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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For fiscal year ended September 30, 1996
Commission File Number 1-8328 ANACOMP, INC.
(Exact name of registrant as specified in its charter)
Indiana 35-1144230
(State of incorporation) (IRS Employer Identification No.)
11550 North Meridian Street, P.O. Box 40888
Indianapolis,Indiana 46240
(Address of principal executive offices) (ZipCode)
Registrant's telephone number, including area code: 317-844-9666
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock, $.01 par value
Common Stock Warrants
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, and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934
subsequent to the distribution of Securities under a plan confirmed by a court.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this form 10-K. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of December 16, 1996: Common stock par value $.01 per share,
$111,318,708. Common Stock outstanding as of December 16, 1996 was 13,700,764
shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement relating to the registrant's 1997
Annual Meeting of Shareholders to be held on February 3, 1997, have been
incorporated by reference in Part III of this Annual Report on Form 10-K.
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PART I
ITEM 1. BUSINESS
Overview
Anacomp, Inc. ("Anacomp" or the "Company") is one of the world's leading
providers of products and services used to manage corporate information
throughout its life cycle. The Company serves more than 15,000 customers in 65
countries, maintaining significant market positions in micrographics products
and services, magnetic media manufacturing, digital output services, and related
information delivery technologies.
One of Anacomp's largest businesses is output services. In the United
States, the Company is the second largest provider of Computer Output to
Microfilm ("COM") output services, the high-speed conversion of digital
information to microfilm or microfiche. Micrographics is widely used throughout
the world as a long-term, low-cost medium for storing large amounts of
information.
Although still a small percentage of Anacomp's revenues, the Company has
quickly become a significant provider of digital output services since entering
this market in fiscal 1995, ranking as the third largest U.S. provider of
Compact Disc-Recordable ("CD-R") output services. Available throughout the
United States and at an increasing number of the Company's international
locations, CD services provide Anacomp's customers with a high-capacity storage
and delivery solution for applications requiring frequent and high-speed
information retrieval.
Anacomp recently introduced archival services and print/mail services, both
of which it views as highly complementary to its existing output services. The
Company offers archival services, the physical storage of microfilmed records,
at selected service centers in the United States and plans to open several new
archival vaults in fiscal 1997. The Company intends to expand this business to
include the off-site storage of multiple-media formats and, ultimately, to
develop an electronic storage and distribution service. Anacomp believes that
print/mail services, which involve the output and mailing of printed information
for clients, represent a promising opportunity for both the Company and its
customers. The Company intends to roll-out this service to a broad portion of
its U.S. customer base in fiscal 1997.
Complementing Anacomp's output services are the development and sale of
micrographic and digital systems for customers who desire in-house information
management solutions. The Company and its subsidiaries have introduced virtually
every major advance in the COM industry, including the XFP 2000, the world's
leading COM system, and Advanced Function Indexing, a sophisticated method to
index and retrieve large volume COM applications. Recently, Anacomp has
increasingly invested in electronic management products to provide customers
with COLD (Computer Output to Laserdisk), imaging, workflow, and document
management solutions.
The Company Also Provides Maintenance And Professional Services To Its
Customers Worldwide To Facilitate The Installation, Management, Maintenance, And
Competitive Use Of Information Delivery Solutions. Services Include System
Integration, Technical Support, Document Conversion, And Software And Hardware
Maintenance.
Anacomp derives a significant portion of its revenues and profits from the
sale of micrographics supplies, as well as magnetic media products. The Company
has the world's largest installed base of COM systems (approximately 55% of
those in use), which enables it to generate recurring revenue by providing
related consumable supplies, a significant portion of which are proprietary.
Anacomp also is a major manufacturer and distributor of computer tape products
used by data processing operations, including 3480/ 3490E tape cartridges, open
reel tape, and back-up tape cartridges such as quarter-inch, 4mm, and 8mm.
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In general, the Company's customers are mid-sized and large organizations
whose businesses rely on efficient, reliable, and ongoing access to significant
amounts of information. The Company's clients include leaders in the finance,
insurance, and retail industries, businesses that tend to process and maintain
relatively large amounts of customer and legal documentation. In addition, the
Company's 44 output service facilities in the United States, along with multiple
locations abroad, have made Anacomp an attractive supplier for customers
requiring products and services at multiple locations.
The Company believes it has a loyal following among businesses in the
United States and abroad, and provides a solid foundation for continued
technological and market innovation.
Recent Developments
On June 4, 1996, the Company emerged from bankruptcy proceedings under its
Third Amended Joint Plan of Reorganization (the "Reorganization"). On such date,
the Company canceled its existing secured debt and subordinated debt, including
15% Senior Subordinated Notes, 13.875% Convertible Subordinated Debentures and
9% Convertible Subordinated Debentures, and its equity securities, including
common stock, common stock purchase rights, preferred stock and warrants, and
distributed to its creditors approximately $22 million in cash, $112.2 million
principal amount of its 11-5/8% Senior Secured Notes due 1999 (the "Senior
Secured Notes"), $160 million principal amount of its 13% Senior Subordinated
Notes due 2002 (the "Senior Subordinated Notes"), 10 million shares of new
common stock, par value $.01 per share (the "New Common Stock"), and warrants to
purchase 362,694 shares of New Common Stock at a price of $12.23 per share for a
period of five years from June 4, 1996. The Plan of Reorganization resulted in a
reduction of approximately $173 million in principal and accrued interest on the
Company's debt obligations and in liquidation amount and accrued dividends on
its preferred stock. The resulting capital structure reduced the Company's
interest expense by approximately $30 million per year.
The process began January 5, 1996, when Anacomp filed a Prenegotiated Plan
of Reorganization with the U.S. Bankruptcy Court in Delaware under Chapter 11 of
the U.S. Bankruptcy Code. The Company was in default under substantially all of
its debt agreements as a result of its failure to make $89.7 million of
principal payments scheduled for April 26, 1995 and October 26, 1995 on the
senior secured credit facilities (including $60 million relating to the
revolving loan agreement which expired on October 26, 1995), $11.4 million of
principal and interest payments on the 9% Convertible Subordinated Debentures
which were due January 15, 1996, $34.1 million of interest payments scheduled
for May 1, 1995 and November 1, 1995 on its Senior Subordinated Notes, and $3.2
million of interest payments scheduled for July 15, 1995 and January 15, 1996 on
the 13.875% Subordinated Debentures, as well as certain financial covenant
violations, and the cross-default provisions of the other debt agreements.
Organization and Operations
Anacomp currently employs over 2,600 people at multiple facilities and
offices in the United States, Canada, Brazil, Japan, and Europe, including 44
output service centers in the United States.
Domestically, Anacomp markets its products and services through two
separate sales forces based in offices located throughout the country. The U.S.
Group, which employs approximately 120 salespeople, is comprised of ten regions
responsible for sales of micrographics and CD-R services; COM systems and
related maintenance services, supplies, and equipment; digital hardware and
software solutions; and sales of magnetics products to end-users. The Magnetics
Group sales organization employs 21 salespeople and is responsible for sales of
magnetics products, primarily to dealers and distributors.
Outside of the United States, the Company maintains direct sales forces in
most of those countries where it has subsidiaries, and a network of dealers and
distributors is used to reach the market in other countries. In addition to
relationships with end-users and with dealers and distributors worldwide, the
Company also manufactures products as an Original Equipment Manufacturer ("OEM")
to companies who re-label and sell Anacomp's products under their respective
brand names.
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The Company provides round-the-clock maintenance and professional services
through over 600 highly trained service employees operating in various countries
worldwide. In the United States, over 400 field service engineers and managers
provide geographic coverage through ten districts. Internationally, maintenance
services are provided either by Anacomp employees operating in the Company's
foreign subsidiaries or by employees of dealers and distributors.
Anacomp maintains its corporate headquarters in Carmel, Indiana, and has
corporate and administrative offices in Atlanta, Georgia and Poway (San Diego),
California. The Company operates three manufacturing facilities, all of which
have received international recognition for quality standards by earning
International Standards Organization ("ISO") 9002 certification. All of
Anacomp's micrographics manufacturing and software development is conducted at
the Company's Poway facility. The Company's magnetics manufacturing facilities
are located in Graham, Texas and Brynmawr, Wales.
Engineering, Research and Development
Anacomp's engineering costs, including research and development, were
significantly reduced in fiscal 1996, primarily as a result of the substantial
completion of the IBM and Xerox print stream projects for the XFP 2000 COM
system. However, the Company continues to make investments in projects that
enhance the XFP 2000 and the overall value of COM, including a high-speed
bitmapping initiative and the continuing development of DragonCOM, a version of
the XFP 2000 for the Asian market that is capable of processing double-byte
ideographic languages.
