction with the issuance of the Unsecured Notes and the entering into
of our Senior Secured Credit Facility on February 20, 2002. The remaining
interest rate swap agreement represented a notional amount of $25 million
that was classified as a trading derivative in 2002. As such, changes in
the fair value of this derivative resulted in a charge of $0.2 million for
2002. As of August 31, 2002, the fair value of this derivative represented
a liability of approximately $0.9 million and it expired during 2003.

(Provision) Benefit for Income Taxes. For 2003 and 2002, the Company
recorded an income tax provision of $132,000 and an income tax benefit of
$1,171,000, respectively. The Company's provision in 2003 relates to state
income taxes. No federal expense is being reported due to a tax loss that
is expected for the year. The Company's benefit related to the net
operating loss carryback generated in years ended August 31, 2002
attributable to TSHC. No net federal income tax benefit is reflected in the
statement of operations for net operating losses to be carried forward
since realization of the potential benefit of net operating loss
carry-forwards is not considered to be more likely than not.

Net Income (Loss). As a result of the foregoing, we reported net
income of $10.8 million in 2003 as compared to a net loss of $5.5 million
in 2002.

YEAR ENDED AUGUST 31, 2002 COMPARED TO YEAR ENDED AUGUST 25, 2001

Net Sales. Net sales increased $23.3 million, or 8.3%, to $304.4 million
in 2002, from $281.1 million in 2001. This increase was due primarily to the
inclusion of $16.2 million of net sales from ECI in 2002, which was acquired on
March 30, 2001, as compared to $0.7 million in 2001 and an increase in sales of
other product lines.

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

Scholastic Products. Net sales increased $10.9 million, or 4.2% to
$269.4 million in 2002 from $258.4 million in 2001. Of this increase, $5.2
million was due to increased unit volumes and selling prices of high school
and college class rings and a $4.7 million increase in graduation products
and yearbook revenues. The remaining increase was due to the July 15, 2002
acquisition of Milestone.

Recognition and Affinity Products. Net sales increased $12.4 million
to $35.0 million in 2002 from $22.6 million in 2001. The increase was
primarily the result of $16.2 million of net sales attributable to ECI,
partially offset by lower sales of sports fan affinity jewelry.

Gross Profit. Gross margin was 51.7% in 2002, a 2.3 percentage point
increase from 49.4% in 2001. The gross margin increase in 2002 was partially the
result of the inclusion of the ECI operations for this period. Excluding ECI,
gross margin would have been 50.1% in 2002 compared to 49.4% in 2001. The 0.7
percentage point increase in gross margins was primarily the result of increased
operating efficiencies.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $9.8 million, or 8.1%, to $129.7 million in
2002 from $120.0 million in 2001. As a percentage of net sales, selling, general
and administrative expenses decreased 0.1 percentage points in 2002 compared to
2001. 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 $7.9 million to $90.6
million, or 29.8% of net sales, in 2002 from $82.7 million, or 29.4% of net
sales, in 2001. General and administrative expenses in 2002 were $39.1 million,
or 12.9% of net sales, as compared to $37.3 million, or 13.3% of net sales, in
2001. This decrease in general and administrative expenses as a percentage of
revenue was a result of realization of the balance of the synergy savings
related to the Taylor Acquisition, partially offset by increased employee health
insurance costs.

Loss on Extinguishment of Debt. In conjunction with the issuance of the
Unsecured Notes and the Senior Secured Credit Facility on February 20, 2002, the
Company paid off the then outstanding term loans and revolver under the former
credit facility and bridge notes to affiliates. As a result, a loss of $5.7
million was recognized relating to the write-off of unamortized deferred
financing costs.

Operating Income. As a result of the foregoing, operating income was $22.1
million, or 7.3% of net sales, in 2002 as compared with $18.9 million, or 6.7%
of net sales, in 2001. The scholastic products segment reported operating income
of $20.8 million and the recognition and affinity products segment reported an
operating loss of $1.9 million in 2001. The adoption of SFAS No. 145 required us
to reclassify the $5.7 million loss from extinguishment of debt from
extraordinary items into operating expenses for 2002. Without this
reclassification the operating income for 2002 would have been $27.7 million,
consisting of $23.2 million operating income from the scholastic products
segment and $4.5 million operating income from the recognition and affinity
products segment for 2002. This increase in the recognition and affinity product
segment was primarily attributable to favorable impact of approximately $5.9
million from the ECI Acquisition on March 30, 2001.

Interest Expense, Net. Net interest expense was $26.0 million in 2002 and
$22.8 million in 2001. The average debt outstanding in 2002 and in 2001 was
$225.7 million and $201.2 million, respectively. The weighted average interest
rate of debt outstanding in 2002 and in 2001 was 11.5% and 11.4% respectively.

Other Expense. Other expense was $2.8 million in 2002, of which $2.6
million was a result of the termination and reclassification of interest rate
swaps that occurred in conjunction with the issuance of the Unsecured Notes and
the entering into of our Senior Secured Credit Facility on February 20, 2002.
The remaining interest rate swap agreement representing a notional amount of $25
million has been classified as a trading derivative. As such, changes in the
fair value of this derivative resulted in a charge of $0.2 million for the
period February 20, 2002 to August 31, 2002. As of August 31, 2002, the fair
value of this derivative represented a liability of approximately $0.9 million.

Benefit for Income Taxes. For 2002 and 2001, the Company recorded income
tax benefit of $1,171,000 and $1,443,000. The Company's benefit relates to the
expected annual benefits from the net operating loss carryback generated in
years ended August 31, 2002 and August 25, 2001 attributable to TSHC. No net
federal income tax benefit is reflected in the statement of operations for net
operating losses to be carried forward since realization of the potential
benefit of net operating loss carry-forwards is not considered to be more likely
than not.

Cumulative Effect of Change in Accounting Principle. The cumulative effect
of change in accounting principle, representing a loss of $1.8 million, was
recorded due to the adoption of SAB 101 as of August 27, 2000.

Net Loss. As a result of the foregoing, we reported a net loss of $5.5
million in 2002 as compared to a net loss of $4.3 million in 2001.
20

SEASONALITY

The Company's scholastic product sales tend to be seasonal. Class ring
sales are highest during October through December (which overlaps the Company's
first and second fiscal quarters), when students have returned to school after
the summer recess and orders are taken for class rings for delivery to students
before the winter holiday season. Sales of the Company's fine paper products are
predominantly made during February through April (which overlaps the Company's
second and third fiscal quarters) for graduation in April and June. The Company
has historically experienced operating losses during the period of the Company's
fourth fiscal quarter, which includes the summer months when school is not in
session, thus reducing related shipment of products. Yearbook sales are highest
during the months of May through June, as yearbooks are typically shipped to
schools prior to the school's summer break. The Company's recognition and
affinity product line sales are also seasonal. The majority of the sales of
achievement publications are shipped in November of each year. The remaining
recognition and affinity product line sales are highest during the winter
holiday season and in the period prior to Mother's Day. As a result, the effects
of the seasonality of the class ring business on the Company are somewhat
tempered by the Company's relatively broad product mix. As a result of the
foregoing, the Company's working capital requirements tend to exceed its
operating cash flows from July through December.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities. Operating activities provided cash flows of $26.5
million for fiscal 2003 as compared to $23.3 million in fiscal 2002. The $3.2
million increase in cash flows from operating activities between the two periods
was primarily the result of an increase in operating cash from net income before
depreciation, amortization and other non-cash charges of $5.7 million and
increases in the change in prepaid expenses and other assets of $2.8 million,
inventories of $0.7 million, and income tax receivable of $0.7 million. These
increases in cash flows were partially offset by decreases in the changes in
receivables of $1.1 million, deferred revenue of $1.1 million, and accounts
payable, accrued expenses and other long-term liabilities of $4.1 million.
Operating activities provided cash flows of $23.3 million for fiscal 2002 as
compared to $10.3 million in fiscal 2001. The $13.0 million increase in cash
flows from operating activities between the two periods was primarily the result
of an increase in operating cash from net income before depreciation,
amortization and other non-cash charges of $3.9 million, a decrease in accounts
receivable and income tax receivable of $14.5 million, a decrease in inventories
of $0.5 million and a decrease in other assets of $1.9 million. These increases
in cash flows were partially offset by an increase in prepaid expenses, other
assets and deferred revenue of $6.7 million and a decrease in accounts payable,
accrued expenses and other long-term liabilities of $1.0 million.

Investing Activities. Capital expenditures in 2003, 2002 and 2001 were
$11.2 million, $14.2 million and $7.5 million, respectively. The increase in
capital expenditures in 2002 was primarily attributable to the purchase of two
new printing presses at Taylor. Also affecting investing activities in 2002 and
2001 were the Milestone Acquisition and the ECI Acquisition.

Financing Activities. Net cash used in financing activities in 2003 was
$15.1 million, primarily used to pay down bank revolver borrowings. Net cash
provided from financing activities in 2002 and 2001 was $4.7 million and $48.4
million, respectively. In February 2002, we issued $177.0 million of Unsecured
Notes due 2007 and entered into a new $40.0 million Senior Secured Credit
Facility. The Company paid off the then outstanding term loans and revolver
under the former credit agreement, its bridge notes to affiliates and settled
all but $25.0 million in notional amount of its interest rate swap agreements.
In 2001, in connection with the acquisition of ECI, we entered into the second
amended and restated credit agreement whereby we borrowed approximately $27.3
million to fund a portion of the acquisition. In addition, CHPIII provided us
with approximately $24.5 million in cash in return for the issuance of a bridge
note representing an obligation of $8.5 million and the issuance of series A
preferred stock and common stock for $16.0 million.

Capital Resources. In February 2002, we entered into the Senior Secured
Credit Facility. As of August 30, 2003, $9.5 million under that facility was
outstanding.

In connection with the Taylor Acquisition, CBI signed a gold consignment
financing agreement with a bank. Under its gold consignment financing agreement,
CBI has the ability to have on consignment the lowest of (i) the dollar value of
27,000 troy ounces of gold, (ii) $10.1 million and (iii) a borrowing base,
determined based upon a percentage of gold located at CBI's facilities and other
approved locations, as specified by the agreement. Under the terms of the
consignment arrangement, CBI does not own the consigned gold nor have risk of
loss related to such inventory until the money is received by the bank from CBI
in payment for the gold purchased. Accordingly, CBI does not include the values
of consigned gold in its inventory or the corresponding liability for financial
statement purposes. As a result, as of August 30, 2003 and August 31, 2002, CBI
held approximately 17,780 ounces and 14,380 ounces, respectively, of gold valued
at $6.7 million and $4.6 million, respectively, on consignment from the bank.

Cash generated from operating activities and availability under our Senior
Secured Credit Facility and prior credit facilities which were paid off in
February 2002 have been our principal sources of liquidity. Our liquidity needs
arise primarily from debt service, working capital, capital expenditure and
general corporate requirements. As of August 30, 2003, we had approximately
$28.3 million available under our credit facility.

We believe that cash flow from our operating activities combined with the
availability of funds under our Senior Secured Credit Facility will be
sufficient to support our operations and liquidity requirements for the
foreseeable future.

CONTRACTUAL OBLIGATIONS

We have contractual obligations due as follows (in thousands):

<Table>
<Caption>
FISCAL YEAR ENDING
---------------------------------------------------------------------
DESCRIPTION 2004 2005 2006 2007 2008 THEREAFTER TOTAL
- ----------- ------ ------ ------- -------- ------ ---------- --------

Long-term debt............ $ -- $ -- $ -- $217,210 $ -- $ -- $217,210
Credit facility(1)........ -- -- 9,500 -- -- -- 9,500
Operating leases.......... 2,850 2,193 1,882 1,495 1,188 3,530 13,138
Capital leases............ 682 606 566 541 219 -- 2,614
------ ------ ------- -------- ------ ------ --------
Total contractual cash
obligations............. $3,582 $2,799 $11,948 $219,246 $1,407 $3,530 $242,462
====== ====== ======= ======== ====== ====== ========
</Table>

- ---------------

(1) Also outstanding is $2.1 million in the form of letters of credit.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement requires, among other things, that gains and losses
on the early extinguishments of debt be classified as extraordinary only if they
meet the criteria for extraordinary treatment set forth in Accounting Principles
Board Opinion No. 30. The provisions of this statement related to classification
of gains and losses on the early extinguishments of debt became effective for
fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 required
us to reclassify certain items from extraordinary items into operating income
(loss).

In June 2002, SFAS No. 146, "Accounting for Costs Associated with Exit or
Disposal Activities," was issued, which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
Emerging Issues Task Force (EITF) Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)." This statement requires
recognition of a liability for a cost associated with an exit or disposal
activity when the liability is incurred as opposed to the date of an entity's
commitment

to an exit plan or disposal activity. The adoption of SFAS No. 146 in January
2003 did not have a material effect on our financial statements.

In December 2002, SFAS 148 was issued, which amends SFAS 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. It also amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. Certain disclosure requirements were effective for us beginning
December 15, 2002 and we have complied with those requirements. The adoption of
the additional reporting requirements of SFAS 148 in December 2002 did not have
a material effect on our financial statements.

In December 2002, FASB Interpretation No. 45 ("FIN 45"), "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others an interpretation of FASB Statements No. 5,
57, and 107 and rescission of FASB Interpretation No. 34", was issued, which
addresses the disclosures to be made by a guarantor in its interim and annual
financial statements about its obligation under guarantees and clarifies the
requirements related to the recognition of a liability by a guarantor at the
inception of a guarantee for the obligations the guarantor has undertaken in
issuing that guarantee. The adoption of FIN 45 in December 2002 did not have a
material effect on our financial statements.

In April 2003, SFAS No. 149 ("SFAS 149"), "Amendments of Statement 133 on
Derivative Instruments and Hedging Activities", was issued, which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The adoption of SFAS 149 in the third quarter of fiscal year ended
2003 did not have a significant impact on our financial statements.

In May 2003, SFAS No. 150 ("SFAS 150"), "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity", was issued,
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. We
will adopt SFAS 150 beginning our first quarter of fiscal year 2004. We are
currently reviewing the impact this statement will have on our financial
statements.

In May 2003, FIN 46, "Consolidation of Variable Interest Entities", was
issued, which clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements", to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. We will
adopt FIN 46 beginning our first quarter of fiscal year 2004 and we are
currently reviewing the impact this statement will have on our financial
statements.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Interest Rate Risk. We have market risk exposure from changes in interest
rates on our variable rate debt. Our policy is to manage interest rate exposure
through the use of a combination of fixed and floating rate debt instruments and
through the use of interest rate swaps. Our Senior Secured Credit Facility and
our gold consignment agreement are variable rate facilities. The interest rates
under those facilities are based on a floating benchmark rate (such as LIBOR or
the Federal Funds rate) plus a fixed spread. In fiscal year 2002, upon
consummation of the issuance of our senior unsecured notes we terminated
approximately $1.7 million of our existing swap agreements and interest rate
swaps representing a notional amount of $25.0 million remained in place. As of
August 31, 2003, $0 remained in place.

Our derivatives and other financial instruments subject to interest rate
risk consist of long-term debt (including current portion), an interest rate
swap and notional amount under the gold consignment agreement. The net fair
value of these financial instruments at August 30, 2003 and August 31, 2002
represented a current liability of $0 and $0.9 million, respectively.

If the interest rate on our variable debt increased or decreased by 1% in
the fiscal year ended 2003, our interest expense would have changed by
approximately $0.1 million during the same period. As of August 30, 2003 and
August 31, 2002, the fair value of our debt approximated its carrying value and
is estimated based on quoted market prices for comparable instruments.

Semi-Precious Stones. We purchase the majority of our semi-precious stones
from a single source supplier in Germany. We believe that all of our major
competitors purchase their semi-precious stones from this same supplier. The
purchases beginning fiscal 2002 are payable in Euros and in 2001 were payable in
Deutsche Marks. During 2001, in order to hedge our foreign currency risks, we
purchased a total of $2.0 million in forward Deutsche Mark contracts with
various maturity dates resulting in a net gain of $0.1 million. In the fiscal
years ended 2003 and 2002 we did not purchase any forward contracts.

