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

                                    FORM 10-K
(Mark One)


[X]     ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the fiscal year ended March 31, 2002

                                       or

[ ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
        EXCHANGE ACT OF 1934
        For the transition period from ____________ to __________

        Commission file number 33-97090

                               ACG HOLDINGS, INC.
             (Exact name of registrant as specified in its charter)

           Delaware
(State or other jurisdiction                        62-1395968
of incorporation or organization)        (I.R.S. employer identification number)

100 Winners Circle, Brentwood, Tennessee                37027
(address of principal executive offices)              (Zip Code)

Registrants telephone number including area code    (615) 377-0377

                          AMERICAN COLOR GRAPHICS, INC.
             (Exact name of registrant as specified in its charter)

            New York
(State or other jurisdiction of                       16-1003976
incorporation or organization)           (I.R.S. employer identification number)

100 Winners Circle, Brentwood, Tennessee                37027
(address of principal executive offices)              (Zip Code)

Registrants telephone number including area code    (615) 377-0377

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 registrants' 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
          -----

Aggregate  market  value of the voting and  non-voting  common stock of ACG
Holdings, Inc. held by non-affiliates: Not applicable.

ACG Holdings, Inc. has 143,399 shares outstanding of its common stock, $.01 Par
Value, as of May 31, 2002 (all of which are privately owned and not traded on a
public market).

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None



<PAGE>


                                      INDEX



                                                                         Page
                                                                      Referenced
                                                                      Form 10-K
                                                                      ----------


                                     PART I


Item 1. Business............................................................. 2
Item 2. Properties........................................................... 7
Item 3. Legal Proceedings.................................................... 8
Item 4. Submission of Matters to A Vote of Security Holders.................. 8


                                     PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder
        Matters ............................................................. 9
Item 6. Selected Financial Data.............................................. 9
Item 7. Management's Discussion and Analysis of Financial Condition
        and Results of Operations............................................13
Item 7A.Quantitative and Qualitative Disclosures About Market Risk...........23
Item 8. Financial Statements and Supplementary Data..........................24
Item 9. Changes In and Disagreements With Accountants on Accounting and
        Financial Disclosure.................................................51


                                    PART III

Item 10. Directors and Executive Officers ...................................52
Item 11. Executive Compensation..............................................53
Item 12. Security Ownership of Certain Beneficial Owners and Management......58
Item 13. Certain Relationships and Related Transactions......................59



                                     PART IV


Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.....60



         Signatures..........................................................68




<PAGE>





                                     PART I

Special Note Regarding Forward Looking Statements

This Annual Report on Form 10-K (this "Report") contains forward-looking
statements within the meaning of Section 21E of the Securities Act of 1934.
Discussions containing such forward-looking statements may be found in Items 1,
3, 7 and 7A hereof, as well as within this Report generally. In addition, when
used in this Report, the words "believes," "anticipates," "expects" and similar
expressions are intended to identify forward-looking statements. Forward-looking
statements are subject to a number of risks and uncertainties. Actual results in
the future could differ materially from those described in the forward-looking
statements as a result of many factors outside the control of ACG Holdings, Inc.
("Holdings"), together with its wholly-owned subsidiary, American Color
Graphics, Inc. ("Graphics"), including, but not limited to:
    -    a failure to achieve improvements in operating efficiency or income
         from the consolidation of our operations,
    -    fluctuations in the cost of paper and other raw materials used,
    -    changes in the advertising and print markets,
    -    actions by our competitors, particularly with respect to pricing,
    -    the financial condition of our customers,
    -    our financial condition and liquidity,
    -    the general condition of the United States economy,
    -    demand for our products and services, and
    -    the matters set forth in this Report generally.

Consequently, such forward-looking statements should be regarded solely as
our current plans, estimates and beliefs. We do not undertake and specifically
decline any obligation to publicly release the results of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances after the date of such statements or to reflect the occurrence of
anticipated or unanticipated events.

ITEM 1.  BUSINESS

General

We are a successor to a business that commenced operations in 1926, and are one
of the largest national diversified commercial printers in North America with
nine print plants in eight states and Canada, seven stand-alone premedia
facilities located throughout the United States and one digital visual effects
facility located in California that provides special effects services for the
motion picture industry. We operate primarily in two business segments of the
commercial printing industry: print, (which accounted for approximately 87% of
total sales during the fiscal year ended March 31, 2002 ("Fiscal Year 2002"))
and premedia services conducted through our American Color division (which
accounted for approximately 12% of total sales in Fiscal Year 2002). Our print
business and our premedia services business are both headquartered in Brentwood,
Tennessee. Partnerships affiliated with Morgan Stanley Dean Witter & Co.
("MSDW") currently own 57.7% of the outstanding common stock and 72.7% of the
outstanding preferred stock of Holdings.

Market data used throughout this Report was obtained from industry publications
and internal company estimates. While we believe such information is reliable,
the accuracy of such information has not been independently verified and cannot
be guaranteed.

Financial Information About Industry Segments

See segment disclosure in note 16 of our consolidated financial statements
appearing elsewhere in this Report.

                                       2

<PAGE>


Print

Our print business, which accounted for approximately 87%, 86% and 85% of our
sales in Fiscal Year 2002, the fiscal year ended March 31, 2001 ("Fiscal Year
2001") and the fiscal year ended March 31, 2000 ("Fiscal Year 2000"),
respectively, produces retail advertising inserts, comics and other
publications.

Retail Advertising Inserts (86% of print sales in both Fiscal Year 2002 and
Fiscal Year 2001 and 83% in Fiscal Year 2000). We believe that we are one of the
largest printers of retail advertising inserts in the United States. We print
advertising inserts for approximately 270 retailers. Retail advertising inserts
are preprinted advertisements, generally in color, that display products sold by
a particular retailer or manufacturer. Advertising inserts are used extensively
by many different retailers; including discount, department, supermarket, home
center, drug and automotive stores. Inserts are an important and cost effective
means of advertising for these merchants. Advertising inserts are primarily
distributed through insertion in newspapers but are also distributed by direct
mail or in-store by retailers and generally advertise for a specific, limited
sale period. As a result, advertising inserts are both time sensitive and
seasonal.

Comics (8% of print sales in both Fiscal Year 2002 and Fiscal Year 2001 and 11%
in Fiscal Year 2000). We believe that we are one of the largest printers of
comics in the United States. Comics consist of newspaper Sunday comics, comic
insert advertising and comic books. We print Sunday comics for over 200
newspapers in the United States and Canada and print a significant share of the
annual comic book requirements of Marvel Entertainment Group, Inc.

Other Publications (6% of print sales in each of Fiscal Year 2002, Fiscal Year
2001 and Fiscal Year 2000). We print local newspapers, TV guide listings and
other publications.

In the last quarter of Fiscal Year 2001, the print segment began to present
postage revenue in sales as opposed to netting postage revenue against the
related postage costs within cost of sales. This presentation is consistent with
the requirements of Emerging Issues Task Force 00-10 "Accounting for Shipping
and Handling Fees and Costs" ("EITF 00-10"). Under EITF 00-10, the netting of
revenues and expenses associated with shipping and handling is no longer
permitted. The print segment's financial information for Fiscal Year 2001 and
Fiscal Year 2000 has been reclassified to conform with this presentation.

Print Production

Our network of nine print plants in the United States and Canada is
strategically well positioned to service our customers, providing us with
distribution efficiencies and shorter turnaround times, two factors that we
believe will allow our continuing success in servicing large national and
regional accounts. There are primarily three printing processes used to produce
advertising inserts and newspaper supplements: offset lithography (heatset and
cold), rotogravure and flexography. We principally use heatset offset and
flexographic web printing equipment in our print operations. We own the majority
of our printing equipment, which currently consists of 48 heatset offset
presses, 2 coldset offset presses and 11 flexographic presses. Most of our
advertising inserts, publications and comic books are printed using the offset
process, while substantially all of our newspaper Sunday comics and comic
advertising inserts are printed using the flexographic process.

In the heatset offset process, the desired printed images are distinguished
chemically from the non-image areas of a metal plate. This allows the image area
to attract solvent-based ink which is then transferred from the plate to a
rubber blanket and then to the paper surface. Once printed, the web goes through
an oven that evaporates the solvents from the ink, thereby setting the ink on
the paper. In the cold offset process, inks are set by the absorption of
solvents into the paper. Due to the drying process, the heatset offset process
can be utilized on a wide variety of papers. Generally, heatset offset presses
have the ability to provide a more colorful and attractive product than cold
offset presses.

The flexographic process differs from offset printing in that it utilizes relief
image plates and water-based (as opposed to solvent-based) inks. The
flexographic image area results from application of ink to the raised image
surface on the plate, which is transferred directly to the paper. Once printed,
the water-based inks are rapidly dried. Our flexographic printing generally can
provide vibrant color reproduction at a lower cost than heatset offset printing.
The strengths of flexography compared with the rotogravure and offset processes
are faster press set-up times, reduced paper waste, reduced energy use and
maintenance costs, and environmental advantages due to the use of water-based
inks and the use of less paper. Faster press set-up times make the process
particularly attractive to commercial customers with shorter runs and extensive
product versioning.


                                       3

<PAGE>


In addition to press capacity, certain equipment parameters are critical to
competing in the advertising insert market, including cut-off length, folder
capabilities and certain in-line and off-line finishing capabilities. Cut-off
length is one of the determinants of the size of the printed page. Folder
capabilities for advertising inserts must include a wide variety of page sizes,
page counts and page layouts. Finally, some advertising inserts require gluing
or stitching of the product, adding cards, trimming and numbering. These
production activities generally are done in-line with the press to meet the
expedited delivery schedules required by many customers. We believe that our mix
and configuration of presses and press services allows for efficient tailoring
of printing services to customers' product needs.

As is reflective of our national account status, we believe we are one of the
United States' largest mailers. In combination with our national account status
with the United States Postal Service and our experience in such areas as list
services, addressing accuracy and postal service, we are able to offer
distribution and mailing services that help to maximize the advertising impact
and financial return for our customers.

Premedia Services

Our premedia services business is conducted by our American Color division
("American Color") which accounted for approximately 12%, 13% and 14% of our
Fiscal Year 2002, Fiscal Year 2001 and Fiscal Year 2000 sales, respectively. We
believe we are one of the largest full-service providers of premedia services in
the United States (based upon revenues) and a technological leader in this
industry. Our premedia services business commenced operations in 1975. We
provide these services nationwide within our print plants, our seven stand-alone
service locations and through our managed services sites (premedia service
facilities at a customer location). We assist customers in the capture,
manipulation, transmission and distribution of images. The majority of this work
leads to the production of a four-color image in a format appropriate for use by
printers as well as other forms of media. We make page changes, including type
changes, and combine digital page layout information with electronically
captured and color-corrected four-color images. From these digital files,
proofs, final corrections, and finally, four-color films or digital files are
produced for each page. The final four-color films or digital files enable
printers to prepare plates for each color resulting in the appearance of full
color on the printed page generated. Our revenue from these traditional services
is being supplemented by additional revenue sources including digital asset
management, managed services, computer-to-plate services, creative services,
conventional and digital photography, consulting and training services,
multimedia and internet services, and software and data-base management. We have
been a leader in implementing these new technologies, which enables us to reduce
unit costs and effectively service the increasingly complex demands of our
customers more quickly than many of our competitors. We have also been one of
the leaders in the integration of electronic page make-up, desktop
computer-based design and layout, and digital cameras into premedia production.

The premedia services industry is highly fragmented, primarily consisting of
smaller local and regional companies, with only a few national full-service
premedia companies such as American Color, none of which has a significant
nationwide market share.

Competitive Advantages and Strategy

Competitive Advantages. We believe that we have the following competitive
advantages in our print and premedia services businesses:

Modern Equipment. We believe that our web heatset offset and flexographic web
printing equipment is generally among the most advanced in the industry and that
the average age of our equipment is significantly less than the majority of our
regional competitors and is comparable to our major national competitors. We
incorporate technological changes as they occur in order to enhance our process
controls and improve our quality. We acquire auxiliary equipment when
appropriate to increase our product offerings and lower our costs. We are also
committed to a comprehensive, long-term maintenance program, which enhances the
reliability and extends the life of our presses and other production equipment.
We also believe that our premedia equipment is significantly more advanced than
many of our smaller regional competitors, many of whom have not incorporated
digital premedia technologies and computer-to-plate services to the same extent
as we have, nor adopted an open systems environment which allows greater
flexibility and more efficient maintenance.


                                       4

<PAGE>


Strong Customer Base. We provide printing services to a diverse base of
customers, including approximately 270 retailers and over 200 newspapers in the
United States and Canada. Our print services customer base includes a
significant number of the major national retailers and larger newspaper chains
as well as numerous smaller regional retailers. Our consistent focus on
providing high quality print products and strong customer service at competitive
prices has resulted in long-term relationships with many of these customers. Our
premedia services customer base includes large and medium-sized customers in the
retail, publishing, catalog and packaging businesses, many of whom also have
long-term relationships with our print segment. We have been successful in
continuing to increase the proportion of our business under long-term contracts.

Competitive Cost Structure. We have reduced the variable and fixed costs of
production at our print facilities over the past several years and believe we
are well positioned to maintain our competitive cost structure in the future due
to economies of scale. We have also reduced manufacturing costs and selling,
general and administrative expenses in our premedia services business primarily
through the application of certain digital premedia production methodologies,
facility consolidation and continued cost containment focus.

Strong Management Team. Our experienced print management group maintains a clear
focus on our customers, growth, quality and continued cost reduction, resulting
in an improved cost structure and a well-defined strategy for future expansion.
Our management group in the premedia services business consists of individuals
who we believe will manage the premedia services business for growth and
profitability and will continue to upgrade our capabilities.

National Presence. We believe our eight print plants in the United States and
one plant in Canada provide us with distribution efficiencies, strong customer
service, flexibility and short turnaround times, all of which are instrumental
in our continued success in servicing our large national and regional retail
accounts. Our sales and marketing groups provide the necessary customer coverage
and enable us to successfully penetrate regional markets. We believe that our
premedia services facilities provide us with contingency capabilities, increased
capacity during peak periods, access to highly skilled technical personnel
throughout the country, short turnaround time and other customer service
advantages.

Strategy. Our objective is to increase shareholder value by growing our
revenues, increasing our market share and reducing costs. Our strategy to
achieve this objective is as follows:

Grow Unit Volume. We believe that our level of national sales coverage, when
coupled with our significant industry experience and customer-focused sales
force, will result in unit growth. In an effort to stimulate unit volume growth,
we have strengthened our print sales group. Unit volume growth is also expected
to result from continued capital expansion and selective print acquisitions. In
addition, in our premedia services business, we have strengthened our sales
force, provided expanded training, and more closely focused our marketing
efforts on new, larger customers.

Improve Customer and Product Mix. We intend to increase our share of the retail
advertising insert market. In addition, we expect to continue to adjust the mix
of our customers and products within the retail advertising insert market to
those that are more profitable and less seasonal and to maximize the use of our
equipment. We are also continuing expansion of our print facilities'
capabilities for in-plant prepress and postpress services. Our premedia services
business will continue to focus on high value-added new business opportunities,
particularly large-scale projects that will best utilize the breadth of services
and technologies we have to offer. Additionally, we will continue to pursue
large scale managed services opportunities as well as national and large
regional customers that require more sophisticated levels of service and
technologies.

Reduce Manufacturing Costs and Improve Quality. We intend to further reduce our
production costs at our print and premedia service facilities through our Total
Quality Management Process, an ongoing cost reduction and continuous quality
improvement process. Additionally, we plan to continue to maximize scale
advantages in the purchasing, technology and engineering areas. We also intend
to continue to gain variable cost efficiencies in our premedia services business
by using our technical resources to improve digital premedia workflows. In
addition, we believe we will be able to reduce our per unit technical, sales and
management costs as we increase sales in this business.

Make Opportunistic Acquisitions. An integral part of our long-term growth
strategy includes a plan to selectively assess and acquire other print and
premedia services companies that we believe will enhance our leadership position
in these industries.


                                       5

<PAGE>

Restructuring

In January 2002, our Board of Directors approved a restructuring plan for our
print and premedia services segments. This plan included the closing of one
print and one premedia facility, the downsizing of another premedia facility and
the relocation of certain equipment and personnel within our company. This plan
was designed to improve asset utilization, operating efficiency and
profitability. See note 14 to our consolidated financial statements appearing
elsewhere in this Report.

Customers and Distribution

Customers. We sell our print products and services to a large number of
customers, primarily retailers and newspapers, and all of our products are
produced in accordance with customer specifications. We perform approximately
44% of our print work, including the printing of retail advertising inserts,
Sunday comics and comic books, under contracts, ranging in term from one year to
ten years. Many of the contracts automatically extend for one year unless there
has been notice to the contrary from either of the contracting parties within a
certain number of days before the end of any term. For the balance of our print
work, we obtain varying time commitments from our customers ranging from
job-to-job to annual allocations. Print prices are generally fixed during such
commitments; however, our standard terms of trade call for the pass-through of
changes in the price of raw materials, primarily paper and ink.

Our premedia services customers consist of magazine and newspaper publishers,
retailers, catalog sales organizations, printers, consumer products companies,
packaging manufacturers, advertising agencies and direct mail advertisers. Our
customers typically have a need for high levels of technical expertise, short
turnaround times and responsive customer service. In addition to our historical
regional customer base, our premedia services business is increasingly focused
on larger, national accounts that have a need for a broad range of fully
integrated services and communication capabilities requiring leading edge
technology.

The print and premedia services businesses have historically had certain common
customers and our ability to cross-market is an increasingly valuable tool as
computer-to-plate, regional versioning, electronic digital imaging, managed
services and speed to market become more important to our customers. We believe
cross-marketing enables us to provide more comprehensive solutions for our
customers' premedia and printing needs.

No single customer accounted for sales in excess of 10% of our consolidated
sales in Fiscal Year 2002. Our top ten customers accounted for approximately 50%
of our consolidated sales in Fiscal Year 2002.

Distribution. We distribute our print products primarily by truck to customer
designated locations (primarily newspapers and customer retail stores) and via
mail. Distribution costs are generally paid by the customer, and most shipping
is by common carrier. Our premedia services business generally distributes its
products via electronic transmission, overnight express, or other methods of
personal delivery.

Competition

Commercial printing in the United States is a large, highly fragmented,
capital-intensive industry and we compete with numerous national, regional and
local printers. A trend of industry consolidation in recent years can be
attributed to (1) customer preferences for larger printers with a greater range
of services, (2) capital requirements and (3) competitive pricing pressures. We
believe that competition in the print business is based primarily on quality and
service at a competitive price.

American Color competes with numerous premedia services firms on both a national
and regional basis. The industry is highly fragmented, primarily consisting of
smaller local and regional companies, with only a few national full-service
premedia companies such as American Color, none of which has a significant
nationwide market share.


                                       6

<PAGE>


Raw Materials

The primary raw materials used in our print business are paper and ink. During
Fiscal Year 2000, paper prices were on average at lower levels than comparable
periods in the prior year. Throughout Fiscal Year 2001, the cost of paper
increased. In Fiscal Year 2002, demand for advertising declined, resulting in
reduced paper requirements. The reduction in paper requirements resulted in a
decline in paper prices throughout the year. Management expects that, as a
result of our strong relationships with key suppliers, our material costs will
remain competitive within the industry. In accordance with industry practice, we
generally pass through increases in the cost of paper to customers in the costs
of our printed products, while decreases in paper costs generally result in
lower prices to customers. We purchase all of our ink and related products under
long-term ink supply contracts. The primary inputs in premedia service processes
are film and proofing materials.

In both of our business segments, there is an adequate supply of the necessary
materials available from multiple vendors. We are not dependent on any single
supplier and have had no significant problems in the past obtaining necessary
raw materials.

Seasonality

Some of our print and premedia services business is seasonal in nature,
particularly those revenues derived from advertising inserts. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Seasonality" appearing elsewhere in this Report.

Backlog

Because our print and premedia services products are required to be delivered
soon after final customer orders are received, we do not experience any backlog
of unfilled customer orders.

Employees

As of April 30, 2002, we had a total of approximately 2,430 employees, of which
approximately 230 employees are represented by a collective bargaining agreement
that will expire on December 31, 2004. We consider our relations with our
employees to be excellent.

Governmental and Environmental Regulations

We are subject to regulation under various federal, state and local laws
relating to employee safety and health, and to the generation, storage,
transportation, disposal and emission into the environment of hazardous
substances. We believe that we are in material compliance with such laws and
regulations. Although compliance with such laws and regulations in the future is
likely to entail additional capital expenditures, we do not anticipate that such
expenditures will be material. See "Legal Proceedings - Environmental Matters"
appearing elsewhere in this Report.

ITEM 2.  PROPERTIES

We operate in 17 locations in 12 states and Canada. We own seven print plants in
the United States and one in Canada and lease one print plant in California. Our
American Color division has seven stand-alone production locations, all of which
are leased. Our American Color division also operates premedia services
facilities on the premises of several of our customers ("managed services") and
in each of our print plants. In addition, we maintain one small executive office
in Connecticut, a digital visual effects facility in California and our
headquarter facility in Brentwood, Tennessee, all of which are leased. We
believe that our plants and facilities are adequately equipped and maintained
for present and planned operations.

                                       7


<PAGE>


ITEM 3.  LEGAL PROCEEDINGS

We have been named as a defendant in several legal actions arising from our
normal business activities. In the opinion of management, any liabilities that
may arise from such actions will not, individually or in the aggregate, have a
material adverse effect on our financial condition or results of operations.

Environmental Matters

Graphics, together with over 300 other persons, has been designated by the U.S.
Environmental Protection Agency as a potentially responsible party (a "PRP")
under the Comprehensive Environmental Response Compensation and Liability Act
("CERCLA," also known as "Superfund") at one Superfund site. Although liability
under CERCLA may be imposed on a joint and several basis and our ultimate
liability is not precisely determinable, the PRPs have agreed that Graphics'
share of removal costs is approximately 0.46% and therefore Graphics believes
that its share of the anticipated remediation costs at such site will not be
material to its business or financial condition. Based upon an analysis of
Graphics' volumetric share of waste contributed to the site and the agreement
among the PRPs, we maintain a reserve of approximately $0.1 million in
connection with this liability on our consolidated balance sheet at March 31,
2002. We believe this amount is adequate to cover such liability.