The Company also launched an engineering initiative in fiscal 1996 known as
"Pegasys" to automate Anacomp's 44 output service centers in the United States
and to develop a state-of-the-art data transmission capability for these
centers. Anacomp believes that better automation of the service centers will
maximize processing capacity, increase productivity, and reduce operating costs.
An improved transmission capability will enable many more of Anacomp's service
customers to send their data to the Company electronically, eliminating the need
for tape handling (on the part of both the customer and the Company's service
center staff) as well as eliminating tape pick-up and delivery. In addition,
data transmission will facilitate the Company's plan to consolidate selected
service centers in order to increase efficiencies and reduce operating costs.
Anacomp expects its current limited research and development relating to
advanced digital technologies to grow going forward as the Company introduces
new digital products and services. These costs will be tempered, however, by the
Company's plan to acquire the rights to core technologies whenever possible.
Anacomp's focus in the digital area will be on the development of customer
applications, where the Company believes it can add value.
The Company also owns various patents and licenses covering aspects of its
product line and its production processes, as well as proprietary trade secret
information relating to its products and services. While Anacomp believes that
the protection provided by these patents, licenses, and proprietary information
is important, the Company also believes that equally significant is the
knowledge and experience of its employees, and their abilities to develop and
market the Company's products and services and to provide a value-added benefit
to customers.
Raw Materials and Suppliers
Polyester is the principal raw material used in the manufacture of
microfilm and magnetic media products, two of Anacomp's primary businesses. A
worldwide shortage of polyester has abated recently, and supply and demand are
more in balance now. As a result, Anacomp has seen its cost of polyester for
magnetic media products decrease recently -- reversing a previous trend of
increasing costs.
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SKC America, Inc. and SKC Limited (collectively "SKC") is Anacomp's sole
supplier of duplicate microfilm, the result of a ten-year supply agreement
between the companies entered into in 1993 as part of SKC's purchase of
Anacomp's Sunnyvale, California duplicate microfilm facilities. SKC's duplicate
film production is dedicated exclusively to Anacomp, and SKC also provides
Anacomp with polyester for a large percentage of its magnetic media products. In
connection with the supply agreement, SKC also provided Anacomp with a $25
million trade credit facility, secured by up to $10 million of products sold to
Anacomp by SKC. In addition, under an amendment to the supply agreement executed
in 1996, Anacomp agreed to certain price increases, retroactive to 1994, and
agreed to make the following deferred payments to SKC related to the retroactive
price increases: $400,000 in 1997; $600,000 in 1998; $800,000 in 1999; $800,000
in 2000; and $1,000,000 in 2001.
Anacomp's XFP 2000 COM system utilizes a proprietary, patented original
film canister, and the original film used in that canister is supplied
exclusively by the Eastman Kodak Company ("Kodak"). Anacomp also purchases from
Kodak substantially all of its requirements for original microfilm for
earlier-generation COM recorders manufactured by Anacomp and others, although
Anacomp has from time to time purchased orginal microfilm utilized in those
older COM recorders from other suppliers.
Market Strategy
The Company's market strategy adheres to a paradigm known as the
Information Delivery Life Cycle, which describes the relationship between the
age of information, the frequency and speed of access, and the type of media
upon which the information is stored. In general, as information ages, the
frequency with which retrieval is required and the speed with which it needs to
be delivered declines. To achieve the greatest degree of cost-effectiveness and
efficiency, organizations migrate this information across several different
delivery systems over the life of the information.
[GRAPHIC OMITTED]
Newly created information is generally the most frequently accessed,
requiring a high-speed storage media such as magnetic disk ("DASD"). As the
information begins to age, it is often migrated to optical disk ("OD") or CD-R,
which offers quick access to information at a lower cost than DASD and which has
high storage capacity. As the need to access information becomes more
infrequent, it often is migrated to magnetic tape, an even lower cost media that
provides somewhat slower, yet readily accessible, information delivery. Once
information moves to an archival stage in its life cycle, it is often moved to
microfilm and microfiche, which offers very low storage costs for both archival
and non-archival applications.
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Anacomp's array of products and services are designed to help organizations
best manage how they store, deliver, and migrate their information across this
entire life cycle. The Company believes that vendor consolidation, a gradual
blending of product and market components of document imaging, and similar
trends will favor suppliers that can provide a broad, technologically robust
suite of products and services across the entire cycle. The Company also
believes that this market will continue to favor vendors with a fully developed
domestic and international infrastructure allowing them to serve large customers
and reap the benefits of economies of scale.
Additionally, competitive pressures on companies in industries served by
Anacomp have steadily increased the demand for output services. Concerns over
technology obsolescence, the sometimes high capital cost of information
management systems, and a general recognition of the benefits of outside
expertise have induced many companies to reduce in-house expenditures on certain
operations in favor of third-party service providers. Through outsourcing,
companies are able to avoid the capital requirements of proprietary data
management and storage systems, and maintain flexibility to migrate their
information as new products and technologies become available.
Anacomp believes this trend should have a positive impact on many of the
output services offered by the Company. Value-added product features (such as
customized indexes, retrieval software, and other user productivity
enhancements), as well as strong client relationships and unsurpassed customer
service enable Anacomp to differentiate itself from other service providers.
Anacomp recognizes that certain products and services in the information
delivery industry are declining relative to others. Traditionally, micrographics
has provided one of the most cost-effective means of data storage and retrieval
for information-intensive organizations such as banks, insurance companies,
financial service companies, retailers, healthcare providers, and government
agencies. However, the ongoing growth of local area and client/server networks
and similar systems based on digital technologies has and will continue to
result in alternative data storage and retrieval technologies for active records
management. Over the next few years, the Company believes that micrographics
technology will continue to retain certain cost and functional advantages over
alternative data storage media, which will keep micrographics competitive in a
wide range of applications. Over a longer term, the Company believes
micrographics technology will be viewed predominately as a cost-effective method
for long-term data storage.
The Company also believes that its leadership in micrographics,
particularly COM services, affords it a substantial marketing and business
platform from which to advance its product and service plans. New and
complementary offerings such as CD-R output services provide a migration path
for customer transitions to digital technologies for certain applications.
Further, by maximizing its share of existing markets such as micrographics and
magnetic media, the Company creates additional opportunities to work with
organizations to better manage their information throughout its life cycle.
The Company believes that strategic acquisitions are integral to future
success in the fragmented information delivery industry. To that end, a core
component of the Company's strategy is to acquire a select number of outsourcing
and other businesses that provide services complementary to Anacomp's existing
data output services. Recent and potential acquisitions include companies in
either COM or CD-R outsourcing, as well as organizations providing complementary
archival and print/mail services.
Likewise, the Company is actively pursuing partnerships with companies
which it believes possess products, technology, or other resources that add
value to Anacomp's own capabilities. Currently, the Company maintains
partnerships with major technology companies for the development of print and
data stream technologies, the development of digital software applications, the
distribution of COM systems in Asia, and in other information management areas.
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Products and Services
Anacomp's information management solutions address its customers' needs
along the entire life cycle of documents. The Company's product and service
offerings are grouped into several areas: Output Services, Technology Services,
Output Systems, Micrographics Supplies and Magnetic Media.
The table below shows Anacomp's revenues by product and service line for
the last three fiscal years. The table is presented on a traditional comparative
basis for the twelve months ended September 30, 1996, to facilitate a meaningful
comparison to fiscal years 1995 and 1994. Consequently, the fiscal 1996
information presented below does not comply with accounting requirements for
companies upon emergence from bankruptcy which calls for separate reporting for
the newly reorganized company and the predecessor company.
Year Ended September 30,
1996 1995 1994
(Dollars in Thousands)
---------------------------------------------------------------------------------
Output Services $103,733 21% $132,144 22% $131,238 22%
Technology Services 82,105 17 86,175 15 91,339 15
Output Systems 32,794 7 51,276 9 57,627 10
Micrographics Supplies 150,449 31 190,621 32 204,346 35
Magnetic Media 112,187 23 128,353 22 97,545 17
Other 4,872 1 2,620 0 10,504 1
$486,140 100% $591,189 100% $592,599 100%
Output Services
COM Services
COM services, the delivery of microfilm outsourcing services, represents
the largest component of Anacomp's output services. The Company operates 44
output service centers in the United States, ranking second in domestic market
share, and plans to begin offering COM services in fiscal 1997 at startup output
service centers in Canada and Europe.
On a daily basis, Anacomp's output service centers receive thousands of
electronic downloads and computer tapes from customers. This information (both
text and graphics) is converted to 16mm microfilm or to microfiche, which is a
four-inch by six-inch film medium capable of storing up to 1,000 pages of
computer output. Turnaround for a typical COM services job ranges from two hours
to 36 hours, depending on specific circumstances and requirements, and the
centers generally operate 24 hours a day every day of the year.