Gold. We purchase all of our gold requirements from The Bank of Nova
Scotia through our revolving credit and gold consignment agreement. We consign
the majority of our gold from The Bank of Nova Scotia and pay for gold as the
product is shipped to customers and as required by the terms of the gold
consignment agreement. As of August 30, 2003, we had hedged most of our gold
requirements for the fiscal year ending August 28, 2004 through the purchase of
gold options.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
American Achievement Corporation

We have audited the accompanying consolidated balance sheets of American
Achievement Corporation and subsidiaries (the "Company") as of August 30, 2003
and August 31, 2002 and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in the period
ended August 30, 2003. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of the Company as of August 30,
2003, and August 31, 2002, and the results of their operations and their cash
flows for each of the three years in the period ended August 30, 2003 in
conformity with accounting principles generally accepted in the United States of
America.

As discussed in Note 2 to the consolidated financial statements, the
Company changed its method of accounting for goodwill and other intangible
assets as of September 1, 2002 upon the adoption of Statement of Financial
Accounting Standard No. 142,"Goodwill and Other Intangible Assets."

/s/ DELOITTE & TOUCHE LLP

Austin, Texas
November 17, 2003

AMERICAN ACHIEVEMENT CORPORATION

CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
------------- -------------
(DOLLARS IN THOUSANDS,
EXCEPT SHARE DATA)

ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 1,735 $ 1,562
Accounts receivable, net of allowance for doubtful
accounts of $3,242 and $3,578, respectively............ 44,193 46,326
Income tax receivable..................................... -- 738
Inventories, net.......................................... 23,310 25,427
Prepaid expenses and other current assets, net............ 30,317 28,021
-------- --------
Total current assets.............................. 99,555 102,074
PROPERTY, PLANT AND EQUIPMENT, net.......................... 65,307 66,592
TRADEMARKS.................................................. 41,855 41,855
GOODWILL.................................................... 162,059 159,308
OTHER ASSETS, net of accumulated amortization of $8,057 and
$5,701, respectively...................................... 26,725 31,797
-------- --------
Total assets...................................... $395,501 $401,626
======== ========

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Bank overdraft............................................ $ 4,877 $ 4,324
Accounts payable.......................................... 6,564 9,364
Customer deposits......................................... 21,393 23,649
Accrued expenses.......................................... 26,856 24,773
Deferred revenue.......................................... 5,123 6,515
Accrued interest.......................................... 4,231 4,138
-------- --------
Total current liabilities......................... 69,044 72,763
LONG-TERM DEBT.............................................. 226,710 242,117
OTHER LONG-TERM LIABILITIES................................. 9,854 4,642
-------- --------
Total liabilities................................. 305,608 319,522
REDEEMABLE MINORITY INTEREST IN SUBSIDIARY.................. 18,050 16,850
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Series A preferred stock, $.01 par value; 1,200,000 shares
authorized, 1,007,366 shares and 1,006,847 shares
issued and outstanding, respectively; liquidation
preference of $100,737, and $100,685, respectively..... 10 10
Common stock, $.01 par value; 1,250,000 shares authorized,
809,775 shares and 809,351 shares issued and
outstanding, respectively.............................. 8 8
Additional paid-in capital................................ 95,350 95,310
Accumulated deficit....................................... (18,375) (27,941)
Accumulated other comprehensive loss...................... (5,150) (2,133)
-------- --------
Total stockholders' equity........................ 71,843 65,254
-------- --------
Total liabilities and stockholders' equity........ $395,501 $401,626
======== ========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.
26

AMERICAN ACHIEVEMENT CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

<Table>
<Caption>
FOR THE YEAR ENDED
------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25,
2003 2002 2001
---------- ---------- ----------
(DOLLARS IN THOUSANDS)

Net sales................................................... $308,431 $304,378 $281,053
Cost of sales............................................... 139,170 146,898 142,164
-------- -------- --------
Gross profit.............................................. 169,261 157,480 138,889
Selling, general and administrative expenses................ 129,423 129,734 119,972
Loss on extinguishment of debt.............................. -- (5,650) --
-------- -------- --------
Operating income.......................................... 39,838 22,096 18,917
Interest expense, net....................................... 28,940 26,026 22,846
Other expense............................................... -- 2,783 --
-------- -------- --------
Income (loss) before income taxes......................... 10,898 (6,713) (3,929)
Benefit (provision) for income taxes...................... (132) 1,171 1,443
-------- -------- --------
Income (loss) before cumulative effect of change in
accounting principle................................... 10,766 (5,542) (2,486)
Cumulative effect of change in accounting principle......... -- -- (1,835)
-------- -------- --------
Net income (loss)......................................... 10,766 (5,542) (4,321)
Preferred dividends......................................... (1,200) (1,200) (1,200)
-------- -------- --------
Net income (loss) applicable to common stockholders....... $ 9,566 $ (6,742) $ (5,521)
======== ======== ========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.
27

AMERICAN ACHIEVEMENT CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<Table>
<Caption>
PREFERRED STOCK COMMON STOCK
------------------------------------- ----------------
SERIES A SERIES B
------------------ ----------------
SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT
--------- ------ ------- ------ ------- ------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

BALANCE, August 26, 2000.............................. 854,467 $ 9 -- $ -- 696,914 $7
Comprehensive loss --
Net loss.............................................. -- -- -- -- -- --
Adjustment to minimum pension liability............... -- -- -- -- -- --
Change in effective portion of derivative loss........ -- -- -- -- -- --
--------- --- ------- ----- ------- --
Total comprehensive loss.............................. -- -- -- -- -- --
Issuance of American Achievement Series B Preferred
Stock............................................... -- -- 16,000 160 -- --
Exchange of Series B Preferred Stock for Series A and
common stock........................................ 146,880 1 (16,000) (160) 112,137 1
Accrued dividends on minority interest in CBI......... -- -- -- -- -- --
Exercise of Stock Options............................. -- -- -- -- 300 --
--------- --- ------- ----- ------- --
BALANCE, August 25, 2001.............................. 1,001,347 10 -- -- 809,351 8
--------- --- ------- ----- ------- --
Comprehensive loss --
Net loss.............................................. -- -- -- -- -- --
Adjustment to minimum pension liability............... -- -- -- -- -- --
Change in effective portion of derivative loss........ -- -- -- -- -- --
Reclassification into earnings for derivative
termination......................................... -- -- -- -- -- --
--------- --- ------- ----- ------- --
Total comprehensive income (loss)..................... -- -- -- -- -- --
Accrued dividends on minority interest in CBI......... -- -- -- -- -- --
Issuance of American Achievement Series A Preferred
stock............................................... 5,500 -- -- -- -- --
--------- --- ------- ----- ------- --
BALANCE, August 31, 2002.............................. 1,006,847 10 -- -- 809,351 8
--------- --- ------- ----- ------- --
Comprehensive income --
Net income............................................ -- -- -- -- -- --
Adjustment to minimum pension liability............... -- -- -- -- -- --
--------- --- ------- ----- ------- --
Total comprehensive income (loss)..................... -- -- -- -- -- --
Accrued dividends on minority interest in CBI......... -- -- -- -- -- --
Issuance of stock..................................... 519 -- -- -- 424 --
--------- --- ------- ----- ------- --
BALANCE, August 30, 2003.............................. 1,007,366 $10 -- $ -- 809,775 $8
========= === ======= ===== ======= ==

<Caption>
ACCUMULATED
OTHER
ADDITIONAL COMPREHENSIVE
PAID-IN INCOME ACCUMULATED
CAPITAL (LOSS) DEFICIT TOTAL
---------- ------------- ----------- -------
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)

BALANCE, August 26, 2000.............................. $78,760 $ -- $(15,678) $63,098
Comprehensive loss --
Net loss.............................................. -- -- (4,321) (4,321)
Adjustment to minimum pension liability............... -- (519) -- (519)
Change in effective portion of derivative loss........ -- (2,232) -- (2,232)
------- ------- -------- -------
Total comprehensive loss.............................. -- (2,751) (4,321) (7,072)
Issuance of American Achievement Series B Preferred
Stock............................................... 15,840 -- -- 16,000
Exchange of Series B Preferred Stock for Series A and
common stock........................................ 158 -- -- --
Accrued dividends on minority interest in CBI......... -- -- (1,200) (1,200)
Exercise of Stock Options............................. 2 -- -- 2
------- ------- -------- -------
BALANCE, August 25, 2001.............................. 94,760 (2,751) (21,199) 70,828
------- ------- -------- -------
Comprehensive loss --
Net loss.............................................. -- -- (5,542) (5,542)
Adjustment to minimum pension liability............... -- (1,614) -- (1,614)
Change in effective portion of derivative loss........ -- (377) -- (377)
Reclassification into earnings for derivative
termination......................................... -- 2,609 -- 2,609
------- ------- -------- -------
Total comprehensive income (loss)..................... -- 618 (5,542) (4,924)
Accrued dividends on minority interest in CBI......... -- -- (1,200) (1,200)
Issuance of American Achievement Series A Preferred
stock............................................... 550 -- -- 550
------- ------- -------- -------
BALANCE, August 31, 2002.............................. 95,310 (2,133) (27,941) 65,254
------- ------- -------- -------
Comprehensive income --
Net income............................................ -- -- 10,766 10,766
Adjustment to minimum pension liability............... -- (3,017) -- (3,017)
------- ------- -------- -------
Total comprehensive income (loss)..................... -- (3,017) 10,766 7,749
Accrued dividends on minority interest in CBI......... -- -- (1,200) (1,200)
Issuance of stock..................................... 40 -- -- 40
------- ------- -------- -------
BALANCE, August 30, 2003.............................. $95,350 $(5,150) $(18,375) $71,843
======= ======= ======== =======
</Table>

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

AMERICAN ACHIEVEMENT CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
FOR THE YEAR ENDED
----------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25,
2003 2002 2001
---------- ---------- --------------
(DOLLARS IN THOUSANDS)

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................... $ 10,766 $ (5,542) $ (4,321)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization.......................... 14,149 19,712 17,586
Loss on extinguishment of debt......................... -- 5,650 --
Amortization of debt discount and deferred financing
fees.................................................. 2,051 1,355 1,534
Cumulative effect of change in accounting principle.... -- -- 1,835
Issuance of Preferred Stock in settlement of
obligation............................................ -- (550) --
Unrealized loss on free-standing derivative............ -- 182 --
(Recovery) provision for doubtful accounts............. (376) 145 383
Changes in assets and liabilities
Decrease (increase) in receivables................... 2,469 3,582 (10,093)
Decrease in inventories, net......................... 2,117 1,380 881
Decrease (increase) in income tax receivable......... 738 38 (776)
Increase in prepaid expenses and other current
assets, net......................................... (2,296) (5,057) (5,437)
Increase in other assets............................. (1,043) (739) (2,620)
(Decrease) increase in deferred revenue.............. (1,392) (284) 6,799
(Decrease) increase in accounts payable and accrued
expenses and other long-term liabilities............ (685) 3,438 4,485
-------- --------- --------
Net cash provided by operating activities......... 26,498 23,310 10,256
-------- --------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................ (11,243) (14,247) (7,499)
Sale of property.......................................... -- 673 --
Sales of Publishing Segment............................... -- -- 47
Acquisitions, net of cash acquired........................ -- (15,502) (50,413)
-------- --------- --------
Net cash used in investing activities............. (11,243) (29,076) (57,865)
-------- --------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on term loan facility............................ -- (121,400) --
Proceeds from debt issuance, net of debt issue cost....... -- 166,612 35,835
Proceeds from issuance of common and preferred stock...... -- -- 16,000
Exercise of stock option.................................. -- -- 2
Proceeds from issuance of stock........................... 40 -- --
Payment of bridge notes to affiliate...................... -- (28,383) (8,600)
Bank revolver borrowings, net............................. (15,675) (8,684) 5,121
Repayment of interest rate swaps.......................... -- (3,279) --
Increase (decrease) in bank overdraft..................... 553 (174) --
-------- --------- --------
Net cash provided by (used in) financing
activities....................................... (15,082) 4,692 48,358
-------- --------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........ 173 (1,074) 749
CASH AND CASH EQUIVALENTS, beginning of fiscal year......... 1,562 2,636 1,887
-------- --------- --------
CASH AND CASH EQUIVALENTS, end of fiscal year............... $ 1,735 $ 1,562 $ 2,636
======== ========= ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the fiscal year for --
Interest............................................... $ 26,790 $ 24,001 $ 20,461
======== ========= ========
Income taxes........................................... $ 133 $ 802 $ 443
======== ========= ========
SUPPLEMENTAL DISCLOSURE OF NONCASH FINANCING ACTIVITIES:
Accrued Dividends on CBI Series A Preferred............... $ 1,200 $ 1,200 $ 1,200
======== ========= ========
Issuance of preferred stock in settlement of obligation... $ -- $ 550 --
======== ========= ========
</Table>

The accompanying notes are an integral part of these consolidated financial
statements.
29

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)

1. BACKGROUND AND ORGANIZATION

American Achievement Corporation, a Delaware corporation (together with its
subsidiaries, "AAC" or the "Company"), is a manufacturer and supplier of class
rings, yearbooks and other graduation-related scholastic products for the high
school and college markets and manufactures and markets recognition and affinity
jewelry designed to commemorate significant events, achievements and
affiliations. The Company also operates a division which sells achievement
publications in the specialty directory publishing industry nationwide. The
Company markets its products and services primarily in the United States and
operates in two reporting segments, scholastic products and recognition and
affinity products. The Company's corporate offices and primary manufacturing
facilities are located in Austin and Dallas, Texas.

Prior to July 27, 2000, the Company's operations consisted of Commemorative
Brands, Inc. ("CBI"), owned 100% by Commemorative Brands Holding Corp. ("CBHC").
CBHC was formed on June 27, 2000 to serve as a holding company for CBI
operations and future acquisitions. The Company changed its name from CBHC to
American Achievement Corporation on January 23, 2002. AAC is owned primarily by
Castle Harlan Partners II ("CHPII") and Castle Harlan Partners III ("CHPIII").

On July 27, 2000, the Company acquired Taylor Senior Holding Corp.
("TSHC"), the parent company of Taylor Publishing Company ("Taylor") that
produces the Company's yearbooks (the "Taylor Acquisition"). On March 30, 2001,
the Company acquired Educational Communications, Inc. ("ECI") that produces the
Company's academic achievement publications (the "ECI Acquisition"). On July 15,
2002, American Achievement acquired Milestone Marketing Incorporated
("Milestone"), a specialty marketer of class rings and other graduation products
to the college market (the "Milestone Acquisition") (See Note 3).

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

FISCAL YEAR-END

The Company uses a 52/53-week fiscal year ending on the last Saturday of
August.

CONSOLIDATION

The consolidated financial statements include the accounts of the Company.
All significant intercompany accounts and transactions have been eliminated in
consolidation.

The 11 5/8% Senior Unsecured Notes Due 2007 (the "Unsecured Notes") are
guaranteed by every direct and indirect domestic subsidiary of American
Achievement Corporation. The guarantees by the guarantor subsidiaries are full,
unconditional, and joint and several. All of the guarantor subsidiaries are
wholly owned, with the exception of CBI, which is majority owned. American
Achievement Corporation is a holding company with no independent assets or
operations other than its investment in its subsidiaries.

CHANGE IN ACCOUNTING PRINCIPLE

Effective September 1, 2002, the Company adopted Statement of Financial
Accounts Standards No. 142 "Goodwill and Other Intangible Assets" ("SFAS 142"),
which revises the accounting for purchased goodwill and intangible assets. This
statement was applied to all goodwill and other intangible assets recognized on
the balance sheet, regardless of when those assets were initially recorded. Upon
its adoption, the Company no longer amortized its goodwill or trademarks.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Effective August 27, 2000, the Company changed its accounting method for
recognizing revenue on certain sales to independent sales representatives, in
order to comply with the provisions of Securities and Exchange Commission Staff
Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB
101"). Under SAB 101, the recognition of revenue and related gross profit on
sales to independent sales representatives, along with commissions to
independent sales representatives that are directly related to the revenue,
should be deferred until the independent sales representative delivers the
product and title passes to the Company's end customer. Previously, the Company
recognized revenue from these transactions upon shipment of product to the
independent sales representative, net of estimates for possible returns and
allowances. The cumulative effect of the change in accounting principle resulted
in an increase of $1.8 million to the net loss for the year ended August 25,
2001. This change had no impact on the Company's cash flows from operations.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents include highly liquid investments with original
maturities of three months or less.

INVENTORIES

Inventories, which include raw materials, labor and manufacturing overhead,
are stated at the lower of cost or market using the first-in, first-out (FIFO)
method.