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

None.

                                       8


<PAGE>


                                     PART II

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

    Market Information
    ------------------

    There is no established public market for the common stock of either
    Holdings or Graphics.

    Holders
    -------

    As of May 31, 2002, there were approximately 98 record holders of Holdings'
    common stock. Holdings is the sole shareholder of Graphics' common stock.

    Dividends
    ---------

    There have been no cash dividends declared on any class of common equity for
    the two most recent fiscal years. See restrictions on Holdings' ability to
    pay dividends and Graphics' ability to transfer funds to Holdings in note 1
    to our consolidated financial statements appearing elsewhere in this Report.

    Recent Sales of Unregistered Securities
    ---------------------------------------

    During the first and third quarters of Fiscal Year 2000, certain officers
    exercised options to purchase an aggregate of 8,143 and 1,106 shares of
    Holdings stock, respectively, for $.01/share. The securities that were sold
    were exempt from registration on the basis that all such officers are
    "accredited investors" as defined by the rules of the Securities Act of
    1933, as amended.


ITEM 6.  SELECTED FINANCIAL DATA

Set forth below is selected financial data for and as of the fiscal years ended
March 31, 2002, 2001, 2000, 1999 and 1998. The balance sheet data as of March
31, 2002, 2001, 2000, 1999 and 1998 and the statement of income data for the
fiscal years ended March 31, 2002, 2001, 2000, 1999 and 1998 are derived from
the audited consolidated financial statements for such periods and at such
dates. The selected financial data below, for the fiscal year ended March 31,
1998, also reflects our discontinued wholly-owned subsidiary, Sullivan Media
Corporation ("SMC").

This data should be read in conjunction with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and our consolidated
financial statements appearing elsewhere in this Report.


                                       9

<PAGE>





                                             Selected Financial Data
                                                ACG Holdings, Inc.

<TABLE>
<CAPTION>
                                                                               Fiscal Year Ended March 31,
                                                             ----------------------------------------------------------------
                                                                2002          2001         2000          1999          1998
                                                             ----------------------------------------------------------------
Statement of Income Data:                                                         (Dollars in thousands)
<S>                                                          <C>             <C>          <C>           <C>           <C>
Sales                                                        $ 542,421       606,039      554,282       520,343       533,335
Cost of Sales                                                  465,448       508,188      464,017       439,091       461,407
                                                             ---------     ---------    ---------     ---------     ---------
    Gross Profit                                                76,973        97,851       90,265        81,252        71,928
Selling, general and administrative expenses (a)                37,961        44,232       44,181        46,333        54,227
Restructuring costs and other special charges (b)               12,920          --           --           5,464         5,598
                                                             ---------     ---------    ---------     ---------     ---------
    Operating income                                            26,092        53,619       46,084        29,455        12,103
Interest expense, net                                           29,806        32,929       33,798        36,077        38,813
Other expense                                                      637         1,194          627         1,217           412
Income tax expense (benefit) (c)                                (5,073)       (4,927)       2,189           523         2,106
                                                             ---------     ---------    ---------     ---------     ---------
     Income (loss) from continuing operations
     before extraordinary items                                    722        24,423        9,470        (8,362)      (29,228)
                                                             ---------     ---------    ---------     ---------     ---------
Discontinued operations: (d)

      Estimated loss on shut down, net of tax                     --            --           --            --            (667)

Extraordinary loss on early extinguishment of
debt (e)                                                          --            --           --          (4,106)         --
                                                             ---------     ---------    ---------     ---------     ---------
Net income (loss)                                            $     722        24,423        9,470       (12,468)      (29,895)
                                                             =========     =========    =========     =========     =========
Balance Sheet Data (at end of period):

Working capital (deficit)                                    $    (865)       15,288       (2,973)       (5,451)       11,610
Total assets                                                 $ 280,513       302,202      303,812       299,000       329,958
Long-term debt and capitalized leases,
  including current installments                             $ 252,792       261,706      277,344       289,589       319,657
Stockholders' deficit                                        $ (96,020)      (85,867)    (109,389)     (119,306)     (106,085)

Other Data:

Net cash provided by operating activities                    $  38,216        40,913       38,774        48,137        18,257
Net cash used by investing activities                        $ (16,493)      (19,006)     (24,145)      (10,364)      (10,100)
Net cash used by financing activities                        $ (17,189)      (21,968)     (14,576)      (37,812)       (8,143)
Capital expenditures (including lease                        $  24,550        25,271       22,724        16,238        23,713
  obligations entered into)
Ratio of earnings to fixed charges                                  (f)         1.56x        1.32x           (f)           (f)
EBITDA (g)                                                   $  61,573        88,305       80,007        64,286        52,367
</TABLE>


                                                             10

<PAGE>


NOTES TO SELECTED FINANCIAL DATA

(a) For the fiscal year ended March 31, 1998 ("Fiscal Year 1998") selling,
    general and administrative expense includes $1.5 million of non-recurring
    American Color charges associated with the relocation of American Color's
    corporate office and various severance related expenses and $0.6 million of
    non-cash charges associated with an employee benefit program.

(b) In January 2002, we approved a restructuring plan for our print and American
    Color divisions, which was designed to improve asset utilization, operating
    efficiency and profitability. We recorded $8.6 million of costs under this
    plan in Fiscal Year 2002.

    In March 1999, we approved a restructuring plan for our American Color
    division, which was designed to consolidate certain facilities in order to
    improve asset utilization and operational efficiency, modify the
    organizational structure as a result of facility consolidation and other
    changes and reduce overhead and other costs. We recorded $4.6 million of
    costs under this plan in the fiscal year ended March 31, 1999 ("Fiscal Year
    1999").

    In January 1998, we approved a restructuring plan for our print division
    designed to improve responsiveness to customer requirements, increase asset
    utilization and reduce overhead costs. We recorded $3.9 million of costs
    under this plan in Fiscal Year 1998.

    In addition, we recorded $4.3 million, $0.9 million and $1.7 million of
    other special charges related to asset write-offs and write-downs in our
    print and American Color divisions in Fiscal Year 2002, Fiscal Year 1999 and
    Fiscal Year 1998, respectively. See note 14 to our consolidated financial
    statements appearing elsewhere in this Report for further discussion of
    Fiscal Year 2002 and 1999 restructuring activity.

(c) In the fourth quarter of Fiscal Year 2002, the valuation allowance for
    deferred tax assets was reduced by $5.5 million, resulting in a
    corresponding credit to deferred income tax expense. This adjustment
    reflected a change in circumstances which resulted in a judgment that a
    corresponding amount of our deferred tax assets will be realized in future
    years. The valuation allowance decreased by $0.1 million during Fiscal Year
    2002 as a result of changes in the deferred tax items. This decrease
    primarily includes the $5.5 million decrease discussed above and a $4.2
    million increase related to the tax effect of the minimum pension liability,
    which is a component of other comprehensive income.

(d) In February of the fiscal year ended March 31, 1997, we made a strategic
    decision to shut down the operation of our wholly-owned subsidiary SMC.
    SMC's shut down has been accounted for as a discontinued operation, and
    accordingly, SMC's operations are segregated in our consolidated financial
    statements.

(e) As part of a refinancing transaction entered into on May 8, 1998 (the "1998
    Refinancing"), we recorded an extraordinary loss related to early
    extinguishment of debt of $4.1 million, net of zero taxes. This
    extraordinary loss primarily consisted of the write-off of deferred
    financing costs related to refinanced indebtedness in Fiscal Year 1999.

(f) The deficiency in earnings required to cover fixed charges for the fiscal
    years ended March 31, 2002, 1999 and 1998 was $4,351, $7,839 and $27,122,
    respectively. The deficiency in earnings to cover fixed charges is computed
    by subtracting earnings before fixed charges, income taxes, discontinued
    operations and extraordinary items from fixed charges. Fixed charges consist
    of interest expense and one-third of operating lease rental expense, which
    is deemed to be representative of the interest factor. The deficiency in
    earnings required to cover fixed charges includes non-cash depreciation of
    property, plant and equipment and amortization of goodwill and other assets
    and other non-cash charges which are reflected in the financial statements,
    in the following amounts (in thousands):

                                         Fiscal Year Ended March 31,
                                   ----------------------------------------
                                       2002           1999          1998
                                   -----------     ----------    ----------
         Depreciation             $   27,024      $  29,651     $  28,124
         Amortization                  4,175          4,025        10,413
         Non-cash charges              4,723            945         2,301
                                   -----------     ----------    ----------
           Total                  $   35,922      $  34,621     $  40,838
                                   ===========     ==========    ==========


                                       11
<PAGE>



(g) EBITDA is included in the Selected Financial Data because we believe that
    investors regard EBITDA as a key measure of a leveraged company's
    performance and ability to meet its future debt service requirements. EBITDA
    is defined as earnings before net interest expense, income tax expense
    (benefit), depreciation, amortization, other non-cash expenses, other
    special charges related to asset write-offs and write-downs, other expense
    (income), discontinued operations and extraordinary items. EBITDA is not a
    measure of financial performance under generally accepted accounting
    principles and should not be considered an alternative to net income (or any
    other measure of performance under generally accepted accounting principles)
    as a measure of performance or to cash flows from operating, investing or
    financing activities as an indicator of cash flows or as a measure of
    liquidity. Certain covenants in the Indenture dated as of August 15, 1995
    and the bank credit agreement entered into in May 1998 are based on EBITDA,
    subject to certain adjustments.

    EBITDA in Fiscal Year 2002 includes restructuring costs related to the print
    and American Color divisions of $6.5 million and $2.1 million, respectively.

    EBITDA in Fiscal Year 2000 includes $0.5 million of non-recurring costs
    associated with the consolidation of certain production facilities at the
    American Color division.

    EBITDA in Fiscal Year 1999 includes $4.6 million in restructuring costs
    related to the American Color division, $0.6 million of non-recurring costs
    associated with the consolidation of certain production facilities at the
    American Color division, $0.3 million of non-recurring employee termination
    expenses and $0.2 million of non-cash charges associated with an employee
    benefit program.

    EBITDA in Fiscal Year 1998 includes $3.9 million in restructuring costs
    related to the print division, $1.5 million of non-recurring charges
    associated with the relocation of American Color's corporate office and
    various severance related expenses, and $0.7 million of certain charges
    associated with employee benefit programs.



                                       12
<PAGE>


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


Overview


Print. Commercial printing in the United States is highly competitive. The
significant capital required to keep pace with changing technology and
competitive pricing trends has led to a trend of industry consolidation in
recent years. In addition, customers' preferences for larger printers, such as
our company, with a wider variety of services, greater distribution
capabilities, critical scale and more flexibility have also contributed to
consolidation within the industry. The industry is expected to remain
competitive in the near future and our sales will continue to be subject to
changes in retailers' demands for printed products.

The cost of paper is a principal factor in our overall pricing to our customers.
The level of paper costs also has a significant impact on our reported sales.
During Fiscal Year 2000, paper prices were on average at lower levels than
comparable periods in the previous year. Throughout Fiscal Year 2001, the cost
of paper increased. In Fiscal Year 2002, demand for advertising declined,
resulting in reduced paper requirements. The reduction in paper requirements
resulted in a decline in paper prices throughout the year. In accordance with
industry practice, we generally pass through increases in the cost of paper to
customers in the costs of our printed products, while decreases in paper costs
generally result in lower prices to customers.

In recent years, comprehensive quality improvement and cost reduction programs
have been implemented for all our printing processes. As a result of these
measures, we have been successful in lowering our manufacturing costs within the
print segment, while improving product quality.

American Color (Premedia Services). The premedia services industry has
experienced significant technological advances as electronic digital premedia
systems have replaced the more manual and photography-based methods utilized in
the past. Over the last several years, this shift in technology, which improved
process efficiencies and reduced processing costs, produced increased unit
growth for American Color as the demand for color pages increased. Selling price
levels per page, however, have declined because of greater efficiencies
resulting from technological advancements. Revenue from traditional services is
being supplemented by additional revenue sources including digital asset
management, managed services, computer-to-plate services, creative services,
conventional and digital photography, consulting and training services,
multimedia and internet services, and software and data-base management.



                                       13
<PAGE>


The following table summarizes our historical results of continuing operations
for Fiscal Years 2002, 2001 and 2000:

                                           Fiscal Year Ended March 31,
                                   ---------------------------------------------
                                     2002              2001             2000
                                   --------          --------         ---------
                                               (Dollars in thousands)


Sales

   Print                           $ 473,915          519,961          470,458

   American Color                     65,293           80,060           80,240

   Other (a)                           3,213            6,018            3,584
                                   ---------        ---------        ---------
     Total                           542,421          606,039          554,282
                                   =========        =========        =========

Gross Profit

   Print                           $  62,673           74,745           73,572

   American Color                     15,130           22,856           17,971

   Other (a)                            (830)             250           (1,278)
                                   ---------        ---------        ---------
      Total                        $  76,973           97,851           90,265
                                   =========        =========        =========

Gross Margin

   Print                                13.2%            14.4%            15.6%

   American Color                       23.2%            28.6%            22.4%

      Total                             14.2%            16.2%            16.3%

Operating Income (Loss)

   Print (b)                       $  31,148           49,918           49,446

   American Color (b)                  2,805           11,409            4,883

   Other (a) (c)                      (7,861)          (7,708)          (8,245)
                                   ---------        ---------        ---------
        Total                      $  26,092           53,619           46,084
                                   =========        =========        =========

(a) Other operations primarily include revenues and expenses associated with our
    digital visual effects business ("Digiscope").

(b) Print and American Color operating income in Fiscal Year 2002 includes the
    impact of restructuring costs of $6.5 million and $2.1 million,
    respectively. Print and American Color operating income in Fiscal Year 2002
    also includes $3.9 million and $0.4 million of other special charges related
    to non-cash asset write-offs and write-downs, respectively. See
    "Restructuring Costs and Other Special Charges" below. American Color's
    operating income also includes $0.6 million of non-recurring charges in
    Fiscal Year 2000 associated with the consolidation of certain production
    facilities.

(c) Also includes corporate general and administrative expenses, and
    amortization expense.



                                       14
<PAGE>

Historical Results of Operations

                      Fiscal Year 2002 vs. Fiscal Year 2001

Total sales decreased 10.5% to $542.4 million in Fiscal Year 2002 from $606.0
million in Fiscal Year 2001. This decrease primarily reflects a decrease in
print sales of $46.1 million, or 8.9%, and a decrease in American Color's sales
of $14.8 million, or 18.4%. Total gross profit decreased to $77.0 million, or
14.2% of sales, in Fiscal Year 2002 from $97.9 million, or 16.2% of sales, in
Fiscal Year 2001. Total operating income decreased to $26.1 million, or 4.8% of
sales, in Fiscal Year 2002 from $53.6 million, or 8.8% of sales, in Fiscal Year
2001. See the discussion of these changes by segment below.

In the fourth quarter of Fiscal Year 2001, the print segment began to present
postage revenue in sales as opposed to netting postage revenue against the
related postage costs within cost of sales. This presentation is consistent with
the requirements of EITF 00-10. Under EITF 00-10, the netting of revenues and
expenses associated with shipping and handling is no longer permitted. The
financial information for Fiscal Year 2001 and Fiscal Year 2000 has been
reclassified to conform with this presentation.

Print

Sales. Print sales decreased $46.1 million to $473.9 million in Fiscal Year 2002
from $520.0 million in Fiscal Year 2001. The decrease in Fiscal Year 2002
includes a 6.9% decrease in print production volume, a decrease in postage
revenues, an increase in customer supplied paper and the impact of declining
paper prices. The reduced production volume is largely attributable to weakness
in the retail industry and the corresponding reduction in demand for printing as
a result of reduced advertising spending during Fiscal Year 2002. In response to
the current economic conditions, we have consolidated production. See the
discussion of the January 2002 restructuring plan below under "Restructuring
Costs and Other Special Charges".

Gross Profit. Print gross profit decreased $12.0 million to $62.7 million in
Fiscal Year 2002 from $74.7 million in Fiscal Year 2001. Print gross margin
decreased to 13.2% in Fiscal Year 2002 from 14.4% in Fiscal Year 2001. The
decreases in gross profit and gross margin are largely related to the decreased
print production volume and certain changes in product and customer mix.

Selling, General and Administrative Expenses. Print selling, general and
administrative expenses decreased $3.6 million to $21.2 million, or 4.5% of
print sales, in Fiscal Year 2002, from $24.8 million, or 4.8% of print sales, in
Fiscal Year 2001. This decrease includes the impact of decreases in certain
selling and employee related expenses.

Operating Income. As a result of the above factors and the incurrence of
restructuring and other special charges associated with the January 2002
restructuring plan of $10.4 million in Fiscal Year 2002 (see "Restructuring
Costs and Other Special Charges" below), operating income from the print
business decreased $18.8 million to $31.1 million in Fiscal Year 2002 from $49.9
million in Fiscal Year 2001.

American Color (Premedia Services)

Sales. American Color's sales decreased $14.8 million to $65.3 million in Fiscal
Year 2002 from $80.1 million in Fiscal Year 2001. The decrease in Fiscal Year
2002 was primarily the result of reduced premedia production volume. The reduced
volume includes the impact of the economic slowdown and related weakness in
demand for advertising during Fiscal Year 2002. See the discussion of the
January 2002 restructuring plan below under "Restructuring Costs and Other
Special Charges".

Gross Profit. American Color's gross profit decreased $7.8 million to $15.1
million in Fiscal Year 2002 from $22.9 million in Fiscal Year 2001. American
Color's gross margin decreased to 23.2% in Fiscal Year 2002 from 28.6% in Fiscal
Year 2001. The decreases in gross profit and gross margin are primarily the
result of reduced premedia production volume, offset in part by reduced
manufacturing costs due to the continuance of various cost containment programs
at the production facilities.


                                       15
<PAGE>


Selling, General and Administrative Expenses. American Color's selling, general
and administrative expenses decreased $1.6 million to $9.8 million, or 15.0% of
American Color's sales in Fiscal Year 2002, from $11.4 million, or 14.3% of
American Color's sales in Fiscal Year 2001. This decrease includes the impact of
decreases in certain selling and employee related expenses.

Operating Income. As a result of the above factors and the incurrence of
restructuring and other special charges associated with the January 2002
restructuring plan of $2.5 million in Fiscal Year 2002 (see "Restructuring Costs
and Other Special Charges" below), operating income at American Color decreased
$8.6 million to $2.8 million in Fiscal Year 2002 from $11.4 million in Fiscal
Year 2001.

                      Fiscal Year 2001 vs. Fiscal Year 2000

Total sales increased 9.3% to $606.0 million in Fiscal Year 2001 from $554.3
million in Fiscal Year 2000. This increase is primarily attributable to an
increase in print sales of $49.5 million, or 10.5%. Total gross profit increased
to $97.9 million, or 16.2% of sales, in Fiscal Year 2001 from $90.3 million, or
16.3% of sales, in Fiscal Year 2000. Total operating income increased to $53.6
million, or 8.8% of sales, in Fiscal Year 2001 from $46.1 million, or 8.3% of
sales, in Fiscal Year 2000. See the discussion of these changes by segment
below.


Print

Sales. Print sales increased $49.5 million to $520.0 million in Fiscal Year 2001
from $470.5 million in Fiscal Year 2000. The increase in Fiscal Year 2001
primarily includes the impact of increased paper prices and postage revenues and
a slight increase in production volume.

Gross Profit. Print gross profit increased $1.1 million to $74.7 million in
Fiscal Year 2001 from $73.6 million in Fiscal Year 2000. Print gross margin
decreased to 14.4% in Fiscal Year 2001 from 15.6% in Fiscal Year 2000. The
increase in gross profit includes the impact of reduced manufacturing costs and
increased production volume. The decrease in gross margin is primarily
attributable to the impact of increased paper prices reflected in sales.

Selling, General and Administrative Expenses. Print selling, general and
administrative expenses increased to $24.8 million, or 4.8% of print sales, in
Fiscal Year 2001 from $24.1 million, or 5.1% of print sales, in Fiscal Year
2000. This increase includes increases in certain selling and employee related
expenses, offset in part by a reduction in pension costs.

Operating Income. As a result of the above factors, operating income from the
print business increased to $49.9 million in Fiscal Year 2001 from $49.4 million
in Fiscal Year 2000.


American Color (Premedia Services)

Sales. American Color's sales of $80.1 million in Fiscal Year 2001 approximated
sales of $80.2 million in Fiscal Year 2000.

Gross Profit. American Color's gross profit increased $4.9 million to $22.9
million in Fiscal Year 2001 from $18.0 million in Fiscal Year 2000. American
Color's gross margin increased to 28.6% in Fiscal Year 2001 from 22.4% in Fiscal
Year 2000. These increases are primarily the result of reduced manufacturing
costs related to various cost containment programs and the consolidation of
certain production sites. Fiscal Year 2000 included $0.6 million of
non-recurring costs associated with the consolidation of certain production
sites.

Selling, General and Administrative Expenses. American Color's selling, general
and administrative expenses decreased to $11.4 million, or 14.3% of American
Color's sales in Fiscal Year 2001, from $13.1 million, or 16.3% of American
Color's sales in Fiscal Year 2000. These decreases include the impact of various
cost containment programs implemented during Fiscal Year 2000.

Operating Income. As a result of the above factors, operating income at American
Color increased $6.5 million to $11.4 million in Fiscal Year 2001 from $4.9
million in Fiscal Year 2000.


                                       16
<PAGE>



Other Operations (Fiscal Year 2002 vs. Fiscal Year 2001 and Fiscal Year 2001 vs.
Fiscal Year 2000)

Other operations consist primarily of revenues and expenses associated with
Digiscope and corporate general, administrative and other expenses, including
amortization expense.

Operating losses from other operations increased to a loss of $7.9 million in
Fiscal Year 2002 from a loss of $7.7 million in Fiscal Year 2001. This change
includes a $0.8 million increase in operating losses at Digiscope due primarily
to lower digital visual effects production volume, offset in part by decreases
in certain corporate general and administrative expenses.

