GENERAL

This discussion and analysis of financial condition and results of operations reviews the results of operations of the Company, on a consolidated basis, for the three months ended March 31, 2009 as compared to the three months ended March 31, 2008. This discussion and analysis of financial condition and results of operations has been derived from, and should be read in conjunction with, the unaudited Condensed Consolidated Financial Statements and Notes to Condensed Consolidated Financial Statements contained herein.

The Company is a leading manufacturer and global distributor of educational, health, medical technology and agricultural products, primarily offered through more than 50 separate catalogs.

The following is a summary of key events for the three months ended March 31, 2009:

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decrease in net sales of 8.2% in the first quarter of 2009, as compared to the same period in 2008;

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decrease in gross profit of 5.4% in the first quarter of 2009, as compared to the same period in 2008; the gross profit margin increased to 40.6% in 2009 from 39.5% for the comparable period in 2008;

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decrease of 17.8% in earnings before income taxes to $6.6 million in the first quarter of 2009, as compared to $8.0 million in the same period in 2008;

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an impairment to marketable securities of $.2 million was charged against earnings before taxes in the first quarter ended March 31, 2009 related to other-than-temporary losses in market value;

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decrease of 30.0% in net earnings applicable to common stockholders to $1.9 million in the first quarter of 2009, as compared to $2.8 million in the same period in 2008; diluted earnings per common share were $.11 in the first quarter of 2009, compared to $.16 in the comparable period in 2008;

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aggregate investment in marketable securities was $4.2 million at March 31, 2009, compared to $3.3 million invested in marketable securities at March 31, 2008; no additional investments in marketable securities were made in the quarters ended March 31, 2009 or 2008;

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semi-annual dividend payments were made on March 31, 2009 totaling $4.3 million on the Company's Series I Preferred Stock and Series J Preferred Stock, of which $2.2 million was accreted during the first quarter of 2009.

A key strength of the Company's business is its ability to generate cash consistently. The Board of Directors and management use cash generated as a measure of the Company's performance. The Company uses the cash generated from operations to strengthen the balance sheet, including making investments and reducing liabilities such as pension and debt obligations, paying dividends on its preferred stocks and completing prudent acquisition opportunities. The Company's management believes that examining the ability to generate cash provides investors with additional insight into the Company's performance.

The following table sets forth selected financial data (i) as a percentage of net sales for the three months ended March 31, 2009 and 2008 and (ii) the percentage change in those reported items between the comparable quarterly periods in 2009 and 2008:

                                                             % of Net Sales    Balance
                                                             2009      2008    % Change

     Net sales                                                100.0 %  100.0 %    (8.2) %
     Cost of sales                                             59.4     60.5     (10.0)
                       Gross profit                            40.6     39.5      (5.4)

     Selling and administrative expense                        25.8     23.4        1.0
                       Earnings from operations                14.8     16.1     (14.7)

     Other (expense) income:
        Interest expense                                       (.4)     (.6)     (32.6)
        Other, net                                             (.2)       .5         **
                                                               (.6)     (.1)         **
                  Earnings before income taxes                 14.2     16.0     (17.8)

     Income taxes:
        Current                                                 5.4      4.6        7.1
        Deferred                                               (.1)      1.4    (107.9)
                                                                5.3      6.0     (19.1)
                       Net earnings                             8.9 %   10.0 %   (17.0)

** not meaningful

FLUCTUATIONS IN QUARTERLY RESULTS OF OPERATIONS

The Company is subject to seasonal influences with peak levels occurring in the second and third quarters of the fiscal year primarily due to increased educational shipments coinciding with the start of the new school year in the Fall. As a result, the Company typically recognizes approximately 60% of its annual net earnings in the second and third quarters of its fiscal year.
Inventory levels increase in March through June in anticipation of the peak shipping season. The majority of shipments are made between June and August, and the majority of cash receipts are collected from August through October.

Quarterly results may also be materially affected by the timing of acquisitions, the timing and magnitude of costs related to such acquisitions, variations in costs of products sold, the mix of products sold and general economic conditions. Results for any quarter are not indicative of the results for any subsequent fiscal quarter or for a full fiscal year.

RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 2009 AS COMPARED TO THREE MONTHS ENDED MARCH 31, 2008

Net Sales

Net sales for the first quarter of 2009 decreased 8.2% to $46.3 million from $50.4 million for the comparable period in 2008. The decrease in sales is primarily attributable to the recessionary national, state and local economy.
However, of the 8.2% decline in revenue, 1.8% is attributable to the change in the currency exchange rate of the U.S. dollar compared to the Canadian dollar in the respective quarters.

Net sales for the educational segment, totaling $38.6 million, decreased 7.6% in the first quarter of 2009 from $41.8 million in the comparable period in 2008.
The commercial segment recorded net sales of $7.7 million for the first quarter of 2009, decreasing 10.9% from $8.7 million for the first quarter of 2008. The sales decrease in the educational segment relates primarily to school district funding shortfalls due to state budget deficits. Currently, 43 of 50 states are projecting budget deficits in the 2009-2010 fiscal year beginning in July.
Funding directed to states through the federal stimulus plan had not provided assistance

to school districts in the 2009 first quarter. Sales were negatively impacted in the commercial segment primarily by a decline in agriculture-related spending as dairy commodity pricing for the Company's customer base declined from one year ago.

Gross Profit

Gross profit for the first quarter of 2009 decreased 5.4% to $18.8 million from $19.9 million in 2008. The decrease in gross profit for the first quarter of 2009 is primarily attributed to the 8.2% decrease in net sales. The gross profit margin increased to 40.6% for the first quarter of 2009 from 39.5% for the comparable period in 2008. The gross profit margin improvement is driven by stability in the Company's proprietary product lines, which have higher gross profit margins than other products in both domestic and international markets, and effective efforts to manage transportation costs.

The educational segment gross profit for the first quarter of 2009 decreased 7.2% to $16.1 million from $17.3 million for the comparable period in 2008. The educational segment gross profit margin increased to 41.7% in the first quarter of 2009 from 41.5% in the first quarter of 2008, primarily resulting from the product mix in the respective quarters. The commercial segment gross profit for the first quarter of 2009 decreased 5.0% to $3.3 million compared to $3.5 million for the first quarter of 2008. The commercial segment yielded a gross profit margin of 43.4% in the first quarter of 2009, as compared to 40.7% in first quarter of 2008, primarily attributable to the favorable product mix.

Other costs of sales, which the Company does not allocate by segment, including transportation costs incurred in the procurement of inventories and shipment of customer orders, declined by 16.9% in the first quarter of 2009 compared to the first quarter of 2008 primarily as a result of long-term efforts to reduce costs, including the negotiation of favorable shipping contract terms and consolidation of shipments.

Selling and Administrative Expense

Selling and administrative expense for the first quarter of 2009 increased 1.0% to $11.9 million from $11.8 million in the comparable period in 2008. As a percent of net sales, selling and administrative expenses amounted to 25.8% for the first quarter of 2009, as compared to 23.4% in the first quarter of 2008.
Expenses include advertising and catalog costs, warehouse and shipping activities, customer service and general administrative functions. In comparison to the first quarter of 2008, selling and administrative expenses for the first quarter of 2009 were primarily impacted by: (i) an increase in group health care costs of $.1 million as a result of increases in medical expenses;
(ii) an increase in advertising costs of $.2 million related to higher paper and postage costs incurred for the production and distribution of catalogs; and
(iii) a decrease of $.2 million in non-production related salaries and wages paid.

The Company recorded $0 and less than $.1 million in compensation expense for each of the first quarters of 2009 and 2008 related to grants of stock options to certain employees and directors.

The Company incurred expenses of $.3 million to Geneve for certain administrative services for each of the quarters ended March 31, 2009 and 2008, respectively.

Interest Expense

Interest expense for the first quarter of 2009 decreased 32.6% to $194 thousand from $288 thousand for the first quarter of 2008. The decrease in interest expense is principally due to the decrease in the average effective interest rate on outstanding debt under the Company's primary line of credit to 1.5% for the first quarter of 2009, compared to 4.9% for the first quarter of 2008.
Interest expense of $.1 million in each of the first quarters of 2009 and 2008 relates to other long-term accruals established in the fourth quarter of 2006 in connection with the transfer of ownership of certain assets.

Weighted average rates under the Company's credit agreements were 2.6%, 3.0% and 4.3% at March 31, 2009, December 31, 2008 and March 31, 2008, respectively.