SALES REPRESENTATIVE ADVANCES AND RELATED RESERVE

The Company advances funds to independent sales representatives as prepaid
commissions against anticipated earnings. Such amounts are repaid by the
independent sales representatives through earned commissions on product sales.
The Company provides reserves to cover those amounts which it estimates to be
uncollectible. These amounts are included in prepaid expenses and other current
assets in the accompanying consolidated balance sheets.

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost, net of accumulated
depreciation. Depreciation is provided principally using the straight-line
method based on estimated useful lives of the assets as follows:

<Table>
<Caption>
DESCRIPTION USEFUL LIFE
- ----------- --------------

Buildings and improvements.................................. 10 to 25 years
Tools and dies.............................................. 14 to 19 years
Machinery and equipment..................................... 2 to 10 years
</Table>

Maintenance, repairs and minor replacements are charged against operations
as incurred; major replacements and betterments are capitalized. The cost of
assets sold or retired and the related accumulated depreciation are removed from
the accounts at the time of disposition, and any resulting gain or loss is
reflected as other income or expense for the period. Depreciation expense
recorded in the accompanying consolidated statements of operations is $12,568,
$11,941 and $10,856 for the years ended August 30, 2003, August 31, 2002, and
August 25, 2001, respectively.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

TRADEMARKS, GOODWILL, AND OTHER INTANGIBLE ASSETS

Goodwill was $162,059 and $159,308 at August 30, 2003 and August 31, 2002,
respectively, and trademarks were $41,855 at August 30, 2003 and August 31,
2002. During the year ended August 30, 2003, goodwill increased primarily due to
a $2.4 million reclassification of work force in place from other intangible
assets.

The impact of the implementation of SFAS No. 142 and comparison to the
prior years is as follows:

<Table>
<Caption>
FOR THE YEAR ENDED
------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25,
2003 2002 2001
---------- ---------- ----------

Reported net income (loss)..................... $10,766 $(5,542) $(4,321)
Add: goodwill amortization................... -- 4,013 3,438
Add: trademark amortization.................. -- 1,544 1,092
------- ------- -------
Pro forma net income........................... $10,766 $ 15 $ 209
======= ======= =======
</Table>

The Company includes other intangible assets subject to amortization in
other assets on the balance sheet. The other intangible assets subject to
amortization are as follows:

<Table>
<Caption>
ACCUMULATED
GROSS ASSET AMORTIZATION NET ASSET
----------- ------------ ---------

At August 30, 2003
Deferred financing costs.......................... $10,344 $(3,286) $ 7,058
Customer lists and distribution contracts......... 16,072 (4,771) 11,301
------- ------- -------
Total intangible assets subject to
amortization.............................. $26,416 $(8,057) $18,359
======= ======= =======
At August 31, 2002
Deferred financing costs.......................... $10,151 $(1,503) $ 8,648
Customer lists and distribution contracts......... 16,072 (3,193) 12,879
Work force in place............................... 3,377 (1,005) 2,372
------- ------- -------
Total intangible assets subject to
amortization.............................. $29,600 $(5,701) $23,899
======= ======= =======
</Table>

Total amortization on intangible assets above was $3,361 and $2,237 for the
years ended August 30, 2003 and August 31, 2002, respectively, of which
amortization on deferred financing costs is recorded as interest expense and
amortization on customer lists and distribution contracts is recorded as
amortization expense. Deferred financing costs have a useful life of 1-7 years
and customer lists and distribution contracts have a useful life of 10-12 years.
Estimated annual amortization expense for fiscal years ended 2004 through 2008
is approximately $3.4 million each year.

OTHER ASSETS

Other assets include the intangible assets listed above and ring samples
supplied to national chain stores, jewelry stores and sales representatives of
the Company. Ring samples are expensed on a straight-line basis over a useful
life of six years.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Other assets, net consists of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Ring samples................................................ $7,179 $7,029
Other....................................................... 1,187 869
------ ------
Other assets, net........................................... $8,366 $7,898
====== ======
</Table>

IMPAIRMENT OF LONG-LIVED ASSETS

SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets," requires an entity to review long-lived tangible and intangible assets
for impairment whenever events or changes in circumstances indicate the carrying
amount of an asset may not be recoverable. Recoverability of these assets is
measured by comparison of its carrying amount to future undiscounted cash flows
the assets are expected to generate. If long-lived assets are considered to be
impaired, the impairment to be recognized equals the amount by which the
carrying value of the assets exceeds its fair market value and is recorded in
the period the determination was made.

INCOME TAXES

In accordance with SFAS No. 109, "Accounting for Income Taxes," deferred
tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax basis. Deferred tax
assets and liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which those temporary differences are expected to
be recovered or settled. Deferred tax assets are recognized net of any valuation
allowance. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in operations in the period that includes the enactment
date.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The Company's financial instruments consist primarily of cash and cash
equivalents, accounts receivable, bank overdraft, accounts payable and long-term
debt (including current maturities). The carrying amounts of the Company's cash
and cash equivalents, accounts receivable, bank overdraft and accounts payable
approximate fair value due to their short-term nature. The fair value of the
Company's long-term debt approximates the recorded amount based on current rates
available to the Company for debt with the same or similar terms.

DERIVATIVE FINANCIAL INSTRUMENTS

The Company adopted SFAS No. 133, "Accounting for Derivative Instruments
and Hedging Activities," beginning on August 27, 2000. SFAS No. 133 establishes
accounting and reporting standards for derivative instruments and hedging
activities. SFAS No. 133 requires that an entity recognize derivatives as either
assets or liabilities on the balance sheet and measure those instruments at fair
value. The accounting for changes in the fair value of a derivative depends on
the intended use of the derivative and the resulting designation. The adoption
of SFAS No. 133 did not have a material effect on the Company's financial
statements.

The Company designates its derivatives based upon criteria established by
SFAS No. 133. For a derivative designated as a fair value hedge, the gain or
loss is recognized in earnings in the period of

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

change together with the offsetting loss or gain on the hedged item attributed
to the risk being hedged. For a derivative designated as a cash flow hedge, the
effective portion of the derivative's gain or loss is initially reported as a
component of accumulated other comprehensive income (loss) and subsequently
reclassified into earnings when the hedged exposure affects earnings. The
ineffective portion of the gain or loss is reported in earnings immediately.

Trading derivatives are reflected in other current liabilities at their
fair value with any changes in fair value being reported in other income or
expense.

STOCK-BASED COMPENSATION

The Company accounts for equity instruments issued to non-employees in
accordance with the provisions of SFAS No. 123 ("SFAS 123"), "Accounting for
Stock-Based Compensation," as amended by SFAS No. 148 ("SFAS 148"),"Accounting
for Stock-Based Compensation -- Transition and Disclosure an amendment of FASB
Statement No. 123". The Company accounts for stock-based employee compensation
arrangements in accordance with the provisions of Accounting Principles Board
Opinion No. 25 ("APB No. 25"), "Accounting for Stock Issued to Employees" and
complies with the disclosure provisions of SFAS 123, as amended by SFAS 148.
Accordingly, no compensation expense has been recognized for the Company's stock
plans.

Had compensation expense for the stock plans been determined based on the
fair value at the grant date for options granted in the fiscal years ended 2003,
2002, and 2001 consistent with the provisions of SFAS 123, as amended by SFAS
148, the pro forma net income (loss) would have been reported as follows:

<Table>
<Caption>
FOR THE YEAR ENDED
------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25,
2003 2002 2001
---------- ---------- ----------

Net income (loss)..................................... $10,766 $(5,542) $(4,321)
Less: stock-based compensation expense, net of related
taxes............................................... 30 8 15
------- ------- -------
Net income (loss) -- pro forma........................ $10,736 $(5,550) $(4,336)
======= ======= =======
</Table>

The fair value of each option grant is estimated at the date of grant using
the Black-Scholes pricing model with the following weighted average assumptions
for grants in the fiscal years ended 2003, 2002 and 2001:

<Table>
<Caption>
2003 2002 2001
-------- -------- ----

Risk-free interest rate................................... 3.93% 4.88% N/A
Expected life............................................. 10 years 10 years N/A
Volatility................................................ 25% 28% N/A
Dividend yield............................................ -- -- --
</Table>

REVENUE RECOGNITION

In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulleting No. 101 (SAB 101), "Revenue Recognition in Financial
Statements," which among other guidance, clarified the staff's views on various
revenue recognition and reporting matters. As a result, the Company changed its
method of accounting for certain sales transactions. Under its previous policy,
the Company recognized revenue to the independent sales representatives upon
shipment of the product from its production facility. Under the new accounting
method, adopted retroactive to August 27, 2000, the first

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

day of the Company's 2001 fiscal year, the Company changed its accounting method
for recognizing revenue and related gross profit on sales to independent sales
representatives, along with commissions to independent sales representatives
that are directly related to the revenue until the independent sales
representative delivers the product and title passes to the Company's end
customer.

The Company's revenues from product sales, excluding revenue through
independent sales representatives, are recognized at the time the product is
shipped, the risks and rewards of ownership have passed to the customer and
collectibility is reasonably assured. Provisions for sales returns, warranty
costs and rebate expenses are recorded at the time of sale based upon historical
information and current trends.

The Company recognizes revenues on its publishing operations based upon the
completed contract method, and revenue is recognized when the products are
shipped.

RESERVE ON SALES REPRESENTATIVE ADVANCES

The Company advances funds to new sales representatives in order to open up
new sales territories or makes payments to predecessor sales representatives on
behalf of successor sales representatives. Such amounts are repaid by the sales
representatives through earned commissions on product sales. The Company
provides reserves to cover those amounts that it estimates to be uncollectible.
The following represents the activity associated with the reserve on sales
representative advances:

<Table>
<Caption>
BALANCE AT CHARGED TO
BEGINNING OF COSTS AND BALANCE AT
PERIOD EXPENSES WRITE-OFFS(1) END OF PERIOD
------------ ---------- ------------- -------------

For the Year Ended
August 25, 2001.................... 4,278 1,473 (2,747) 3,004
August 31, 2002.................... 3,004 2,499 (2,660) 2,843
August 30, 2003.................... 2,843 2,335 (2,662) 2,516
</Table>

- ---------------

(1) Represents principally write-offs of terminated sales representative amounts
and forgiveness of amounts by the Company.

SEASONALITY

The Company's scholastic product sales tend to be seasonal. Class ring
sales are highest during October through December (which overlaps the Company's
first and second fiscal quarters), when students have returned to school after
the summer recess and orders are taken for class rings for delivery to students
before the winter holiday season. Sales of the Company's fine paper products are
predominately made during February through April (which overlaps the Company's
second and third fiscal quarters) for graduation in April and June. The Company
has historically experienced operating losses during the period of the Company's
fourth fiscal quarter, which includes the summer months when school is not in
session, thus reducing related shipment of products. Yearbook sales are highest
during the months of May through June, as yearbooks are typically shipped to
schools prior to the school's summer break. The Company's recognition and
affinity product line sales are also seasonal. The majority of the sales of
achievement publications are shipped in November of each year. The remaining
recognition and affinity product line sales are highest during the winter
holiday season and in the period prior to Mother's Day. As a result, the effects
of the seasonality of the class ring business on the Company are somewhat
tempered by the Company's relatively broad product mix. As a result of the
foregoing, the Company's working capital requirements tend to exceed its
operating cash flows from July through December.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATION OF CREDIT RISK

Credit is extended to certain industries, such as educational and retail,
which may be affected by changes in economic or other external conditions. The
Company's policy is to manage its exposure to credit risk through credit
approvals and limits.

SHIPPING AND HANDLING FEES

In accordance with Emerging Issues Task Force (EITF) Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," the Company recognizes as
revenue amounts billed to customers related to shipping and handling, with the
related expense recorded as a component of cost of sales.

SUPPLIER CONCENTRATION

The Company purchases substantially all synthetic and semi-precious stones
from a single supplier located in Germany.

ADVERTISING

The Company expenses advertising costs as incurred; however in accordance
with Statement of Position 93-7 "Reporting on Advertising Costs" the Company
defers certain advertising costs until the first time the advertising takes
place. These deferred advertising costs are included in prepaid expenses and
other current assets.

Selling, general and administrative expenses for the Company include
advertising expenses of $7,204, $6,905 and $3,551 for the years ended August 30,
2003, August 31, 2002, and August 25, 2001, respectively.

USE OF ESTIMATES

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

RECLASSIFICATIONS

Certain reclassifications of prior-year balances have been made to conform
to the current-year presentation.

COMPREHENSIVE INCOME (LOSS)

Beginning with fiscal year 2001, the effective portion of the loss on
derivatives and unrecognized losses on accrued minimum pension liabilities were
included in other comprehensive income (loss). The

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

following amounts were included in determining the Company's comprehensive
income (loss) for the years ended August 30, 2003, August 31, 2002, and August
25, 2001.

<Table>
<Caption>
FOR THE YEAR ENDED
------------------------------------
AUGUST 31, AUGUST 30, AUGUST 25,
2003 2002 2001
---------- ---------- ----------

Net income (loss)..................................... $10,766 $(5,542) $(4,321)
Reclass into earnings for derivative
reclassification.................................... -- (377) (2,232)
Reclass into earnings for derivative termination...... -- 2,609 --
Adjustment in minimum pension liability............... (3,017) (1,614) (519)
------- ------- -------
Total comprehensive income (loss)..................... $ 7,749 $(4,924) $(7,072)
======= ======= =======
</Table>

For measurement purposes for the Taylor Publishing Company Plan, the
weighted average discount rate used in determining the accumulated benefit
obligation was revised to 6.0 from 7.25 percent and 7.25 from 8.0 percent during
the years ended August 30, 2003 and August 31, 2002, respectively. Approximately
$2,267 and $993 of the unrecognized loss on minimum pension liability is a
result of the change in the estimated weighted average discount rate for the
fiscal years ended 2003 and 2002, respectively.

As of August 30, 2003 and August 31, 2002 the Company no longer held any
derivatives considered to be cash flow hedges.

RECENT ACCOUNTING PRONOUNCEMENTS

In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical
Corrections". This statement requires, among other things, that gains and losses
on the early extinguishments of debt be classified as extraordinary only if they
meet the criteria for extraordinary treatment set forth in Accounting Principles
Board Opinion No. 30. The provisions of this statement related to classification
of gains and losses on the early extinguishments of debt became effective for
fiscal years beginning after May 15, 2002. The adoption of SFAS No. 145 required
the Company to reclassify certain items from extraordinary items into operating
income (loss).

In December 2002, SFAS 148 was issued, which amends SFAS 123, to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. It also amends the
disclosure requirements of SFAS 123 to require prominent disclosures in both
annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. Certain disclosure requirements were effective for the Company
beginning December 15, 2002 and the Company has complied with those
requirements. The adoption of the additional reporting requirements of SFAS 148
in December 2002 did not have a material effect on the financial statements.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

In April 2003, SFAS No. 149 ("SFAS 149"), "Amendments of Statement 133 on
Derivative Instruments and Hedging Activities", was issued, which amends and
clarifies financial accounting and reporting for derivative instruments,
including certain derivative instruments embedded in other contracts
(collectively referred to as derivatives) and for hedging activities under FASB
Statement No. 133, "Accounting for Derivative Instruments and Hedging
Activities". The adoption of SFAS 149 in the third quarter of the fiscal year
ended 2003 did not have a significant impact on the Company's financial
statements.

In May 2003, SFAS No. 150 ("SFAS 150"), "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity", was issued,
which establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity. The
Company will adopt SFAS 150 beginning its first quarter of fiscal year 2004. The
Company is currently reviewing the impact this statement will have on its
financial statements.

In May 2003, FIN 46, "Consolidation of Variable Interest Entities", was
issued, which clarifies the application of Accounting Research Bulletin No. 51,
"Consolidated Financial Statements", to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have sufficient equity at risk for the entity to finance its activities
without additional subordinated financial support from other parties. The
Company will adopt FIN 46 beginning its first quarter of fiscal year 2004 and is
currently reviewing the impact this statement will have on its financial
statements.

3. SIGNIFICANT ACQUISITIONS

Effective March 30, 2001, Honors Acquisition Corporation, a wholly owned
subsidiary of American Achievement, purchased all the outstanding stock of ECI,
for a total purchase price of $58.7 million. The acquisition of ECI was
accounted for using the purchase method of accounting and, accordingly, the
purchase price has been allocated to assets acquired and liabilities assumed
based upon estimated fair values. Subsequent to the transaction, Honors
Acquisition Corporation was dissolved into the Company, and ECI remained the
surviving wholly owned subsidiary of the Company. ECI's primary business is the
sales and marketing of achievement publications of the specialty directory
publishing industry.