Operating losses from other operations improved to a loss of $7.7 million in
Fiscal Year 2001 from a loss of $8.2 million in Fiscal Year 2000. This change
includes a $1.4 million decrease in operating losses at Digiscope due primarily
to higher digital visual effects production volume, offset in part by increases
in certain corporate general and administrative expenses and increased
amortization expense.

Non-cash amortization expenses (which primarily includes goodwill amortization)
within other operations, were $3.0 million, $3.2 million and $2.8 million in
Fiscal Years 2002, 2001 and 2000, respectively.

Restructuring Costs and Other Special Charges

Restructuring Costs

In January 2002, our Board of Directors approved a restructuring plan for our
print and premedia services segments designed to improve asset utilization,
operating efficiency and profitability. This plan included the closing of our
print facility in Hanover, Pennsylvania and our premedia services facility in
West Palm Beach, Florida, the downsizing of our Buffalo, New York premedia
services facility and the elimination of certain administrative personnel. This
action resulted in the elimination of 189 positions within our company.

As a result of this plan, we recorded a pretax restructuring charge of
approximately $8.6 million in the fourth quarter of Fiscal Year 2002. This
charge is classified within restructuring costs and other special charges in our
consolidated statement of income in Fiscal Year 2002. The cost of this
restructuring plan has been accounted for in accordance with the guidance set
forth in Emerging Issues Task Force Issue 94-3 "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(Including Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). The
restructuring charge includes severance and related termination benefits, lease
termination costs primarily related to future lease commitments, equipment
deinstallation costs directly associated with the disassembly of certain
printing presses and other equipment, and other costs primarily including legal
fees, site clean-up costs and the write-off of certain press related parts that
provide no future use or functionality.

The following table summarizes the activity related to this restructuring plan
for Fiscal Year 2002 (in thousands):

<TABLE>
<CAPTION>
                                                                                     03/31/02
                                                     Restructuring                 Restructuring
                                                        Charges        Activity       Reserve
                                                     -------------     --------    -------------
<S>                                                    <C>              <C>            <C>
        Severance and other employee costs             $ 5,065          (1,546)        3,519
        Lease termination costs                          1,517            (228)        1,289
        Equipment deinstallation costs                   1,010          (1,010)         --
        Other costs                                      1,046            (623)          423
                                                       -------          ------         -----
                                                       $ 8,638          (3,407)        5,231
                                                       =======          ======         =====
</TABLE>


As of March 31, 2002, we believe the restructuring reserve of $5.2 million is
adequate. The process of closing two facilities and downsizing one facility,
including equipment deinstallation and relocation of that equipment to other
facilities, was completed by March 31, 2002. The majority of all remaining costs
will be paid or settled before March 31, 2003. These costs will be funded
through cash generated from operations and borrowings under our Revolving Credit
Facility (defined below).


                                       17
<PAGE>



In March 1999, we approved a plan for our American Color division, which was
designed to consolidate certain facilities in order to improve asset utilization
and operational efficiency, modify the organizational structure as a result of
facility consolidation and other changes and reduce overhead and other costs.
Approximately $3.1 million of these costs were paid or settled before March 31,
2000. During Fiscal Year 2002 and Fiscal Year 2001, $0.3 million and $1.1
million of these costs were paid, respectively. The remaining $0.1 million
balance in the restructuring reserve at March 31, 2002 includes remaining
payouts of involuntary employee termination and lease commitment costs.

Other Special Charges

We recorded an impairment charge of approximately $4.3 million in the fourth
quarter of our Fiscal Year 2002, to reflect the decision to abandon certain
company assets. The provision was based on a review of our long-lived assets in
accordance with Statement of Financial Accounting Standards No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of"
("SFAS 121"). This impairment charge is classified within restructuring costs
and other special charges in the consolidated statements of income.

Interest Expense

Interest expense decreased 9.3% to $30.0 million in Fiscal Year 2002 from $33.0
million in Fiscal Year 2001. This decrease reflects lower levels of indebtedness
and lower borrowing costs. See note 5 to our consolidated financial statements
appearing elsewhere in this Report.

Interest expense decreased 2.7% to $33.0 million in Fiscal Year 2001 from $34.0
million in Fiscal Year 2000. This decrease reflects lower levels of
indebtedness, offset in part by increased borrowing costs.

Income Taxes

For Fiscal Year 2002, our federal tax benefit was greater than the federal tax
benefit calculated using the federal statutory rate. For Fiscal Years 2001 and
2000, our federal tax expense was less than the federal tax expense calculated
using the federal statutory rate. These differences were primarily due to
decreases in the valuation allowance, partially offset by amortization of
nondeductible goodwill and foreign tax expense. In the fourth quarter of Fiscal
Year 2002, the valuation allowance for deferred tax assets was reduced by $5.5
million, resulting in a corresponding credit to deferred income tax expense.
This adjustment reflected a change in circumstances which resulted in a judgment
that a corresponding amount of our deferred tax assets will be realized in
future years. The valuation allowance decreased by $0.1 million during Fiscal
Year 2002 as a result of changes in the deferred tax items. This decrease
primarily includes the $5.5 million decrease discussed above and a $4.2 million
increase related to the tax effect of the minimum pension liability, which is a
component of other comprehensive income.

Net Income

As a result of the factors discussed above, our net income decreased to $0.7
million in Fiscal Year 2002 from $24.4 million in Fiscal Year 2001. Our net
income increased to $24.4 million in Fiscal Year 2001 from $9.5 million in
Fiscal Year 2000. Fiscal Year 2002 net income includes $8.6 million of
restructuring costs and $4.3 million of other special charges related to asset
write-offs associated with the January 2002 restructuring plan.

Minimum Pension Liability

In compliance with Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" ("SFAS 87"), we recorded a minimum pension
liability of approximately $10.8 million in Fiscal Year 2002. This liability
represents the amount that the accumulated benefit obligation exceeds the fair
value of the plan assets at March 31, 2002. The recording of this liability had
no impact on our consolidated statement of income for Fiscal Year 2002, but is
recorded as a component of other comprehensive loss in our consolidated
statement of stockholders' deficit at March 31, 2002.


                                       18
<PAGE>


Liquidity and Capital Resources

We have a $145 million credit facility with a syndicate of lenders (the "Bank
Credit Agreement") that provides for:

    (1)  a $25 million amortizing term loan facility maturing on March 31, 2004
         (the "A Term Loan Facility"),
    (2)  a $50 million amortizing term loan facility maturing on March 31, 2005
         (the "B Term Loan Facility"), and
    (3)  a revolving credit facility providing for a maximum of $70 million
         borrowing availability, subject to certain customary conditions,
         maturing on March 31, 2004, including up to $40 million for letters of
         credit, (the "Revolving Credit Facility").

At March 31, 2002, we had no borrowings outstanding under the Revolving Credit
Facility and had letters of credit outstanding of approximately $22.6 million.
As a result, we had additional borrowing availability of approximately $47.4
million.

At March 31, 2002, $9.5 million of the A Term Loan Facility and $39.6 million of
the B Term Loan Facility remained outstanding. Scheduled A Term Loan Facility
and B Term Loan Facility payments due in Fiscal Year 2003 are approximately $5.3
million and $4.7 million, respectively. Scheduled repayments of existing capital
lease obligations and other senior indebtedness during Fiscal Year 2003 are
approximately $8.3 million and $1.7 million, respectively.

During Fiscal Year 2002, we repurchased in the open market, an aggregate
principal amount of $8.2 million of our 12 3/4 % Senior Subordinated Notes Due
2005 (the "Notes") for approximately $8.1 million.

In Fiscal Year 2002, net cash provided by operating activities of $38.2 million
(see consolidated statements of cash flows appearing elsewhere in this Report)
and proceeds from the sale of fixed assets of $0.4 million were primarily used
to fund the following expenditures:

    (1)  $17.2 million in principal repayments of indebtedness and financing
         costs (including capital lease obligations of $7.5 million and
         repurchase of the Notes of $8.2 million), and
    (2)  $16.8 million in cash capital expenditures.

Our cash-on-hand of approximately $24.1 million is presented net of outstanding
checks and accordingly, cash is presented at a balance of $4.5 million in the
March 31, 2002 balance sheet. We plan to continue our program of upgrading our
print and premedia equipment and currently anticipate that Fiscal Year 2003 cash
capital expenditures will be approximately $28 million and equipment acquired
under capital leases will be approximately $1 million.

Our primary sources of liquidity are cash provided by operating activities and
borrowings under the Revolving Credit Facility. We anticipate that our primary
needs for liquidity will be to conduct our business, meet our debt service
requirements, make capital expenditures and, if we elect, redeem, repay or
repurchase outstanding indebtedness, including repurchases of Notes in privately
negotiated transactions or in open market purchases, to the extent permitted by
our Bank Credit Agreement.

At March 31, 2002, we had total indebtedness outstanding of $252.8 million,
including capital lease obligations, as compared to $261.7 million at March 31,
2001, representing a net reduction in total indebtedness during Fiscal Year 2002
of $8.9 million. Of the total debt outstanding at March 31, 2002, $49.1 million
(excluding letters of credit) was outstanding under the Bank Credit Agreement at
a weighted-average interest rate of 4.7%. Indebtedness under the Bank Credit
Agreement bears interest at floating rates. At March 31, 2002, we had
indebtedness other than obligations under the Bank Credit Agreement of $203.7
million (including $171.8 million of the Notes). We are currently in compliance
with all financial covenants set forth in the Bank Credit Agreement. See note 5
to our consolidated financial statements appearing elsewhere in this Report.

A significant portion of Graphics' long-term obligations, including indebtedness
under the Bank Credit Agreement and the Notes, has been fully and
unconditionally guaranteed by Holdings. Holdings is subject to certain
restrictions under its guarantee of indebtedness under the Bank Credit
Agreement, including among other things, restrictions on mergers, acquisitions,
incurrence of additional debt and payment of cash dividends. See note 1 to our
consolidated financial statements appearing elsewhere in this Report.


                                       19
<PAGE>


EBITDA
                                             Fiscal Year Ended March 31,
                                    --------------------------------------------
                                      2002              2001             2000
                                    --------          --------         --------
                                               (Dollars in thousands)
EBITDA

   Print (a)                        $ 57,170           74,298           72,543

   American Color (a)                  8,437           17,075           11,003

   Other (b)                          (4,034)          (3,068)          (3,539)
                                    --------         --------         --------

      Total                         $ 61,573           88,305           80,007
                                    ========         ========         ========

EBITDA Margin

    Print                               12.1%            14.3%            15.4%

    American Color                      12.9%            21.3%            13.7%

       Total                            11.4%            14.6%            14.4%


(a) EBITDA for the print and American Color segments in Fiscal Year 2002
    includes the impact of restructuring costs of $6.5 million and $2.1 million,
    respectively. See "Restructuring Costs and Other Special Charges" above.
    American Color EBITDA also includes $0.5 million of non-recurring charges in
    Fiscal Year 2000 associated with the consolidation of certain production
    facilities.


(b) Other operations include revenues and expenses associated with our digital
    visual effects business and corporate general and administrative expenses.


EBITDA is presented and discussed because we believe that investors regard
EBITDA as a key measure of a leveraged company's performance and ability to meet
its future debt service requirements. "EBITDA" is defined as earnings before net
interest expense, income tax expense (benefit), depreciation, amortization,
other non-cash expenses, other special charges related to asset write-offs and
write-downs and other expense (income). "EBITDA Margin" is defined as EBITDA as
a percentage of net sales. EBITDA is not a measure of financial performance
under generally accepted accounting principles and should not be considered an
alternative to net income (or any other measure of performance under generally
accepted accounting principles) as a measure of performance or to cash flows
from operating, investing or financing activities as an indicator of cash flows
or as a measure of liquidity. Certain covenants in the Indenture and the Bank
Credit Agreement are based on EBITDA, subject to certain adjustments.

Amortization of Goodwill

Goodwill is amortized on a straight-line basis by business segment through
Fiscal Year 2002. Statement of Financial Accounting Standards No. 142, "Goodwill
and Other Intangible Assets" ("SFAS 142"), is effective for fiscal years
beginning after December 15, 2001. In compliance with this pronouncement, we
adopted SFAS 142 on April 1, 2002. Application of the non-amortization
provisions of SFAS 142 is expected to result in an increase in pre-tax income of
approximately $2.8 million in Fiscal Year 2003. We expect to perform the first
of the required impairment tests of goodwill during Fiscal Year 2003. We do not
anticipate that these tests will have a material effect on our results of
operations or financial position.

Impact of Inflation

In accordance with industry practice, we generally pass through increases in our
costs (primarily paper and ink) to customers in the costs of our printed
products, while decreases in paper costs generally result in lower prices to
customers. During Fiscal Year 2000, paper prices were on average at lower levels
than comparable periods in the prior year. Throughout Fiscal Year 2001, the cost
of paper increased. In Fiscal Year 2002, demand for advertising declined,
resulting in reduced paper requirements. The reduction in paper requirements
resulted in a decline in paper prices throughout the year. We expect that, as a
result of our strong relationship with key suppliers, our material costs will
remain competitive within the industry.


                                       20
<PAGE>


Seasonality

Some of our print and premedia services business is seasonal in nature,
particularly those revenues derived from advertising inserts. Generally, our
sales from advertising inserts are highest during periods prior to the following
advertising periods: Spring advertising season (March - May); Back-to-School
(July - August); and Thanksgiving/Christmas (October - December). Sales of
newspaper Sunday comics are not subject to significant seasonal fluctuations.
Our strategy has been and will continue to include the mitigation of the
seasonality of our print business by increasing our sales to customers whose own
sales are less seasonal (i.e., food and drug companies) and who utilize
advertising inserts more frequently.

Environmental

Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations and which do not contribute to current or future
period revenue generation are expensed. Environmental liabilities are recorded
when assessments and/or remedial efforts are probable and the related costs can
be reasonably estimated. We believe that environmental liabilities, currently
and in the prior periods discussed herein, are not material. We maintain a
reserve of approximately $0.1 million in connection with a Superfund site in our
consolidated statement of financial position at March 31, 2002, which we believe
to be adequate. See "Legal Proceedings - Environmental Matters" appearing
elsewhere in this Report. We do not anticipate receiving insurance proceeds
related to this potential settlement. Management does not expect that any
identified matters, individually or in the aggregate, will have a material
adverse effect on our consolidated financial position or results of operations.

Accounting

There are no pending accounting pronouncements that, when adopted, are expected
to have a material effect on our results of operations or financial position.

Critical Accounting Policies

Our consolidated financial statements and related public financial information
are based on the application of generally accepted accounting principles
("GAAP"). GAAP requires the use of estimates, assumptions, judgments and
subjective interpretations of accounting principles that have an impact on the
assets, liabilities, revenue and expense amounts reported. These estimates can
also affect supplemental information contained in the external disclosures of
our company including information regarding contingencies, risk and financial
condition. We base our estimates on historical experience and on various other
assumptions that are believed to be reasonable under the circumstances.
Valuations based on estimates are reviewed for reasonableness and conservatism
on a consistent basis throughout our company. Actual results may differ from
these estimates under different assumptions or conditions.

Critical accounting policies are defined as those that are reflective of
significant judgments and uncertainties, and potentially result in materially
different results under different assumptions and conditions. We believe the
following critical accounting policies affect our more significant judgments and
estimates used in the preparation of our consolidated financial statements:

Allowance for Doubtful Accounts

We continuously monitor collections and payments from our customers. Allowances
for doubtful accounts are maintained based on historical payment patterns, aging
of accounts receivable and actual write-off history. We estimate losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. The allowance for doubtful accounts balances were approximately $2.6
million and $3.9 million at March 31, 2002 and March 31, 2001, respectively.

Restructuring

During Fiscal Year 2002, we established restructuring reserves for our print and
premedia services segments. These reserves, for severance and other exit costs,
required the use of estimates. Though management believes these estimates
accurately reflect the costs of these plans, actual results may be different.


                                       21
<PAGE>


Contingencies

We have established reserves for environmental and legal contingencies at both
the operating and corporate levels. A significant amount of judgment and use of
estimates is required to quantify our ultimate exposure in these matters. The
valuation of reserves for contingencies is reviewed on a quarterly basis to
assure that we are properly reserved. Reserve balances are adjusted to account
for changes in circumstances for ongoing issues and the establishment of
additional reserves for emerging issues. While we believe that the current level
of reserves is adequate, changes in the future could impact these
determinations.

Deferred Taxes

We estimate our actual current tax expense together with our temporary
differences resulting from differing treatment of items, such as fixed assets,
for tax and accounting purposes. These temporary differences result in deferred
tax assets and liabilities. We must then assess the likelihood that our deferred
tax assets will be recovered from future taxable income or the reversal of
existing taxable temporary differences and to the extent we believe that
recovery is not likely, we must establish a valuation allowance. At March 31,
2002, we had a valuation allowance of $23.3 million established against our
deferred tax assets. We considered changes in the allowance when calculating the
tax provision in the statement of income. Significant management judgment is
required in determining our provision for income taxes, our deferred tax assets
and liabilities and any valuation allowance recorded against our net deferred
tax assets.

Contractual Obligations and Commercial Commitments

The following table gives information about our existing material commitments
under our indebtedness and contractual obligations (in thousands):

<TABLE>
<CAPTION>
                                                                 Payments Due By Fiscal Year Ending March 31,
                                                         --------------------------------------------------------------
                                            Total                                                              2007
                                           Payments                                                             and
       Contractual Obligations               Due           2003         2004         2005        2006        Thereafter
---------------------------------------   ---------      -------      -------      -------     --------      ----------
<S>                                       <C>             <C>          <C>          <C>         <C>           <C>
Long-term debt                            $ 222,584       11,644       21,712       17,473      171,755         --
Capitalized lease obligations                30,208        8,295       10,023        2,160        2,395        7,335
Operating lease obligations                  13,630        3,251        2,617        2,054        1,672        4,036
                                          ---------       ------       ------       ------      -------       ------
    Total contractual cash obligations    $ 266,422       23,190       34,352       21,687      175,822       11,371
                                          =========       ======       ======       ======      =======       ======
</TABLE>


In the quarter ended December 31, 1997, we entered into multi-year contracts to
purchase a portion of our raw materials to be used in our normal operations. In
connection with such purchase agreements, pricing for a portion of our raw
materials is adjusted for certain movements in market prices, changes in raw
material costs and other specific price increases. We are deferring certain
contractual provisions over the life of the contracts, which are being
recognized as the purchase commitments are achieved. The amount deferred at
March 31, 2002 is $34.2 million and is included within Other liabilities in our
consolidated balance sheet. At March 31, 2002 we had no other significant
contingent commitments. The following table gives information about our other
commercial commitments (in thousands):


<TABLE>
<CAPTION>
                                                                          Fiscal Year Ending March 31,
                                                         --------------------------------------------------------------
                                           Total                                                               2007
         Other Commercial                 Amounts                                                              and
           Commitments                   Committed         2003          2004       2005       2006         Thereafter
---------------------------------------  ---------       --------      --------   --------   --------     -------------
<S>                                      <C>              <C>             <C>        <C>        <C>           <C>
Standby letters of credit                $  22,560        18,273          831        --         --            3,456
</TABLE>


                                       22
<PAGE>



Financial Indebtedness Covenants

Our Bank Credit Agreement (1) requires satisfaction of certain financial
covenants including Minimum Consolidated EBITDA, Consolidated Interest Coverage
Ratio and Leverage Ratio requirements, (2) requires prepayments in certain
circumstances including excess cash flows, proceeds from asset dispositions in
excess of prescribed levels and certain capital structure transactions and (3)
contains various restrictions and limitations on the following items: (a) the
level of capital spending, (b) the incurrence of additional indebtedness, (c)
mergers, acquisitions, investments and similar transactions and (d) dividends
and other distributions. In addition, the agreement includes various other
customary affirmative and negative covenants. The Senior Subordinated Notes
Indenture's negative covenants are similar to, but in certain respects are less
restrictive than, covenants under the Bank Credit Agreement. Graphics' ability
to pay dividends or lend funds to Holdings is restricted. See note 1 to our
consolidated financial statements appearing elsewhere in this Report for a
discussion of those restrictions.



ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative Information. In the ordinary course of business, our exposure to
market risks is limited as is described below. Market risk is the potential loss
arising from adverse changes in market rates and prices, such as interest and
foreign currency exchange rates. Currently, we do not utilize derivative
financial instruments such as forward exchange contracts, future contracts,
options and swap agreements.

Interest Rate Risk for us primarily relates to interest rate fluctuations on
variable rate debt.

Foreign Currency Exchange Rate Risk is minimal as we have only one print
facility outside the United States (in Canada) and any fluctuations in net asset
values as a result of changes in foreign currency exchange rates associated with
activity at this one facility would be immaterial to the company as a whole.

Quantitative Information. At March 31, 2002 and March 31, 2001, we had both
fixed rate and variable rate debt. The carrying value of our total variable rate
debt approximated the fair value of such debt at March 31, 2002 and March 31,
2001. At our March 31, 2002 and March 31, 2001 borrowing levels, a hypothetical
10% adverse change in interest rates on the variable rate debt would have been
immaterial. Approximately 78% and 79% of our long-term debt (excluding
capitalized lease obligations) was fixed rate at March 31, 2002 and March 31,
2001, respectively.

The above market risk discussions are forward-looking statements of market risk
assuming the occurrence of certain adverse market conditions. Actual results in
the future may differ materially from those projected as a result of actual
developments in the market.


                                       23
<PAGE>


ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                                        Page No.

The following consolidated financial statements of
ACG Holdings, Inc. are included in this Report:

Report of Independent Auditors ...............................................25
Consolidated balance sheets - March 31, 2002 and 2001 ........................26
For the Years Ended March 31, 2002, 2001 and 2000:
                Consolidated statements of income.............................28
                Consolidated statements of stockholders' deficit..............29
                Consolidated statements of cash flows.........................30
Notes to Consolidated Financial Statements ...................................32


The following consolidated financial statement schedules of ACG Holdings, Inc.
are included in Part IV, Item 14:

         I.   Condensed Financial Information:
              Condensed Consolidated Financial Statements (parent company only)
              for the years ended March 31, 2002, 2001 and 2000, and as of March
              31, 2002 and 2001

        II.   Valuation and qualifying accounts

All other schedules specified under Regulation S-X for ACG Holdings, Inc. have
been omitted because they are either not applicable, not required, or because
the information required is included in the financial statements or notes
thereto.