In response to a gradual decline in the market for micrographics services
and a more competitive market, in fiscal 1995 Anacomp completed installation of
XFP 2000 COM systems in all of its output service centers, increasing the
efficiency of COM production. Additionally, the Company has upgraded many of
these systems with Anacomp-developed emulation software for IBM and Xerox laser
print streams, expanding the potential market for COM services and resulting in
higher average prices than for other COM output.
As an adjunct to COM services, Anacomp also provides External Facilities
Management ("XFM") services to selected customers. Under an XFM arrangement,
Anacomp operates and manages a customer's COM production at Anacomp's
facilities.
The COM services segment of the micrographics industry processed over 45
billion images in 1995, generating over $350 million in revenues. The Company
believes it holds an estimated 25 percent to 30 percent market share, second
only to First Image Management Company, a division of First Data Corporation.
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ALVA CD Services
Anacomp is the third largest U.S. provider of CD-R output services. The
Company's ALVA CD Services provide Anacomp customers with a high-capacity
storage and delivery solution for applications requiring frequent and high-speed
information retrieval.
ALVA CD services involves storing and indexing customer information such as
invoices and customer statements on CD-R. In addition to indexed CD output, ALVA
also includes sophisticated Windows-based software for accessing and retrieving
the data. ALVA is available at the majority of the Company's output service
centers in the United States, as well as through new Company output service
centers in Canada and Europe.
Anacomp estimates the total market for CD services to grow from an
estimated $10 - $15 million in revenues in fiscal 1996 to $75 million by 1999.
The Company believes that its ALVA solution has significant advantages over
competing products, primarily due to the Company's network of output service
centers, its extensive knowledge of applications and indexing expertise, and
ALVA's flexible and easy-to-use user interface.
Archival And Print/Mail Services
Anacomp provides archival storage services at several of its output service
centers in the United States, providing the long-term storage of original
microfilmed records for its COM services customers. The microfilm is stored in a
secure vault within the Anacomp facility, providing customers with a convenient
and safe method of off-site storage of critical business records. In addition,
Anacomp offers customers the ability to retrieve their records on an as-needed
basis. Anacomp plans to expand this business in fiscal 1997 by opening several
new archival vaults.
The Company also intends to broaden its archival services business in the
future by storing multiple-media records -- such as paper, optical disks, and
magnetic tape in addition to microfiche and microfilm -- at dedicated storage
facilities. Anacomp has taken a first step in this direction in October 1996 by
acquiring Archive Storage, Inc. ("ASI"), a small Massachusetts company that
operated an underground, climate-controlled storage vault. ASI also provided
records management and disaster recovery consulting services to businesses,
helping customers ensure they are storing the right information on the most
cost-effective media for the appropriate periods of time.
Anacomp plans to expand print/mail services, the output and mailing of
printed information, in the United States in fiscal 1997. The Company sees
print/mail services as complementary to the COM and CD output services it offers
to clients today, and the Company believes it can leverage its existing client
relationships and application knowledge to obtain significant print/mail
revenues by providing its customers with distinct cost and service advantages.
Technology Services
Anacomp's technology services includes both traditional maintenance
services as well as newer professional services offered by the Company.
Anacomp maintains approximately 98% of its own installed base of COM
systems, as well as a large percentage of those built by other companies. In
addition, the Company provides maintenance services for micrographics-related
devices and, increasingly, non-micrographics equipment. Since many customers
tend to use the maintenance services of the vendor that installed the system,
maintenance revenues traditionally have been a function of new COM system sales
and the size of the installed base. Anacomp's COM maintenance market share is
approximately 65 percent in the United States, 50 percent in Europe, and 15
percent in the Americas (excluding the United States) and Asia.
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In fiscal 1996, Anacomp identified professional services as a potential
growth segment of its maintenance business. Professional services refers to the
delivery of project-specific expertise in such areas as job set-ups, user
interfaces, data communications, and networking. Tasks include software
development, problem resolution, and consulting. In the past, Anacomp had
provided many of these services to customers free of charge. As an example of
how the Company plans to market professional services, Anacomp now provides a
specified number of hours of "free" job set-up assistance with each XFP 2000
sold; the customer is charged for work exceeding those hours.
Output Systems
COM Systems
Anacomp is the world's leading manufacturer and distributor of COM systems,
offering a complete line of COM recorders, duplicators, sorters, and related
software. Anacomp's installed base of COM systems, approximately 55 percent of
those in use worldwide, is more than twice as large as its nearest competitor,
and related sales of COM services and supplies to the installed base provide the
Company with a recurring revenue stream that constitutes a significant portion
of its annual revenues.
The XFP 2000, which is manufactured by the Company, is the most advanced
COM recorder on the market and has enabled the Company to capture an estimated
57 percent of all new COM systems sold or leased. The XFP 2000 is faster and
more reliable than previous COM recorders and, through its laser technology, has
the capability to generate precise reproductions of any image.
In fiscal 1996, Anacomp introduced DragonCOM, a version of the XFP 2000 for
the Asian market, which is capable of processing Chinese, Korean, Taiwanese,
Japanese, and other ideographic languages utilizing the popular IBM Advanced
Function Presentation ("AFP") architecture.
Anacomp also has developed two new software products that emulate IBM and
Xerox laser print streams. AFP software developed in conjunction with IBM
enables the XFP 2000 to process and image AFP formatted data streams used by IBM
high-speed mainframe laser printers. Xerox Compatibility Feature ("XCF")
software developed in partnership with Xerox enables the XFP 2000 to process the
same data stream used by Xerox high-speed, high-volume laser printers.
Principal customers for the Company's COM systems include
information-intensive organizations such as banks, insurance companies,
financial service companies, retailers, healthcare providers, and government
agencies, as well as non-Anacomp COM output service centers. While the majority
of COM systems are sold outright, the Company does offer customers lease and
monthly usage options.
The Company's primary competitors in the sale of COM systems are
Agfa-Gevaert AG ("Agfa") and Micrographic Technology Corporation. Competition is
based principally on product features, as well as on such factors as product
quality, service and price. Anacomp sells approximately 57 percent of all new
COM systems sold worldwide, including those sold through an OEM arrangement.
Electronic Data Management
The Company is working actively to bring to market a new suite of
electronic data and image management solutions, known as "Concerto". These
software solutions are expected to support a wide range of computer output,
document images, document routing, and management applications. Applications are
expected to include customer response systems, healthcare claims processing,
litigation support, insurance claims processing, and many other applications
involving the electronic storage, retrieval, routing, and management of
documents and associated information.
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The Company also markets an integrated system for information management
known as XSTAR, or the eXtended STorage And Retrieval system ("XSTAR"). Launched
in 1995, XSTAR is a solution for mainframe computing environments that allows
organizations with significant data access requirements to expedite information
retrieval regardless of the data's location.
The Company intends to position itself as a comprehensive provider of
integrated solutions for organizing, storing, routing, and processing
information of all types. In order to quickly and cost-effectively provide these
solutions to its customers, and to take maximum advantage of the Company's areas
of expertise, Anacomp has embarked on establishing technology alliances with the
foremost providers of the key technologies available today for managing and
delivering information.
Micrographics Supplies
Anacomp sells the most comprehensive line of micrographics supplies in the
world, including original silver halide film, duplicate film, chemicals for
microfilm processing, paper and toners for reader/printers, micrographics lamps
and bulbs, and other consumables. The Company also markets a complete line of
microfilm/microfiche readers.
Anacomp is the world's largest supplier of duplicate microfilm, which is
used to create one or more additional copies of original microfiche and
microfilm masters. The Company's share of this estimated $75 million worldwide
market is approximately 67 percent, which includes sales to its own output
centers. Anacomp's primary competitor in the duplicate microfilm market is
Rexham Graphics Ltd. ("Rexham") with an estimated 25 percent share of the
worldwide duplicate film market.
The Company sells original microfilm for Anacomp's COM systems and for
other manufacturers' COM systems, with film sold for Anacomp's systems
representing the vast majority of original microfilm sales. Anacomp competes in
sales of non-proprietary original COM microfilms with other manufacturers,
including Agfa, Fuji Photo Film U.S.A., Inc. ("Fuji"), Kodak, and Imation
Enterprises Corporation ("Imation") (formerly part of 3M). For non-OEM sales of
the XFP 2000, the Company is the exclusive supplier for original microfilm
because of the proprietary nature of the canister in which the film is placed.
Anacomp sells its consumable supplies directly to more than 90 percent of its
worldwide installed base.