The estimated fair value of assets acquired and liabilities assumed
relating to the ECI acquisition is summarized below:

<Table>

Working capital............................................. $ 5,534
Property, plant and equipment............................... 400
Other intangibles........................................... 17,240
Goodwill.................................................... 35,492
Other long-term assets...................................... 44
-------
$58,710
=======
</Table>

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company incurred approximately $2.4 million in financing costs
associated with the acquisition. During the year ended August 31, 2002, these
costs were recognized as an extraordinary charge in the statement of operations
in conjunction with the retirement of the associated debt.

Effective July 15, 2002, American Achievement purchased all the outstanding
stock and warrants of Milestone for a total purchase price of $16.3 million. The
acquisition of Milestone was accounted for using the purchase method of
accounting and, accordingly, the purchase price has been allocated to assets
acquired and liabilities assumed based upon estimated fair values. Milestone is
a specialty marketer of class rings and other graduation products to the college
market. Effective December 31, 2002, Milestone merged into CBI, with CBI as the
surviving entity. In conjunction with the merger, for each share of Milestone
common stock held by the Company, the Company received one share of CBI common
stock. The existing common stock and warrants of Milestone were cancelled in
connection with this transaction.

The estimated fair value of assets acquired and liabilities assumed
relating to the Milestone acquisition is summarized below:

<Table>

Working capital deficit..................................... $(2,413)
Property, plant and equipment............................... 113
Other intangibles........................................... 2,500
Goodwill.................................................... 16,047
Other long-term assets...................................... 28
-------
$16,275
=======
</Table>

During the year ended August 30, 2003, goodwill was increased by
approximately $378 primarily related to professional services incurred in
connection with the Milestone acquisition. Goodwill and trademarks related to
Milestone are not amortized in accordance with SFAS No. 142.

As a result of these transactions, the consolidated financial statements of
the Company as of August 31, 2002, include the results of operations of
Milestone for the period from July 15, 2002, to August 31, 2002, and the results
of operations for ECI, consolidated TSHC, and consolidated CBI for the year
ended August 31, 2002. The consolidated financial statements of the Company as
of August 25, 2001, include the results of operations of ECI for the period from
March 30, 2001, to August 25, 2001, and the results of operations for
consolidated TSHC and for consolidated CBI for the year ended August 25, 2001.

The following unaudited pro forma data summarizes the results of operations
for the years indicated as if both the Milestone and ECI acquisitions had been
completed as of the beginning of the year ended August 25, 2001:

<Table>
<Caption>
AUGUST 30, AUGUST 31, AUGUST 25
2003 2002 2001
---------- ----------- -----------
(UNAUDITED) (UNAUDITED)

Net sales.......................................... $308,431 $310,275 $304,494
Operating income (loss)............................ 39,838 (8,273) 2,068
Net income (loss) applicable to common
stockholders..................................... 9,566 (9,473) (967)
</Table>

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

4. INVENTORIES, NET

Net inventories consist of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Raw materials............................................... $ 7,876 $ 8,781
Work in process............................................. 8,043 8,171
Finished goods.............................................. 7,632 8,653
Less -- Reserves............................................ (241) (178)
------- -------
$23,310 $25,427
======= =======
</Table>

Cost of sales includes depreciation and amortization of $8,955, $8,406 and
$7,535 for the fiscal years ended 2003, 2002 and 2001, respectively.

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consist of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Sales representative advances............................... $10,350 $10,978
Less -- reserve on sales representative advances.......... (2,516) (2,843)
Deferred publication and ring costs......................... 8,376 9,853
Prepaid advertising and promotion materials................. 2,580 3,390
Deferred tax asset.......................................... 6,378 2,784
Other....................................................... 5,149 3,859
------- -------
$30,317 $28,021
======= =======
</Table>

Included in other current assets as of August 30, 2003 and August 31, 2002,
is approximately $641 and $970, respectively, paid for options to purchase gold.
The outstanding options at August 30, 2003, expire in various amounts through
May 30, 2004. The Company carries these gold options at the lower of cost or
market.

6. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net consist of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Land........................................................ $ 6,097 $ 6,097
Buildings and improvements.................................. 12,725 11,342
Tools and Dies.............................................. 30,895 28,960
Machinery and equipment..................................... 58,649 56,269
Construction in progress.................................... 3,256 2,517
-------- --------
Total................................................ 111,622 105,185
Less -- accumulated depreciation............................ (46,315) (38,593)
-------- --------
Property, plant and equipment, net.......................... $ 65,307 $ 66,592
======== ========
</Table>

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

7. ACCRUED EXPENSES

Accrued expenses consists of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Commissions and royalties................................... $ 8,397 $ 8,354
Compensation and related costs.............................. 7,456 7,033
Other....................................................... 3,022 3,566
Acquisition-related liabilities............................. 377 1,078
Accrued sales and property taxes............................ 1,493 1,450
Accumulated postretirement medical benefit cost............. 5,361 2,542
Accrued management fees -- related party (see Note 14)...... 750 750
------- -------
$26,856 $24,773
======= =======
</Table>

8. LONG-TERM DEBT

Long-term debt consists of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

11 5/8% Senior unsecured notes due 2007 (net of unamortized
discount of $1,145 and $1,413)............................ $175,855 $175,587
11% Senior subordinated notes due 2007...................... 41,355 41,355
Senior secured credit facility.............................. 9,500 25,175
-------- --------
Total long-term debt................................. $226,710 $242,117
======== ========
</Table>

11 5/8% SENIOR UNSECURED NOTES

On February 20, 2002, the Company issued $177 million of senior unsecured
notes (the "Unsecured Notes") due in 2007. The Unsecured Notes bear interest at
a stated rate of 11 5/8%. The Unsecured Notes were issued at a discount of
0.872% resulting in net proceeds of approximately $175.5 million before
considering financing costs. The effective rate of the Unsecured Notes after
discount is approximately 13.0%. The Unsecured Notes rank pari passu with the
Company's existing and future senior indebtedness, including obligations under
the Company's Senior Secured Credit Facility (as defined below). The Unsecured
Notes are guaranteed by the Company's domestic subsidiaries, and the guarantees
rank pari passu with the existing Senior Subordinated Notes and future senior
debt of the Company and its subsidiaries. The Unsecured Notes and the guarantees
on the Unsecured Notes are effectively subordinated to any of the Company's
secured debt.

The Company may not redeem the Unsecured Notes until 2005, except that the
Company, in connection with a public equity offering, may redeem up to 35
percent of the Unsecured Notes before the third anniversary of the issue date of
the Unsecured Notes as long as (a) the Company pays a certain percentage of the
principal amount of the Unsecured Notes, plus interest, (b) the Company redeems
the Unsecured Notes within 90 days of completing a public equity offering and
(c) at least 65 percent of the aggregate principal amount of the Unsecured Notes
issued remains outstanding afterward.

If a change in control, as defined in the indenture relating to the
Unsecured Notes (the "AAC Indenture"), occurs, the Company must give the holders
of the Unsecured Notes the opportunity to sell

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

their Unsecured Notes to the Company at 101 percent of the principal amount of
the Unsecured Notes, plus accrued interest.

The Unsecured Notes contain customary negative covenants and restrictions
on actions by the Company and its subsidiaries including, without limitation,
restrictions on additional indebtedness, investments, asset dispositions outside
the ordinary course of business, liens, and transactions with affiliates, among
other restrictions (as defined in the AAC Indenture). In addition, the Unsecured
Notes contain covenants, which restrict the declaration or payment of dividends
by the Company and/or its subsidiaries (as defined in the AAC Indenture). The
Unsecured Notes also require that the Company meet certain financial covenants
including a minimum fixed charge coverage ratio (as defined in the AAC
Indenture). The Company was in compliance with the Unsecured Notes covenants as
of August 30, 2003.

11% SENIOR SUBORDINATED NOTES

CBI's 11% senior subordinated notes (the "Subordinated Notes") mature on
January 15, 2007. The Subordinated Notes are redeemable at the option of CBI in
whole or in part, at any time on or after January 15, 2002, at specified
redemption prices ranging from 105.5 percent of the principal amount thereof if
redeemed during 2002 and declining to 100 percent of the principal amount
thereof if redeemed during the year 2005 or thereafter, plus accrued and unpaid
interest and Liquidated Damages as defined in the indenture relating to the
Subordinated Notes, as amended (the "CBI Indenture"), if any, thereon to the
date of redemption. The Company has not redeemed any of the Subordinated Notes
as of August 30, 2003.

In the event of a change of control (as defined in the CBI Indenture), each
holder of the Subordinated Notes will have the right to require CBI to purchase
all or any part of such holder's Subordinated Notes at a purchase price in cash
equal to 101 percent of the aggregate principal amount thereof, plus accrued and
unpaid interest and Liquidated Damages, if any, thereon to the date of purchase.

In the event of an asset sale (as defined in the CBI Indenture), CBI is
required to apply any Net Proceeds (as defined in the CBI Indenture) to
permanently reduce senior indebtedness, to acquire another business or long-term
assets or to make capital expenditures. To the extent such amounts are not so
applied within 365 days and the amount not applied exceeds $5.0 million, CBI is
required to make an offer to all holders of the Subordinated Notes to purchase
an aggregate principal amount of Subordinated Notes equal to such excess amount
at a purchase price in cash equal to 100 percent of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages, if any,
thereon to the date of purchase.

The Subordinated Notes contain certain covenants that, among other things,
limit the ability of CBI to engage in certain business transactions such as
mergers, consolidations or sales of assets that would decrease the value of CBI
or cause an event of default. The Company was in compliance with the
Subordinated Notes covenants as of August 30, 2003.

SENIOR SECURED CREDIT FACILITY

In conjunction with the issuance of the Unsecured Notes, on February 20,
2002, the Company entered into a $40 million senior revolving credit facility
(the "Senior Secured Credit Facility") with various financial institutions, with
all of the Company's current domestic subsidiaries as guarantors. Loans made
pursuant to the Senior Secured Credit Facility are secured by a first priority
security interest in substantially all of the Company's and the Company's
domestic subsidiaries' assets and in all of the Company's domestic subsidiaries'
capital stock.

Availability under the Senior Secured Credit Facility is restricted to the
lesser of (1) $40 million or (2) the Borrowing Base Amount as defined in the
credit agreement under the Senior Secured Credit

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Facility (the "Credit Agreement"). Availability under the Senior Secured Credit
Facility as of August 30, 2003 was approximately $28.3 million with $9.5 million
borrowings outstanding. The Senior Secured Credit Facility matures on February
20, 2006.

Advances under the Senior Secured Credit Facility may be made as base rate
loans or LIBOR loans at the Company's election (except for the initial loans
which were base rate loans). Interest rates payable upon advances are based upon
the base rate or LIBOR depending on the type of loan the Company chooses, plus
an applicable margin based upon a consolidated leverage ratio of certain
outstanding indebtedness to EBITDA (to be calculated in accordance with the
terms specified in the Credit Agreement). The effective rate on borrowings for
the year ended August 30, 2003 was 9.1%.

The Credit Agreement contains customary negative covenants and restrictions
on actions by the Company and its subsidiaries including, without limitation,
restrictions on indebtedness, declaration or payment of dividends, liens, and
changing the provisions of the gold consignment agreement, among other
restrictions. In addition, the Credit Agreement requires that the Company meet
certain financial covenants, ratios and tests, including capital expenditure
limits, a maximum secured leverage ratio, a minimum interest coverage ratio, and
a minimum fixed charge coverage ratio. The Company was in compliance with the
Credit Agreement covenants as of August 30, 2003.

FORMER SENIOR CREDIT FACILITY

On March 30, 2001, in connection with the acquisition of ECI, as discussed
in Note 3, the Company entered into the second amended and restated credit
agreement with a syndication of banks (the Credit Agreement). This agreement
governed the Company's revolving credit facility (Revolver), term loan A (Term
A), and term loan B (Term B).

On October 13, 2000 and March 30, 2001, in accordance with the provisions
of the Credit Agreement, the Company entered into interest rate swap agreements
whereby it received a floating rate of interest and paid a fixed rate of
interest, to be paid over the term of the swap agreement, representing $62.5
million, or 50% of the outstanding Term A and Term B loans. All ineffectiveness
associated with the derivative over the remaining life of the Term A and Term B
loans was included in earnings.

In conjunction with the issuance of the Unsecured Notes on February 20,
2002 and entrance into the Senior Secured Credit Facility, the Company paid off
the then outstanding Term A and Term B loans and the Revolver under the former
credit facility.

BRIDGE NOTES DUE TO AN AFFILIATE

TP Holding Corp., and AAC had subordinated bridge promissory notes (the
Bridge Notes) due to CHPIII, a stockholder of the Company, totaling
approximately $26.9 million in principal and accrued interest as of August 25,
2001. The principal and accrued interest were due as of February 28, 2004. The
Bridge Notes bore interest at 12 percent per annum, compounding monthly. The
Bridge Notes were paid in full in connection with the issuance of the Unsecured
Notes on February 20, 2002.

EARLY EXTINGUISHMENT OF DEBT

In conjunction with the issuance of the Unsecured Notes and entrance into
the Senior Secured Credit Facility in February 2002, the Company paid off the
then outstanding term loans and revolver under the former credit facility, the
bridge notes to affiliates and settled all but $25 million in notional amount of
the interest rate swap agreements. During the fiscal year ended August 31, 2002,
the Company recognized an extraordinary charge of approximately $5.7 million
relating to the write-off of unamortized deferred

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

financing costs. Upon adoption of SFAS No. 145 on September 1, 2002, "Rescission
of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and
Technical Corrections," the Company reclassed this amount to operating expenses.
Due to the termination and reclassification of interest rate swaps, the Company
recorded a charge to other expense of approximately $2.6 million.

As a result of the early prepayment of certain debt obligations, the
remaining interest rate swap agreement representing a notional amount of $25
million was reclassified as a trading derivative. As such, changes in the fair
value of this derivative are recognized in other income or expensed. The net
fair value of these financial instruments at August 30, 2003 and August 31, 2002
represented a current liability of $0 and $0.9 million, respectively.

The Company's long-term debt outstanding as of August 30, 2003 matures as
follows:

<Table>
<Caption>
AMOUNT
MATURING
--------

Fiscal Year Ending
2004...................................................... $ --
2005...................................................... --
2006...................................................... 9,500
2007...................................................... 217,210
Thereafter................................................ --
--------
$226,710
========
</Table>

The weighted average interest rate on debt outstanding as of August 30,
2003 and August 31, 2002 was 12.3% and 11.5%, respectively.

9. DERIVATIVE FINANCIAL INFORMATION

The Company has held interest rate swap agreements in place with the intent
of managing its exposure to interest rate risk on its existing debt obligation.
The Company had four outstanding agreements to effectively convert LIBOR-based
variable rate debt to fixed rate debt based on a total notional amount of $62.5
million. On February 20, 2002, in conjunction with the issuance of the Unsecured
Notes and entrance into the Senior Secured Credit Facility, the Company paid off
the then outstanding term loans and revolver under the former credit facility,
the bridge notes to affiliates, and settled all but $25 million in notional
amount of the interest rate swap agreements.

During the year ended August 25, 2001, the Company considered these swap
agreements as cash flow hedging instruments. The Company recorded net receipts
or payments under these agreements as an adjustment to interest expense, while
the effective portion of changes in the fair value of the swap agreements was
included in other comprehensive income. The net unrealized loss on the interest
rate swaps for the year ended August 25, 2001 was approximately $2.2 million and
was recorded net of tax effects as other comprehensive loss in the consolidated
statement of stockholders' equity. The net gain or loss during 2001 related to
the ineffective portion of the interest rate swap agreements was not material.

During the year ended August 31, 2002, the company recorded a charge to
other expense for approximately $2.6 million due to the termination of the
interest rate swap agreements and the reclassification of the remaining interest
rate swap agreement, representing a notional amount of $25 million, as a trading
derivative. The trading derivative was recorded at its fair value, with any
changes in fair value being reported in income, and matured in March 2003. The
Company recorded a charge to other expense of approximately $0.2 million due to
changes in fair value for the year ended August 31, 2002. As of August 31, 2003,
$0 remained in place.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

10. COMMITMENTS AND CONTINGENCIES

LEASES

Certain Company facilities and equipment are leased under agreements
expiring at various dates through 2018. The Company's commitments under the
noncancellable portion of all operating and capital leases for each of the five
years ending after August 30, 2003 and thereafter are approximately as follows:

<Table>
<Caption>
OPERATING
FISCAL YEAR ENDING EXPENSE CAPITAL
- ------------------ --------- -------

2004........................................................ $ 2,850 $ 682
2005........................................................ 2,193 606
2006........................................................ 1,882 566
2007........................................................ 1,495 541
2008........................................................ 1,188 219
Thereafter.................................................. 3,530 --
Interest.................................................... -- (239)
------- ------
$13,138 $2,375
======= ======
</Table>

Lease and rental expense included in the accompanying consolidated
statements of operations was $3,931, $3,332 and $2,939 for the years ended
August 30, 2003, August 31, 2002 and August 25, 2001, respectively.