                                       24
<PAGE>


                         Report of Independent Auditors

Board of Directors
ACG Holdings, Inc.

We have audited the accompanying consolidated balance sheets of ACG Holdings,
Inc. as of March 31, 2002 and 2001, and the related consolidated statements of
income, stockholders' deficit, and cash flows for each of the three fiscal years
in the period ended March 31, 2002. Our audits also included the financial
statement schedules listed in the Index Item 14(a). These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of ACG
Holdings, Inc. at March 31, 2002 and 2001, and the consolidated results of their
operations and their cash flows for each of the three fiscal years in the period
ended March 31, 2002, in conformity with accounting principles generally
accepted in the United States. Also, in our opinion, the related financial
statement schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.



/s/ Ernst & Young LLP
Nashville, Tennessee
May 24, 2002




                                       25
<PAGE>


                               ACG HOLDINGS, INC.
                           Consolidated Balance Sheets
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                         March 31,
                                                                  ---------------------
                                                                    2002         2001
                                                                  --------     --------
<S>                                                               <C>          <C>
Assets
------
Current assets:

  Cash                                                            $   4,547         --

  Receivables:

    Trade accounts, less allowance for doubtful accounts of
      $2,557 and $3,905 at March 31, 2002 and 2001,
      respectively                                                   50,870     62,585

    Income tax receivable                                             1,015         --

    Other                                                             2,060      2,049
                                                                  ---------  ---------
                Total receivables                                    53,945     64,634

  Inventories                                                         9,137     12,864

  Deferred income taxes                                               7,564      9,817

  Prepaid expenses and other current assets                           3,839      3,740
                                                                  ---------  ---------
                Total current assets                                 79,032     91,055

Property, plant and equipment:

   Land and improvements                                              2,913      2,926

   Buildings and improvements                                        22,210     20,333

   Machinery and equipment                                          198,057    200,770

   Furniture and fixtures                                            11,710     10,533

   Leased assets under capital leases                                56,830     52,762

   Equipment installations in process                                11,446      9,598
                                                                  ---------  ---------
                                                                    303,166    296,922

   Less accumulated depreciation                                   (180,676)  (167,014)
                                                                  ---------  ---------
                Net property, plant and equipment                   122,490    129,908

Excess of cost over net assets acquired, less accumulated
  amortization of $53,274 and $50,262 at March 31, 2002
  and 2001, respectively                                             66,548     69,560

Other assets                                                         12,443     11,679
                                                                  ---------  ---------
                Total assets                                      $ 280,513  $ 302,202
                                                                  =========  =========
</TABLE>


See accompanying notes to consolidated financial statements


                                       26
<PAGE>


                               ACG HOLDINGS, INC.
                           Consolidated Balance Sheets
      (Dollars in thousands, except par values and liquidation preference)


<TABLE>
<CAPTION>
                                                                                    March 31,
                                                                             ---------------------
                                                                               2002         2001
                                                                             --------     --------
<S>                                                                        <C>            <C>
Liabilities and Stockholders' Deficit
-------------------------------------

Current liabilities:

  Current installments of long-term debt and capitalized leases            $  19,946        7,809

  Trade accounts payable                                                      25,906       36,310

  Accrued expenses                                                            34,045       31,474

  Income taxes                                                                  --            174
                                                                           ---------     ---------

     Total current liabilities                                                79,897       75,767

Long-term debt and capitalized leases, excluding current installments        232,846      253,897

Deferred income taxes                                                          2,933       10,546

Other liabilities                                                             60,857       47,859
                                                                           ---------     ---------

     Total liabilities                                                       376,533      388,069

Stockholders' deficit:

  Common stock, voting, $.01 par value, 5,852,223 shares authorized,
     143,399 shares issued and outstanding                                         1            1

  Preferred stock, $.01 par value, 15,823 shares authorized, 3,617 shares
     Series AA convertible preferred stock issued and outstanding,
     $39,442,551 liquidation preference, and 1,606 shares Series BB
     convertible preferred stock issued and outstanding, $17,500,000
     liquidation preference                                                     --             --

  Additional paid-in capital                                                  58,500       58,370

  Accumulated deficit                                                       (140,340)    (141,062)

  Other accumulated comprehensive loss, net of tax                           (14,181)      (3,176)
                                                                            ---------    ---------

     Total stockholders' deficit                                             (96,020)     (85,867)
                                                                            ---------    ---------

  Commitments and contingencies

     Total liabilities and stockholders' deficit                           $ 280,513      302,202
                                                                           ---------     ---------
</TABLE>










See accompanying notes to consolidated financial statements.

                                       27


<PAGE>


                               ACG HOLDINGS, INC.
                        Consolidated Statements of Income
                                 (In thousands)


<TABLE>
<CAPTION>
                                                         Year ended March 31,
                                                  -------------------------------------
                                                      2002         2001         2000
                                                  -----------   ----------   ----------

<S>                                               <C>             <C>          <C>
Sales                                             $ 542,421       606,039      554,282

Cost of sales                                       465,448       508,188      464,017
                                                  -----------   ----------   ----------
  Gross profit                                       76,973        97,851       90,265

Selling, general and administrative expenses         34,949        41,176       41,562

Amortization of goodwill                              3,012         3,056        2,619

Restructuring costs and other special charges        12,920            --           --
                                                  -----------   ----------   ----------

  Operating income                                   26,092        53,619       46,084
                                                  -----------   ----------   ----------

Other expense (income):

   Interest expense                                  29,973        33,042       33,963

   Interest income                                     (167)         (113)        (165)

   Other, net                                           637         1,194          627
                                                  -----------   ----------   ----------
       Total other expense                           30,443        34,123       34,425
                                                  -----------   ----------   ----------
   Income (loss) before income taxes                 (4,351)       19,496       11,659

Income tax expense (benefit)                         (5,073)       (4,927)       2,189
                                                  -----------   ----------   ----------
       Net income                                 $     722        24,423        9,470
                                                  ===========   ==========   ==========
</TABLE>




See accompanying notes to consolidated financial statements.

                                       28
<PAGE>

                            ACG HOLDINGS, INC.
             Consolidated Statements of Stockholders' Deficit
                              (In thousands)

<TABLE>
<CAPTION>
                                                         Series AA
                                                           and BB                                      Other
                                              Voting     convertible     Additional                  accumulated
                                              common     preferred        paid-in     Accumulated    comprehensive
                                              stock         stock         capital       deficit      income (loss)         Total
                                             ---------   -------------   -----------  ------------   --------------    ------------

<S>                                         <C>               <C>           <C>         <C>             <C>            <C>
Balances, March 31, 1999                    $        1        --            58,286      (174,905)        (2,688)       $  (119,306)
                                                                                                                       ------------
Net income                                          --        --              --           9,470             --              9,470

  Other comprehensive income, net of tax:

    Change in cumulative
    translation adjustment                          --        --              --              --            296                296

    Minimum pension liability                       --        --              --              --            184                184
                                                                                                                       ------------

Comprehensive income                                                                                                         9,950

Treasury stock                                      --        --              --             (50)            --                (50)

Executive stock compensation                        --        --                17            --             --                 17
                                            -----------   ------------   ------------  -----------    -------------    ------------

Balances, March 31, 2000                    $        1        --            58,303      (165,485)        (2,208)       $  (109,389)
                                                                                                                       ------------

Net income                                          --        --              --          24,423             --             24,423

    Other comprehensive loss, net of tax:

     Change in cumulative
     translation adjustment                         --        --              --              --           (968)              (968)
                                                                                                                       ------------

Comprehensive income                                                                                                        23,455

Executive stock compensation                        --        --                67            --             --                 67
                                            -----------   ------------   ------------  -----------    -------------    ------------

Balances, March 31, 2001                    $        1        --            58,370      (141,062)        (3,176)       $   (85,867)
                                                                                                                       ------------

Net income                                          --        --              --             722             --                722

    Other comprehensive loss, net of tax:

      Change in cumulative translation
      adjustment                                    --        --              --              --           (254)              (254)

      Minimum pension liability                     --        --              --              --        (10,751)           (10,751)
                                                                                                                       ------------

Comprehensive loss                                                                                                         (10,283)

Executive stock compensation                        --        --               130            --             --                130
                                            -----------   ------------   ------------  -----------    -------------    ------------


Balances, March 31, 2002                    $        1        --            58,500      (140,340)       (14,181)       $   (96,020)
                                            ===========   ============   ============  ===========    =============    ============
</TABLE>



See accompanying notes to consolidated financial statements.




                                       29

<PAGE>



                                   ACG HOLDINGS, INC.
                         Consolidated Statements of Cash Flows
                                     (In thousands)

<TABLE>
<CAPTION>
                                                                              Year ended March 31,
                                                                      --------------------------------------
                                                                           2002         2001         2000
                                                                      ------------   ----------   ----------

<S>                                                                   <C>                <C>           <C>
Cash flows from operating activities:

   Net income                                                         $       722        24,423       9,470

Adjustments to reconcile net income to net cash provided
by operating activities:

      Other special charges - non-cash                                      4,282         --           --

      Depreciation                                                         27,024        30,579      30,067

      Amortization of goodwill                                              3,012         3,056       2,619

      Amortization of other assets                                          1,163         1,051       1,100

      Amortization of deferred financing costs                              1,420         1,389       1,326

      Loss on disposals of property, plant and equipment                      147           403         286

      Deferred income tax expense (benefit)                                (5,360)       (7,302)        115

Changes in assets and liabilities, net of effects of acquisition
of business:

      Decrease (increase) in receivables                                   11,682         3,118      (7,832)


      Increase in current income taxes receivable                          (1,015)         --          --

      Decrease (increase) in inventories                                    3,705        (1,920)     (2,676)

      Increase (decrease) in trade accounts payable                       (10,358)       (9,246)      8,611

      Increase (decrease) in accrued expenses                               2,584          (122)       (178)

      Increase (decrease) in current income taxes payable                    (174)          118      (1,140)

      Increase (decrease) in other liabilities                              2,247        (2,451)     (1,459)

      Other                                                                (2,865)       (2,183)     (1,535)
                                                                        ----------    ----------   ---------
           Total adjustments                                               37,494        16,490      29,304
                                                                        ----------    ----------   ---------
Net cash provided by operating activities                                  38,216        40,913      38,774
                                                                        ----------    ----------   ---------
</TABLE>






                                       30

<PAGE>


                               ACG HOLDINGS, INC.
               Consolidated Statements of Cash Flows - Continued
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                               Year ended March 31,
                                                                        ------------------------------------
                                                                           2002         2001         2000
                                                                        ----------   ----------   ----------

<S>                                                                    <C>             <C>          <C>
Cash flows from investing activities:

      Purchases of property, plant and equipment                          (16,771)     (19,161)     (21,462)

      Acquisition of business                                              --             --         (2,829)

      Proceeds from sales of property, plant and equipment                    400          180          169

      Other                                                                  (122)         (25)         (23)
                                                                       ----------      -------       -------
                Net cash used by investing activities                     (16,493)     (19,006)     (24,145)
                                                                       ----------      -------       -------
Cash flows from financing activities:

       Debt:

         Proceeds                                                            --           --          9,215

         Payments                                                          (9,237)     (14,787)     (15,893)


         Increase in deferred financing costs                                (483)        (198)        (371)

         Repayment of capital lease obligations                            (7,453)      (6,961)      (7,504)

         Exchange rate adjustment                                             (16)         (22)         (23)
                                                                       ----------      -------       -------
                Net cash used by financing activities                     (17,189)     (21,968)     (14,576)
                                                                       ----------      -------       -------

Effect of exchange rates on cash                                               13           61          (53)
                                                                       ----------      -------       -------
Change in cash                                                              4,547        --             --

Cash:

   Beginning of period                                                       --          --             --
                                                                       ----------      -------       -------
   End of period                                                       $    4,547        --             --
                                                                       ==========      =======       =======



Supplemental disclosure of cash flow information:

Cash paid for:

   Interest                                                            $   28,320       31,873        32,639

   Income taxes, net of refunds                                        $    1,530        2,418         3,111

Non-cash investing activities:

   Lease obligations                                                   $    7,779        6,110         1,262
</TABLE>





See accompanying notes to consolidated financial statements.

                                       31

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(1)  Summary of Significant Accounting Policies

     ACG Holdings, Inc. ("Holdings") has no operations or significant assets
     other than its investment in American Color Graphics, Inc. ("Graphics").
     Holdings and Graphics are collectively referred to as (the "Company").
     Holdings is dependent upon distributions from Graphics to fund its
     obligations. Under the terms of its debt agreements at March 31, 2002,
     Graphics' ability to pay dividends or lend to Holdings was either
     restricted or prohibited, except that Graphics may pay specified amounts to
     Holdings (i) to pay the repurchase price payable to any officer or employee
     (or their estates) of Holdings, Graphics or any of their respective
     subsidiaries in respect of their stock or options to purchase stock in
     Holdings upon the death, disability or termination of employment of such
     officers and employees (so long as no default, or event of default, as
     defined, has occurred under the terms of the Bank Credit Agreement, as
     defined below, and provided the aggregate amount of all such repurchases
     does not exceed $2 million) and (ii) to fund the payment of Holdings'
     operating expenses incurred in the ordinary course of business, other
     corporate overhead costs and expenses (so long as the aggregate amount of
     such payments does not exceed $250,000 in any fiscal year) and Holdings'
     obligations pursuant to a tax sharing agreement with Graphics. A
     significant portion of Graphics' long-term obligations has been fully and
     unconditionally guaranteed by Holdings.

     The two business segments of the commercial printing industry in which the
     Company operates are (i) print and (ii) premedia services conducted by its
     American Color division.

     Significant accounting policies are as follows:

     (a)  Basis of Presentation

          The consolidated financial statements include the accounts of Holdings
          and all greater than 50% - owned subsidiaries, which are consolidated
          under accounting principles generally accepted in the United States.

          All significant intercompany transactions and balances have been
          eliminated in consolidation.

          Earnings-per-share data has not been provided since Holdings' common
          stock is closely held.

          Certain prior period information has been reclassed to conform to
          current period presentation.

     (b)  Revenue Recognition

          Print revenues are recognized upon the completion of production.
          Shipment of printed material generally occurs upon completion of this
          production process. Materials are printed to unique customer
          specifications and are not returnable. Credits relating to
          specification variances and other customer adjustments are not
          significant.

     (c)  Inventories

          Inventories are valued at the lower of first-in, first-out ("FIFO")
          cost or market (net realizable value).

     (d)  Property, Plant and Equipment

          Property, plant and equipment is stated at cost. Depreciation, which
          includes amortization of assets under capital leases, is based on the
          straight-line method over the estimated useful lives of the assets or
          the remaining terms of the leases. Estimated useful lives used in
          computing depreciation and amortization expense are 3 to 15 years for
          furniture and fixtures and machinery and equipment, and 15 to 40 years
          for buildings and improvements.


                                       32
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

     (e)  Excess of Cost Over Net Assets Acquired

          The excess of cost over net assets acquired (or "goodwill") was
          amortized on a straight-line basis over a range of 5 to 40 years for
          each of its principal business segments through the fiscal year ended
          March 31, 2002.

     (f)  Impairment of Long-Lived Assets

          The Company evaluates the recoverability of its long-lived assets in
          accordance with Statement of Financial Accounting Standards No. 121,
          "Accounting for the Impairment of Long-Lived Assets and Long-Lived
          Assets to be Disposed Of" ("SFAS 121"). SFAS 121 requires periodic
          assessment of certain long-lived assets for possible impairment when
          events or circumstances indicate that the carrying amounts may not be
          recoverable. Long-lived assets are grouped and evaluated for
          impairment at the lowest level for which there are identifiable cash
          flows that are independent of the cash flows of other groups of
          assets. If it is determined that the carrying amounts of such
          long-lived assets are not recoverable, the assets are written down to
          their fair value.

     (g)  Other Assets

          Financing costs related to the Bank Credit Agreement (as defined
          herein) are deferred and amortized over the term of the agreement.
          Costs related to the Notes (as defined herein) are deferred and
          amortized over the ten-year term of the Notes. Covenants not to
          compete are amortized over the terms of the underlying agreements,
          which are generally 5 years.

     (h)  Income Taxes

          Income taxes have been provided using the liability method in
          accordance with Statement of Financial Accounting Standards No. 109,
          "Accounting for Income Taxes" ("SFAS 109"). Management has evaluated
          the need for a valuation allowance for deferred tax assets and
          believes that certain deferred tax assets will more likely than not be
          realized through the future reversal of existing taxable temporary
          differences and future earnings of the Company. In the fourth quarter
          of the fiscal year ending March 31, 2002, the valuation allowance was
          reduced by $5.5 million, resulting in a corresponding credit to
          deferred income tax expense. This adjustment reflected a change in
          circumstances which resulted in a judgment that a corresponding amount
          of the Company's deferred tax assets will be realized in future years.

     (i)  Foreign Currency Translation

          The assets and liabilities of the Company's Canadian facility, which
          include interdivisional balances, are translated at year-end rates of
          exchange while revenue and expense items are translated at average
          rates for the year.

          Translation adjustments are recorded as a separate component of
          stockholders' deficit. Since the transactions of the Canadian facility
          are denominated in its functional currency and the interdivisional
          accounts are of a long-term investment nature, no transaction
          adjustments are included in operations.

     (j)  Environmental

          Environmental expenditures that relate to current operations are
          expensed or capitalized as appropriate. Expenditures that relate to an
          existing condition caused by past operations, and which do not
          contribute to current or future period revenue generation, are
          expensed. Environmental liabilities are provided when assessments
          and/or remedial efforts are probable and the related amounts can be
          reasonably estimated.


                                       33

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

     (k)  Fair Value of Financial Instruments

          The Company discloses the estimated fair values of its financial
          instruments together with the related carrying amount. The Company is
          not a party to any financial instruments with material
          off-balance-sheet risk.

     (l)  Concentration of Credit Risk

          Financial instruments, which subject the Company to credit risk,
          consist primarily of trade accounts receivable. Concentration of
          credit risk with respect to trade accounts receivable are generally
          diversified due to the large number of entities comprising the
          Company's customer base and their geographic dispersion. The Company
          performs ongoing credit evaluations of its customers and maintains an
          allowance for potential credit losses.

     (m)  Use of Estimates

          The preparation of the financial statements in conformity with
          accounting principles generally accepted in the United States requires
          management to make estimates and assumptions that affect the amounts
          reported in the financial statements and accompanying notes. Actual
          results could differ from those estimates.

     (n)  Stock-Based Compensation

          The Company has elected to follow Statement of Financial Accounting
          Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
          123") in accounting for its stock-based compensation plan. The Company
          believes that including the fair value of compensation plans in
          determining net income is consistent with accounting for the cost of
          all other forms of compensation.

     (o)  Shipping and Handling Costs

          In compliance with Emerging Issues Task Force Issue No. 00-10
          "Accounting for Shipping and Handling Fees and Costs" ("EITF 00-10"),
          the Company began to present postage revenue in the print segment
          sales as opposed to netting postage revenue against the related
          postage costs within the print segment's cost of sales. Under EITF
          00-10, the netting of revenues and expenses associated with shipping
          and handling is no longer permitted. The print segment's financial
          information reflects a reclass of the postage revenues of
          approximately $18.7 million and $7.6 million to sales from cost of
          sales in the fiscal years ended March 31, 2001 and March 31, 2000,
          respectively. The Company's shipping and handling costs are reflected
          within Cost of Sales in the Consolidated Statements of Income.

     (p)  Impact of Recently Issued Accounting Standards

          On July 20, 2001, the Financial Accounting Standards Board issued
          Statement of Financial Accounting Standards No. 142, "Goodwill and
          Other Intangible Assets" ("SFAS 142"), which establishes a new method
          of testing goodwill for impairment using a fair-value-based approach
          and does not permit amortization of goodwill as previously required by
          Accounting Principles Board Opinion No. 17, "Intangible Assets". An
          impairment loss would be recorded if the recorded goodwill exceeds its
          implied fair value. SFAS 142 is effective for fiscal years beginning
          after December 15, 2001. In compliance with this pronouncement, the
          Company adopted SFAS 142 on April 1, 2002. Application of the
          non-amortization provisions of SFAS 142 is expected to result in an
          increase in pre-tax income of approximately $2.8 million in the fiscal
          year ending March 31, 2003. The Company expects to perform the first
          of the required impairment tests of goodwill during the fiscal year
          ending March 31, 2003. Management does not anticipate that these tests
          will have a material effect on the Company's results of operations or
          financial position.


                                       34

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

     In August 2001, the Financial Accounting Standards Board issued Statement
     of Financial Accounting Standards No. 144 "Accounting for the Impairment or
     Disposal of Long-Lived Assets" ("SFAS 144") which provides clarifications
     of certain implementation issues within SFAS 121, along with additional
     guidance on the accounting for the impairment or disposal of long-lived
     assets. SFAS 144 supercedes SFAS 121 and applies to all long-lived assets.
     SFAS 144 develops one accounting model (based on the model in SFAS 121) for
     long-lived assets that are to be disposed of by sale, as well as addresses
     the principal implementation issues. SFAS 144 is effective for financial
     statements issued for fiscal years beginning after December 15, 2001. In
     compliance with this pronouncement, the Company adopted SFAS 144 on April
     1, 2002. The adoption of SFAS 144 will not have a material effect on the
     Company's results of operations or financial position.