Ancomp has an estimated 33 percent of the micrographics supplies market in
Europe and an estimated 39 percent of the supplies market in the Americas
(excluding the United States) and Asia. In Europe, the Company's primary
competitors for micrographics supplies and equipment are the Kalle Microfilm
Division of Hoechst AG, A. Messerli AG and Rexham. Its primary competitors in
Japan are Kodak and Fuji.
Magnetic Media
Anacomp manufactures, sells, and distributes a broad range of magnetics
products such as open reel tape, 3480/3490E tape cartridges, TK 50/52
CompacTape, and back-up tape cartridges such as quarter-inch, 4mm, and 8mm.
Anacomp is the world's largest manufacturer of half-inch tape products, widely
used by many organizations for the near-line storage of business data.
Anacomp is exploring new applications and markets based on its magnetics
coating capacity. In fiscal 1995, Anacomp introduced voice logging tape and
instrumentation tape. Voice logging tape is used by brokerage companies, "911"
emergency service providers, and other entities to record telephone
conversations. Instrumentation tape is used by various government agencies to
measure and record sensitive data. In fiscal 1996, Anacomp began to use magnetic
coated media to manufacture transfer tape, which is found on the back of
transaction media (similar to credit and telephone cards).
The Company is actively seeking partnerships that will enable the Company
to participate in the next generation of magnetic media products, including
half-inch metal particle tape (3590 cartridges). This product will be introduced
in fiscal 1997 and is expected to enjoy significant growth as this market
expands over the next several years.
11
Anacomp primarily sells its magnetics products through its worldwide
distributor and dealer network and, to a lesser extent, through parts of the
Company's direct sales force. Anacomp markets its magnetics products under the
"Memorex", "Dysan", "Graham", and "StorageMaster" trademarks.
Anacomp has no significant competitors with respect to the manufacture of
open reel tape, and its worldwide market share for that product is estimated at
92 percent. Anacomp competes with Imation and BASF AG in the sale of 3480/3490E
data cartridges. Anacomp's worldwide market share for 3480 and 3490E data
cartridges is estimated to be 38 percent and 35 percent, respectively.
Industry Segment and Foreign Operations
As discussed in Note 1 to the consolidated financial statements, Anacomp
operates in a single business segment -- providing equipment, supplies and
services for information management, including storage, processing and
retrieval. Financial information concerning the Company's operations in
different geographical areas is included in Note 22 to the consolidated
financial statements.
Summary
Soon to begin its fourth decade of operation, Anacomp has substantial
market positions for most of its products. Serving more than 15,000 customers in
65 countries, the Company is one of the oldest and most well-known names in
information management.
Micrographics, historically its core product line, continues to provide the
Company access to a premier customer base and the revenue to invest in new
products and technologies. New products and services, such as ALVA, Concerto,
archival services, and print/mail services, offer the Company the opportunity to
extend its history of leadership into the next decade. After its financial
reorganization in fiscal 1996, Anacomp believes it has positioned itself to
become the world leader in helping organizations manage information across its
entire life cycle.
13
ITEM 2. PROPERTIES
Anacomp maintains its corporate headquarters in Carmel, Indiana (a suburb
of Indianapolis) and has corporate and administrative offices in Atlanta,
Georgia and Poway (San Diego), California. Micrographics manufacturing,
engineering, customer service, marketing and product maintenance facilities are
all located in Poway, California near San Diego. Anacomp's magnetics
manufacturing facilities are located in Graham, Texas and Brynmawr, Wales.
During 1994, Anacomp's Graham and Brynmawr facilities received international
recognition for quality standards, earning International Standards Organization
("ISO") 9002 certification. Anacomp's Poway facility earned ISO 9002
certification in September 1995.
The following table indicates the square footage of Anacomp's
facilities:
Operating Other Corporate
Facilities Facilities Facilities Total
United States:
Leased .................................. 601,700 119,614 49,111 770,425
Owned ................................... 147,420 15,630 - 163,050
749,120 135,244 49,111 933,475
International:
Leased .................................. 105,254 29,410 - 134,664
Owned ................................... 145,000 -- -- 145,000
250,254 29,410 - 279,664
Total ................................. 999,374 164,654 49,111 1,213,139
Other Facilities consist primarily of abandoned facilities, of which
151,569 square feet is sublet to others. Anacomp also leases office space for
its sales and service centers in a variety of locations. Anacomp considers its
facilities adequate for its present needs and does not believe that it would
experience any difficulty in replacing any of its present facilities if any of
its current agreements were terminated.
ITEM 3. LEGAL PROCEEDINGSLegal Proceedings
The Company and its subsidiaries are named defendants in several lawsuits
and claims arising in the ordinary course of business. While the outcome of such
claims, lawsuits or other proceedings against the Company cannot be predicted
with certainty, management expects that any liability arising thereunder, to the
extent not provided for through insurance or otherwise, will not have a material
adverse effect on the financial statements of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the three months ended September 30,
1996, to a vote of Anacomp's security holders through the solicitation of
proxies or otherwise.
14
EXECUTIVE OFFICERS OF THE REGISTRANT
The current executive officers of the Company, their ages (as of December
16, 1996) and positions are listed below:
Name Age Position
P. Lang Lowrey, III 43 President, Chief Executive Officer and
Chairman of the Board
Ralph W. Koehrer 51 President and Chief Operating Officer
(effective January 6, 1997)
Donald L. Viles 50 Executive Vice President and
Chief Financial Officer
Ray L. Dicasali 48 Senior Vice President and
Chief Technology Officer
Barry L. Kasarda 53 Senior Vice President-Operations
Kevin M. O'Neill 42 Senior Vice President-Global Marketing
William C. Ater 56 Vice President, Chief Administrative Officer
and Secretary
Jeffrey S. Withem 37 Vice President-Planning and Communications
and Chief of Staff
Thomas L. Brown 40 Vice President and Treasurer
K. Gordon Fife 51 Vice President-Tax
George C. Gaskin 37 Vice President-Legal, Corporate Counsel and
Assistant Secretary
Hasso Jenss 53 President-European Group
Gary M. Roth 54 President-International Group
T. Randy Simmons 49 President-U.S. Group
Peter Williams 44 President-Magnetics Group
The business experience of the above officers and directors for the past
five years is described below. Each executive officer is elected for a term of
one year and holds office until his successor is chosen and qualified or until
his death, resignation or removal.
P. Lang Lowrey, III was elected Chairman of the Board on June 4, 1996. Mr.
Lowrey was elected President and Chief Operating Officer in May 1995 and
subsequently assumed the duties of Chief Executive Officer, effective October 1,
1995. Prior to that, he served as President - Magnetics Group from November 1992
to May 1995. He served from October 1990 to October 1992 as Vice President
Worldwide Marketing Division.
Ralph W. Koehrer was elected President and Chief Operating Officer
(effective January 6, 1997) on December 10, 1996. Koehrer will join the Company
from Automatic Data Processing, Inc. ("ADP"), where, most recently, he served as
a corporate officer and as president of ADP's Information and Processing
Services division.
Donald L. Viles was elected Executive Vice President and Chief Financial
Officer on February 15, 1996. From October 1985 to February 1996, he served as
Vice President and Controller.
Ray L. Dicasali was elected Senior Vice President and Chief Technology
Officer on June 3,1996. From 1993 to 1996, Mr. Dicasali served as Senior Vice
President of Technology and CIO of Flexel. From 1989 to 1993, Mr. Dicasali was
Senior Vice President and CIO of Dun and Bradstreet Software.
Barry L. Kasarda was elected Senior Vice President - Operations on December
10, 1996, after assuming responsibility for the Technology Services Group. He
had been elected Senior Vice President of Manufacturing and Materials on June 3,
1996 and continues to oversee those functions. From 1993 to 1996, he served as
Vice President of Materials. Prior to joining the Company, Mr. Kasarda served as
Vice President and General Manager of ABEX Division of Parker Hannifin
Corporation from 1989 to 1993.
15
Kevin M. O'Neill was elected Senior Vice President - Global Marketing on
June 3, 1996. Mr. O'Neill had previously served as Vice President of Global
Marketing from 1995 until June 1996. From 1994 to 1995, Mr. O'Neill served as
Vice President of Marketing, Strategic Resellers Group. Prior to joining the
Company, Mr. O'Neill served as Senior Director, Marketing & Product Development
for Fujitsu-ICL Systems, Inc. from 1982 to 1994.
William C. Ater was elected Vice President and Chief Administrative Officer
in February 1988. He has served as Secretary since March 1985.
Jeffrey S. Withem was elected Vice President - Planning and Communications
and Chief of Staff on June 3, 1996. Mr. Withem was Vice President, Strategic
Planning and Corporation Communications from October 1995 to June 1996. From
1993 to 1995, Mr. Withem served as Vice President, Marketing, for the Company's
Magnetics Group. Prior to that, he was Marketing Communications Manager for
Worldwide Marketing for the Company from 1990 to 1992.