PENDING LITIGATION

GOLD CONSIGNMENT AGREEMENT

Under the Company's gold consignment financing arrangement, the Company has
the ability to have on consignment the lowest of the dollar value of 27,000 troy
ounces of gold, $10.1 million or a borrowing base, determined based upon a
percentage of gold located at the Company's facilities and other approved
locations, as specified by the agreement. For the years ended August 30, 2003,
August 31, 2002 and August 25, 2001, the Company expensed consignment fees of
approximately $319, $258 and $241, respectively. Under the terms of the
consignment arrangement, the Company does not own the consigned gold nor does it
have risk of loss related to such inventory until the money is received by the
bank from the Company in payment for the gold purchased. Accordingly, the
Company does not include the value of consigned gold in its inventory or the
corresponding liability for financial statement purposes. As of August 30, 2003
and August 31, 2002, the Company held approximately 17,780 ounces and 14,830
ounces, respectively, of gold valued at $6.7 million and $4.6 million,
respectively, on consignment from the bank.

EMPLOYMENT CONTRACTS

The Company has employment agreements with its executive officers, the
terms of which expire at various times through August 2005. Unless terminated,
one executive officer's employment agreement adds

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

one day to the term for each day that passes, and accordingly, there are always
two years remaining on the term. The remaining executive officers terms can be
automatically extended for an additional one-year term. Such agreements, which
have been revised from time-to-time, provide for minimum salary levels, adjusted
annually for cost-of-living changes, as well as for incentive bonuses for a
certain executive that are payable if specific management goals are attained as
discussed in Note 11. The aggregate commitment for future salaries as of August
30, 2003, excluding bonuses, was approximately $2.6 million.

11. EMPLOYEE COMPENSATION AND BENEFITS

POSTRETIREMENT PENSION AND MEDICAL BENEFITS

CBI provides certain healthcare and life insurance benefits for former
employees of the L.G. Balfour Company who retired prior to December 31, 1990. L.
G. Balfour Company, Inc., recognized the actuarial present value of the
accumulated postretirement benefit obligation ("APBO") of approximately $6.2
million at February 28, 1993, using the delayed recognition method over a period
of 20 years.

Certain hourly employees of Taylor are covered by a defined benefit pension
plan ("TPC Plan") established by Taylor.

The benefits under the CBI and TPC Plans are based primarily on the
employees' years of service and compensation near retirement. The funding
policies for these plans are consistent with the funding requirements of federal
laws and regulations.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table sets forth the funded status of each plan:

<Table>
<Caption>
AUGUST 30, 2003 AUGUST 31, 2002
------------------------ ------------------------
TAYLOR CBI TAYLOR CBI
PENSION POSTRETIREMENT PENSION POSTRETIREMENT
------- -------------- ------- --------------

Change in benefit obligation:
Obligation beginning of the year........ $10,851 $ 3,341 $ 9,471 $ 3,511
Service cost............................ 397 -- 349 --
Interest cost........................... 781 282 729 240
Actuarial loss (gain)................... 462 1,609 (133) (4)
Benefit payments........................ (542) (529) (558) (406)
Change in discount rate................. 2,267 -- 993 --
------- ------- ------- -------
Obligation, end of year................. $14,216 $ 4,703 $10,851 $ 3,341
------- ------- ------- -------
Change in fair value of plan assets (in
thousands):
Fair value of plan assets, beginning of
year.................................. $ 8,902 -- $ 8,441 --
Actual return of plan assets............ 391 -- 14 --
Employer contributions.................. 710 529 1,005 406
Benefit payments........................ (542) (529) (558) (406)
------- ------- ------- -------
Fair value of plan assets, end of
year.................................. $ 9,461 $ -- $ 8,902 $ --
------- ------- ------- -------
Plan assets at fair value --
Unfunded accumulated benefit
obligation in excess of plan
assets............................. $(4,755) $(4,703) $(1,949) $(3,341)
Unrecognized net loss (gain).......... -- 1,400 -- (176)
Unrecognized prior service costs...... -- 1,731 -- 2,022
------- ------- ------- -------
Accumulated postretirement benefit cost,
current and long-term................. $(4,755) $(1,572) $(1,949) $(1,495)
======= ======= ======= =======
</Table>

The net periodic postretirement benefit cost for the years ended August 30,
2003, August 31, 2002, and August 25, 2001 include the following components:

<Table>
<Caption>
AUGUST 30, 2003 AUGUST 31, 2002 AUGUST 25, 2001
------------------------ ------------------------- ------------------------
TAYLOR CBI TAYLOR CBI TAYLOR CBI
PENSION POSTRETIREMENT PENSION POSTRETIREMENT PENSION POSTRETIREMENT
------- -------------- ------- --------------- ------- --------------

Service costs, benefits
attributed to service
during the period......... $ 397 $ -- $ 349 $ -- $ 323 $ --
Interest cost............... 781 282 729 240 656 186
Expected return on assets... (814) -- (769) -- (743) --
Amortization of unrecognized
net loss (gain)........... 68 33 1 (2) -- (6)
Amortization of unrecognized
net prior service costs... -- 291 -- 291 -- 1
----- ---- ----- ---- ----- ----
Net periodic postretirement
benefit cost (income)..... $ 432 $606 $ 310 $529 $ 236 $181
===== ==== ===== ==== ===== ====
</Table>

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amounts recognized in the consolidated balance sheet are as follows:

Accrued benefit liability............... $ 4,755 $1,572 $ 1,949 $1,495
Accumulated other comprehensive loss.... (5,150) -- (2,133) --
</Table>

The weighted average discount rate used in determining the accumulated
postretirement benefit obligation for CBI was 6.25 percent for fiscal year ended
2003 and 7.25 percent compounded annually for fiscal years ended 2002 and 2001.
As the plan is unfunded, no assumption was needed as to the long-term rate of
return on assets.

For measurement purposes for the CBI plan, a 10 percent annual rate of
increase in the per capita cost of covered healthcare benefits was assumed for
fiscal year 2003, while in fiscal years 2002 and 2001, this rate was 5 percent.
The healthcare cost trend rate assumption has a significant effect on the
amounts reported. Increasing (or decreasing) the assumed healthcare cost trend
rate one percentage point in each year would increase (or decrease) the
accumulated postretirement benefit obligation by $298, or 6 percent, and by
$220, or 6 percent, as of August 30, 2003, and August 31, 2002, respectively,
and the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost by $16, or 6 percent, and by $15, or 6
percent, for the fiscal years ended 2003 and 2002, respectively.

For measurement purposes for the TPC Plan, the weighted average discount
rate used in determining the accumulated postretirement benefit obligation was
6.0 percent and 7.25 percent as of August 30, 2003, and August 31, 2002,
respectively, the long-term rate of return on plan assets was 9.0 percent and
the annual salary increases were assumed to be 4.5 percent as of August 30,
2003, and August 31, 2002.

EXECUTIVE STOCK AWARD

Pursuant to an employment agreement entered into between the Company and
its chief executive officer in July 1999, the board of directors authorized the
issuance of 5,500 shares of Series A preferred stock to the Company's chief
executive officer as discretionary compensation in August 2001. Accordingly, the
Company recorded a compensation charge of approximately $550 related to this
award in 2001. These shares were issued to the Company's chief executive officer
during the year ended August 31, 2002.

CBI DEFERRED COMPENSATION

CBI has deferred compensation agreements with certain sales representatives
and executives, which provide for payments upon retirement or death based on the
value of life insurance policies or mutual fund shares at the retirement date.
As of August 30, 2003, and August 31, 2002, CBI had accrued a total of
approximately $85 and $149, respectively, related to these agreements. Such
amounts, net of the current portion of approximately $21 and $63 as of August
30, 2003, and August 31, 2002, respectively, are included in other long-term
liabilities in the accompanying consolidated balance sheets.

TAYLOR 401(K) PLAN

Taylor sponsored a qualified defined contribution 401(K) plan that covered
substantially all nonunion employees of Taylor. Taylor matched 50 percent of
nonunion participants' voluntary contributions up to a maximum of 4 percent of
the participants' compensation. As of January 1, 2002, the Taylor 401(K) plan
was merged into the American Achievement Corporation 401(K) plan. Taylor's
contributions were approximately $199 and $459 for the years ended August 31,
2002 and August 25, 2001, respectively.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CBI 401(K) PLAN

CBI sponsored a qualified defined contribution 401(K) plan that covered all
eligible employees of CBI. CBI matched 50 percent of participant's voluntary
contributions up to a maximum of 4 percent of the participant's compensation. As
of January 1, 2002, the CBI 401(K) plan was merged into the American Achievement
Corporation 401(K) plan. CBI made contributions of approximately $60 and $172
for the years ended August 31, 2002 and August 25, 2001, respectively.

AMERICAN ACHIEVEMENT CORPORATION 401(K) PLAN

Effective January 1, 2002, the Taylor 401(K) Plan and the CBI 401(K) Plan
were merged into the American Achievement Corporation 401(K) Plan. The plan
covers substantially all nonunion employees of the Company. The plan matches 50
percent of participants' voluntary contributions up to a discretionary percent
determined by the Company. The discretionary percentage in effect for the fiscal
years ended 2003 and 2002 was up to 3 percent for hourly employees and up to 4
percent for salaried and office hourly employees. AAC made contributions of
approximately $779 and $516 for the years ended August 30, 2003 and August 31,
2002, respectively.

12. INCOME TAXES

The Company and its wholly-owned and majority owned domestic subsidiaries
file a consolidated federal income tax return. The (provision) benefit for
income taxes on income before cumulative effect of change in accounting
principle reflected in the consolidated statements of operations consists of the
following:

<Table>
<Caption>
FISCAL YEAR ENDED
------------------------------------
AUGUST 30, AUGUST 31, AUGUST 25,
2003 2002 2001
---------- ---------- ----------

Federal --
Current............................................. $ -- $1,444 $1,576
Deferred............................................ -- -- --
State --
Current............................................. (132) (273) (133)
Deferred............................................ -- -- --
----- ------ ------
$(132) $1,171 $1,443
===== ====== ======
</Table>

The (provision) benefit for income taxes differs from the amount that would
be computed if the income (loss) before income taxes were multiplied by the
federal income tax rate (statutory rate) as follows:

<Table>
<Caption>
2003 2002 2001
------- ------ ------

Computed tax (provision) benefit at statutory rate
(34%)................................................... $(3,705) $ 361 $1,336
State taxes, net of federal benefit....................... (87) (180) (88)
Change in valuation allowance and other................... 3,660 990 195
------- ------ ------
Total income tax (provision) benefit...................... $ (132) $1,171 $1,443
======= ====== ======
</Table>

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Deferred tax assets and liabilities consist of the following:

<Table>
<Caption>
AUGUST 30, AUGUST 31,
2003 2002
---------- ----------

Deferred tax assets
Allowances and reserves................................... $ 1,979 $ 2,070
Net operating loss carryforwards.......................... 28,149 25,480
Accrued liabilities and other............................. 6,390 2,836
------- -------
Total deferred tax assets................................. 36,518 30,386
Less valuation allowance.................................... (5,324) (7,727)
------- -------
Net deferred tax assets................................... 31,194 22,659
------- -------
Deferred tax liabilities
Depreciation.............................................. 7,866 7,807
Amortization of intangibles............................... 23,074 14,401
Prepaids and other........................................ 254 451
------- -------
Total deferred tax liabilities............................ 31,194 22,659
------- -------
Net deferred tax assets (liabilities)..................... $ -- $ --
======= =======
</Table>

For tax reporting purposes, the Company has a U.S. net operating loss
carryforward of approximately $74 million as of August 30, 2003. Utilization of
the net operating loss carryforwards is contingent on the Company's ability to
generate income in the future. The net operating loss carryforwards will expire
in various years through 2023 if not previously utilized.

13. STOCKHOLDERS' EQUITY:

Effective July 27, 2000, AAC, CBI and CB Acquisition entered into an
agreement and plan of merger (the Merger Agreement). Under the terms of the
Merger Agreement, upon the effective date of the merger, CBI merged with CB
Acquisition, a wholly owned subsidiary of AAC. Following the merger, CB
Acquisition ceased to exist and CBI remained the surviving majority-owned
subsidiary of AAC. Upon consummation of the merger, each share of CBI's issued
and outstanding common stock was converted into one share of American
Achievement common stock, and each share of CBI's issued and outstanding Series
B Preferred stock was converted into one share of AAC's Series A Preferred
Stock.

Immediately following the above transaction, AAC acquired all issued and
outstanding shares of TSHC through the issuance of AAC common stock and AAC
series A preferred stock in exchange for the contribution by all the TSHC
shareholders of all of their capital stock of TSHC. TSHC holds a 100 percent
ownership interest in TP Holding Corp., which holds a 100 percent ownership
interest in Taylor, its operating subsidiary. For accounting purposes, AAC has
been deemed the acquirer.

The original CBI Series A preferred stock of 100,000 shares remains issued
and outstanding from the Company's subsidiary CBI and was unaffected by the
Merger Agreement. As of July 27, 2000, and in connection with the merger, CBI
Series A preferred stock ownership now represents a minority interest including
all accumulated accrued dividends. The minority interest is stated at
liquidation value.

The Company's board of directors has authorized the issuance of up to
1,200,000 shares of AAC preferred stock, par value $.01 per share and 1,250,000
shares of AAC common stock, par value $.01 per share.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

AAC SERIES A PREFERRED STOCK

The holders of AAC Series A Preferred Stock ("Series A Preferred") are
entitled to one vote per share, voting together with the holders of the AAC
common stock as one class on all matters presented to the stockholders. No
dividends accrue on the Series A Preferred.

Dividends may be paid on the Series A Preferred if and when declared by the
board of directors out of funds legally available therefore. The Series A
Preferred is nonredeemable. In the event of any liquidation, dissolution or
winding up of the Company, the holders of the Series A Preferred shall receive
payment of the liquidation value of $100 per share plus any accrued and unpaid
dividends prior to the payment of any distributions to the holders of the
American Achievement Common of the Company, which totals approximately $100,737
and $100,685 at August 30, 2003 and August 31, 2002, respectively. So long as
shares of the Series A Preferred remain outstanding, the Company may not
declare, pay or set aside for payment any dividends on the AAC common stock. The
Company's Senior Secured Credit Facility restricts the Company's ability to pay
dividends on the Series A Preferred.

During the year ended August 31, 2002, 5,500 shares of the Series A
Preferred of the Company were issued to the Company's chief executive officer
pursuant to a bonus provided for in fiscal year 2001. Pursuant to an employment
agreement entered into between the Company and its chief executive officer in
July 1999, and as amended as of February 1, 2002, if the Company achieves a
certain consolidated EBITDA target, as defined by the agreement, for the fiscal
years commencing with the year ended 2002 and ending in fiscal year 2004, the
chief executive officer is entitled to receive up to a total of $1 million in
face value of the Company's Series A Preferred during the period. As of August
30, 2003, the Company has accrued approximately $300 related to the employment
agreement.

During the year ended August 30, 2003, a director was granted 519 shares of
Series A Preferred in partial consideration of the annual director fee.

AAC SERIES B PREFERRED STOCK

During the year ended August 25, 2001, the board of directors of the
Company designated 25,000 shares of authorized AAC preferred stock as Series B
("Series B Preferred") with the following preferences, rights and limitations.
No Series B Preferred was outstanding as of August 31, 2002 and August 25, 2001.
During the year ended August 31, 2002, the board of directors cancelled Series B
Preferred.

COMMON STOCK

The holders of AAC Common Stock ("Common") are entitled to one vote for
each share held of record on all matters submitted to a vote of stockholders,
including the election of directors, and vote together as one class with the
holders of the preferred stock.