(2)  Inventories

<TABLE>
<CAPTION>
     The components of inventories are as follows (in thousands):             March 31,
                                                                      -------------------------
                                                                           2002         2001
                                                                      ------------   ----------
<S>                                                                   <C>              <C>
            Paper                                                     $   7,158        10,805

            Ink                                                             169           234

            Supplies and other                                            1,810         1,825
                                                                      ---------        ------
                Total                                                 $   9,137        12,864
                                                                      =========        ======
</TABLE>


(3)  Other Assets

<TABLE>
<CAPTION>
    The components of other assets are as follows (in thousands):             March 31,
                                                                      -------------------------
                                                                           2002         2001
                                                                      ------------   ----------

<S>                                                                   <C>              <C>
          Deferred financing costs, less accumulated
            amortization of $7,271 in 2002 and $5,851
            in 2001                                                   $   4,111         5,048

          Spare parts inventory, net of valuation allowance
            of $100 in 2002 and 2001                                      5,600         4,434

          Other                                                           2,732         2,197
                                                                      ---------        ------
               Total                                                  $  12,443        11,679
                                                                      =========        ======
</TABLE>

(4)  Accrued Expenses

<TABLE>
<CAPTION>
     The components of accrued expenses are as follows (in thousands):        March 31,
                                                                      -------------------------
                                                                           2002         2001
                                                                      ------------   ----------
<S>                                                                   <C>              <C>

          Compensation and related taxes                              $  10,125        13,132

          Employee benefits                                              11,463         9,527

          Interest                                                        4,258         4,033

          Restructuring                                                   5,343           396

          Other                                                           2,856         4,386
                                                                      ---------        ------
               Total                                                  $  34,045        31,474
                                                                      =========        ======
</TABLE>

                                       35
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(5)  Notes Payable, Long-Term Debt and Capitalized Leases

<TABLE>
<CAPTION>
     Long-term debt is summarized as follows (in thousands):                   March 31,
                                                                      -------------------------
                                                                           2002         2001
                                                                      ------------   ----------
<S>                                                                   <C>              <C>
          Bank Credit Agreement:

                 Series A Term Loan                                   $   9,495          9,642

                 Series B Term Loan                                      39,630         39,643
                                                                      ---------        -------
                                                                         49,125         49,285

         12 3/4% Senior Subordinated Notes Due 2005                     171,755        180,000

         Capitalized leases                                              30,208         29,882

         Other loans with varying maturities and
             interest rates                                               1,704          2,539
                                                                      ---------        -------
                   Total long-term debt                                 252,792        261,706

         Less current installments                                       19,946          7,809
                                                                      ---------        -------
                   Long-term debt and capitalized leases,
                       excluding current installments                 $ 232,846        253,897
                                                                      ==========       =======
</TABLE>

     The Company has a $145 million credit facility with a syndicate of lenders
     (the "Bank Credit Agreement"), providing for a $70 million revolving credit
     facility which is not subject to a borrowing base limitation (the
     "Revolving Credit Facility") maturing on March 31, 2004, a $25 million
     amortizing term loan facility maturing on March 31, 2004 (the "A Term Loan
     Facility") and a $50 million amortizing term loan facility maturing on
     March 31, 2005 (the "B Term Loan Facility").

     As noted above, the Revolving Credit Facility provides for a maximum of $70
     million borrowing availability, subject to certain customary conditions.
     This availability includes a provision for up to $40 million of letters of
     credit. At March 31, 2002, the Company had no borrowings outstanding under
     the Revolving Credit Facility and letters of credit outstanding of
     approximately $22.6 million. As a result, the Company had additional
     borrowing availability of approximately $47.4 million.

     Interest under the Bank Credit Agreement is floating based upon existing
     market rates plus agreed upon margin levels. In addition, the Company is
     obligated to pay commitment and letter of credit fees. Such margin levels
     and fees reduce over the term of the agreement subject to the achievement
     of certain Leverage Ratio measures. The weighted-average rate on
     outstanding indebtedness under the Bank Credit Agreement at March 31, 2002
     was 4.7% and 6.8% at March 31, 2001.




                                       36

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements


The Senior Subordinated Notes (the "Notes") bear interest at 12 3/4% and mature
August 1, 2005. Interest on the Notes is payable semi-annually on February 1 and
August 1. The Notes are redeemable at the option of Graphics in whole or in part
from August 1, 2001, at 103.188% of the principal amount and from August 1,
2002, at 100% of the principal amount, plus accrued interest. Upon the
occurrence of a change of control triggering event, as defined, each holder of a
Note will have the right to require Graphics to repurchase all or any portion of
such holder's Note at 101% of the principal amount thereof, plus accrued
interest. The Notes are subordinate to all existing and future senior
indebtedness, as defined, of Graphics, and are guaranteed on a senior
subordinated basis by Holdings.

During the fiscal year ending March 31, 2002, the Company repurchased in the
open market, an aggregate principal amount of $8.2 million of the Notes for
approximately $8.1 million.

Borrowings under the Bank Credit Agreement are secured by substantially all of
the Company's assets. In addition, Holdings has fully and unconditionally
guaranteed the indebtedness under the Bank Credit Agreement, which guarantee is
secured by a pledge of all of Graphics' and its subsidiaries' stock. The
agreement (1) requires satisfaction of certain financial covenants including
Minimum Consolidated EBITDA, Consolidated Interest Coverage Ratio and Leverage
Ratio requirements, (2) requires prepayments in certain circumstances including
excess cash flows, proceeds from asset dispositions in excess of prescribed
levels and certain capital structure transactions and (3) contains various
restrictions and limitations on the following items: (a) the level of capital
spending, (b) the incurrence of additional indebtedness, (c) mergers,
acquisitions, investments and similar transactions and (d) dividends and other
distributions. In addition, the agreement includes various other customary
affirmative and negative covenants. The Senior Subordinated Notes Indenture's
negative covenants are similar to, but in certain respects are less restrictive
than, covenants under the Bank Credit Agreement. Graphics' ability to pay
dividends or lend funds to Holdings is restricted (see note 1 for a discussion
of those restrictions).

The amortization for total long-term debt and capitalized leases at March 31,
2002 is shown below (in thousands):


                                           Long-Term              Capitalized
            Fiscal year                      Debt                   Leases
       ---------------------          ------------------        ---------------

            2003                      $     11,644               $    10,541

            2004                            21,712                    11,316

            2005                            17,473                     3,023

            2006                           171,755                     3,065

            2007                               --                      2,792

            Thereafter                         --                      5,346
                                     --------------------        --------------

               Total                 $     222,584                    36,083
                                     ====================

            Imputed interest                                          (5,875)
                                                                 --------------

               Present value of minimum lease payments           $    30,208
                                                                 ==============

Capital leases have varying maturity dates and implicit interest rates which
generally approximate 7%-10%. The Company estimates that the carrying amounts of
the Company's debt and other financial instruments approximate their fair values
at March 31, 2002 and 2001.



                                       37

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(6)  Income Taxes

     Deferred income taxes reflect the net tax effects of temporary differences
     between the carrying amounts of assets and liabilities for financial
     reporting purposes and the amounts as measured by tax laws and regulations.
     Significant components of the Company's deferred tax liabilities and assets
     as of March 31, 2002 and 2001 are as follows (in thousands):


                                                               March 31,
                                                      -------------------------
                                                          2002         2001
                                                      ------------   ----------

          Deferred tax liabilities:

             Book over tax basis in fixed assets      $    21,351      22,508

             Foreign taxes                                  3,306       3,626

             Accumulated amortization                       1,313       1,758

             Other, net                                     3,990       3,315
                                                      ------------   ----------

             Total deferred tax liabilities                29,960      31,207

          Deferred tax assets:

             Bad debts                                      1,016       1,545

             Accrued expenses and other liabilities        23,670      23,468

             Net operating loss carryforwards              26,212      25,766

             AMT credit carryforwards                       1,477       1,922

             Minimum pension liability                      4,217          --

             Cumulative translation adjustment              1,345       1,246
                                                      ------------   ----------

             Total deferred tax assets                     57,937      53,947

             Valuation allowance for deferred
               tax assets                                  23,346      23,469
                                                      ------------   ----------

             Net deferred tax assets                       34,591      30,478
                                                      ------------   ----------

          Net deferred tax (assets) liabilities       $    (4,631)        729
                                                      ============   ==========

      Management has evaluated the need for a valuation allowance for deferred
      tax assets and believes that certain deferred tax assets will more likely
      than not be realized through the future reversal of existing taxable
      temporary differences and future earnings of the Company. In the fourth
      quarter of the fiscal year ending March 31, 2002, the valuation allowance
      was reduced by $5.5 million, resulting in a corresponding credit to
      deferred income tax expense. This adjustment reflected a change in
      circumstances which resulted in a judgment that a corresponding amount of
      the Company's deferred tax assets will be realized in future years. The
      valuation allowance decreased by $0.1 million during the fiscal year
      ending March 31, 2002 as a result of changes in the deferred tax items.
      This decrease primarily includes the $5.5 million decrease discussed above
      and a $4.2 million increase related to the tax effect of the minimum
      pension liability, which is a component of other comprehensive income.


                                       38


<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

       Income tax expense (benefit) attributable to income from continuing
                     operations consists of (in thousands):


                                                      Year ended March 31,
                                                      --------------------
                                                   2002        2001       2000
                                                ----------  ---------  ---------
      Current

        Federal                                 $   (445)       457        169

        State                                        249        343        251

        Foreign                                      483      1,575      1,654
                                                ----------  ---------  ---------
         Total current                               287      2,375      2,074
                                                ----------  ---------  ---------
      Deferred

        Federal                                   (4,505)    (6,344)      (133)

        State                                       (909)    (1,515)       (15)

        Foreign                                       54        557        263
                                                ----------  ---------  ---------

         Total deferred                           (5,360)    (7,302)       115
                                                ----------  ---------  ---------

      Provision (benefit) for Income Taxes      $ (5,073)    (4,927)     2,189
                                                ==========  =========  =========

      The effective tax rates for the fiscal years ending March 31, 2002, 2001
      and 2000 were 116.6%, (25.3%) and 18.8%, respectively. The difference
      between these effective tax rates relating to continuing operations and
      the statutory federal income tax rate is composed of the following items:

                                                      Year ended March 31,
                                                      --------------------
                                                   2002        2001       2000
                                                ----------  ---------  ---------

      Statutory tax rate                           35.0%       35.0%     35.0%

      State income taxes, less
        federal tax impact                          9.9        (3.9)      1.3

      Foreign taxes, less federal
        tax impact                                 (8.0)        7.1      10.9


      Amortization                                (14.1)        3.2       5.1


      Change in valuation
        allowance                                  88.4       (59.1)    (37.7)

      Other, net                                    5.4        (7.6)      4.2
                                                ----------  ---------  ---------
      Effective income tax rate                   116.6%      (25.3%)    18.8%
                                                ==========  =========  =========



                                       39


<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

      As of March 31, 2002, the Company had available net operating loss
      carryforwards ("NOL's") for state purposes of $36.7 million, which can be
      used to offset future state taxable income. If these NOL's are not
      utilized, they will begin to expire in 2003 and will be totally expired in
      2022.

      As of March 31, 2002, the Company had available NOL's for federal purposes
      of $70.5 million, which can be used to offset future federal taxable
      income. If these NOL's are not utilized, they will begin to expire in 2011
      and will be totally expired in 2022.

      The Company also had available an alternative minimum tax credit
      carryforward of $1.5 million, which can be used to offset future taxes in
      years in which the alternative minimum tax does not apply. This credit can
      be carried forward indefinitely.

      The Company has alternative minimum tax NOL's in the amount of $61.3
      million, which will begin to expire in 2011 and will be completely expired
      in 2022.

(7)   Other Liabilities

      The components of other liabilities are as follows (in thousands):


                                                               March 31,
                                                        ------------------------
                                                            2002        2001
                                                        ----------    ----------
      Deferred revenue agreements                       $  34,204       27,255

      Long-term pension and postretirement liabilities     12,070       16,002

      Minimum pension liability                            10,751           --

      Other                                                 3,832        4,602

                                                        ----------    ----------
           Total                                        $  60,857       47,859
                                                        ==========    ==========

(8)   Employee Benefit Plans

      Defined Benefit Pension Plans

      Pension Plans
      The Company sponsors defined benefit pension plans covering full-time
      employees of the Company who had at least one year of service at December
      31, 1994. Benefits under these plans generally are based upon the
      employee's years of service and, in the case of salaried employees,
      compensation during the years immediately preceding retirement. The
      Company's general funding policy is to contribute amounts within the
      annually calculated actuarial range allowable as a deduction for federal
      income tax purposes. The plans' assets are maintained by trustees in
      separately managed portfolios consisting primarily of equity and fixed
      income securities. In October 1994, the Board of Directors approved an
      amendment to the Company's defined benefit pension plans, which resulted
      in the freezing of additional defined benefits for future services under
      the plans effective January 1, 1995.

      Supplemental Executive Retirement Plan
      In October 1994, the Board of Directors approved a new Supplemental
      Executive Retirement Plan ("SERP"), which is a defined benefit plan, for
      certain key executives. Benefits under this plan will be paid from the
      Company's assets. The aggregate accumulated projected benefit obligation
      under this plan was approximately $2.9 million and $2.8 million at March
      31, 2002 and March 31, 2001, respectively.



                                       40


<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

      Defined Benefit Postretirement Plans

      Postretirement Benefits
      The Company provides certain other postretirement benefits for employees,
      primarily life and health insurance. Full-time employees who have attained
      age 55 and have at least five years of service are entitled to
      postretirement health care and life insurance coverage. Postretirement
      life insurance coverage is provided at no cost to eligible retirees.
      Special cost sharing arrangements for health care coverage are available
      to employees whose age plus years of service at the date of retirement
      equals or exceeds 85 ("Rule of 85"). Any eligible retiree not meeting the
      Rule of 85 must pay 100% of the required health care insurance premium.

      Effective January 1, 1995, the Company amended the health care plan
      changing the health care benefit for all employees retiring on or after
      January 1, 2000. This amendment had the effect of reducing the accumulated
      postretirement benefit obligation by approximately $3 million. This
      reduction is reflected as unrecognized prior service cost and is being
      amortized on a straight line basis over 15.6 years, the average remaining
      years of service to full eligibility of active plan participants at the
      date of the amendment.

      401(k) Defined Contribution Plan

      Effective January 1, 1995, the Company amended its 401(k) defined
      contribution plan. Eligible participants may contribute up to 15% of their
      annual compensation subject to maximum amounts established by the Internal
      Revenue Service and receive a matching employer contribution on amounts
      contributed. The employer matching contribution is made bi-weekly and
      equals 2% of annual compensation for all plan participants plus 50% of the
      first 6% of annual compensation contributed to the plan by each employee,
      subject to maximum amounts established by the Internal Revenue Service.
      The Company's contribution under this Plan amounted to $4.2 million during
      the fiscal years ended March 31, 2002 and March 31, 2001 and $4.1 million
      during the fiscal year ended March 31, 2000.



                                       41

<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

The following table provides a reconciliation of the changes in the defined
benefit plans' benefit obligations and fair value of plan assets for the fiscal
years ended March 31, 2002 and 2001 and a statement of the funded status of such
plans as of March 31, 2002 and 2001 (in thousands):

<TABLE>
<CAPTION>
                                                        Defined Benefit              Defined Benefit
                                                          Pension Plans             Postretirement Plan
                                                    ------------------------    ------------------------
                                                       2002         2001           2002         2001
                                                    -----------  -----------    -----------  -----------
<S>                                                 <C>             <C>            <C>          <C>
Change in Benefit Obligation

  Benefit obligation at beginning of year           $  55,327       53,198          2,739        2,617

  Service cost                                            431          438              7           14

  Interest cost                                         4,256        4,102            185          196

  Plan participants' contributions                         --           --            247          222

  Actuarial loss                                        1,025        1,106            258          272

  Expected benefit payments                            (2,885)      (3,481)          (594)        (582)

  Curtailment gain                                         --           (2)            --           --

  Settlement gain                                          --          (34)            --           --
                                                    -----------  -----------    -----------  -----------
  Benefit obligation at end of year
                                                    $  58,154       55,327          2,842        2,739
                                                    ===========  ===========    ===========  ===========


Change in Plan Assets

  Fair value of plan assets at beginning of year    $  48,671       56,098             --           --

  Actual return on plan assets                         (6,159)      (4,681)            --           --

  Employer contributions                                  598          639            347          360

  Plan participants' contributions                         --           --            247          222

  Benefits paid                                        (2,885)      (3,385)          (594)        (582)
                                                    -----------  -----------    -----------  -----------
  Fair value of plan assets at end of year          $  40,225       48,671             --           --
                                                    ===========  ===========    ===========  ===========


Funded Status                                       $ (17,929)      (6,656)        (2,842)      (2,739)

  Unrecognized net actuarial (gain) or loss            10,686       (1,285)          (306)        (954)

  Unrecognized prior service gain                          --         (102)        (2,077)      (2,078)

  Additional minimum pension liability                (10,751)          --             --           --
                                                    -----------  -----------    -----------  -----------
  Accrued benefit liability                           (17,994)      (8,043)        (5,225)      (5,771)
                                                    ===========  ===========    ===========  ===========
</TABLE>


                                       42

<PAGE>




                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

<TABLE>
<CAPTION>
                                        Defined Benefit Pension Plans          Defined Benefit Postretirement Plan
                                        -----------------------------          -----------------------------------
                                           2002                2001                  2002                2001
                                        ---------           ---------             ---------           ---------
<S>                                        <C>               <C>                    <C>                 <C>
Weighted - Average Assumptions

  Discount rate - benefit obligation        7.50%             7.75%                 7.50%               7.75%

  Expected return on plan assets           10.00%            10.00%                  N/A                 N/A

  Rate of compensation increase              N/A               N/A                   N/A                 N/A
</TABLE>


For measurement purposes under the defined benefit postretirement plan, an 11
percent annual rate of increase in the per capita cost of covered health care
benefits (including prescription drugs) was assumed for March 31, 2002. This
rate was assumed to decrease gradually to 5 percent through the fiscal year
ending 2008 and remain at that level thereafter.


<TABLE>
<CAPTION>
                                           Defined Benefit Pension Plans            Defined Benefit Postretirement Plan
                                        -------------------------------------   -----------------------------------------
                                            2002         2001         2000          2002           2001           2000
                                        -----------  -----------  -----------   -----------    -----------    -----------

<S>                                     <C>              <C>          <C>             <C>           <C>             <C>
Components of Net Periodic Benefit Cost

  Service cost                          $      431          438          425             7            14              26

  Interest cost                              4,256        4,102        3,945           185           196             178

  Expected return on plan assets            (4,693)      (5,468)      (4,815)           --            --              --

  Amortization of prior service cost          (102)        (112)         (89)         (222)         (222)           (222)

  Curtailment gain                             (94)          (3)         (62)           --            --              --

  Settlement loss                               --           --           69            --            --              --

  Recognized net actuarial gain                 --         (885)          (5)         (169)         (123)           (110)
                                        -----------  -----------  -----------   -----------    -----------    -----------
  Net periodic benefit income           $     (202)      (1,928)        (532)         (199)         (135)           (128)
                                        ===========  ===========  ===========   ===========    ===========    ===========
</TABLE>




Assumed health care cost trend rates have a significant effect on the amounts
reported for the medical component of the defined benefit postretirement plan. A
one-percentage point change in the assumed health care cost trend rates would
have the following effects:


                                               1% Point               1% Point
                                               Increase               Decrease
                                            -------------          ------------

  Effect on total of service and interest
  cost components of expense                    $  7                      (5)

  Effect on postretirement benefit
  obligation                                    $106                    (109)



                                       43


<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(9)    Capital Stock

       At March 31, 2002, capital stock consists of Holdings' common stock
       ("Common Stock") and Series AA and Series BB convertible preferred stock
       collectively, ("Preferred Stock"). Each share of Common Stock is entitled
       to one vote on each matter common shareholders are entitled to vote on.
       The Preferred Stock has no voting rights. Dividends on the Common Stock
       and Preferred Stock are discretionary by the Board of Directors. Upon the
       occurrence of a Liquidation Event (as defined in the amended and restated
       Certificate of Incorporation), all amounts available for payment or
       distribution shall first be paid to holders of Series BB preferred stock,
       then holders of Series AA preferred stock and then to holders of Common
       Stock. Each share of the Preferred Stock may be converted, at the option
       of the holder, into shares of Common Stock using conversion ratios and
       subject to conditions set forth in the Holdings' Certificate of
       Incorporation.


(10)   Stock Option Plans

       Common Stock Option Plan

       In 1993, the Company established the ACG Holdings, Inc. Common Stock
       Option Plan. This plan, as amended, (the "1993 Common Stock Option Plan")
       is administered by a committee of the Board of Directors (the
       "Committee") and currently provides for granting up to 17,322 shares of
       Common Stock. On January 16, 1998, the Company established another common
       stock option plan (the "1998 Common Stock Option Plan"). This plan is
       administered by the Committee and provides for granting up to 36,939
       shares of Common Stock. The 1993 Common Stock Option Plan and the 1998
       Common Stock Option Plan are collectively referred to as the "Common
       Stock Option Plans". Stock options may be granted under the Common Stock
       Option Plans to officers and other key employees of the Company at the
       exercise price per share of Common Stock, as determined at the time of
       grant by the Committee in its sole discretion. All options are 25%
       exercisable on the first anniversary date of a grant and vest in
       additional 25% increments on each of the next three anniversary dates of
       each grant. All options expire 10 years from date of grant.

       A summary of activity under the Common Stock Option Plans is as follows:


                                                       Weighted-
                                                        Average
                                                        Exercise     Exercisable
                                           Options      Price($)     Options (a)
                                          ---------    -----------   -----------

        Outstanding at March 31, 1999       37,181         11.23        9,698

          Granted                            2,665         18.02

          Exercised                         (9,249)          .01

          Forfeited                           (757)        88.72
                                           -------

        Outstanding at March 31, 2000       29,840         13.35        9,536

          Granted                             --              --

          Exercised                           --              --

          Forfeited                           --              --
                                           -------

        Outstanding at March 31, 2001       29,840         13.35       19,087

          Granted                              450           .01

          Exercised                           --              --

          Forfeited                           --              --
                                           -------
        Outstanding at March 31, 2002       30,290         13.15       27,569
                                           =======


(a)    365 of the exercisable options at March 31, 2000, 780 of the exercisable
       options at March 31, 2001 and 1,418 of the exercisable options at March
       31, 2002 have a $240/option exercise price, all other exercisable
       options, in all periods, have a $.01/option exercise price.