Thomas L. Brown was elected Vice President and Treasurer on May 19, 1996.
From January 1995 to April 1996, Mr. Brown served as Corporate Controller of
Hurco Companies, Inc. Mr. Brown had previously served as Assistant Vice
President of Financial Reporting and Analysis for the Company from March 1991 to
1995.
K. Gordon Fife was elected Vice President - Tax in October 1985.
George C. Gaskin was elected Vice President - Legal, Corporate Counsel and
Assistant Secretary on June 3, 1996. From June 1990 to June 1996, Mr. Gaskin
served as Corporate Counsel and Assistant Secretary.
Hasso Jenss was elected President of the European Group effective October
1,1995. Mr. Jenss served as Vice President - European Micrographics from
November 1993 to September 1995. Prior to that, he served from October 1989 to
October 1993 as Managing Director of Anacomp's German subsidiary.
Gary M. Roth was elected President of the International Group, effective
October 1, 1995. Previously, Mr. Roth served as Vice President, Americas/Asia
Division from November 1992 to September 1995. From October 1991 to October
1992, he served as Manager, LAAP/Canada Operations. From October 1988 to October
1991, he served as Vice President - Data Systems Division.
T. Randy Simmons was elected President of the U.S. Group, effective October
1, 1995. Previously, Mr. Simmons served as Vice President, Direct Sales Division
- - East from November 1994 to September 1995. Prior to that, he served as Vice
President - Information Systems Division from November 1991 to November 1994. He
served from 1987 to 1991 as Vice President - Micrographics Services Division.
Peter Williams was elected President of the Magnetics Group, effective
October 1, 1995. Previously, he served as General Manager of the Magnetics
European Group from 1993 to September 1995. Prior to that, he served from 1990
to 1993 as Vice President, Wales Operations - Magnetics.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
Market, holder and dividend information concerning the Company's common
stock appears on page A-2 of this Annual Report on Form 10-K.
16
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data appears on page A-2 of this Annual Report on Form
10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's discussion and analysis of financial condition and results of
operations appears on pages A-3 to A-9 of this Annual Report on Form 10-K.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements and supplementary financial information appear on
pages A-10 to A-41 of this Annual Report on Form 10-K.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are no changes in or disagreements with accountants on accounting and
financial disclosures.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company hereby incorporates by reference the information contained
under the headings "Election of Directors" and "Compliance with Section 16(a) of
the Securities and Exchange Act of 1934" from its definitive Proxy Statement
(hereinafter, the "Proxy Statement") to be delivered to the shareholders of the
Company in connection with the 1997 Annual Meeting of Shareholders to be held
February 3, 1997. Certain information relating to executive officers of the
Company appears on pages 13 and 14 hereof.
ITEM 11. EXECUTIVE COMPENSATIONExecutive Compensation
The Company hereby incorporates by reference the information contained
under the heading "Executive Compensation" in the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The Company hereby incorporates by reference the information contained
under the heading "Security Ownership of Management and Other Beneficial Owners"
in the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There are no relationships or related transactions that require disclosure.
17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. The following financial statements and other information appear in
Appendix A to this Annual Report on Form 10-K and are filed as a part hereof:
Selected Financial Data.
Market Price and Dividend Information.
Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Report of Independent Public Accountants.
Consolidated Balance Sheets - September 30, 1996 and 1995.
Consolidated Statements of Operations -
Four Months Ended September 30, 1996,
Eight Months Ended May 31, 1996,
Twelve Months Ended September 30, 1995 and 1994.
Consolidated Statements of Cash Flows -
Four Months Ended September 30, 1996,
Eight Months Ended May 31, 1996,
Twelve Months Ended September 30, 1995 and 1994.
Consolidated Statements of Stockholders' Equity (Deficit) -
Four Months Ended September 30, 1996,
Eight Months Ended May 31, 1996,
Twelve Months Ended September 30, 1995 and 1994.
Notes to Consolidated Financial Statements.
2. Financial Statement Schedules are not filed with this Annual Report on
Form 10-K because the Schedules are either inapplicable or the required
information is represented in the financial statements or notes thereto.
(b) Reports on Form 8-K:
During the quarter ended September 30, 1996, and prior to filing its Annual
Report on Form 10-K, Anacomp filed no reports on Form 8-K.
(c) The following exhibits are filed with this Annual Report on Form 10-K or
incorporated herein by reference to the document set forth next to the exhibit
listed below.
Previously unfiled documents are noted with an asterisk (*):
(3) Articles of Incorporation and Bylaws:
a) The Amended and Restated Articles of Incorporation of Anacomp were
effective June 4, 1996, and are incorporated by reference to Anacomp's Form 8-K
filed on June 19, 1996 (File No. 1-8328).
b) The Amended and Restated Bylaws of Anacomp were effective June 4, 1996,
and are incorporated by reference to Anacomp's Form 8-K filed on June 19, 1996
(File No. 1-8328).
18
(4) Instruments defining the rights of security holders, including
indentures:
(a) Third Amended Joint Plan of Reorganization of the Company and certain
of its subsidiaries. Previously filed and incorporated by reference to the
Company's Form 8-A filed on May 15, 1996 (File No. 0-7641).
(b) Indenture, dated as of June 4, 1996, between the Company and The Bank
of New York, as trustee, relating to the Company's 11-5/8% Senior Secured Notes
due 1999. Previously filed and incorporated by reference to the Company's Form
8-K filed on June 19, 1996 (File No. 1-8328).
(c) Application by the Company for Exemption from Section 314(d) of the
Trust Indenture Act of 1939, as amended, pursuant to Section 304(d) and Rule
4d-7 thereunder. Previously filed and incorporated by reference to the Company's
Form 8-K filed on June 19, 1996 (File No. 1-8328).
(d) Indenture, dated as of June 4, 1996, between the Company and IBJ
Schroder Bank & Trust Company, as trustee, relating to the Company's 13% Senior
Subordinated Notes due 2002. Previously filed and incorporated by reference to
the Company's Form 8-K filed on June 19, 1996 (File No. 1-8328).
(e) Warrant Agreement, dated as of June 4, 1996, between the Company and
ChaseMellon Shareholder Services, L.L.C. Previously filed and incorporated by
reference to the Company's Form 8-K filed on June 19, 1996 (File No. 1-8328).
(f) Security and Pledge Agreement, dated as of June 4, 1996, by the
Company, in favor of the Senior Secured Trustee. Previously filed and
incorporated by reference to the Company's Form 8-K filed on June 19, 1996 (File
No. 1-8328).
(g) First Leasehold Deed of Trust, Assignment of Rents, Security Agreement
and Fixture Filing, dated June 4, 1996, made by Anacomp, Inc., as grantor, in
favor of Chicago Title Insurance Company, as trustee, for the benefit of The
Bank of New York, as beneficiary. Previously filed and incorporated by reference
to the Company's Form 8-K filed on June 19, 1996 (File No. 1-8328).
(h) First Deed of Trust, Assignment of Rents, Security Agreement and
Fixture Filing, dated June 4, 1996 made by Anacomp, Inc., as grantor, in favor
of Chicago Title Insurance Company, as trustee, for the benefit of The Bank of
New York, as beneficiary. Previously filed and incorporated by reference to the
Company's Form 8-K filed on June 19, 1996 (File No. 1-8328).
(10) Material Contracts:
(a) *Amended and Restated Employment Agreement, effective October 1, 1996,
between Anacomp, Inc. and P. Lang Lowrey, III.
(b) Employment Agreement, effective March 1, 1992, between Anacomp, Inc.
and Thomas R. Simmons. Previously filed and incorporated by reference to the
Company's Form 10-K for the year ended September 30, 1993.
(c) *Employment Agreement, effective October 1, 1992, between Anacomp, Inc.
and William C. Ater.
19
(d) *Employment Agreement, effective February 15, 1996, between Anacomp,
Inc. and Donald L. Viles.
(e) Common Stock Registration Rights Agreement, dated as of June 4, 1996 by
and among the Company and the Holders of Registrable Shares. Previously filed
and incorporated by reference to the Company's Form 8-K filed on June 19, 1996
(File No. 1-8328).
(f) Senior Secured Note Registration Rights Agreement, dated as of June 4,
1996 by and among the Company and the Holders of Registrable Notes. Previously
filed and incorporated by reference to the Company's Form 8-K filed on June 19,
1996 (File No. 1-8328).
(g) Senior Subordinated Note Registration Rights Agreement dated as of June
4, 1996, by and among the Company and Holders of Registrable Notes. Previously
filed and incorporated by reference to the Company's Form 8-K filed on June 19,
1996 (File No. 1-8328).