Dividends may be paid on Common if and when declared by the board of
directors of the Company out of funds legally available therefore. The Company
does not expect to pay dividends on the Common in the foreseeable future. So
long as shares of the Series A Preferred remain outstanding, the Company may not
declare, pay or set aside for payment any dividends on the Common. The Company's
Senior Secured Credit Facility restricts the Company's ability to pay dividends
on the Common.

During the year ended August 30, 2003, a director was granted 424 shares of
Common in partial consideration of the annual director fee.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

COMMON STOCK PURCHASE WARRANTS

CBI had issued warrants, and the Company has assumed these obligations
pursuant to the Merger Agreement. The warrants are exercisable to purchase an
aggregate of 21,405 shares of Common at a price of $6.67 per share. The warrants
expire on January 31, 2008.

SUBSCRIPTION AGREEMENT

In accordance with a subscription agreement entered into by the Company and
CHPII, a stockholder of the Company, and certain of its affiliates (the "Castle
Harlan Group"), the Company granted the Castle Harlan Group certain registration
rights with respect to the shares of capital stock owned by it pursuant to which
the Company agreed, among other things, to effect the registration of such
shares under the Securities Act of 1933 at any time at the request of the Castle
Harlan Group. The Company also granted to the Castle Harlan Group unlimited
piggyback registration rights on certain registrations of shares of capital
stock by the Company.

STOCK-BASED COMPENSATION PLAN

On July 27, 2000, the effective date of the Merger Agreement, all
outstanding options under the 1997 Stock Option Plan, whether vested or
unvested, converted into an option to acquire on the same terms and conditions
as were applicable under the 1997 Stock Option Plan, shares of the Company's
common stock at ratio of 1 to 1 at a purchase price based on fair value at the
merger date, determined to be $7.02 per share. The 2000 Stock Option Plan became
effective on July 27, 2000. Under the 2000 Stock Option Plan, a total of 122,985
shares of common stock has been reserved for issuance, and 24,893, 53,352 and
92,215 of those shares were available for grant to directors and employees of
the Company as of August 30, 2003, August 31, 2002 and August 25, 2001,
respectively. The 2000 Stock Option Plan provides for the granting of both
incentive and nonqualified stock options. Options granted under the 2000 Stock
Option Plan have a maximum term of 10 years and are exercisable under the terms
of the respective option agreements at 110 percent of fair market value for all
incentive stock options issued to employees and at fair market value of the
common stock at the date of grant for all other options issued. Payment of the
exercise price must be made in cash, a combination of cash and a note or in
whole or in part by delivery of shares of the Company's common stock. All common
stock issued upon exercise of options granted pursuant to the 2000 Stock Option
Plan will be subject to a voting trust agreement.

During the year ended August 28, 2000, the Company issued an option to
purchase 12,524 shares of AAC common stock to an executive whereby the terms of
the option are the same as provided for in the 2000 Stock Option Plan with the
exception that the option vests over a two-year period and expires in five
years.

During the year ended August 31, 2002, the Company issued an option to
purchase 12,500 shares of AAC Common Stock to an executive where terms of the
option are the same as provided for in the Company's 2000 Stock Option Plan,
with the exception that the option vested on the date of grant.

During the year ended August 30, 2003, the Company issued options to
employees to purchase 28,500 shares of Common and to a director to purchase
1,059 shares of Common. The weighted average exercise price of these grants were
$6.22 per share.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Incentive stock options for 94,859 shares and 70,209 shares and
nonqualified stock options for 2,933 and 1,874 shares of the Company's common
stock were outstanding as of August 30, 2003, and August 31, 2002, respectively.
The weighted average remaining contractual life of all outstanding options was
7.59 years at August 30, 2003. A summary of the status of the Company's 2000
Stock Option Plan as of August 30, 2003, August 31, 2002 and August 25, 2001,
and changes during the fiscal years then ended are presented below:

<Table>
<Caption>
AUGUST 30, 2003 AUGUST 31, 2002 AUGUST 25, 2001
-------------------- -------------------- --------------------
WEIGHTED WEIGHTED WEIGHTED
SHARES OF AVERAGE SHARES OF AVERAGE SHARES OF AVERAGE
COMMON EXERCISE COMMON EXERCISE COMMON EXERCISE
STOCK PRICE STOCK PRICE STOCK PRICE
--------- -------- --------- -------- --------- --------

Outstanding at beginning of
fiscal year............... 72,083 $3.86 39,858 $7.02 31,892 $7.02
Granted..................... 29,559 6.22 41,613 1.51 -- --
Exercised................... -- -- -- -- (300) 7.02
Canceled.................... (3,850) 3.18 (388) 7.02 (734) 7.02
Conversion of options for
change in underlying
stock..................... -- -- -- -- -- --
------ ----- ------ ----- ------ -----
Outstanding at end of fiscal
year...................... 97,792 $4.50 72,083 $3.86 30,858 $7.02
====== ===== ====== ===== ====== =====
Options exercisable at
year-end.................. 58,413 $5.08 42,582 $5.40 30,390 $7.02
Weighted average fair value
of options granted during
the fiscal year ended..... $2.64 $0.76 $ --
</Table>

The fair value of each grant was estimated on the date of the grant using
the Black-Scholes option pricing model with the following weighted average
assumptions used for grants in the fiscal years ended 2003 and 2002: dividend
yield of nil; expected volatility of 25.00% and 27.99%, respectively; risk-free
interest rate of 3.93% and 4.88%, respectively; and expected life of 10 years.
The Black-Scholes option pricing model was developed for use in estimating the
fair value of traded options, which have no vesting restrictions and are fully
transferable. In addition, option pricing models require the input of highly
subjective assumptions, including expected stock price volatility. Because the
Company's stock options have characteristics significantly different from those
of traded options and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the existing
models do not necessarily provide a reliable single measure of the fair value of
its stock options.

Pursuant to an employment agreement entered into between the Company and
its chief executive officer in July 1999, as amended on February 1, 2002, if the
Company achieves certain EBITDA targets as defined by the agreement at any point
from 2002 through 2004, the chief executive is entitled to receive up to a total
of $1 million in face value of the Company's Series A Preferred Stock. In
addition, the plan provided for the immediate issuance of an option to purchase
12,500 shares of the Company's common stock with a discretionary option to
purchase shares. An option to purchase 12,500 shares was granted in 2002
pursuant to this plan. This option was granted at or above fair market value;
thus, no compensation expense was recognized. The executive is also entitled to
receive discretionary bonuses as directed by the Board of Directors up to $300
annually, all of which is accrued as of August 30, 2003.

14. RELATED-PARTY TRANSACTIONS

The Company entered into a management agreement on March 30, 2001, with
Castle Harlan, Inc. (the "Manager"), pursuant to which the Manager agreed to
provide business and organization strategy,

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

financial and investment management and merchant and investment banking services
to the Company and its subsidiaries. The Company has agreed to indemnify the
Manager against liabilities, costs, charges and expenses relating to the
Manager's performance of its duties, other than such of the foregoing resulting
from the Manager's gross negligence or willful misconduct. The agreement is for
a term of 10 years, renewable automatically from year to year unless CHPIII or
CHPII shall own less than 5 percent of the then-outstanding capital stock of the
Company. Beginning fiscal year 2002, the Company is to pay a management fee
equal to $3.0 million, unless otherwise prohibited by the Company's Senior
Secured Credit Facility (see Note 8). The Company was subject to a similar
management agreement with the Manager that was signed on July 27, 2000, and an
agreement signed on December 16, 1996. Amounts paid under all management
agreements totaled approximately $3,000, $2,638 and $2,562 for the years ended
August 30, 2003, August 31, 2002 and August 25, 2001, respectively. As of August
30, 2003, and August 31, 2002, the Company had accrued management fees of
approximately $750. Management fees for investment banking services of
approximately $557 were included in deferred financing costs related to the
funding of the ECI Acquisition. During the year ended August 31, 2002, this cost
was recognized in the statement of operations in connection with the retirement
of the associated debt.

In connection with the Merger and the ECI Acquisition, the Company has a
receivable from the Castle Harlan Group relating to the acquisition and merger
expenses that were to be reimbursed to the Company. The amount of such
receivables were approximately $0 and $26 as of August 30, 2003 and August 31,
2002, respectively.

15. BUSINESS SEGMENTS:

The Company operates in two reportable business segments: scholastic
products, and recognition and affinity products. The principal products sold in
the scholastic segment are class rings, yearbooks and graduation products, which
include fine paper products and graduation accessories. The scholastic segment
primarily serves the high school and college markets. The recognition and
affinity segment includes publications that recognize the academic achievement
of top students at the high school and college levels, jewelry commemorating
family events, fan affinity jewelry and related products, and professional
sports championship rings. The accounting policies of the segments are the same
as those described in the summary of significant accounting policies in Note 2.

AMERICAN ACHIEVEMENT CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following is a summary of certain financial information relating to the
two segments:

<Table>
<Caption>
RECOGNITION
SCHOLASTIC AND AFFINITY TOTAL
---------- ------------ --------

Year ended August 30, 2003
Net sales.......................................... $269,146 $39,285 $308,431
Interest expense................................... 26,046 2,894 28,940
Depreciation and amortization...................... 12,137 2,012 14,149
Segment operating income........................... 30,310 9,528 39,838
Capital expenditures............................... 10,099 1,144 11,243
Goodwill........................................... 115,074 46,985 162,059
Segment assets..................................... 305,669 89,832 395,501
Year ended August 31, 2002
Net sales.......................................... $269,362 $35,016 $304,378
Interest expense, net.............................. 19,371 6,655 26,026
Depreciation and amortization...................... 15,547 4,165 19,712
Segment operating income........................... 18,187 3,909 22,096
Capital expenditures............................... 12,754 1,493 14,247
Goodwill........................................... 112,598 46,710 159,308
Segment assets..................................... 310,453 91,173 401,626
Year ended August 25, 2001
Net sales.......................................... $258,435 $22,618 $281,053
Interest expense................................... 20,561 2,285 22,846
Depreciation and amortization...................... 16,856 730 17,586
Segment operating income........................... 20,832 (1,915) 18,917
Capital expenditures............................... 6,744 755 7,499
Goodwill........................................... 101,170 46,327 147,497
Segment assets..................................... 354,444 30,527 384,971
</Table>

The Company's reportable segments are strategic business units that offer
products to different consumer segments. Each segment is managed separately
because each business requires different marketing strategies. The Company
evaluates the performance of each segment based on the profit or loss from
operations before income taxes, not including nonrecurring gains or losses.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

On April 25, 2002, American Achievement Corporation ("the Company")
dismissed Arthur Andersen LLP ("Arthur Andersen" or "AA") as the Company's
independent auditors. The dismissal of AA was recommended by the Audit Committee
of the Company's Board of Directors and approved by the Company's Board of
Directors. The Company engaged Deloitte & Touche LLP to serve as the Company's
independent auditors for the fiscal year 2002.

Arthur Andersen's reports on the Company's consolidated financial
statements for each of the fiscal years ended August 25, 2001 and August 26,
2000 did not contain an adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope or accounting principles.

During the fiscal years ended August 25, 2001 and August 26, 2000, and
through April 25, 2002, there were no disagreements with Arthur Andersen on any
matters of accounting principles or practices, financial statement disclosures,
or auditing scope or procedures which, if not resolved to AA's satisfaction,
would have caused them to make reference to the subject matter of the
disagreements in connection with their report on the Company's consolidated
financial statements for such years; and there were no reportable events as
defined in Item 304(a)(1)(v) of Regulation S-K of the Securities Exchange Act of
1934.

During the fiscal years ended August 26, 2000 and August 25, 2001, and
through April 25, 2002, the Company did not consult with Deloitte & Touche, LLP
regarding the application of accounting principles to a specified transaction,
either completed or proposed, or the type of audit opinion that might be
rendered on the Company's consolidated financial statements, or any other
matters or reportable events as set forth in Items 304(a)(1)(v) of Regulation
S-K.

ITEM 9A. CONTROLS AND PROCEDURES

As of a date within 90 days of the date of this report (the "Evaluation
Date"), we carried out an evaluation, under the supervision and with the
participation of our management, including our President and Chief Executive
Officer and our Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure control and procedures pursuant to Rule 13a-14 under
the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based upon
this evaluation, our President and Chief Executive Officer and our Chief
Financial Officer concluded that, as of the Evaluation Date, our disclosure
controls and procedures were adequate to ensure that information required to be
disclosed by us in the reports filed or submitted by us under the Exchange Act
is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms.

Additionally, our President and Chief Executive Officer and Chief Financial
Officer determined, as of a date within 90 days of the date of this report, that
there were no significant changes in our internal controls or in other factors
that could significantly affect our internal controls subsequent to the date of
their evaluation.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information regarding our directors,
executive officers and other senior officers. Our directors are elected by the
shareholders at our annual meeting and serve until the next annual meeting and
the election and qualification of their successors.

<Table>
<Caption>
NAME AGE POSITION
- ---- --- --------

David G. Fiore....................... 56 President, Chief Executive Officer and Director
Sherice P. Bench..................... 44 Chief Financial Officer, Secretary and
Treasurer
Charlyn A. Daugherty................. 55 Senior Vice President -- Jewelry Operations
Parke H. Davis....................... 60 Senior Vice President -- Retail Products
Donald A. Percenti................... 47 Senior Vice President -- Scholastic
Products/General Manager Publishing
John K. Castle....................... 62 Director
David B. Pittaway.................... 52 Director
William M. Pruellage................. 30 Director
Edward O. Vetter..................... 83 Director
Zane Tankel.......................... 63 Director
Kenneth Roman........................ 73 Director
</Table>

David G. Fiore became our President and Chief Executive Officer and a
director in July 2000, and since August 1999 had been President and CEO and a
director of CBI, one of our subsidiaries. Prior to joining CBI, Mr. Fiore was
the President and CEO of Reliant Building Products, Inc. from 1992 to 1998. From
1988 to 1992, Mr. Fiore was the President and CEO of CalTex Industries, Inc. and
held the positions of Division General Manager, VP of Manufacturing and Director
of Marketing with the Atlas Powder Company from 1977 to 1988.

Sherice P. Bench has been our Secretary and Treasurer since July 2000 and
became our Chief Financial Officer in August 2001. From July 2000 to August
2001, Ms. Bench was CFO of CBI. From 1996 to July 2000, Ms. Bench was Vice
President and Controller of CBI. From 1989 to 1996, Ms. Bench was Vice President
Finance and Controller for CJC Holdings, the prior owner of ArtCarved. Prior to
that time, Ms. Bench was employed as an audit manager with Arthur Andersen LLP.

Charlyn A. Daugherty has been Senior Vice President -- Jewelry Operations
since 1999. From 1996 to 1999, she was Vice President -- Manufacturing of CBI
and from 1989 to 1996, Ms. Daugherty was President -- Manufacturing Division of
CJC Holdings. From 1989 to 1990, Ms. Daugherty was Vice President -- Operations
of CJC Holdings.

Parke H. Davis has been Senior Vice President -- Retail Products since
1996. From 1991 to 1996, Mr. Davis was President -- Class Ring Division of CJC
Holdings and before that served as its President -- Keepsake Division and its
President -- College Class Ring Sales.

Donald A. Percenti has been Senior Vice President -- Scholastic
Products/General Manager Publishing since 2001. From 1996 to 2001, he served as
Senior Vice President -- Scholastic Products. From 1991 to 1996, he was Vice
President -- Sales and Marketing of L.G. Balfour Company. From 1977 to 1991, Mr.
Percenti was employed by Balfour in various capacities.

John K. Castle has been director of our company since its formation in July
2000 and was a director of CBI from 1996 to 2000. Mr. Castle is Chairman and
Chief Executive Officer of Castle Harlan, Inc. Mr. Castle is also Chairman and
CEO of Branford Castle, Inc., an investment holding company. Immediately prior
to forming Branford Castle in 1986, Mr. Castle was President and Chief Executive
Officer and a Director of Donaldson, Lufkin, & Jenrette, Inc., one of the
nation's leading investment banking firms. Mr. Castle is a Director of various
private equity companies, and is a member of the

corporation of the Massachusetts Institute of Technology. Mr. Castle is also a
Trustee of New York Presbyterian Hospital and the Whitehead Institute of
Biomedical Research. He also served as a Trustee of New York Medical College for
22 years and was Chairman of its Board for 11 years. Previously, Mr. Castle was
a Director of the Equitable Life Assurance Society of the United States, Sealed
Air Corporation, Universal Compression Holdings, Inc., and Statia Terminals
Group, N.V. He was educated at the Massachusetts Institute of Technology (S.B.)
and the Harvard Business School (M.B.A. with High Distinction and Baker
Scholar).