Income Tax Provision

Aristotle and its qualifying domestic subsidiaries are included in the Federal income tax return and certain state income tax returns of Geneve. The provision for income taxes for the Company is determined on a separate return basis in accordance with the terms of a tax sharing agreement with Geneve, and payments for current Federal and certain state income taxes are made to Geneve.

The income tax provision for the first quarter of 2009 was $2.4 million compared to $3.0 million for the comparable period in 2008. These tax provisions reflect effective tax rates of 37.0% and 37.6% for the first quarters of 2009 and 2008, respectively. For each of the first quarters of 2009 and 2008, the difference between the Federal statutory income tax rate of 35% and the effective income tax rate results principally from state income taxes, net of the Federal benefit, and the differential between the Federal tax rate and the tax rates in the foreign jurisdictions in which the Company operates.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 2009, the Company had working capital of $78.0 million, increasing from $76.2 million at December 31, 2008. At March 31, 2008, the Company had working capital of $86.2 million. Cash and cash equivalents decreased $.5 million in the first quarter of 2009 compared to cash and cash equivalents at December 31, 2008, ending the period at $14.8 million. Cash and cash equivalents decreased $1.1 million in the first quarter of 2008, ending the period at $4.5 million. The change in cash and cash equivalents during the first quarter of 2009 as compared to the same period in 2008 is primarily due to the following activities:

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The Company provided cash of $4.1 million from operations during the first quarter of 2009 compared to a use of $2.0 million for the comparable period of 2008. The increase in cash generated from operations in the first quarter of 2009 compared to the first quarter of 2008 was principally the net result of a $.9 million decline in net earnings, which was more than offset by lower investments in working capital.

The changes in current assets and liabilities are typical for the first quarter of the fiscal year as the Company is preparing for its peak business cycle, which occurs during the second and third quarters of the fiscal year. For more information on the seasonality of the Company's business, please refer to the "Fluctuations in Quarterly Results of Operations" section above.

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The Company used cash of $.2 million for investing activities in the first quarter of 2009, compared to $2.3 million in the first quarter of 2008. Capital expenditures to replace and upgrade existing capital equipment and install new equipment and fixtures to provide additional operating efficiencies totaled $.2 million in the first quarter of 2009. In the first quarter of 2008, the Company used cash of $1.3 million to fund the purchase of fixed assets, including $.7 million for renovation of an existing facility.

No cash investments were made during the first quarter of 2009. In the first quarter of 2008, the Company increased its investment in a limited partnership by $1.0 million.

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Financing activities used cash of $4.4 million in the first quarter of 2009, compared to providing cash of $3.2 million for the comparable period in 2008.
In the first quarter of 2009, the Company paid $4.3 million in preferred stock cash dividends on March 31, 2009, and made $.1 million of principal payments on long-term debt. In the first quarter of 2008, borrowings under the Company's primary credit facility of $7.5 million were due to seasonal working capital requirements, and to fund the $4.3 million payment of the preferred stock cash dividends on March 31, 2008.

On October 15, 2003, the Company entered into a five-year, non-amortizing, $45.0 million Revolving Credit Facility. The Revolving Credit Facility provides the Company with seasonal working capital, letters of credit and funds for appropriate acquisitions of businesses similar in nature to the Company's current business segments. This debt carries a variable rate of interest that is based on Prime or LIBOR rates plus applicable margins. On February 26, 2008, the Company and its primary lenders executed an amendment to the Revolving Credit Facility. The primary provisions of the amendment: (i) extend the term of the Revolving Credit Facility from October 15, 2008 to January 31, 2013; (ii) provide the Company the option to expand the capacity of the facility from $45.0 million to $60.0 million during the term of the agreement; (iii) relieve the Company of certain monthly reporting obligations; (iv) modify the pricing structure to provide interest rates more favorable to the Company; and (v) update certain financial covenants to standards relevant to the Company's current financial condition. At March 31, 2009, the weighted average interest rate on this debt was 1.5%. The Revolving Credit Facility currently has a committed weighted average rate of interest (including applicable margins) of 1.4%. Such rate commitment will expire on May 26, 2009. Rates are renewable by the Company during the term of the Revolving Credit Facility for interest periods of one to six months. The Company's Revolving Credit Facility is collateralized by certain accounts receivable, inventories and property, plant and equipment, and shares of a certain subsidiary's outstanding capital stock and ownership interests of certain of the Company's limited liability subsidiaries. The Revolving Credit Facility contains various financial and operating covenants, including, among other things, requirements to maintain certain financial ratios and restrictions on additional indebtedness, common stock dividend payments, capital disposals and intercompany management fees.
The Company was in compliance with all financial covenants as of March 31, 2009.