                                       44



<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

       In the fiscal year ended March 31, 2002, 450 options were granted with a
       weighted-average grant-date fair value of $969/option. These options were
       granted with a $.01/option exercise price. In the fiscal year ended March
       31, 2000, 1,970 options were granted with weighted-average grant-date
       fair value of approximately $.01/option and 495 options were granted with
       weighted-average grant-date fair value of $539/option. These options were
       granted with a weighted-average exercise price of $.01/option. Also, in
       the fiscal year ended March 31, 2000, 200 options were granted with a
       weighted-average grant-date fair value of approximately $.01/option and a
       weighted-average exercise price of $240/option. The fair value for all
       options was estimated at the date of grant using a Black-Scholes option
       pricing model with the following weighted-average assumptions for the
       fiscal years ended March 31, 2002 and 2000: risk-free interest rates of
       3.8% and 5.3 - 6.4%, respectively; no annual dividend yield; volatility
       factors of 0; and an expected option life of 5 years. The
       weighted-average remaining contractual life of the options outstanding at
       March 31, 2002 was 5.2 years. A total of 6,831 shares (including 362
       previously exercised options that were subsequently cancelled) of
       Holdings Common Stock were reserved for issuance, but not granted under
       the Common Stock Option Plans at March 31, 2002.

       As a result of the SFAS 123 requirements, the Company recognized related
       stock compensation expense of $0.1 million in the fiscal year ended March
       31, 2002 and less than $0.1 million in the fiscal year ended March 31,
       2001 and the fiscal year ended March 31, 2000.

       Preferred Stock Option Plan

       In the fiscal year ended March 31, 1998, the Company established the ACG
       Holdings, Inc. Preferred Stock Option Plan (the "Preferred Stock Option
       Plan"). This plan is administered by the Committee and provides for
       granting up to 583 shares of Preferred Stock. Stock options may be
       granted under this Preferred Stock Option Plan to officers and other key
       employees of the Company at the exercise price per share of Preferred
       Stock, as determined at the time of grant by the Committee in its sole
       discretion. All options are fully vested and are 100% exercisable at the
       date of grant. All options expire 10 years from date of grant.

       A summary of the Preferred Stock Option Plan is as follows:

                                                                     Options
                                                                  --------------
       Outstanding at March 31, 1999                                    555

          Granted                                                        --

          Exercised                                                      --

          Forfeited                                                      --
                                                                  --------------
       Outstanding at March 31, 2000                                    555

          Granted                                                        --

          Exercised                                                      --

          Forfeited                                                      --
                                                                  --------------
       Outstanding at March 31, 2001                                    555

          Granted                                                        --

          Exercised                                                      --

          Forfeited                                                      --
                                                                  --------------
       Outstanding at March 31, 2002                                    555
                                                                  ==============

       All options were granted with a $1,909 exercise price. The
       weighted-average remaining contractual life of the options outstanding at
       March 31, 2002 was 5.8 years. All of the options outstanding were
       exercisable at March 31, 2002. A total of 28 shares of Holdings Preferred
       Stock was reserved for issuance, but not granted under the Preferred
       Stock Option Plan at March 31, 2002. No grants of preferred options in
       the fiscal years ended March 31, 2002, March 31, 2001 and March 31, 2000,
       resulted in zero stock compensation expense for those years.



                                       45
<PAGE>



                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(11)   Commitments and Contingencies

       The Company incurred rent expense for the fiscal years ended March 31,
       2002, 2001 and 2000 of $5.2 million, $5.9 million and $6.0 million,
       respectively, under various operating leases. Future minimum rental
       commitments under existing operating lease arrangements at March 31, 2002
       are as follows (in thousands):


                    Fiscal Year
                    -----------
                    2003                      $    3,251

                    2004                           2,617

                    2005                           2,054

                    2006                           1,672

                    2007                           1,556

                    Thereafter                     2,480
                                              -----------
                        Total                 $   13,630
                                              ===========


       The Company has employment agreements with one of its principal officers
       and four other employees. Such agreements provide for minimum salary
       levels as well as for incentive bonuses, which are payable if specified
       management goals are attained. In addition, the Company has consulting
       agreements with three former employees. The aggregate commitment for
       future compensation at March 31, 2002, excluding bonuses, was
       approximately $1.8 million.

       In the quarter ended December 31, 1997, the Company entered into
       multi-year contracts to purchase a portion of the Company's raw materials
       to be used in its normal operations. In connection with such purchase
       agreements, pricing for a portion of the Company's raw materials is
       adjusted for certain movements in market prices, changes in raw material
       costs and other specific price increases. The Company is deferring
       certain contractual provisions over the life of the contracts, which are
       being recognized as the purchase commitments are achieved. The amount
       deferred at March 31, 2002 is $34.2 million and is included within Other
       liabilities in the Company's consolidated balance sheet.

       Graphics, together with over 300 other persons, has been designated by
       the U.S. Environmental Protection Agency as a potentially responsible
       party (a "PRP") under the Comprehensive Environmental Response
       Compensation and Liability Act ("CERCLA", also known as "Superfund") at
       one Superfund site. Although liability under CERCLA may be imposed on a
       joint and several basis and the Company's ultimate liability is not
       precisely determinable, the PRPs have agreed that Graphics' share of
       removal costs is 0.46% and therefore Graphics believes that its share of
       the anticipated remediation costs at such site will not be material to
       its business or financial condition. Based upon an analysis of Graphics'
       volumetric share of waste contributed to the site and the agreement among
       the PRPs, the Company maintains a reserve of approximately $0.1 million
       in connection with this liability on its consolidated balance sheet at
       March 31, 2002. The Company believes this amount is adequate to cover
       such liability.

       The Company has been named as a defendant in several legal actions
       arising from its normal business activities. In the opinion of
       management, any liabilities that may arise from such actions will not,
       individually or in the aggregate, have a material adverse effect on the
       consolidated financial statements of the Company.

(12)   Significant Customers

       No single customer represented more than 10% of total sales in the fiscal
       years ended March 31, 2002, 2001, and 2000.




                                       46
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(13)   Interim Financial Information (Unaudited)

       Quarterly financial information follows (in thousands):


                                                                     Net
                                                    Gross           Income
                                    Net Sales       Profit          (Loss)
                                  ------------    -----------     -----------
        Fiscal Year 2002

          Quarter Ended:
            June 30               $  140,115         20,910           5,040
            September 30             133,740         18,080             945
            December 31              147,290         21,666           3,632
            March 31                 121,276         16,317          (8,895)
                                  ------------    -----------     -----------

                Total             $  542,421         76,973             722
                                  ============    ===========     ===========

        Fiscal Year 2001

          Quarter Ended:
            June 30               $  144,496         24,915           6,936
            September 30             146,862         24,280           4,547
            December 31              170,534         27,999           7,699
            March 31                 144,147         20,657           5,241
                                  ------------    -----------     -----------

                 Total            $  606,039         97,851          24,423
                                  ============    ===========     ===========

(14)    Restructuring Costs and Other Special Charges


        Restructuring Costs

        In January 2002, the Company's Board of Directors approved a
        restructuring plan for the print and premedia services segments designed
        to improve asset utilization, operating efficiency and profitability.
        This plan included the closing of a print facility in Hanover,
        Pennsylvania and a premedia services facility in West Palm Beach,
        Florida, the downsizing of a Buffalo, New York premedia services
        facility and the elimination of certain administrative personnel. This
        action resulted in the elimination of 189 positions within the Company.

        As a result of this plan, the Company recorded a pretax restructuring
        charge of approximately $8.6 million in the fourth quarter of the fiscal
        year ending March 31, 2002. This charge is classified within
        restructuring costs and other special charges in the consolidated
        statement of income in the fiscal year ended March 31, 2002. The cost of
        this restructuring plan was accounted for in accordance with the
        guidance set forth in Emerging Issues Task Force Issue 94-3 "Liability
        Recognition for Certain Employee Termination Benefits and Other Costs to
        Exit an Activity (Including Certain Costs Incurred in a Restructuring)"
        ("EITF 94-3"). The restructuring charge includes severance and related
        termination benefits, lease termination costs primarily related to
        future lease commitments, equipment deinstallation costs directly
        associated with the disassembly of certain printing presses and other
        equipment, and other costs primarily including legal fees, site clean-up
        costs and the write-off of certain press related parts that provide no
        future use or functionality.



                                       47
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

        The following table summarizes the activity related to this
        restructuring plan for the fiscal year ended March 31, 2002 (in
        thousands):

<TABLE>
<CAPTION>
                                                                                     03/31/02
                                                  Restructuring                    Restructuring
                                                     Charges        Activity          Reserve
                                                  -------------    -----------     -------------
<S>                                               <C>                <C>                <C>
           Severance and other employee costs     $    5,065         (1,546)            3,519
           Lease termination costs                     1,517           (228)            1,289
           Equipment deinstallation costs              1,010         (1,010)               --
           Other costs                                 1,046           (623)              423
                                                  -------------    -----------     -------------
                                                  $    8,638         (3,407)            5,231
                                                  =============    ===========     =============
</TABLE>

        As of March 31, 2002, the Company believes the restructuring reserve of
        $5.2 million is adequate. The process of closing two facilities and
        downsizing one facility, including equipment deinstallation and
        relocation of that equipment to other facilities within the Company, was
        completed by March 31, 2002. The majority of all remaining costs will be
        paid or settled before March 31, 2003. These costs will be funded
        through cash generated from operations and borrowings under the
        Revolving Credit Facility.

        In March 1999, the Company approved a plan for its American Color
        division, which was designed to consolidate certain facilities in order
        to improve asset utilization and operational efficiency, modify the
        organizational structure as a result of facility consolidation and other
        changes and reduce overhead and other costs. Approximately $3.1 million
        of these costs were paid or settled before March 31, 2000. During the
        fiscal year ended March 31, 2002 and the fiscal year ended March 31,
        2001, $0.3 million and $1.1 million of these costs were paid,
        respectively. The remaining $0.1 million balance in the restructuring
        reserve at March 31, 2002 includes remaining payouts of involuntary
        employee termination and lease commitment costs.

        Other Special Charges

        The Company recorded an impairment charge of approximately $4.3 million
        in the fourth quarter of the fiscal year ended March 31, 2002, to
        reflect the decision to abandon certain Company assets. The provision
        was based on a review of the Company's long-lived assets in accordance
        with SFAS 121. This impairment charge is classified within restructuring
        costs and other special charges in the consolidated statements of
        income.


(15)    Parent Guarantee of Subsidiary Debt

        Graphics, the issuer of the Notes, is a wholly-owned subsidiary of
        Holdings. Holdings has no other subsidiaries. Holdings has fully and
        unconditionally guaranteed the payment of principal and interest on the
        Notes on an unsecured senior subordinated basis. The guaranty by
        Holdings ranks junior to all existing and future senior indebtedness of
        Holdings, including its full and unconditional guaranty of Graphics
        obligations under the Bank Credit Agreement. Holdings conducts no
        business other than as the sole shareholder of Graphics and has no
        significant assets other than the capital stock of Graphics, all of
        which is pledged to secure Holdings' obligations under the Bank Credit
        Agreement. Holdings is dependent upon distributions from Graphics to
        fund its obligations. Graphics' ability to pay dividends or lend funds
        to Holdings is restricted (see note 1 for a discussion of those
        restrictions).



                                       48
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements

(16)    Industry Segment Information

        The Company has significant operations principally in two industry
        segments: (1) print and (2) premedia services. All of the Company's
        print business and assets are attributed to the print division and all
        of the Company's premedia services business and assets are attributed to
        the American Color division ("American Color"). The Company's digital
        visual effects operations and corporate expenses have been segregated
        and do not constitute a reportable segment.

        The Company has two reportable segments: (1) print and (2) premedia
        services. The print business produces retail advertising inserts, comics
        (newspaper Sunday comics, comic insert advertising and comic books), and
        other publications. The Company's premedia services business assists
        customers in the capture, manipulation, transmission and distribution of
        images. The majority of the premedia services work leads to the
        production of four-color separations in a format appropriate for use by
        printers.

        The accounting policies of the segments are the same as those described
        in the summary of significant accounting policies. The Company evaluates
        performance based on segment EBITDA which is defined as earnings before
        net interest expense, income tax expense (benefit), depreciation,
        amortization, other non-cash expenses, other special charges related to
        asset write-offs and write-downs and other expense (income). The Company
        generally accounts for intersegment revenues and transfers as if the
        revenues or transfers were to third parties, that is, at current market
        prices.

        The Company's reportable segments are business units that offer
        different products and services. They are managed separately because
        each segment requires different technology and marketing strategies. A
        substantial portion of the revenue, long-lived assets and other assets
        of the Company's reportable segments are attributed to or located in the
        United States.


<TABLE>
<CAPTION>
                                                               Premedia      Corporate
        (In thousands)                            Print        Services      and Other      Total
        --------------------------              ---------      ---------     ----------    -------

        <S>                                     <C>              <C>         <C>           <C>
        2002
        Segment revenues                        $ 473,915        65,293        3,213       542,421

        EBITDA *                                $  57,170         8,437       (4,034)       61,573
        Depreciation and amortization              22,147         5,225        3,827        31,199
        Interest expense                             --            --         29,973        29,973
        Interest income                              --            --           (167)         (167)
        Other special charges - SFAS 121            3,875           407         --           4,282
        Other, net                                    (27)          400          264           637
                                                ---------        ------      -------       -------

           Income (loss) before income taxes    $  31,175         2,405      (37,931)       (4,351)

        Total assets                            $ 240,818        20,906       18,789       280,513

        Total capital expenditures              $  21,851         2,460          239        24,550
</TABLE>


* 2002 EBITDA includes restructuring charges of $6,491 and $2,147 for the Print
and Premedia Services segments, respectively.




                                       49
<PAGE>


                               ACG HOLDINGS, INC.

                   Notes to Consolidated Financial Statements


<TABLE>
<CAPTION>
                                                               Premedia      Corporate
        (In thousands)                            Print        Services      and Other      Total
        --------------------------              ---------      ---------     ----------    -------

        <S>                                     <C>              <C>         <C>           <C>
        2001
        Segment revenues                        $ 519,961        80,060         6,018       606,039

        EBITDA                                  $  74,298        17,075        (3,068)       88,305
        Depreciation and amortization              24,380         5,666         4,640        34,686
        Interest expense                              --            --         33,042        33,042
        Interest income                               --            --           (113)         (113)
        Other, net                                    (33)          856           371         1,194
                                                ---------     ---------     ---------     ---------

        Income (loss) before income taxes       $  49,951        10,553       (41,008)       19,496

        Total assets                            $ 256,786        28,457        16,959       302,202

        Total capital expenditures              $  19,492         5,539           240        25,271

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

        2000
        Segment revenues                        $ 470,458        80,240         3,584       554,282

        EBITDA                                  $  72,543        11,003        (3,539)       80,007
        Depreciation and amortization              23,097         5,983         4,706        33,786
        Interest expense                              --            --         33,963        33,963
        Interest income                               --            --           (165)         (165)
        Other charges, net                            --            137           --            137
        Other, net                                     98           208           321           627
                                                ---------     ---------     ---------     ---------

        Income (loss) before income taxes       $  49,348         4,675       (42,364)       11,659

        Total assets                            $ 262,761        31,333         9,718       303,812

        Total capital expenditures              $  17,977         4,419           328        22,724
</TABLE>





                                       50
<PAGE>



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

          None.



                                       51
<PAGE>


                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS

The following table provides certain information about each of the current
directors and executive officers of Holdings and Graphics (ages as of March 31,
2002). All directors hold office until their successors are duly elected and
qualified.

  Name                       Age    Position with Graphics and Holdings
  ----                       ---    -----------------------------------
  Stephen M. Dyott           50     Chairman, President of Holdings, Chief
                                    Executive Officer and Director
  James S. Hoch              42     Director
  Eric T. Fry                35     Director
  Joseph M. Milano           49     Executive Vice President and Chief Financial
                                    Officer
  Larry R. Williams          61     Executive Vice President, Purchasing of
                                    Graphics
  Stuart R. Reeve            38     Executive Vice President, Operations of
                                    Graphics
  Timothy M. Davis           47     Senior Vice President/Administration,
                                    Secretary and General Counsel
  Malcolm J. Anderson        63     President of the print division of Graphics
  Kathleen A. DeKam          41     President of American Color
  Patrick W. Kellick         44     Senior Vice President/Corporate Controller
                                    and Assistant Secretary

Stephen M. Dyott - Chairman and Chief Executive Officer of Graphics and Holdings
since September 1996; President of Holdings since February 1995; President of
Graphics since 1991; Director of Graphics and Holdings since September 1994;
Chief Operating Officer of Holdings from February 1995 to September 1996 and
Chief Operating Officer of Graphics from 1991 to September 1996; Vice President
and General Manager - Flexible Packaging, American National Can Company ("ANCC")
from 1988 to 1991; Vice President and General Manager - Tube Packaging, ANCC
from 1985 to 1987.

James S. Hoch - Director of Graphics and Holdings since February of 2001;
Managing Director of Morgan Stanley & Co. ("MS&Co.") and the general partner of
Morgan Stanley Capital Partners III, L.P. ("MSCP III") and Morgan Stanley
Leveraged Equity Fund II, L.P. ("MSLEF II"); joined MS&Co. in 1982; Currently a
Director of Silgan Holdings, Choice One Communications, Netscalibur Ltd of the
UK, Primacom AG of Germany, and Xtempus of the UK.

Eric T. Fry - Director of Graphics and Holdings since March 1996; Managing
Director of MS&Co. and the general partner of MSCP III and MSLEF II; joined
MS&Co. in 1989; Director of EnerSys Inc., Direct Response Corporation, Homesite
Group, LifeTrust America, Vanguard Health Systems and The Underwriter Holdings
Company Limited.

Joseph M. Milano - Executive Vice President and Chief Financial Officer of
Holdings and Graphics since 1997; Senior Vice President and Chief Financial
Officer of Holdings and Graphics from 1994 to 1997; Vice President - Finance of
Holdings and Graphics from 1992 to 1994; Vice President and Chief Financial
Officer, Farrel Corporation, 1989 to 1992; Vice President and Chief Financial
Officer, Electronic Mail Corporation of America from 1984 to 1988.

Larry R. Williams - Executive Vice President, Purchasing of Graphics since 1997;
Senior Vice President - Purchasing, Marketing and Newspaper Sales of Graphics
from 1996 to 1997; Senior Vice President of Purchasing / Transportation of
Graphics from 1993 to 1996; Independent Management Consultant from 1992 to 1993
and Senior Vice President, Operations Support for Ryder Systems from 1990 to
1992.

Stuart R. Reeve - Executive Vice President, Operations of Graphics since 1999;
Executive Vice President Sales and Marketing of Graphics from 1997 to 1999;
Senior Vice President Commercial Sales of Graphics 1995 to 1997; Vice President
Sales - Midwest of Graphics 1994 to 1995; Vice President Sales - West of
Graphics 1991 to 1994; Sales Executive of Graphics 1989 to 1991.

Timothy M. Davis - Senior Vice President/Administration, Secretary and General
Counsel of Holdings and Graphics since 1989; Assistant General Counsel of
MacMillan, Inc. and counsel to affiliates of Maxwell Communication Corporation
North America, January 1989 to June 1989; Attorney in private practice from 1981
to 1989.

                                       52

<PAGE>



Malcolm J. Anderson - President of the print division of Graphics since 1999;
Executive Vice President, Operations of Graphics from 1996 to 1999; Senior Vice
President, Operations of Graphics from 1993 to 1996; President, Plastic Products
Division of Kerr Group, Inc. from 1989 to 1993; Vice President Manufacturing -
Flexible Packaging, American National Can Company from 1982 to 1989; Vice
President, Eastern Division General Manager of Sinclair and Valentine Ink
Company from 1980 to 1982.

Kathleen A. DeKam - President of American Color since 1998; Vice President of
Human Resources of American Color from 1996 to 1998; Director of Human
Resources, American Color from 1995 to 1996; Manager of Human Resources -
various print plants, Graphics from 1986 to 1995; Manager of Human Resources,
The Diamond Center from 1985 to 1986; Personnelman, U. S. Navy from 1980 to
1985.

Patrick W. Kellick - Senior Vice President/Corporate Controller of Holdings and
Graphics since 1997; Vice President/Corporate Controller of Holdings and
Graphics from 1989 to 1997; Corporate Controller of Graphics since 1987, and
Assistant Secretary of Holdings and Graphics since 1995; various financial
positions with Williams Precious Metals (a division of Brush Wellman, Inc.) from
1984 to 1987, including CFO from 1986 to 1987; Auditor with KPMG from 1979 to
1984.


ITEM 11.      EXECUTIVE COMPENSATION

Summary Compensation Table

The following table presents information concerning compensation for services to
Holdings and Graphics during the fiscal years ended March 31, 2002, 2001 and
2000 to the Chief Executive Officer and the four other most highly compensated
executive officers (the "Named Executive Officers") of Holdings and/or Graphics.

<TABLE>
<CAPTION>
                                                            Summary Compensation Table


                                                                                                    Long-Term Compensation
                                                                                                    ----------------------
                                                                    Annual Compensation             Awards          Payouts
                                                             -----------------------------   ---------------------  -------
                                                                                                        Securities
                                                                                    Other                 Under-               All
                                                                                    Annual   Restricted   lying               Other
      Name and Principal                                                            Compen-    Stock     Options/    LTIP    Compen-
          Position                            Period         Salary       Bonus     sation    Award(s)   SAR's (#)   Payouts sation
-------------------------------------   ----------------    --------   ----------   -------  ----------  --------   -------- ------
<S>                                     <C>                 <C>        <C>            <C>       <C>        <C>        <C>       <C>
Stephen M. Dyott                        Fiscal Year 2002    $575,000   $  700,000     --         --        --         --        --
Chairman, President of Holdings and     Fiscal Year 2001    $575,000   $1,425,000     --         --        --         --        --
Chief Executive Officer & Director      Fiscal Year 2000    $575,000   $1,000,000     --         --        --         --        --

Joseph M. Milano                        Fiscal Year 2002    $330,000   $  300,000     --         --        --         --        --
Executive Vice President & Chief        Fiscal Year 2001    $330,000   $  425,000     --         --        --         --        --
Financial Officer                       Fiscal Year 2000    $309,231   $  375,000     --         --        --         --        --

Larry R. Williams                       Fiscal Year 2002    $350,000   $  175,000     --         --        --         --        --
Executive Vice President,               Fiscal Year 2001    $300,000   $  225,000     --         --        --         --        --
Purchasing                              Fiscal Year 2000    $300,000   $  225,000     --         --        --         --        --

Stuart R. Reeve                         Fiscal Year 2002    $300,000   $  200,000     --         --         --        --        --
Executive Vice President,               Fiscal Year 2001    $300,000   $  260,000     --         --         --        --        --
Operations of Graphics                  Fiscal Year 2000    $284,616   $  260,000     --         --         441       --        --


Timothy M. Davis                        Fiscal Year 2002    $295,000   $  200,000     --         --         --        --        --
Senior Vice President/Administration,   Fiscal Year 2001    $295,000   $  325,000     --         --         --        --        --
Secretary & General Counsel             Fiscal Year 2000    $277,692   $  275,000     --         --         --        --        --

</TABLE>

                                       53

<PAGE>


The following table presents information concerning the options granted to the
Named Executive Officers during the last fiscal year.