David B. Pittaway has been a director of our company since its formation in
July 2000. Mr. Pittaway was President and Treasurer of CBI from its formation in
April 1996 through December 1996, and was a director of CBI from April 1996 to
July 2000. Mr. Pittaway is a Senior Managing Director of Castle Harlan, Inc. and
has been with the firm since its inception in 1987. Prior to joining Castle
Harlan, Mr. Pittaway was Vice President, Strategic Planning, and Assistant to
the President of Donaldson, Lufkin, & Jenrette, Inc. Before joining DLJ, he was
a management consultant in strategic planning with Bain & Company in Boston,
Mass., and previously was an attorney with Morgan, Lewis & Bockius, specializing
in labor relations. He is also a Board Member of McCormick & Schmick's Holding
Corp., Morton's Restaurant Group, Inc., Charlie Brown's, Inc., Luther's Bar-B-Q,
Inc., Wilshire Restaurant Group, Inc., Equipment Support Services, Inc., and
Branford Chain, Inc. He is a graduate of the University of Kansas (B.A. with
Highest Distinction), and has both an M.B.A. with High Distinction (Baker
Scholar) and a J.D. from Harvard University.

William M. Pruellage has been a director since our formation in July 2000.
Mr. Pruellage is a Vice President of Castle Harlan, Inc. Mr. Pruellage is also a
board member of Universal Compression, Inc., Verdugt Holdings, LLC and Wilshire
Restaurant Group, Inc. Prior to joining Castle Harlan in 1997, Mr. Pruellage
worked in the Mergers and Acquisition group of Merrill Lynch & Co., where he
assisted clients in strategic planning and corporate mergers. Mr. Pruellage
graduated Summa Cum Laude from Georgetown University with a double major in
Finance and International Business. He is a member of the Beta Gamma Sigma Honor
Society.

Edward O. Vetter has been a director since our formation in July 2000 and
was a director of CBI from 1998 to that time. Mr. Vetter has served as President
of Edward O. Vetter & Associates, a private management consulting firm, since
1978 and has also served as a Trustee for the Massachusetts Institute of
Technology since 1979 and is currently a Trustee Emeritus. Mr. Vetter also
served from 1987 to 1991 as Chairman of the Texas Department of Commerce, from
1979 to 1983 as Energy Advisor to the Governor of Texas and from 1976 to 1977 as
U.S. Undersecretary of Commerce, serving as Director of Overseas Private
Investment Corporation and as Director of Pension Benefit Guaranty Corporation.
From 1952 through 1975, Mr. Vetter was employed by Texas Instruments, Inc. in
various capacities and was the Executive Vice President and Chief Financial
Officer at the time of his retirement in 1975. Formerly, Mr. Vetter has served
as a director of AMR Corporation, Champion International, Cabot Corporation,
Dual Drilling Company, Bell Packaging Company, and Pioneer Natural Resources.

Zane Tankel has been a director since our formation in July 2000 and has
been Chairman and CEO of Zane Tankel Consultants, Inc., a sales company, since
1990. In 1994, Mr. Tankel formed Apple Metro, Inc., a restaurant franchisee for
the New York metropolitan area, for the franchisor Applebee's Neighborhood Grill
& Bar. He is presently Chairman and CEO of Apple Metro, Inc. In 1995-1996, Mr.
Tankel was elected Chairman of the Federal Law Enforcement Foundation, which
aids the federal law enforcement community in times of crisis and is currently
on the board. He was the past chapter chairman of the Young Presidents'
Organization and is presently a member of the Board of Directors of the
Metropolitan Presidents Organization, the New York chapter of the World
Presidents Organization. Mr. Tankel served on the Board of Directors of Beverly
Hills Securities Corporation, a wholesale mortgage brokerage company, until its
sale in January 1994.

Kenneth Roman has been a director since April, 2003 and is the former
Chairman and CEO of Ogilvy & Mather Worldwide and its parent, The Ogilvy Group
one of the top international advertising and communications firms. Mr. Roman has
been very active in public service, and is currently a Vice

Chairman of the New York Botanical Garden and on the Board of Memorial
Sloan-Kettering Cancer Center; The National Organization on Disability, and
Sheltering Arms Children's Service.

ITEM 11. EXECUTIVE COMPENSATION

The following table sets forth the cash and non-cash compensation for the
calendar years ended 2003, 2002 and 2001 awarded to or earned by the chief
executive officer and the four other most highly compensated executive officers.

SUMMARY COMPENSATION TABLE

<Table>
<Caption>
LONG-TERM COMPENSATION
ANNUAL COMPENSATION ---------------------------------
------------------------------------- RESTRICTED SECURITIES
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL POSITION YEAR(1) SALARY BONUS COMPENSATION(2) AWARDS OPTIONS(#) PAYOUTS COMPENSATION(3)
- --------------------------- ------- -------- -------- --------------- ---------- ---------- ------- ---------------
(DOLLARS IN THOUSANDS)

David G. Fiore...... 2003 $378,847 $300,000 -- 0 0 $0 --
President and Chief 2002 $361,617 $300,000 -- $936,088 22,500 $0 --
Executive Officer 2001 $311,695 $160,000 -- 0 12,524 $0 --
Sherice P. Bench.... 2003 $196,538 $115,050 -- 0 0 $0 --
Chief Financial Officer 2002 $182,019 $115,000 -- 0 7,966 $0 --
2001 $164,076 $ 39,600 -- 0 0 $0 --
Charlyn A. Daugherty... 2003 $191,154 $105,000 -- 0 0 $0 --
Senior Vice President -- 2002 $185,292 $106,000 -- 0 6,243 $0 --
Jewelry Operations 2001 $175,538 $ 43,750 -- 0 0 $0 --
Parke H. Davis...... 2003 $207,308 $108,650 -- 0 0 $0 --
Senior Vice President -- 2002 $200,769 $108,000 -- 0 6,243 $0 --
Retail Sales 2001 $184,000 $ 33,300 -- 0 0 $0 --
Donald A. Percenti... 2003 $236,847 $141,000 -- 0 0 $0 --
Senior Vice President -- 2002 $217,693 $111,000 -- 0 6,243 $0 --
Scholastic Products 2001 $197,808 $ 54,000 -- 0 0 $0 --
</Table>

- ---------------

(1) Our 2003 fiscal year ended on August 30, 2003. Fiscal year 2002 ended on
August 31, 2002 and fiscal year 2001 ended on August 25, 2001. Executive
compensation for 2001, 2002, and 2003 is for the twelve months ended
December 31 of each year and based on current compensation.

(2) The perquisites and other personal benefits, securities or property received
by the named executive officers did not exceed $50,000 or 10% of the total
annual salary and bonus reported for the named executive officers in cash of
2001, 2002 and 2003. In 2002, we have paid $386,088 in taxes associated with
the receipt by Mr. Fiore in 2002 of 5,500 shares of our series A preferred
stock.

(3) Each of the named executive officers have term life insurance policies equal
to two-times their base salary (maximum of $500,000) in the years 2003 and
2002 and one-times their base salary in the year 2001 with a benefit payable
to a beneficiary selected by the named executive officer upon his or her
death. We have paid the annual premiums on such policies in each of 2003,
2002 and 2001. The annual premium does not exceed $910 for any named
executive officer. No named executive officer is entitled to any cash
surrender value in such policies.

(4) During 2002 due to the increased concerns after September 11, 2001, and the
increased travel requirements of Mr. Fiore, Mrs. Bench and thirteen other
officers and executives of the Company, AAC purchased a travel accident
policy covering Mr. Fiore and Mrs. Bench in the amount of $2,500,000 each
and $250,000 each for the other 13 named executives for a total three year
premium of $4,777. The beneficiaries of the policy are to be named by the
employee, and no named executive is entitled to any cash surrender value in
such policies.

EMPLOYMENT AGREEMENTS

David G. Fiore. Mr. Fiore has an employment agreement with us, pursuant to
which he serves as our Chief Executive Officer and President and as a member of
our Board of Directors. The initial term of his employment agreement was for two
years from August 2, 1999. Unless otherwise terminated, Mr. Fiore's employment
agreement adds one day to the term for each day that passes, and accordingly,
there are always two years remaining on the term. The employment agreement
provides Mr. Fiore with an annual base salary of no less than $300,000. Under
his employment agreement, Mr. Fiore's salary is subject to such increases as our
Board of Directors may determine from time to time.

Mr. Fiore's employment agreement provides for various bonuses to be paid to
him. Mr. Fiore is paid an annual bonus up to $200,000, determined by our Board
of Directors, based upon the achievement of certain EBITDA targets. Mr. Fiore is
also entitled to long-term incentive bonuses in the form of various stock grants
if we achieve certain EBITDA targets as provided for in his employment
agreement. These stock grants are fully vested when granted. At the discretion
of the compensation committee of our Board of Directors, we also may pay Mr.
Fiore a discretionary bonus each year in an amount of up to $100,000.

Mr. Fiore's employment agreement provides that in the event his employment
is terminated without "substantial cause" or he terminates his employment for
"good reason" (each as defined in his employment agreement), he will be entitled
to receive his salary for the remainder of the term under the employment
agreement, plus the portion of the annual bonus actually earned through the date
of termination, plus the long-term incentive bonus. Mr. Fiore and covered family
members will also be entitled to health benefits for 24 months, or until they
become covered under a new employee health plan at no cost to Mr. Fiore.

Mr. Fiore's employment agreement further provides that he may terminate his
employment six months after a "change in control" (as defined in his employment
agreement). Upon such termination, Mr. Fiore will be paid $450,000.

Sherice P. Bench. Ms. Bench has an employment agreement with CBI,
effective as of December 16, 1996, and as of August 30, 2003 serves as our chief
financial officer at an annual salary of $205,000. The initial term of her
employment agreement was for two years, which can be automatically extended for
additional one year terms on December 15th of each succeeding year thereafter
unless earlier terminated by us upon not less than 60 days' prior notice. The
current term of her employment agreement expires on December 15, 2003. Ms. Bench
is entitled to participate in such employee benefit programs, plans and policies
(including incentive bonus plans and incentive stock option plans) as we
maintain and as may be established for our employees from time-to-time on the
same basis as other executive employees are entitled to participate.

Ms. Bench's employment agreement provides that in the event her employment
is terminated without "substantial cause" (as defined in her employment
agreement), she will be entitled to receive 39 bi-weekly severance payments
equal to the average of her bi-weekly compensation in effect within the two
years preceding her termination, accrued but unused vacation, and any accrued
bonus. She will also be entitled to elect the continuation of health benefits at
our cost. Ms. Bench's employment agreement does not provide her with any
payments that are contingent upon a "change in control."

Other Employment Agreements. Charlyn A. Daugherty, Donald A. Percenti and
Parke H. Davis each have an employment agreement with CBI and Ronald Brostrom
and G. Page Singletary have employment agreements with Milestone Marketing
Incorporated, which were assigned to CBI. The initial term of each respective
employment agreement was for three years, which can be automatically extended
for additional one year terms on December 15th of each succeeding year
thereafter unless earlier terminated by us upon not less than 60 days' prior
notice for Ms. Daugherty and Messrs. Davis and Percenti and on the 15th of July
for Messrs. Brostrom and Singletary. The current term of each of their
employment agreements expires on December 15, 2003 for Ms. Daugherty, Messrs.
Davis and Percenti, and on July 15, 2005 for Messrs. Brostrom and Singletary.
Ms. Daugherty and Messrs. Davis, Percenti, Brostrom and Singletary are entitled
to participate in such employee benefit programs, plans and policies

(including incentive bonus plans and incentive stock option plans) as we
maintain and as may be established for our employees from time-to-time on the
same basis as other executive employees are entitled to participate.

Each of the above-described employment agreements for Ms. Daugherty,
Messrs. Davis and Percenti provide that in the event of their termination of
employment without "cause" (as defined in each of their respective employment
agreements), the terminated employee will be entitled to receive 18 months of
severance payments equal to the average of such employee's bi-weekly
compensation in effect within the two years preceding their termination, accrued
but unused vacation and any accrued bonuses. In the event the employment of
Messrs. Brostrom or Singletary is terminated without "cause", he will receive
bi-weekly severance payments equal to his bi-weekly compensation as of the date
of termination until the end of the initial term or one year from date of
termination, accrued but unused vacation, and any accrued bonus. Such employee
will also be entitled to elect the continuation of health benefits at our cost.
None of the above-described employment agreements provide any payments that are
contingent upon a "change of control."

2000 STOCK OPTION PLAN

We have adopted the 2000 Stock Option Plan, which provides for the granting
of incentive stock options and nonqualified stock options to our employees and
directors and the employees and directors of our subsidiaries. The number of
shares of common stock available to be awarded under the option plan is 122,985.
As of November 1, 2003, options to purchase 105,650 shares of common stock had
been granted of which 97,792 remain outstanding. The option plan is administered
by the compensation committee of our board of directors, which has the
discretion to select which employees and directors will receive awards of
options under the plan as well as the amount of such grant.

Each option will expire on the date determined by the compensation
committee of our board of directors, which will not be later than ten years from
the date of grant. Options granted under the option plan generally vest 25% per
year over a four year period. The exercise price for incentive stock options is
the fair market value of the stock on the date that the option is granted. If
the option holder's employment is terminated for any reason, all options that
are not exercisable as of the date of termination will expire, and those options
that are exercisable may be exercised until the option grant period has expired.
Under the option plan, we have certain rights to repurchase from an option
holder the common stock issued upon exercise of the option upon termination of
the option holder's employment.

Stock options were granted to Mr. Fiore, Ms. Bench, Ms. Daugherty, Messrs.
Davis and Percenti during the fiscal year ended 2003 of 10,000, 4,000, 4,000,
4,000 and 4,000 shares, respectively. Also during the fiscal year ended 2003,
Mr. Roman, a director was granted 1,059 stock options. None of the foregoing
individuals exercised any stock options in the fiscal year ended 2003.

The following table sets forth option grants for the CEO, the four named
executive officers, and a director during the year ended August 30, 2003.

OPTIONS GRANTS IN YEAR ENDED AUGUST 30, 2003

<Table>
<Caption>
INDIVIDUAL GRANTS
--------------------------------------------------
PERCENT OF POTENTIAL REALIZABLE
TOTAL VALUE AT ASSUMED
NUMBER OF OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OF OPTION TERM
OPTIONS IN FISCAL BASE PRICE EXPIRATION -----------------------
NAME GRANTED YEAR 2003 ($/SH) DATE 5%($) 10%($)
- ---- ---------- ---------- ----------- ---------- --------- ----------

David G. Fiore, CEO.......... 10,000 35.1% $ 6.02 10/30/12 $98,059 $156,143
Sherice P. Bench............. 4,000 14.0% 6.02 10/30/12 39,224 62,457
Charlyn A. Daugherty......... 4,000 14.0% 6.02 10/30/12 39,224 62,457
Parke H. Davis............... 4,000 14.0% 6.02 10/30/12 39,224 62,457
Donald A. Percenti........... 4,000 14.0% 6.02 10/30/12 39,224 62,457
Kenneth Roman................ 1,059 4.0% 11.70 4/23/13 20,182 32,137
</Table>

COMPENSATION OF DIRECTORS; BOARD COMMITTEES

Directors who are neither members of our management nor affiliates of
Castle Harlan each receive a fee of $40,000 per year, paid quarterly, for their
services as a director. During the fiscal year ended 2003, we granted an option
for 1,059 shares of common stock to Mr. Roman and we issued 519 shares of
preferred stock and 424 shares of common stock in lieu of Mr. Roman's director's
fee of $40,000 for serving on our Board of Directors.

The Board of Directors has established two committees, a compensation
committee and an audit committee. The compensation committee reviews general
policy matters relating to compensation and benefits. The audit committee
recommends the firm to be appointed as independent accountants to audit our
financial statements, discusses the scope and results of the audit with the
independent accountants, reviews with management and the independent accountants
our interim and year-end operating results, considers the adequacy of our
internal control and audit procedures and reviews the non-audit services to be
performed by the independent accountants. The compensation committee consists of
Messrs. Castle, Pittaway and Tankel and the audit committee consists of Messrs.
Pittaway, Pruellage, Roman, Tankel and Vetter.