(h) Amended and Restated Master Supply Agreement, dated October 8, 1993,
among Anacomp, Inc., SKC America, Inc. and SKC Limited. Previously filed and
incorporated by reference to the Company's Form 10-K for the year ended
September 30, 1993.
(11)*Statement re: computation of per share earnings.
(21)*Subsidiaries of the registrant.
(27)*Financial data schedule (Required for electronic filing only).
20
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
ANACOMP, INC.
By: /s/ P. Lang Lowrey, III
P. Lang Lowrey, III
President, Chief Executive
Officer, and Chairman of the Board
December 23, 1996
Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
on the dates indicated.
Dated: December 23, 1996 By: /s/ P. Lang Lowrey, III
P. Lang Lowrey, III
President, Chief Executive
Officer, and Chairman of the Board
Dated: December 23, 1996 By: /s/ Donald L. Viles
Donald L. Viles, Executive Vice
President and Chief Financial Officer
Dated: December 23, 1996 By: /s/ Talton R. Embry
Talton R. Embry, Director
Dated: December 23, 1996 By: /s/ Darius W. Gaskins, Jr.
Darius W. Gaskins, Jr., Director
Dated: December 23, 1996 By: /s/ Jay P. Gilbertson
Jay P. Gilbertson, Director
Dated: December 23, 1996 By: /s/ Richard D. Jackson
Richard D. Jackson, Director
Dated: December 23, 1996 By: /s/ George A. Poole, Jr.
George A. Poole, Jr., Director
Dated: December 23, 1996 By: /s/ Lewis Solomon
Lewis Solomon, Director
21
APPENDIX A
Annual Report on Form 10-K
Anacomp, Inc.
Page
Selected Financial Data .......................................................................... A-2
Market Price and Dividend Information ............................................................ A-2
Management's Discussion and Analysis of Financial Condition and Results of Operations ............ A-3
Report of Independent Public Accountants ......................................................... A-10
Consolidated Balance Sheets -- September 30, 1996 and 1995 ....................................... A-11
Consolidated Statements of Operations -Four Months Ended September 30, 1996, Eight
Months Ended May 31, 1996, Twelve Months Ended September 30, 1995 and 1994 ..................... A-12
Consolidated Statements of Cash Flows -- Four Months Ended September 30, 1996, Eight
Months Ended May 31, 1996, Twelve Months Ended September 30, 1995 and 1994 ..................... A-13
Consolidated Statements of Stockholders' Equity (Deficit) -- Four Months Ended September 30, 1996,
Eight Months Ended May 31, 1996, Twelve Months Ended September 30, 1995 and 1994 ............... A-15
Notes to Consolidated Financial Statements ....................................................... A-16
ANACOMP, INC. AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction with Item 1,
"Business", of Part I of this Annual Report on Form 10-K, and with the Notes to
Consolidated Financial Statements:
Reorganized
Company Predecessor Company
Four Months Ended Eight Months Fiscal Year Ended September 30,
September 30, Ended May 31,
(Dollars in thousands, except per share 1996 1996 1995 1994 1993 1992
amounts)
---
Revenues .............................................. $ 151,542 $ 334,598 $591,189 $592,599 $590,208 $628,940
Income (loss) before extraordinary credit and
cumulative effect of accounting change ............... (22,009) 112,528 (238,326) 6,955 11,691 18,221
Extraordinary credit .................................. -- 52,442 -- -- 6,900 8,700
52,442
Cumulative effect on prior years of a change
in accounting for income taxes ....................... -- -- -- 8,000 --
Net income (loss) ..................................... (22,009)(a) 164,970 (b) (238,326) 14,955 18,591 26,921
Earnings (loss) per common and common equivalent share:
Net income (loss) ..................................... $ (2.19) (c) (c) (c) (c) (c)
Cash dividends per common share ....................... -- -- -- --
(a) The net loss for the four months ended September 30, 1996, includes $25.7
million of Reorganization Asset amortization.
(b) The net income for the eight months ended May 31, 1996, includes $92.8
million of Reorganization items as more fully discussed in Notes 3 and 4 4
to the accompanying consolidated financial statements.
(c) Due to the implementation of Fresh Start Reporting, per share data for the
Predecessor Company has been excluded as they are not comparable.
As of September 30,
----------------------------------------------------------------
Reorganized
Company Predecessor Company
------------------------------------------------
1996 1995 1994 1993 1992
----------------------------------------------------------------
Current assets $147,530 $175,193 $214,129 $218,011 $244,434
Current liabilities 152,996 578,857 208,313 187,082 198,685
Working capital (5,466) (403,664) 5,816 30,929 45,749
Total assets 435,421 421,029 658,639 643,548 681,561
Long-term debt, net of current 217,044 -- 366,625 404,738 429,140
portion
Redeemable preferred stock -- 24,574 24,478 24,383 24,287
Stockholders' equity (deficit) 58,569 (188,243) 49,756 13,799 8,290
MARKET PRICE AND DIVIDEND INFORMATION
Anacomp, Inc.'s common stock is traded on The NASDAQ Stock Market
("NASDAQ") under the ticker symbol "ANCO." The high and low closing prices (as
reported by NASDAQ) for the Company's common stock were as follows:
HIGH LOW
Three months ended:
September 30, 1996 $11.13 $7.63
The Company's borrowing agreements prohibit the payment of cash dividends
on common shares. The number of stockholders of record as of December 16, 1996
was 229. The number of beneficial stockholders of record as of December 16, 1996
was approximately 1,200.
22
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Recent Developments
On June 4, 1996, the Company emerged from bankruptcy proceedings under its
Third Amended Joint Plan of Reorganization (the "Reorganization"). On such date,
the Company canceled its existing secured debt and subordinated debt, including
15% Senior Subordinated Notes, 13.875% Convertible Subordinated Debentures and
9% Convertible Subordinated Debentures, and its equity securities, including
common stock, common stock purchase rights, preferred stock and warrants, and
distributed to its creditors approximately $22 million in cash, $112.2 million
principal amount of its 11-5/8% Senior Secured Notes due 1999 (the "Senior
Secured Notes"), $160 million principal amount of its 13% Senior Subordinated
Notes due 2002 (the "Senior Subordinated Notes"), 10 million shares of new
common stock, par value $.01 per share (the "New Common Stock"), and warrants to
purchase 362,694 shares of New Common Stock at a price of $12.23 per share for a
period of five years from June 4, 1996. The Plan of Reorganization resulted in a
reduction of approximately $173 million in principal and accrued interest on the
Company's debt obligations and in liquidation amount and accrued dividends on
its preferred stock. The resulting capital structure reduced the Company's
interest expense by approximately $30 million per year.
The process began January 5, 1996, when Anacomp filed a Prenegotiated Plan
of Reorganization with the U.S. Bankruptcy Court in Delaware under Chapter 11 of
the U.S. Bankruptcy Code. The Company was in default under substantially all of
its debt agreements as a result of its failure to make $89.7 million of
principal payments scheduled for April 26, 1995 and October 26, 1995 on the
senior secured credit facilities (including $60 million relating to the
revolving loan agreement which expired on October 26, 1995), $11.4 million of
principal and interest payments on the 9% Convertible Subordinated Debentures
which were due January 15, 1996, $34.1 million of interest payments scheduled
for May 1, 1995 and November 1, 1995 on its Senior Subordinated Notes, and $3.2
million of interest payments scheduled for July 15, 1995 and January 15, 1996 on
the 13.875% Subordinated Debentures, as well as certain financial covenant
violations, and the cross-default provisions of the other debt agreements.
Results of Operations
On May 20, 1996 (the "Confirmation Date"), the Company's Plan was confirmed
by the United States Bankruptcy Court and the Company emerged from bankruptcy on
June 4, 1996. As a result of the Reorganization, the recording of the
restructuring transaction and the implementation of Fresh Start Reporting, the
Company's results of operations after May 31, 1996 (the cutoff date used for
financial reporting purposes) are not comparable to results reported in prior
periods. See Note 3 to the accompanying consolidated financial statements for
information on consummation of the Plan of Reorganization and implementation of
Fresh Start Reporting.
To facilitate a meaningful comparison of the Company's quarterly and
year-to-date operating performance in fiscal years 1996 and 1995, the following
discussion of results of operations on a consolidated basis is presented on a
traditional comparative basis for all periods. Consequently, the current year's
information presented below does not comply with accounting requirements for
companies upon emergence from bankruptcy, which requirements call for separate
reporting for the newly reorganized company and the predecessor company.