In 2009, capital expenditures to replace and upgrade existing equipment and install new equipment and fixtures to provide additional operating efficiencies are expected to be $1.8 million.

Capital resources in the future are expected to be used for the development of catalogs and product lines, to acquire additional businesses and for other investing activities. The Company anticipates that there will be sufficient financial resources to meet projected working capital and other cash requirements for at least the next twelve months. Management of the Company believes it has sufficient capacity to maintain current operations and support a sustained level of future growth.

INFLATION

Inflation has had only a minor effect on the Company's operating results and its sources of liquidity. Inflation, including as it related to the increased cost of fuel and plastic materials, did not significantly impact the Company's operating results and its sources of liquidity in each of the first quarters of 2009 and 2008.

SIGNIFICANT ACCOUNTING POLICIES

The preparation of the Condensed Consolidated Financial Statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Condensed Consolidated Financial Statements and notes thereto. Actual results could differ from those estimates. The Company believes that the following accounting policies affect the more significant judgments and estimates used in the preparation of the Condensed Consolidated Financial Statements:

Prepaid Catalog Costs and Amortization - The Company accumulates all direct costs, less applicable vendor rebates, incurred in the development, production and circulation of catalogs on the Condensed Consolidated Balance Sheets until the related catalog is mailed, at which time such catalog costs are amortized into selling and administrative expense over the estimated sales realization cycle of one year, using the ratio of current period revenues to the total of current and future period revenues for each catalog.

Deferred Income Taxes - The Company accounts for income taxes under the asset and liability method, wherein deferred income tax assets and liabilities are recognized for the future tax consequences attributable to differences between the consolidated financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred income 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. The effect on deferred income tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Goodwill - The Company evaluates goodwill for impairment at least annually, or more frequently if events or circumstances indicate that the assets may be impaired, by applying a fair value based test and, if impairment occurs, the amount of impaired goodwill is written off immediately. The Company evaluates goodwill for impairment based on the expected future cash flows or earnings projections. Goodwill is deemed impaired if the estimated discounted cash flows or earnings projections do not substantiate the carrying value. The estimation of such amounts requires significant management judgment with respect to revenue and expense growth rates, changes in working capital and selection of an appropriate discount rate, as applicable. The use of different assumptions would increase or decrease discounted future operating cash flows or earnings projections and could, therefore, change the impairment determination. The Company evaluated its goodwill at December 31, 2008, and determined that there was no impairment of goodwill.

Defined Benefit Plans - The Company accounts for the benefits under its defined benefit pension plan using actuarial models required by SFAS No. 87, "Employers' Accounting for Pensions." These models use an attribution approach that generally spreads individual events over the service lives of the employees in the plan. Examples of "events" are plan amendments and changes in actuarial assumptions such as discount rate, expected return on plan assets and rate of compensation increases. The principle underlying the required attribution approach is that employees render service over their service lives on a relatively consistent basis and, therefore, the statement of earnings effects of pension benefits are earned in, and should be expensed in, the same pattern.

In calculating net periodic benefit cost and the related benefit obligation, the Company is required to select certain actuarial assumptions. These assumptions include discount rate, expected return on plan assets and rate of compensation increase. The

discount rate assumptions reflect the prevailing market rates for long-term, high-quality, fixed-income debt instruments that, if the obligation was settled at the measurement date, would provide the necessary future cash flows to pay the benefit obligation when due. The Company uses long-term historical actual return experience with consideration of the expected investment mix of the plan's assets, as well as future estimates of long-term investment returns, to develop its assumptions of the expected return on plan assets. The rate of compensation increase is based on historical experience and the Company's long-term plans for such increases.

Revenues - Customarily applying FOB-shipping point terms, the Company recognizes revenue upon shipment of products to its customers, which corresponds to the time when risk of ownership transfers. The point of shipment is typically from one of the Company's distribution centers or, on occasion, a vendor's location as a drop shipment. All drop shipment sales are recorded at gross selling price as the Company acts as principal in the transactions.