Our certificate of incorporation and by-laws provides that we indemnify our
officers and directors to the fullest extent permitted by the Delaware General
Corporation Law, which is referred to in this prospectus as the DGCL. Under
Section 145 of the DGCL, a corporation may indemnify its directors, officers,
employees and agents and its former directors, officers, employees and agents
and those who serve, at the corporation's request, in such capacities with
another enterprise, against expenses, including attorneys' fees, as well as
judgments, fines and settlements in nonderivative lawsuits, actually and
reasonably incurred in connection with the defense of any action, suit or
proceeding in which they or any of them were or are made parties or are
threatened to be made parties by reason of their serving or having served in
that capacity. The DGCL provides, however, that the person must have acted in
good faith and in a manner that he or she reasonably believed to be in, or not
opposed to, the best interests of the corporation and, in the case of a criminal
action, he or she must have had no reasonable cause to believe his or her
conduct was unlawful. In addition, the DGCL does not permit indemnification in
an action or suit by or in the right of the corporation where he or she has been
adjudged liable to the corporation, unless, and only to the extent that, a court
determines that he or she fairly and reasonably is entitled to indemnity for
costs the court deems proper in light of liability adjudication. Indemnification
is mandatory to the extent a claim, issue or matter has been successfully
defended.

The certificate of incorporation and the DGCL also prohibit limitations on
officer or director liability for acts or omissions which resulted in a
violation of a statute prohibiting dividend declarations, payments to
stockholders after dissolution and particular types of loans. The effect of
these provisions is to eliminate the rights of our company and our stockholders,
through stockholders' derivative suits on behalf of our company, to recover
monetary damages against an officer or director for breach of a fiduciary duty
as an officer or director, except in the situations described above.

Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors or officers of our company pursuant to the
foregoing provisions, we have been informed that, in the opinion of the SEC,
this indemnification is against public policy as expressed in the Securities Act
and is therefore unenforceable.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the compensation committee is our employee. There are no
compensation committee interlocks (i.e., no executive officer of ours serves as
a member of the board of directors or the compensation committee of another
entity which has an executive officer serving on our board of directors or the
compensation committee).

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information regarding the beneficial
ownership of our voting securities as of November 1, 2003, with respect to (i)
each person or entity who is the beneficial owner of more than 5% of any class
of our voting securities, (ii) each of our directors, (iii) each of the named
executive officers, and (iv) all directors and executive officers as a group.

<Table>
<Caption>
PERCENTAGE OF
NUMBER OF TOTAL NUMBER OF SHARES PERCENTAGE OF
SHARES OF COMMON OF SERIES A TOTAL SERIES A
NAME AND ADDRESS OF BENEFICIAL OWNER(1) COMMON STOCK STOCK(%) PREFERRED PREFERRED(%)
- --------------------------------------- ------------ ------------- ---------------- --------------

Castle Harlan Partners III,
L.P.(2)(3).......................... 431,055 50.3 537,868 53.4
Castle Harlan Partners II,
L.P.(2)(4).......................... 372,015 43.4 456,800 45.4
John K. Castle(2)(5).................. 803,070 93.7 994,668 98.8
David B. Pittaway(2).................. 1,005 * 1,126 *
Zane Tankel(2)(10).................... 1,920 * 938 *
Edward O. Vetter(2)(10)............... 1,382 * 400 *
Kenneth Roman(2)(10).................. 424 * 519 *
William M. Pruellage(2)............... -- * -- *
David G. Fiore(6)(7).................. 35,024 4.1 5,500 *
Sherice P. Bench(6)(8)................ 2,026 * -- *
Charlyn A. Daugherty(6)(9)............ 3,646 * 328 *
Parke H. Davis(6)(9).................. 3,506 * 188 *
Donald A. Percenti(6)(9).............. 3,787 * 469 *
Directors and executive officers as a
group (11 persons, including those
listed above)....................... 855,790 99.7 1,004,136 99.7
</Table>

- ---------------

* Denotes beneficial ownership of less than one percent of the class of
capital stock.

(1) Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission. Beneficial ownership includes shares of
common stock and series A preferred stock that any person has the right to
acquire within 60 days after August 30, 2003. Shares of common stock and
series A preferred stock not outstanding but deemed beneficially owned
because a person or group has the right to acquire them within 60 days are
treated as outstanding only for purposes of determining the percentage
owned by that person or group. For purposes of this table, all fractional

shares have been rounded to the nearest whole share. Except as indicated in
the footnotes to this table, each stockholder named in the table has sole
voting and investment power with respect to the shares set forth opposite
such stockholder's name.

(2) The address for each indicated stockholder or director identified in the
table is c/o Castle Harlan, Inc., 150 East 58th Street, New York, New York
10155.

(3) Includes 17,983 shares of common stock and 22,439 shares of series A
preferred stock held by related entities, all of which may be deemed to be
beneficially owned by Castle Harlan Partners III, L.P. Castle Harlan
Partners III, L.P. disclaims beneficial ownership of these shares.

(4) Includes 41,175 shares of common stock and 50,559 shares of series A
preferred stock held by related entities, all of which may be deemed to be
beneficially owned by Castle Harlan Partners II, L.P. Castle Harlan
Partners II, L.P. disclaims beneficial ownership of these shares.

(5) John K. Castle, one of our directors, is the controlling stockholder of
Castle Harlan Partners III, G.P., Inc., the general partner of the general
partner of Castle Harlan Partners III, L.P., and as such may be deemed to
be a beneficial owner of the shares owned by Castle Harlan Partners III,
L.P. and its affiliates. Mr. Castle disclaims beneficial ownership of such
shares in excess of his proportionate partnership share of Castle Harlan
Partners III, L.P. and its affiliates. In addition, Mr. Castle is the
controlling stockholder of Castle Harlan Partners II G.P., Inc., the
general partner of the general partner of Castle Harlan Partners II, L.P.,
and as such may be deemed to be a beneficial owner of the shares owned by
CastleHarlan Partners II, L.P. and its affiliates. Mr. Castle disclaims
beneficial ownership of such shares in excess of his proportionate
partnership share of Castle Harlan Partners II, L.P. and its affiliates.

(6) The address for each indicated director or executive officer identified in
the table is c/o American Achievement Corporation, 7211 Circle S Road,
Austin, Texas 78745.

(7) Mr. Fiore was granted options to purchase 35,024 shares of our common
stock, which have vested pursuant to our 2000 Stock Option Plan.

(8) Ms. Bench was granted options to purchase 9,000 shares of our common stock,
of which have 2,026 have vested pursuant to our 2000 Stock Option Plan.

(9) Ms. Daugherty and Messrs. Davis and Percenti were each granted options to
purchase 9,000 shares of our common stock, of which 3,318 have vested
pursuant to our 2000 Stock Option Plan.

(10) Messrs. Tankel, Vetter, and Roman were each granted options to purchase
1,115, 1,115 and 1,059 shares of our common stock, respectively, of which
982, 982 and 0 have vested pursuant to our 2000 Stock Option Plan.

The following table sets forth the equity compensation plan information at
August 30, 2003.

EQUITY COMPENSATION PLAN INFORMATION

<Table>
<Caption>
NUMBER OF SECURITIES
REMAINING AVAILABLE FOR
NUMBER OF SECURITIES FUTURE ISSUANCE UNDER
TO BE ISSUED UPON WEIGHTED-AVERAGE EQUITY COMPENSATION
EXERCISE OF EXERCISE PRICE OF PLANS (EXCLUDING
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, SECURITIES REFLECTED IN
PLAN CATEGORY WARRANTS AND RIGHTS WARRANTS AND RIGHTS COLUMN(A))
- ------------- -------------------- -------------------- -----------------------
(A) (B) (C)

Equity compensation plans approved by
Security holders.................... 119,197 $4.89 24,893
------- ----- ------
Equity compensation plans not approved
by security holders................. -- -- --
------- ----- ------
Total............................ 119,197 $4.89 24,893
======= ===== ======
</Table>

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

We entered into a management agreement dated March 30, 2001 with Castle
Harlan, pursuant to which Castle Harlan agreed to provide business and
organizational strategy, financial and investment management and merchant and
investment banking services to us upon the terms and conditions set forth in the
management agreement. As compensation for such services, we agreed to pay Castle
Harlan $3.0 million per year, which amount is payable quarterly in arrears. The
agreement is for a term of ten years, renewable automatically from year to year
thereafter unless Castle Harlan and its affiliates then own less than 5% of our
then outstanding capital stock. We have agreed to indemnify Castle Harlan
against liabilities, costs, charges and expenses relating to its performance of
its duties, other than such of the foregoing resulting from Castle Harlan's
gross negligence or willful misconduct.

On February 11, 2000, CHPIII acquired Taylor, whose primary business is the
designing and printing of student yearbooks. On July 27, 2000, we acquired from
CHPIII all of the issued and outstanding shares of TSHC, Taylor's parent,
through the issuance of 320,929 shares of our common stock and 393,482 shares of
our series A preferred stock.

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Exhibits and Financial Statement Schedules

The following documents are filed as part of this report.

1. Consolidated Financial Statements. See "Index to Consolidated
Financial Statements" -- Item 8.

2. Exhibits. See "Exhibit Index."

(b) Reports on Form 8-K

None.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

AMERICAN ACHIEVEMENT CORPORATION

By: /s/ DAVID G. FIORE
------------------------------------
David G. Fiore
Chief Executive Officer

By: /s/ SHERICE P. BENCH
------------------------------------
Sherice P. Bench
Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated on November 17, 2003.

<Table>

/s/ DAVID G. FIORE Chief Executive Officer
- --------------------------------------
David G. Fiore

/s/ JOHN K. CASTLE Director
- --------------------------------------
John K. Castle

/s/ DAVID B. PITTAWAY Director
- --------------------------------------
David B. Pittaway

/s/ ZANE TANKEL Director
- --------------------------------------
Zane Tankel

/s/ KENNETH ROMAN Director
- --------------------------------------
Kenneth Roman

/s/ EDWARD O. VETTER Director
- --------------------------------------
Edward O. Vetter

/s/ WILLIAM PRUELLAGE Director
- --------------------------------------
William Pruellage
</Table>

EXHIBIT INDEX

<Table>
<Caption>
EXHIBIT
NUMBER DESIGNATION
- ------- -----------

3.1 Certificate of Incorporation of American Achievement
Corporation with all amendments (f/k/a Commemorative Brands
Holding Corp.)**
3.2 By-Laws of American Achievement Corporation (f/k/a
Commemorative Brands Holding Corp.)**
3.3 Certificate of Incorporation of Commemorative Brands, Inc.
with all amendments (f/k/a Scholastic Brands, Inc., Class
Rings, Inc. and Keepsake Jewelry, Inc.)**
3.4 By-Laws of Commemorative Brands, Inc. (f/k/a Scholastic
Brands, Inc., Class Rings, Inc. and Keepsake Jewelry,
Inc.)**
3.5 Certificate of Incorporation of CBI North America, Inc. with
all amendments (f/k/a SBI North America, Inc.)**
3.6 By-Laws of CBI North America, Inc. with all amendments
(f/k/a SBI North America, Inc.)**
3.7 Certificate of Incorporation of Taylor Senior Holding
Corp.**
3.8 By-Laws of Taylor Senior Holding Corp.**
3.9 Amended and Restated Certificate of Incorporation of TP
Holding Corp. (f/k/a TP Acquisition Corp.)**
3.10 By-Laws of TP Holding Corp. (f/k/a TP Acquisition Corp.)**
3.11 Certificate of Incorporation of Taylor Publishing Company
with all amendments (f/k/a Taylor Publishing Company of
Delaware)**
3.12 By-Laws of Taylor Publishing Company (f/k/a Taylor
Publishing Company of Delaware)**
3.13 Certificate of Limited Partnership of Taylor Publishing
Manufacturing, L.P.
3.14 Taylor Publishing Manufacturing, L.P. Limited Partnership
Agreement
3.15 Articles of Incorporation of Educational Communications,
Inc. with all amendments (f/k/a Merit Publishing Company)**
3.16 By-Laws of Educational Communications, Inc.**
3.17 Certificate of Formation of Taylor Manufacturing Holdings,
LLC
3.18 Limited Liability Company Agreement of Taylor Manufacturing
Holdings, LLC
4.1 Indenture, dated as of February 20, 2002, among American
Achievement Corporation, The Bank of New York, as Trustee,
and the Guarantors**
4.2 First Supplemental Indenture, dated as of July 17, 2003,
among American Achievement Corporation, The Bank of New
York, as Trustee, and the Additional Guarantors
4.3 Second Supplemental Indenture, dated as of December 24,
2002, among American Achievement Corporation, The Bank of
New York, as Trustee, and the Additional Guarantors
4.4 Form of 11 5/8 Senior Notes due 2007 (included in Exhibit
4.1)**
4.5 Registration Rights Agreement, dated as of February 20,
2002, among American Achievement Corporation, the Guarantors
and the Initial Purchasers**
4.6 Form of Guarantee (included in Exhibit 4.1)**
4.7 Form of Indenture dated as of December 16, 1996 between
Commemorative Brands, Inc. and HSBC Bank USA (f/k/a Marine
Midland Bank)**
4.8 Form of First Supplemental Indenture, dated as of July 21,
2000, between Commemorative Brands, Inc. and HSBC Bank USA
(f/k/a Marine Midland Bank)**
10.1 Credit Agreement, dated as of February 20, 2002, among
American Achievement Corporation, as the Borrower, the
Lenders party thereto and The Bank of Nova Scotia, as the
Administrative Agent for the Lenders**
10.2 Gold Consignment Agreement dated July 27, 2000 between
Commemorative Brands, Inc. and The Bank of Nova Scotia**
10.3 Subsidiary Pledge and Security Agreement, dated as of
February 20, 2002, made by American Achievement Corporation
in favor of The Bank of Nova Scotia, as administrative agent
for each of the Secured Parties (as defined therein)**
</Table>

<Table>
<Caption>
EXHIBIT
NUMBER DESIGNATION
- ------- -----------

10.4 Borrower Pledge and Security Agreement, dated as of February
20, 2002, made by each domestic subsidiary of American
Achievement Corporation from time to time party hereto in
favor of The Bank of Nova Scotia, as administrative agent
for each of the Secured Parties (as defined therein)**
10.5 Subsidiary Guaranty, dated as of February 20, 2002, made by
each subsidiary of American Achievement Corporation from
time to time party hereto in favor of The Bank of Nova
Scotia, as administrative agent for each of the Secured
Parties (as defined therein)**
10.6 Form of The Management Agreement dated as of March 30, 2001,
among American Achievement Corporation, its Subsidiaries
listed therein and Castle Harlan, Inc.**
10.7 Letter Agreement, dated as of October 11, 2000, amended as
of November 3, 2000, between Scotiabank and TP Holdings
Corp., regarding (i) USD 27,500,000.00MM Interest Rate Swap
Transaction (Ref: S24041) and (ii)USD 25,000,000.00MM
Interest Rate Swap Transaction (Ref: S24042)**
10.8 Employment Agreement, dated as of July 13, 1999 by and
between Commemorative Brands, Inc. and David G. Fiore**
10.9 First Amendment to the Employment Agreement by and between
Commemorative Brands, Inc. and David G. Fiore dated February
1, 2002**
10.10 Employment Agreement, dated as of December 16, 1996 by and
between Commemorative Brands, Inc. and Sherice P. Bench, as
amended**
10.11 Employment Agreement, dated as of December 16, 1996 by and
between Commemorative Brands, Inc. and Donald J. Percenti**
10.12 Employment Agreement, dated as of December 16, 1996 by and
between Commemorative Brands, Inc. and Charlyn A. Cook**
10.13 American Achievement Corporation 2000 Stock Option Plan
(f/k/a Commemorative Brands Holding corp. 2000 Stock Option
Plan)**
12.1 Statement regarding Computation of Ratios of Earnings to
Fixed Charges
16 Letter from Arthur Andersen LLP to the Securities and
Exchange Commission dated May 24, 2002***
21 Subsidiaries of American Achievement Corporation
31.1 CEO Certification Accompanying Period Report Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 CFO Certification Accompanying Period Report Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 CEO Certification Accompanying Period Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
32.2 CFO Certification Accompanying Period Report Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002
</Table>

- ---------------

* Incorporated by reference to the corresponding Exhibit number of the
Company's Current Report on Form 8-K, dated July 30, 2002.

** Incorporated by reference to the corresponding Exhibit number of the
Company's Amended Registration Statement on Form S-4/A, dated April 5,
2002.

*** Incorporated by reference to the corresponding Exhibit number of the
Company's Current Report on Form 8-K, dated May 29, 2002.

**** Incorporated by reference to the corresponding Exhibit number of the
Company's Report on Form 10-K, dated August 31, 2002.