                      Option/SAR Grants in Last Fiscal Year

<TABLE>
<CAPTION>
                                                                                             Alternative
                                                                                             To (f) and (g)
                                                                                              Grant Date
                       Individual Grants                                                         Value
------------------------------------------------------------------------------------------   --------------
                                                   % of Total
                                                    Options/
                                Number of         SAR's Granted
                                Securities             to            Exercise                    Grant
                                Underlying          Employees        or Base                     Date
                                Options/SAR's     in Fiscal Year     Price      Expiration      Present
     Name                       Granted (#)            2002          ($/sh)        Date        Value ($)
-----------------               -------------     --------------     -------    ----------     ---------
<S>                             <C>               <C>                <C>        <C>            <C>
Common Stock Option Plans
   None

Preferred Stock Option Plan

   None
</TABLE>




The following table presents information concerning the fiscal year-end value of
unexercised stock options held by the Named Executive Officers.

               Aggregated Option/SAR Exercises in Last Fiscal Year
                      and Fiscal Year-End Option/SAR Values

<TABLE>
<CAPTION>
                                                                     Number of Securities             Value of Unexercised
                                                                    Underlying Unexercised        In-the-Money Options/ SAR's
                                 Shares Acquired     Value         Options/SAR's at 3/31/02          at 3/31/02 Exercisable/
                                 on Exercise (#)   Realized($)    Exercisable/Unexercisable (#)        Unexercisable ($)
                                 ----------------  -----------    ---------------------------     ---------------------------
Common Stock Option Plans (a)
<S>                               <C>               <C>              <C>                              <C>
  Stephen M. Dyott                --                 --              7,317.75 / 0                     2,515,330 / 0       (a)
  Joseph M. Milano                --                 --              3,993.25 / 0                     1,372,600 / 0       (a)
  Larry R. Williams               --                 --                931.00 / 0                       320,013 / 0       (a)
  Stuart R. Reeve                 --                 --              1,169.50 / 220.50                  401,992 / 75,792  (a)
  Timothy M. Davis                --                 --              1,976.00 / 0                       679,210 / 0       (a)

Preferred Stock Option Plan (b)
  Stephen M. Dyott                --                 --                   292 / 0                     2,320,349 / 0       (b)
  Joseph M. Milano                --                 --                   175 / 0                     1,390,620 / 0       (b)
  Timothy M. Davis                --                 --                    88 / 0                       699,283 / 0       (b)
</TABLE>

(a)  Holdings' common stock has not been registered or publicly traded and,
     therefore a public market price of the stock is not available. The values
     set forth in the table are based on our estimate of the fair market value
     of the common stock at March 31, 2002.

(b)  Holdings' preferred stock has not been registered or publicly traded and,
     therefore a public market price of the stock is not available. The values
     set forth in the table are based on our estimate of the fair market value
     of the preferred stock at March 31, 2002.



                                       54

<PAGE>


Pension Plan

Graphics sponsors the American Color Graphics, Inc. Salaried Employees' Pension
Plan (the "Pension Plan"), a defined benefit pension plan covering full-time
salaried employees of Graphics who had at least one year of service as of
December 31, 1994.

In October 1994, the Board of Directors approved an amendment to the Pension
Plan that resulted in the freezing of additional defined benefits for future
services under such plan effective January 1, 1995 (see note 8 to our
consolidated financial statements appearing elsewhere in this Report).

At March 31, 2002, all of the Named Executive Officers had vested in the Pension
Plan. At March 31, 2002, the Named Executive Officers had the following amounts
of credited service (original hire date through January 1, 1995) and annual
benefit payable upon retirement at age 65 under the Pension Plan: Stephen M.
Dyott (3 years, 3 months; $8,220), Joseph M. Milano (2 years, 7 months; $5,820),
Larry R. Williams (1 year, 5 months; $3,192), Stuart R. Reeve (5 years, 4
months; $9,185) and Timothy M. Davis (5 years, 5 months; $11,700).

The basic benefit payable under the Pension Plan is a five-year certain single
life annuity equivalent to (a) 1% of a participant's "final average monthly
compensation" plus (b) 0.6% of a participant's "final average monthly
compensation" in excess of 40% of the monthly maximum Social Security wage base
in the year of retirement multiplied by years of credited service (not to exceed
30 years of service). For purposes of the Pension Plan, "final average
compensation" (which, for the Named Executive Officers, is reflected in the
salary and bonus columns of the Summary Compensation Table) means the average of
a participant's five highest consecutive calendar years of total earnings (which
includes bonuses) from the last 10 years of service. The maximum monthly benefit
payable from the Pension Plan is $5,000.

The basic benefit under the Pension Plan is payable upon completion of five
years of vesting service and retirement on or after attaining age 65.
Participants may elect early retirement under the Pension Plan upon completion
of five years of vesting service and the attainment of age 55, and receive the
basic benefit reduced by 0.4167% for each month that the benefit commencement
date precedes the attainment of age 65. A deferred vested benefit is available
to those participants who separate from service before retirement provided the
participant has at least five years of vesting service.

Supplemental Executive Retirement Plan

In October 1994, the Board of Directors approved a new SERP, which is a defined
benefit plan, for the Named Executive Officers, four other current executives
and two former executives. The plan provides for a basic annual benefit payable
upon completion of five years vesting service (April 1, 1994 through March 31,
1999 for Messrs. Dyott, Milano, Williams, and Davis and July 1, 1997 through
June 30, 2002 for Messr. Reeve) and retirement on or after attaining age 65, or
the present value of such benefit at an earlier date under certain
circumstances. The Named Executive Officers have the following basic annual
benefit payable under this plan at age 65:

              Stephen M. Dyott           $100,000
              Joseph M. Milano           $100,000
              Larry R. Williams          $ 50,000
              Stuart R. Reeve            $ 50,000
              Timothy M. Davis           $ 75,000

Such benefits will be paid from our assets (see note 8 to our consolidated
financial statements appearing elsewhere in this Report).

Compensation of Directors

Directors of Holdings and Graphics do not receive a salary or an annual retainer
for their services but are reimbursed for expenses incurred with respect to such
services.


                                       55
<PAGE>


Employment Agreements

On October 19, 1998, Graphics entered into an employment agreement with Stephen
M. Dyott (the "Dyott Employment Agreement"), which replaced the agreement
entered into by Graphics and Mr. Dyott on April 3, 1993. The Dyott Employment
Agreement has an initial term of three years. The term under the Dyott
Employment Agreement is automatically extended for one-year periods absent at
least one year's written notice of an intent by either party not to renew. The
Dyott Employment Agreement provides for the payment of an annual salary, annual
bonus and all other employee benefits and perquisites made available to
Graphics' senior executives generally.

Under the Dyott Employment Agreement, if the employee's employment is terminated
by Graphics "without cause" ("cause", as defined in the Dyott Employment
Agreement, means a material breach by the employee of his obligations under the
Dyott Employment Agreement; continued failure or refusal of the employee to
substantially perform his duties to Graphics; a willful and material violation
of Federal or state law applicable to Graphics or the employee's conviction of a
felony or perpetration of a common law fraud; or other willful misconduct that
is injurious to Graphics) or by the employee for "good reason" (which, as
defined in the Dyott Employment Agreement, means a decrease in base pay or a
failure by Graphics to pay material compensation due and payable; a material
diminution of the employee's responsibilities or title; a material change in the
employee's principal employment location; or a material breach by Graphics of a
material term of the Dyott Employment Agreement), the employee will be entitled
to a pro rata portion of the bonus for the year employment was terminated
payable at the time bonuses are generally paid and salary continuation payments
(and certain other benefits) for a period of three years beginning on the date
of termination. The Dyott Employment Agreement contains confidentiality
obligations that survive indefinitely, non-solicitation obligations that end on
the second anniversary of the date employment has ceased and non-competition
obligations that end on the third anniversary of the date employment has ceased.

On July 15, 1998, Graphics entered into severance agreements with Joseph M.
Milano and Timothy M. Davis which provide that in the event the employee's
employment is terminated by Graphics without "cause", as defined above (but also
including as "cause" competition with Graphics), or by the employee for "good
reason", as defined above, the employee will be entitled to a pro rata portion
of the bonus for the year employment was terminated payable at the time bonuses
are generally paid and salary and benefit continuation for three years following
termination. The severance agreements contain confidentiality obligations that
survive indefinitely and non-solicitation and non-competition obligations that
end on the third anniversary of the date employment has ceased.

Graphics is also party to an employment agreement dated as of September 1, 1995,
with Larry R. Williams, which provides for an annual salary, annual bonus and
all other employee benefits and perquisites made available to Graphics' senior
executives generally. The term of Mr. Williams agreement provided for an initial
period of two years with one year automatic extentions. Such agreement also
provides that in the event the employee's employment is terminated by Graphics
without "cause", as defined above, or by the employee for "good reason", as
defined above, the employee will be entitled to base salary continuation for two
years following termination. The employment agreement contains confidentiality
obligations that survive indefinitely and non-solicitation and non-competition
obligations that end on the second anniversary of the date employment has
ceased.

On August 1, 1999, Graphics also entered into a severance agreement with Stuart
Reeve which provides that in the event the employee's employment is terminated
by Graphics without "cause", as defined above (but also including as "cause"
competition with Graphics), or by the employee for "good reason", as defined
above, the employee will be entitled to a pro rata portion of the bonus for the
year employment was terminated payable at the time bonuses are generally paid
and salary and benefit continuation for two years following termination. Such
base salary payments will be reduced, after the first twelve months from the
date of termination, to the extent the employee receives compensation from
another employer. The severance agreement contains confidentiality obligations
that survive indefinitely and non-solicitation and non-competition obligations
that end on the second anniversary of the date employment has ceased.

Compensation Committee Interlocks and Insider Participation

We do not maintain a formal compensation committee. Mr. Dyott sets compensation
in conjunction with the Board of Directors.


                                       56

<PAGE>


Repriced Options

During Fiscal Year 1998, certain common stock option agreements were modified to
reprice options previously granted with a $50 exercise price to a $.01 exercise
price. Based upon the Board of Directors determination, the new exercise price
was not less than the fair market value of such options. See note 10 to our
consolidated financial statements appearing elsewhere in this Report. The
following table presents information concerning all repricing of options and
SARs held by any executive officer during the last ten completed fiscal years.

                        Ten Year Option / SAR Repricings

<TABLE>
<CAPTION>
                                                Number of
                                                Securities      Market Price of       Exercise                    Length of Original
                                                Underlying      Stock at Time of      Price at      New              Option Term
                                               Options/SARs      Repricing or         Time of     Exercise         Remaining at Date
                                 Repricing      Repriced or       Amendment           Repricing    Price            of Repricing or
     Name                          Date         Amended (#)          ($)                 ($)        ($)                Amendment
------------------------------   ---------    ---------------  ----------------       ---------  -----------      ------------------

<S>                              <C>             <C>                 <C>                 <C>         <C>           <C>
Stephen M. Dyott                 01/16/98        1,761                --                 50          .01           8 yrs. 6 mo.
Chairman, President of           01/16/98          380                --                 50          .01           7 yrs. 6 mo.
Holdings, Chief Executive        01/16/98          859                --                 50          .01           6 yrs. 5 mo.
Officer and Director             01/16/98        2,300                --                 50          .01           5 yrs. 0 mo.

Joseph M. Milano                 01/16/98          760                --                 50          .01           8 yrs. 6 mo.
Executive Vice President and     01/16/98          614                --                 50          .01           7 yrs. 6 mo.
Chief Financial Officer          01/16/98          688                --                 50          .01           6 yrs. 5 mo.
                                 01/16/98          102                --                 50          .01           5 yrs. 0 mo.

Larry R. Williams                01/16/98          125                --                 50          .01           8 yrs. 6 mo.
Executive Vice President,        01/16/98          526                --                 50          .01           6 yrs. 5 mo.
Purchasing of Graphics

Stuart R. Reeve                  01/16/98           91                --                 50          .01           8 yrs. 6 mo.
Executive Vice President,        01/16/98          140                --                 50          .01           7 yrs. 6 mo.
Operations of Graphics           01/16/98          420                --                 50          .01           6 yrs. 5 mo.

Timothy M. Davis                 01/16/98          290                --                 50          .01           8 yrs. 6 mo.
Senior Vice President/           01/16/98          535                --                 50          .01           6 yrs. 5 mo.
Administration, Secretary        01/16/98          255                --                 50          .01           5 yrs. 0 mo.
and General Counsel

Malcolm J. Anderson              01/16/98          125                --                 50          .01           8 yrs. 6 mo.
President of Graphics            01/16/98          526                --                 50          .01           6 yrs. 5 mo.

Patrick W. Kellick               01/16/98          257                --                 50          .01           8 yrs. 6 mo.
Senior Vice President/           01/16/98          105                --                 50          .01           6 yrs. 5 mo.
Corporate Controller and
Assistant Secretary

</TABLE>



                                       57
<PAGE>


ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth information, as of March 31, 2002, concerning the
persons having beneficial ownership of more than five percent of the capital
stock of Holdings and the beneficial ownership thereof by each director and
Named Executive Officer of Holdings and by all directors and executive officers
of Holdings as a group. Each holder below has sole voting power and sole
investment power over the shares designated below.

<TABLE>
<CAPTION>
                                              Shares of Holdings   Percent   Shares of Holdings       Percent
Name                                             Common Stock     of Class    Preferred Stock        of Class
------------------------------------          ------------------  --------   ------------------      --------
<S>                                               <C>               <C>         <C>                    <C>
The Morgan Stanley Leveraged Equity
Fund II, L.P.
1221 Ave. of the Americas
New York, NY 10020                                59,450            41.5        2,727                  52.2

MSCP III Entities (a)
1221 Ave. of the Americas
New York, NY 10020                                23,333            16.3        1,070                  20.5

First Plaza Group Trust
c/o Mellon Bank, N.A.
1 Mellon Bank Center
Pittsburgh, PA 15258                              17,000            11.9          780                  14.9

Ell & Co.
c/o The Northern Trust Company
40 Broad Street
New York, NY  10004                                6,537             4.6          300                   5.7

Directors and Named Executive Officers:

        Stephen M. Dyott (b)                      14,970             9.9          315                   5.7

        Joseph M. Milano (c)                       7,235             4.9          175                   3.2

        Larry R. Williams (d)                      1,809             1.3           --                    --

        Stuart R. Reeve (e)                        2,030             1.4           --                    --

        Timothy M. Davis (f)                       3,618             2.5           88                   1.7

        James S. Hoch                                 --              --           --                    --

        Eric T. Fry                                   --              --           --                    --

All current directors and executive officers
as a group (g)                                    33,625            20.9          578                  10.0

</TABLE>

(a)  Includes Morgan Stanley Capital Partners III, L.P., Morgan Stanley Capital
     Investors, L.P. and MSCP III 892 Investors, L.P.
(b)  Includes 7,318 common stock options and 292 preferred stock options
     exercisable within 60 days.
(c)  Includes 3,993 common stock options and 175 preferred stock options
     exercisable within 60 days.
(d)  Includes 931 common stock options and exercisable within 60 days.
(e)  Includes 1,170 common stock options exercisable within 60 days.
(f)  Includes 1,976 common stock options and 88 preferred stock options
     exercisable within 60 days.
(g)  Includes 17,814 common stock options and 555 preferred stock options
     exercisable within 60 days.

                                       58
<PAGE>


ITEM 13.      CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Stockholders' Agreement. Holdings, The Morgan Stanley Leveraged Equity Fund II,
L.P. ("MSLEF II"), other entities affiliated with Morgan Stanley Dean Witter and
Co. ("MSDW") and other stockholders of Holdings entered into an amended and
restated stockholders' agreement, dated as of August 14, 1995. The stockholders'
agreement includes provisions requiring the delivery of certain shares of
Holdings' common stock from the "Purchasers", as defined in the stockholders'
agreement, which includes MSLEF II, certain institutional investors and members
of management, to Holdings, depending upon the return realized by the Purchasers
on their investment, and thereafter from Holdings to the "Existing Holders", as
defined in the stockholders' agreement. Depending upon the returns realized by
the Purchasers on their investment, their interest in the Holdings' common stock
could be reduced and the interest of the Existing Holders could be increased.
The stockholders' agreement gives the Existing Holders, the right to designate a
director of Holdings and the entities affiliated with MSDW also the right to
designate a director. The stockholders' agreement contains rights of first
refusal with regard to the issuance by Holdings of equity securities and sales
by the stockholders of equity securities of Holdings owned by them, specified
tag along and drag along provisions and registration rights. The stockholders'
agreement also restricts our ability to enter into affiliate transactions unless
the transaction is fair and reasonable, with terms no less favorable to us than
if the transaction was completed on an arm's length basis.

Tax Sharing Agreement

Holdings and Graphics are parties to a tax sharing agreement effective July 27,
1989. Under the terms of the agreement, Graphics (whose income is consolidated
with that of Holdings for federal income tax purposes) is liable to Holdings for
amounts representing federal income taxes calculated on a "stand-alone basis".
Each year Graphics pays to Holdings the lesser of (i) Graphics' federal tax
liability computed on a stand-alone basis and (ii) its allocable share of the
federal tax liability of the consolidated group. Accordingly, Holdings is not
currently reimbursed for the separate tax liability of Graphics to the extent
Holdings' losses reduce consolidated tax liability. Reimbursement for the use of
such Holdings' losses will occur when the losses may be used to offset Holdings'
income computed on a stand-alone basis. Graphics has also agreed to reimburse
Holdings in the event of any adjustment (including interest or penalties) to
consolidated income tax returns based upon Graphics' obligations with respect
thereto. No reimbursement obligation currently exists between Graphics and
Holdings. Also under the terms of the tax sharing agreement, Holdings has agreed
to reimburse Graphics for refundable federal income tax equal to an amount which
would be refundable to Graphics had Graphics filed separate federal income tax
returns for all years under the agreement. Graphics and Holdings have also
agreed to treat foreign, state and local income and franchise taxes for which
there is consolidated or combined reporting in a manner consistent with the
treatment of federal income taxes as described above.

Other

MS&Co. is affiliated with entities that beneficially own a substantial majority
of the outstanding shares of capital stock of Holdings. As of March 31, 2002,
Morgan Stanley Senior Funding, Inc. has a $9.6 million participation in the Bank
Credit Agreement. Morgan Stanley Senior Funding, Inc. received interest payments
for the fiscal year ended March 31, 2002 based on its participation during the
course of the year.


                                       59

<PAGE>





                                     PART IV

ITEM 14.      EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a)           The following documents are filed as a part of this Report:

                       Reports of Independent Auditors

              1 and 2.    Financial Statements:  The following Consolidated
                          Financial Statements of Holdings are included in
                          Part II, Item 8:

                          Consolidated balance sheets - March 31, 2002 and 2001

                          For the Years Ended March 31, 2002, 2001 and 2000:

                               Consolidated statements of income
                               Consolidated statements of stockholders' deficit
                               Consolidated statements of cash flows

                               Notes to Consolidated Financial Statements

                          Financial Statement Schedules:  The following
                          financial statement schedules of Holdings are filed
                          as a part of this Report.

     Schedules                                                          Page No.
     ---------                                                          --------

I.   Condensed Financial Information of Registrant:
     Condensed Financial Statements (parent company only) for the years ended
     March 31, 2002, 2001 and 2000 and as of March 31, 2002 and 2001..........62

II.  Valuation and qualifying accounts........................................67


     Schedules not listed above have been omitted because they are not
     applicable or are not required, or the information required to be set-forth
     therein is included in the Consolidated Financial Statements or notes
     thereto.

3.   Exhibits:  The exhibits listed on the accompanying Index to Exhibits
     immediately following the financial statement schedules are filed as part
     of, or incorporated by reference into, this Report.