23
CONSOLIDATED RESULTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries
(Dollars in thousands, except per share amounts) Year ended September 30, 1996 (a) 1995 1994
Revenues:
Services provided.................................................................... $189,257 $219,881 $223,511
Equipment and supply sales........................................................... 296,883 371,308 369,088
486,140 591,189 592,599
Operating costs and expenses:
Costs of services provided........................................................... 104,499 126,493 122,628
Costs of equipment and supplies sold................................................. 226,623 290,842 274,575
Selling, general and administrative expenses......................................... 93,514 132,459 115,819
Amortization of reorganization asset................................................. 25,663 ---- ----
Special charges...................................................................... ---- 136,889 ----
Restructuring charges................................................................ ---- 32,695 ----
450,299 719,378 513,022
Income (loss) before interest, other income, reorganization items, income taxes,
extraordinary credit and cumulative effect of accounting change...................... 35,841 (128,189) 79,577
Interest income.......................................................................... 2,573 2,000 3,144
Interest expense and fee amortization.................................................... (39,629) (70,938) (67,174)
Financial restructuring costs............................................................ ---- (5,987) ----
Other income (expense)................................................................... 6,995 (212) (192)
(30,061) (75,137) (64,222)
Income (loss) before reorganization items, income taxes, extraordinary credit,
and cumulative effect of accounting change........................................... 5,780 (203,326) 15,355
Reorganization items..................................................................... 92,839 ---- ----
Income (loss) before income taxes, extraordinary credit and cumulative effect
of accounting change................................................................. 98,619 (203,326) 15,355
Provision for income taxes............................................................... 8,100 35,000 8,400
Income (loss) before extraordinary credit and
cumulative effect of accounting change............................................... 90,519 (238,326) 6,955
Extraordinary credit - gain on discharge of indebtedness, net of taxes................... 52,442 ---- ----
Cumulative effect on prior years of a change in accounting
for income taxes..................................................................... ---- ---- 8,000
Net income (loss)........................................................................ 142,961 (238,326) 14,955
Preferred stock dividends and discount accretion......................................... 540 2,158 2,158
Net income (loss) available to common stockholders....................................... $142,421 $(240,484) $12,797
(a) This column reflects the combination of historical results for the eight
months ended May 31, 1996, for the Predecessor Company and for the four months
ended September 30, 1996, for the Successor Company.
24
Results of Operations-Fiscal 1996, 1995 and 1994
General
Anacomp reported net income of $143 million for the year ended September
30, 1996 as compared to a net loss of $238.3 million and net income of $15
million for the years ended September 30, 1995 and 1994, respectively. Included
in the fiscal 1996 income are reorganization items of $92.8 million and a $52.4
million extraordinary gain resulting from the discharge of indebtedness.
Included in the fiscal 1995 loss are special charges of $136.9 million,
representing a write-off of goodwill of $108 million and $28.9 million of costs
associated with software investments (See Notes 8 and 18 to the accompanying
consolidated financial statements). Also included in the fiscal 1995 loss is a
$29 million deferred tax provision and $32.7 million of restructuring charges.
Earnings before interest, other income, reorganization items, extraordinary
credits, restructuring charges, special charges, taxes, depreciation and
amortization ("EBITDA") was $84.2 million for the year ended September 30, 1996
as compared to $77.2 million and $114.2 million for the years ended September
30, 1995 and 1994 respectively.
Total revenues for fiscal 1996 of $486.1 million represent a $105.1 million
decrease from fiscal 1995. Approximately $60.1 million of the decrease is due to
the discontinuance or downsizing of certain product lines including Image
Conversion Services ("ICS") ($20 million), flexible diskette media ($20.2
million), reader and reader printer products ($12.7 million) and source document
film ($7.2 million).
Total revenues for fiscal 1995 decreased $1.4 million from the prior fiscal
year. Revenues from sales of magnetics products increased $29.5 million
resulting from the acquisition of Graham Magnetics, Inc. ("Graham Magnetics") in
May 1994. In addition, the acquisition of the COM services customer base of 14
data service centers from National Business Systems, Inc. ("NBS") on January 3,
1994 contributed incremental revenues of approximately $2.7 million to the
fiscal 1995 results. Offsetting these contributions were decreases in
micrographics supplies, COM systems, maintenance services and other revenues.
Anacomp's fiscal 1994 revenues totaled $592.6 million. The Graham Magnetics
acquisition contributed $22.4 million to fiscal 1994 revenues and NBS
contributed $9.1 million to fiscal 1994 revenues.
Selling, general and administrative expenses ("S,G&A") were 19.2% of
revenues in fiscal 1996 compared to 22.4% in fiscal 1995. The decrease in S,G&A
reflects the cost reductions implemented in late fiscal 1995 as part of the
Company's reorganization. Selling, general and administrative expenses were
16.4% of revenues in 1994.
The Company has reclassified certain operating costs within costs of
services provided, costs of equipment and supplies sold and S,G&A in fiscal 1995
and fiscal 1994 to conform with the fiscal 1996 presentation.
1995 Special Charges
As mentioned above, included in the operating results for fiscal 1995 are
special charges totaling $136.9 million, including the write-off of a portion of
goodwill related to micrographics products. During fiscal 1995, Anacomp
announced several significant events which are summarized as follows:
On April 6, 1995, the Company announced that it was withdrawing its
proposed offering of $225 million senior secured notes previously announced on
January 23, 1995.
25
On April 27, 1995, the Company announced that it had agreed with its Senior
Secured Lenders to make its current interest payment of $2 million on its Old
Senior Secured Debt while continuing to negotiate the rescheduling of all or a
substantial portion of the $20 million scheduled amortization payment due April
26, 1995, which the Company failed to make, and the waiver of certain financial
covenant violations as of March 31, 1995. The Company also announced that until
an agreement was reached with its Senior Secured Lenders (and Holders of Old
Senior Subordinated Notes) the Company would not make its $16.9 million interest
payment on the Old Senior Subordinated Notes scheduled for May, 1995 and would
defer making dividend payments on the Old Preferred Stock.
On May 15, 1995, in connection with announcing a second quarter loss of
$8.2 million, the Company announced plans for a restructuring of its operations
which would include several cost cutting measures and personnel reductions. The
Company also announced the appointment of a new president.
These developments significantly constrained Anacomp's ability to finance
certain previously projected activities. In addition, in 1995, Anacomp failed to
achieve its original projections of operating results and experienced lower than
expected sales of major new software products which were first introduced in
January 1995. In light of Anacomp's withdrawn note offering, disappointing
financial performance and default on its indebtedness, the Company prepared a
new operating plan.
Based on the events discussed above and in connection with the change in
accounting discussed in Note 1 to the accompanying consolidated financial
statements, Anacomp determined that goodwill had been impaired and measured the
impairment based on the fair value approach discussed in Note 1. As required by
generally accepted accounting principles, this accounting change, which amounted
to a charge of $108 million, was recorded as a change in estimate of goodwill
and was included in the results of operations during fiscal 1995.
Prior to fiscal 1996, Anacomp invested and capitalized over $20.0 million
related to the development of software to provide advanced capabilities for the
XFP 2000 related to the processing of Xerox and IBM print steams. These software
enhancements are referred to as the Xerox Compatibility Feature ("XCF") and the
Advanced Function Presentation ("AFP") feature. XCF was introduced at the
beginning of the second quarter of fiscal 1995 and AFP at the beginning of the
fourth quarter of fiscal 1995. Initial sales of the XCF product were
significantly below expectations, as were projections for AFP. As a result,
during 1995 Anacomp wrote off $20.3 million of deferred software costs and
established a reserve of $8.6 million (none of which exists at September 30,
1996) for future payments to IBM Pennant Systems for software royalty and system
support obligations which were not recoverable based on revised projections. See
Note 18 to the accompanying consolidated financial statements.
Results of Operations - Products and Services
Output Services
Output services revenues, which accounted for 21% of Anacomp's revenues in
fiscal 1996, were down $8.4 million compared to fiscal 1995 (excluding the
effect of the ICS sale), primarily due to a 10% decrease in volume. Output
services revenues accounted for 22% of Anacomp's revenues in fiscal 1995.
Volumes were increased in fiscal 1995 due in part to the acquisition of the COM
services customer base of 14 data service centers from NBS. Output services
revenues increased 5% in fiscal 1994 on volume increases of 10%. The increase in
fiscal 1994 volume is the result of the NBS acquisition. Decreasing prices
adversely affected Anacomp's output services business in fiscal 1996, 1995 and
1994.
Output services gross margins as a percent of revenue decreased 1% in
fiscal 1996, 5% in fiscal 1995 and 2% in fiscal 1994.
26
Technology Services
Technology services revenues, which accounted for 17% of the Company's
revenues in fiscal 1996, are derived principally from the maintenance of COM
recorders and duplicators. Such revenues decreased 5% in fiscal 1996 when
compared to fiscal 1995 primarily due to the effect of replacing older
generation COM systems with the XFP 2000, which has a capacity significantly
greater than the previous generation COM systems. Technology services accounted
for 15% of fiscal 1995 revenues and were down 5% from fiscal 1994. Technology
services revenues increased $3.5 million in fiscal 1994. The improvement in
fiscal 1994 is largely the result of the addition of a national data service
center company to Anacomp's customer base.