Exhibit
  No.     Description
-------   -----------
3.1       Certificate of Incorporation of Graphics, as amended to date*
3.2       By-laws of Graphics, as amended to date*
3.3       Restated Certificate of Incorporation of Holdings, as amended to date*
3.4       By-laws of Holdings, as amended to date*
4.1       Indenture (including the form of Note), dated as of August 15, 1995,
          among Graphics, Holdings and NationsBank of Georgia, National
          Association, as Trustee**
10.1      Credit Agreement, dated as of August 15, 1995 and Amended and Restated
          as of May 8, 1998, among Holdings, Graphics, GE Capital Corporation as
          Documentation Agent, Morgan Stanley Senior Funding, Inc. as
          Syndication Agent, Bankers Trust Company as Administrative Agent
          and the parties signatory thereto++++
10.1(a)   June 8, 1998, First Amendment to Amended and Restated Credit Agreement
          dated as of May 8, 1998, among Holdings, Graphics, GE Capital
          Corporation as Documentation Agent, Morgan Stanley Senior Funding,
          Inc. as Syndication Agent, Bankers Trust Company as Administrative
          Agent and the parties signatory thereto++++
10.1(b)   February 3, 1999, Second Amendment to Amended and Restated Credit
          Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
          Capital Corporation as Documentation Agent, Morgan Stanley Senior
          Funding, Inc. as Syndication Agent, Bankers Trust Company as
          Administrative Agent and the parties signatory thereto****



                                       60
<PAGE>


10.1(c)   November 9, 1999, Third Amendment to Amended and Restated Credit
          Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
          Capital Corporation as Documentation Agent, Morgan Stanley Senior
          Funding, Inc. as Syndication Agent, Bankers Trust Company as
          Administrative Agent and the parties signatory thereto+++

10.1(d)   January 26, 2001, Fourth Amendment of Amended and Restated Credit
          Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
          Capital Corporation as Documentation Agent, Morgan Stanley Senior
          Funding, Inc. as Syndication Agent, Bankers Trust Company as
          Administrative Agent and the parties signatory thereto+++++
10.1(e)   March 21, 2002, Fifth Amendment to Amended and Restated Credit
          Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
          Capital Corporation as Documentation Agent, Morgan Stanley Senior
          Funding, Inc. as Syndication Agent, Bankers Trust Company as
          Administrative Agent and the parties signatory thereto
10.2      Employment Agreement, dated as of October 19, 1998, between Graphics
          and Stephen M. Dyott***
10.3      Severance Letter, dated August 1, 1999, between Graphics and Stuart
          Reeve***
10.4      Severance Letter, dated July 15, 1998, between Graphics and Joseph
          M. Milano+
10.5      Severance Letter, dated July 15, 1998, between Graphics and
          Timothy M. Davis+
10.6      Severance Letter, dated September 1, 1995, between Graphics and Larry
          Williams+
10.6(a)   Amendment to Severance Letter, dated June 3, 1999, between Graphics
          and Larry Williams*****
10.7      Amended and Restated Stockholders' Agreement, dated as of August 14,
          1995, among Holdings, the Morgan Stanley Leveraged Equity Fund II,
          L.P., Morgan Stanley Capital Partners III, L.P. and the additional
          parties named therein**
10.7(a)   Amendment No. 1, dated January 16, 1998, to Amended and Restated
          Stockholders' Agreement dated as of August 14, 1995, among Holdings,
          the Morgan Stanley Leveraged Equity Fund II, L.P., Morgan Stanley
          Capital Partners III, L.P., and the additional parties named
          herein++++
10.8      Stock Option Plan of Holdings++
10.9      Term Loan Agreement, dated as of June 30, 1997, among Holdings,
          Graphics, BT Commercial Corporation, as Agent, Bankers Trust Company,
          as Issuing Bank, and the parties signatory thereto++++
10.10     Holdings Common Stock Option Plan++++
10.11     Holdings Preferred Stock Option Plan++++
12.1      Statement Re: Computation of Ratio of Earnings to Fixed Charges
21.1      List of Subsidiaries

------------
*         Incorporated by reference from Amendment No. 2 to Form S-1 filed on
          October 4, 1993 - Registration number 33-65702.
+         Incorporated by reference from the Annual Report on Form 10-K for the
          fiscal year ended March 31, 1999 - Commission file number 33-97090.
**        Incorporated by reference from Form S-4 filed on September 19, 1995 -
          Registration number 33-97090.
++        Incorporated by reference from Amendment No. 2 to Form S-4 filed on
          November 22, 1995 - Registration number 33-97090.
***       Incorporated by reference from the Annual Report on Form 10-K for the
          fiscal year ended March 31, 2000 - Commission file number 33-97090.
+++       Incorporated by reference from the Quarterly Report on Form 10-Q for
          the quarter ended December 31, 1999 - Commission file number 33-97090.
****      Incorporated by reference from the Quarterly Report on Form 10-Q for
          the quarter ended December 31, 1998 - file number 33-97090.
++++      Incorporated by reference from the Annual Report on Form 10-K for the
          fiscal year ended March 31, 1998 - Commission file number 33-97090.
*****     Incorporated by reference from the Quarterly Report on Form 10-Q for
          the quarter ended June 30, 1999 - Commission file number 33-97090.
+++++     Incorporated by reference from the Quarterly Report on Form 10-Q for
          the quarter ended December 31, 2000 - Commission file number 33-97090.

(b)     Reports on Form 8-K:
        -------------------

        The following report on Form 8-K was filed during the fourth quarter of
Fiscal Year 2002:

         1.   Form 8-K filed with the Securities and Exchange Commission on
              February 6, 2002 under Item 5 to announce ACG's financial results
              for the twelve month period ended December 31, 2001.

        ACG did not file any other reports on Form 8-K during the three months
ended March 31, 2002.


                                       61
<PAGE>


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               ACG HOLDINGS, INC.
                               Parent Company Only
                            Condensed Balance Sheets
                             (Dollars in thousands)

                                                           March 31,
                                                    ------------------------
                                                      2002           2001
                                                    ----------     ---------
Assets
------

  Current assets:

     Receivable from subsidiary                     $      26          466

     Income taxes receivable                              611           41
                                                     ---------    ---------
                Total assets                        $     637          507


Liabilities and Stockholders' Deficit
-------------------------------------

Liabilities of subsidiary in excess of assets       $  96,657       86,374
                                                     ---------    ---------
  Total liabilities                                    96,657       86,374

Stockholders' deficit:

   Common stock, voting, $.01 par value,
      5,852,223 shares authorized, 143,399
      shares issued and outstanding                         1            1

   Preferred stock, $.01 par value, 15,823
      shares authorized, 3,617 shares Series
      AA convertible preferred stock issued
      and outstanding, $39,442,551 liquidation
      preference, and 1,606 shares Series BB
      convertible preferred stock issued and
      outstanding, $17,500,000 liquidation
      preference                                           --           --


   Additional paid-in capital                          58,500       58,370

   Accumulated deficit                               (140,340)    (141,062)

   Other accumulated comprehensive loss, net of tax   (14,181)      (3,176)
                                                     --------     ---------
        Total stockholders' deficit                   (96,020)     (85,867)
                                                     --------     ---------

   Commitments and contingencies

        Total liabilities and stockholders' deficit  $    637          507
                                                     ========     =========





See accompanying notes to condensed financial statements.


                                       62
<PAGE>


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               ACG HOLDINGS, INC.
                               Parent Company Only
                         Condensed Statements of Income
                                 (In thousands)





                                                    Year ended March 31,
                                             ---------------------------------
                                                2002       2001         2000
                                             ---------   --------    ---------


Equity in income of subsidiary               $  722       24,423       9,470
                                             ---------   --------    ---------
          Net income                         $  722       24,423       9,470
                                             =========   ========    =========














See accompanying notes to condensed financial statements.


                                       63

<PAGE>

           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               ACG HOLDINGS, INC.
                              Parent Company Only
                       Condensed Statements of Cash Flows
                                 (In thousands)






                                              Year ended March 31,
                                      ---------------------------------
                                         2002        2001       2000
                                      ----------  ---------  ----------
Cash flows from operating activities  $     --          --          --

Cash flows from investing activities        --          --          --

Cash flows from financing activities        --          --          --

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

                  Net change in cash  $     --          --          --
                                       =========  =========  ==========






See accompanying notes to condensed financial statements.

                                       64

<PAGE>


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               ACG HOLDINGS, INC.
                               Parent Company Only
                     Notes to Condensed Financial Statements

Description of ACG Holdings, Inc.

Our company was formed in April 1989 under the name GBP Holdings, Inc. to effect
the purchase of all the capital stock of GBP Industries, Inc. from its
stockholders in a leveraged buyout transaction. In October 1989, GBP Holdings,
Inc. changed its name to Sullivan Holdings, Inc. and GBP Industries, Inc.
changed its name to Sullivan Graphics, Inc. Effective June 1993, Sullivan
Holdings, Inc. changed its name to Sullivan Communications, Inc. Effective July
1997, Sullivan Communications, Inc. changed its name to ACG Holdings, Inc.
("Holdings") and Sullivan Graphics, Inc. changed its name to American Color
Graphics, Inc. ("Graphics").

Holdings has no operations or significant assets other than its investment in
Graphics. Holdings is dependent upon distributions from Graphics to fund its
obligations. Under the terms of its debt agreements at March 31, 2001, Graphics'
ability to pay dividends or lend to Holdings is either restricted or prohibited,
except that Graphics may pay specified amounts to Holdings to fund the payment
of Holdings' obligations pursuant to a tax sharing agreement (see note 4).

On April 8, 1993 (the "Acquisition Date"), pursuant to an Agreement and Plan of
Merger dated as of March 12, 1993, as amended (the "Merger Agreement"), between
Holdings and SGI Acquisition Corp. ("Acquisition Corp."), Acquisition Corp. was
merged with and into Holdings (the "Acquisition"). Acquisition Corp. was formed
by The Morgan Stanley Leveraged Equity Fund II, L.P., certain institutional
investors, and certain members of management (the "Purchasing Group") for the
purpose of acquiring a majority interest in Holdings. Acquisition Corp. acquired
a substantial and controlling majority interest in Holdings in exchange for $40
million in cash. In the Acquisition, Holdings continued as the surviving
corporation and the separate corporate existence of Acquisition Corp. was
terminated.

In connection with the Acquisition, the existing consulting agreement with the
managing general partner of Holdings' majority stockholder was terminated and
the related liabilities of Holdings were canceled. The agreement required
Holdings to make minimum annual payments of $1 million for management advisory
services subject to limitations in Graphics' debt agreements. No amounts were
paid during the periods presented in these condensed financial statements.

     1.   Basis of Presentation

          The accompanying condensed financial statements (parent company only)
          include the accounts of Holdings and its investments in Graphics
          accounted for in accordance with the equity method, and do not present
          the financial statements of Holdings and its subsidiary on a
          consolidated basis. These parent company only financial statements
          should be read in conjunction with ACG's consolidated financial
          statements. The Acquisition was accounted for under the purchase
          method of accounting applying the provisions of Accounting Principles
          Board Opinion No. 16 ("APB 16").

     2.   Guarantees

          As set forth in ACG's consolidated financial statements, a substantial
          portion of Graphics' long-term obligations has been guaranteed by
          Holdings.

          Holdings has guaranteed Graphics' indebtedness under the Bank Credit
          Agreement, which guarantee is secured by a pledge of all of Graphics'
          stock. Borrowings under the Bank Credit Agreement are secured by
          substantially all assets of Graphics. Holdings is restricted under its
          guarantee of the Bank Credit Agreement from, among other things,
          entering into mergers, acquisitions, incurring additional debt, or
          paying cash dividends.


                                       65

<PAGE>


           SCHEDULE I - CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                               ACG HOLDINGS, INC.
                               Parent Company Only
                     Notes to Condensed Financial Statements

          On August 15, 1995, Graphics issued $185 million of Senior
          Subordinated Notes (the "Notes") bearing interest at 12 3/4% and
          maturing August 1, 2005. The Notes are guaranteed on a senior
          subordinated basis by Holdings and are subordinate to all existing and
          future senior indebtedness, as defined, of Graphics.

     3.   Dividends from Subsidiaries and Investees

          No cash dividends were paid to Holdings from any consolidated
          subsidiaries, unconsolidated subsidiaries or investees accounted for
          by the equity method during the periods reflected in these condensed
          financial statements.

     4.   Tax Sharing Agreement

          Holdings and Graphics are parties to a tax sharing agreement effective
          July 27, 1989. Under the terms of the agreement, Graphics (whose
          income is consolidated with that of Holdings for federal income tax
          purposes) is liable to Holdings for amounts representing federal
          income taxes calculated on a "stand-alone basis". Each year Graphics
          pays to Holdings the lesser of (i) Graphics' federal tax liability
          computed on a stand-alone basis and (ii) its allocable share of the
          federal tax liability of the consolidated group. Accordingly, Holdings
          is not currently reimbursed for the separate tax liability of Graphics
          to the extent Holdings' losses reduce consolidated tax liability.
          Reimbursement for the use of such Holdings' losses will occur when the
          losses may be used to offset Holdings' income computed on a
          stand-alone basis. Graphics has also agreed to reimburse Holdings in
          the event of any adjustment (including interest or penalties) to
          consolidated income tax returns based upon Graphics' obligations with
          respect thereto. Also, under the terms of the tax sharing agreement,
          Holdings has agreed to reimburse Graphics for refundable federal
          income taxes equal to an amount which would be refundable to Graphics
          had Graphics filed separate federal income tax returns for all years
          under the agreement. Graphics and Holdings have also agreed to treat
          foreign, state and local income and franchise taxes for which there is
          consolidated or combined reporting in a manner consistent with the
          treatment of federal income taxes as described above.

     5.   Refinancing Transaction

          ACG has a $145 million credit facility with a syndicate of lenders
          (the "Bank Credit Agreement"), providing for a $70 million revolving
          credit facility which is not subject to a borrowing base limitation
          (the "Revolving Credit Facility") maturing on March 31, 2004, a $25
          million amortizing term loan facility maturing on March 31, 2004 (the
          "A Term Loan Facility") and a $50 million amortizing term loan
          facility maturing on March 31, 2005 (the "B Term Loan Facility").

          Interest under the Bank Credit Agreement is floating based upon
          existing market rates plus agreed upon margin levels. In addition, ACG
          is obligated to pay specific commitment and letter of credit fees.
          Such margin levels and fees reduce over the term of the agreement
          subject to the achievement of certain Leverage Ratio measures.

          Borrowings under the Bank Credit Agreement are secured by
          substantially all of ACG's assets. In addition, Holdings has
          guaranteed the indebtedness under the Bank Credit Agreement, which
          guarantee is secured by a pledge of all of Graphics' and its
          subsidiaries' stock. The new agreement (1) requires satisfaction of
          certain financial covenants including Minimum Consolidated EBITDA,
          Consolidated Interest Coverage Ratio and Leverage Ratio requirements,
          (2) requires prepayments in certain circumstances including excess
          cash flows, proceeds from asset dispositions in excess of prescribed
          levels and certain capital structure transactions and (3) contains
          various restrictions and limitations on the following items: (a) the
          level of capital spending, (b) the incurrence of additional
          indebtedness, (c) mergers, acquisitions, investments and similar
          transactions and (d) dividends and other distributions. In addition,
          the agreement includes various other customary affirmative and
          negative covenants. Graphics' ability to pay dividends or lend funds
          to Holdings is restricted.


                                       66

<PAGE>


SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
ACG HOLDINGS, INC.


<TABLE>
<CAPTION>
                                          Balance at                                                  Balance at
                                          Beginning        Expense/                    Other           End of
                                          of Period        (Income)     Write-offs   Adjustments       Period
                                          -----------      ----------    ----------   -----------      -----------
                                                                      (In thousands)

<S>                                       <C>                <C>            <C>          <C>          <C>
Fiscal Year ended March 31, 2002

   Allowance for doubtful accounts        $   3,905           (647)         (701)          --         $   2,557

   Reserve for inventory obsolescence     $     485            (62)          (33)          --         $     390

   Income tax valuation allowance         $  23,469             --            -- (a)     (123)        $  23,346



Fiscal Year ended March 31, 2001

   Allowance for doubtful accounts        $   2,945           1,452         (492)          --         $   3,905

   Reserve for inventory obsolescence     $     489             189         (193)          --         $     485

   Income tax valuation allowance         $  36,081              --           -- (b)  (12,612)        $  23,469



Fiscal Year ended March 31, 2000

   Allowance for doubtful accounts        $   2,860             783         (698)          --         $   2,945

   Reserve for inventory obsolescence     $     588             (99)          --           --         $     489

   Income tax valuation allowance         $  41,460              --           -- (c)   (5,379)        $  36,081

</TABLE>

(a)  The decrease in the valuation allowance primarily relates to projected
     future use of net operating loss carryforwards, partially offset by
     deferred tax assets related to an increase in the minimum pension
     liability.

(b)  The decrease in the valuation allowance primarily relates to current year
     income for which no tax expense has been recorded and to projected future
     use of net operating loss carryforwards.

(c)  The decrease in the valuation allowance primarily relates to current year
     income for which no tax expense has been recorded.



                                       67
<PAGE>

                                   SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrants have duly caused this Report to be signed on their
behalf by the undersigned thereunto duly authorized.

                               ACG Holdings, Inc.

                         American Color Graphics, Inc.

                                                                    Date


                        /s/    Stephen M. Dyott                 June 27, 2002
                        --------------------------------     -------------------
                                Stephen M. Dyott
                 Chairman, President and Chief Executive Officer
                               ACG Holdings, Inc.
                      Chairman and Chief Executive Officer
                          American Color Graphics, Inc.
        Director of ACG Holdings, Inc. and American Color Graphics, Inc.

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 and on the dates indicated.



      Signature                      Title                         Date
    -------------                  ---------                     ---------


/s/ Joseph M. Milano          Executive Vice President         June 27, 2002
------------------------      Chief Financial Officer          -------------
   (Joseph M. Milano)



/s/  Patrick W. Kellick      Senior Vice President/            June 27, 2002
------------------------      Corporate Controller             -------------
    (Patrick W. Kellick)      Assistant Secretary
                          (Principal Accounting Officer)



/s/  James S. Hoch                Director                     June 27, 2002
-----------------------                                        -------------
    (James S. Hoch)


/s/  Eric T. Fry                  Director                     June 27, 2002
-----------------------                                        -------------
    (Eric T. Fry)



                                       68

<PAGE>

                               ACG HOLDINGS, INC.
                           Annual Report on Form 10-K
                        Fiscal Year Ended March 31, 2002

                                Index to Exhibits
Exhibit No.     Description
-----------     -----------

     3.1        Certificate of Incorporation of Graphics, as amended to date*
     3.2        By-laws of Graphics, as amended to date*
     3.3        Restated Certificate of Incorporation of Holdings, as amended to
                date*
     3.4        By-laws of Holdings, as amended to date*
     4.1        Indenture (including the form of Note), dated as of August 15,
                1995, among Graphics, Holdings and NationsBank of Georgia,
                National Association, as Trustee**
     10.1       Credit Agreement, dated as of August 15, 1995 and Amended and
                Restated as of May 8, 1998, among Holdings, Graphics, GE Capital
                Corporation as Documentation Agent, Morgan Stanley Senior
                Funding, Inc. as Syndication Agent, Bankers Trust Company as
                Administrative Agent and the parties signatory thereto++++
     10.1(a)    June 8, 1998, First Amendment to Amended and Restated Credit
                Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
                Capital Corporation as Documentation Agent, Morgan Stanley
                Senior Funding, Inc. as Syndication Agent, Bankers Trust Company
                as Administrative Agent and the parties signatory thereto++++
     10.1(b)    February 3, 1999, Second Amendment to Amended and Restated
                Credit Agreement dated as of May 8, 1998, among Holdings,
                Graphics, GE Capital Corporation as Documentation Agent, Morgan
                Stanley Senior Funding, Inc. as Syndication Agent, Bankers Trust
                Company as Administrative Agent and the parties signatory
                thereto****
     10.1(c)    November 9, 1999, Third Amendment to Amended and Restated Credit
                Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
                Capital Corporation as Documentation Agent, Morgan Stanley
                Senior Funding, Inc. as Syndication Agent, Bankers Trust Company
                as Administrative Agent and the parties signatory thereto+++
     10.1(d)    January 26, 2001, Fourth Amendment of Amended and Restated
                Credit Agreement dated as of May 8, 1998, among Holdings,
                Graphics, GE Capital Corporation as Documentation Agent, Morgan
                Stanley Senior Funding, Inc. as Syndication Agent, Bankers Trust
                Company as Administrative Agent and the parties signatory
                thereto +++++
     10.1(e)    March 21, 2002, Fifth Amendment to Amended and Restated Credit
                Agreement dated as of May 8, 1998, among Holdings, Graphics, GE
                Capital Corporation as Documentation Agent, Morgan Stanley
                Senior Funding, Inc. as Syndication Agent, Bankers Trust Company
                as Administrative Agent and the parties signatory thereto
     10.2       Employment Agreement, dated as of October 19, 1998, between
                Graphics and Stephen M. Dyott***
     10.3       Severance Letter, dated August 1, 1999, between Graphics and
                Stuart Reeve***
     10.4       Severance Letter, dated July 15, 1998, between Graphics and
                Joseph M. Milano+
     10.5       Severance Letter, dated July 15, 1998, between Graphics and
                Timothy M. Davis+
     10.6       Severance Letter, dated September 1, 1995, between Graphics and
                Larry Williams+
     10.6(a)    Amendment to Severance Letter, dated June 3, 1999, between
                Graphics and Larry Williams*****
     10.7       Amended and Restated Stockholders' Agreement, dated as of August
                14, 1995, among Holdings, the Morgan Stanley Leveraged Equity
                Fund II, L.P., Morgan Stanley Capital Partners III, L.P. and the
                additional parties named therein**
     10.7(a)    Amendment No. 1, dated January 16, 1998, to Amended and Restated
                Stockholders' Agreement dated as of August 14, 1995, among
                Holdings, the Morgan Stanley Leveraged Equity Fund II, L.P.,
                Morgan Stanley Capital Partners III, L.P., and the additional
                parties named herein++++
     10.8       Stock Option Plan of Holdings++
     10.9       Term Loan Agreement, dated as of June 30, 1997, among Holdings,
                Graphics, BT Commercial Corporation, as Agent, Bankers Trust
                Company, as Issuing Bank, and the parties signatory thereto++++
     10.10      Holdings Common Stock Option Plan++++
     10.11      Holdings Preferred Stock Option Plan++++
     12.1       Statement Re: Computation of Ratio of Earnings to Fixed Charges
     21.1       List of Subsidiaries


                                       69
<PAGE>


-----------
*        Incorporated by reference from Amendment No. 2 to Form S-1 filed on
         October 4, 1993 - Registration number 33-65702.
+        Incorporated by reference from the Annual Report on Form 10-K for the
         fiscal year ended March 31, 1999 - Commission file number 33-97090.
**       Incorporated by reference from Form S-4 filed on September 19, 1995 -
         Registration number 33-97090.
++       Incorporated by reference from Amendment No. 2 to Form S-4 filed on
         November 22, 1995 - Registration number 33-97090.
***      Incorporated by reference from the Annual Report on Form 10-K for the
         fiscal year ended March 31, 2000 - Commission file number 33-97090.
+++      Incorporated by reference from the Quarterly Report on Form 10-Q for
         the quarter ended December 31, 1999 - Commission file number 33-97090.
****     Incorporated by reference from the Quarterly Report on Form 10-Q for
         the quarter ended December 31, 1998 - Commission file number 33-97090.
++++     Incorporated by reference from the Annual Report on Form 10-K for the
         fiscal year ended March 31, 1998 - Commission file number 33-97090.
*****    Incorporated by reference from the Quarterly Report on Form 10-Q for
         the quarter ended June 30, 1999 - Commission file number 33-97090.
+++++    Incorporated by reference from the Quarterly Report on Form 10-Q for
         the quarter ended December 31, 2000 - Commission file number 33-97090.



                                       70