Gross margins increased nearly 7% in fiscal 1996 due primarily to
reductions in costs associated with spare parts and personnel costs.
Output Systems
Output systems revenues, which accounted for 7% of the Company's revenues
in fiscal 1996, decreased $18.5 million with the sale or lease of 118 XFP 2000
systems in fiscal 1996 compared to 153 systems in fiscal 1995. Included in
output systems revenues in fiscal 1995 is $3.5 million of sales of equipment for
use in Anacomp data centers under sale and leaseback arrangements. Output
systems revenues decreased 9% in fiscal 1995 with the sale or lease of 153 XFP
2000 systems compared to 165 systems in fiscal 1994. Output systems revenues
decreased 25% in fiscal 1994 because of the decline in sales or leases of XFP
2000 output systems from 274 systems in fiscal 1993. The decline in fiscal 1994
was partly the result of reduced original equipment manufacturer ("OEM")
shipments (25 systems in fiscal 1994 compared to 67 in fiscal 1993).
Output systems gross margins improved in fiscal 1996, fiscal 1995 and
fiscal 1994 despite reduced revenues as a result of product mix of new and used
systems in fiscal 1996 and higher average selling prices in fiscal 1995 and
1994.
Micrographics Supplies
Micrographics supplies revenues, which accounted for 31% of the Company's
revenues in fiscal 1996, decreased 21% compared to fiscal 1995 principally as a
result of the discontinuance and downsizing of product lines. Micrographics
supplies revenues were 32% and 35% of the Company's revenues in fiscal 1995 and
1994, respectively. Micrographics supplies revenues decreased 7% in fiscal 1995
and 8% in fiscal 1994, principally due to reduced demand for duplicate film,
readers and reader/printers.
Micrographics supplies gross margins as a percent of revenue increased 5%
in fiscal 1996 as a result of changes in product mix due primarily to the sale
and downsizing of product lines. Micrographics supplies gross margins decreased
4% in fiscal 1995.
Magnetic Media
Magnetic media revenues, which accounted for 23% of the Company's revenues
in fiscal 1996, decreased $16.2 million compared to fiscal 1995. The decrease is
due to the closure of the Omaha, Nebraska factory, which produced flexible
diskette media, as well as reduced unit sales of open reel tape. Magnetic media
revenues accounted for 22% of the Company's revenues in fiscal 1995. Fiscal 1995
magnetic media revenues increased $31.9 million over fiscal 1994. The increase
is due to the contribution from the acquisition of Graham Magnetics in May 1994.
The acquisition of Graham Magnetics in May 1994 was the primary reason for a 36%
increase in fiscal 1994 magnetic media revenues over fiscal 1993. Graham
Magnetics manufactured certain magnetics products at its facility in Graham,
Texas. Anacomp has shifted all its U.S. production of those products from its
Omaha, Nebraska plant to the Graham Magnetics facility. The costs associated
with this relocation were not significant. The consolidation resulted in
improved manufacturing efficiencies and overall headcount reduction.
Magnetic media gross margins have remained level over the past 3 years at
approximately 16%.
27
Results of Operations - Other
Interest
Interest expense and fee amortization amounted to $39.6 million in fiscal
1996 compared to $70.9 million in fiscal 1995. The decrease relates to the
discontinuance of interest accrued on the predecessor Company's old subordinated
debt during the bankruptcy proceedings, as well as reduced interest expense on
the new debt instruments.
Interest expense and fee amortization was $70.9 million in fiscal 1995
compared to $67.2 million in fiscal 1994 due to $3.3 million of default interest
and interest on unpaid scheduled interest on the Old Senior Secured Debt as well
as the Old Senior Subordinated Notes which was required by the terms of the
various debt agreements.
Income Taxes
The Company adopted Financial Accounting Standards No. 109, Accounting for
Income Taxes, in the first quarter of fiscal year 1994. The adoption resulted in
a one-time increase to income of $8 million reflecting the cumulative effect on
prior years of this accounting change. In addition, the Company recorded a
deferred tax asset of $95 million representing the U.S. federal and state tax
savings from net operating loss carryforwards ("NOLs") and tax credits. The
Company also recorded a valuation allowance of $60 million, reducing the
deferred tax asset to $35 million. In determining the valuation allowance, the
Company assumed pre-tax income at levels they were experiencing at that time and
considered the impact of the reversal of temporary differences and the periods
in which NOL carryforward benefits expire.
The provision for income taxes in 1996 includes $6.1 million on earnings of
Anacomp's foreign subsidiaries and $2 million of domestic income taxes required
primarily related to the alternative minimum tax and state and local taxes. The
effective rate as a percentage of income before reorganization items,
extraordinary credit, and cumulative effect of accounting change (8.2%) is lower
than the U.S. statutory rate because of non-taxable reorganization income
partially offset by increases resulting from non-deductible amortization.
Included in the provision for income taxes in fiscal 1995 is a deferred tax
provision of $29 million. The deferred tax provision includes U.S. tax on
undistributed foreign earnings of $9 million and a write-off of net deferred tax
assets of $20 million. This write-off results from the uncertainty regarding the
financial restructuring that was in progress and, accordingly, the uncertainty
regarding the ultimate benefit to be derived from Anacomp's tax loss
carryforwards. The remaining components of the provision for income taxes in
1995 were taxes of $4.8 million on earnings of Anacomp's foreign subsidiaries
and a tax reserve adjustment of $1.2 million.
Income taxes as a percentage of income from operations was 55% in fiscal
1994. In fiscal 1994, income tax expense was reduced $1.2 million, as a result
of the favorable settlement and disposition of previously established tax
reserves. The effective tax rate was higher than the U.S. statutory rate because
of amortization of goodwill, which is not deductible for tax purposes, and
generally higher foreign tax rates. See Note 17 to the accompanying consolidated
financial statements.
28
Liquidity and Capital Resources Liquidity and Capital Resources
Anacomp's working capital at September 30, 1996, excluding the current
portion of long-term debt, was $26.4 million compared to a $13.8 million deficit
at September 30, 1995. To facilitate comparison of cash flow activity for fiscal
1996 to fiscal 1995, cash flows for the eight months ended May 31, 1996 and the
four months ended September 30, 1996, as discussed in the accompanying
consolidated statements of cash flows, have been combined for the following
discussion. Net cash provided by operating activities increased to $49.8 million
for fiscal year ended September 30, 1996 compared to $19.9 million in the
comparable prior period, due primarily to significant reductions in receivables
and inventories as well as non-payment of interest on subordinated debt prior to
the Reorganization. Net cash provided by investing activities increased to $3.9
million in the current period, compared to $3.1 million in the comparable prior
period.
Net cash used in financial activities increased to $35.5 million in fiscal
1996 compared to $23.6 million in fiscal 1995. The current period includes a $13
million repayment of debt with proceeds from the sale of the ICS Division.
The Company's cash balance (including restricted cash) as of September 30,
1996 was $47.8 million compared to $19.4 million at September 30, 1995.
Subsequent to September 30, 1996, the Company successfully completed a rights
offering for approximately 3.6 million shares of New Common Stock. The rights
offering generated approximately $25 million in cash, which will be used for the
acquisition of businesses, assets and technologies.
Prior to the Chapter 11 filing, the Company was experiencing a liquidity
shortfall caused by continued declining revenues and a highly leveraged balance
sheet. Upon emergence from bankruptcy proceedings the Company's pre-petition
liquidity problems were improved.
The Company believes that its cash on hand and cash generated from
operations will be sufficient to fund its debt service requirements, acquisition
strategies and working capital requirements in the foreseeable future.
On November 20, 1996, the Company reached agreement with Lehman Brothers
for the refinancing of the Company's 11-5/8% Senior Secured Notes. Lehman
Brothers has agreed to underwrite a new $115 million debt facility to replace
the existing Senior Secured Notes, which had a balance outstanding of $97.9
million at September 30, 1996. The new debt facility will consist of $90 million
in term loans and a revolver of up to $25 million. The refinancing requires the
consent of Anacomp's 13% Senior Subordinated Noteholders. The consent
solicitation period ends January 17, 1997.
Forward - Looking Statements
The statements contained in this filing on Form 10-K that are not
historical facts are forward-looking statements within the meaning of the
Private Securities Litigation Reform Act. Actual results may differ materially
from those included in the forward-looking statements.
29
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and Stockholders of Anacomp, Inc.:
We have audited the accompanying consolidated balance sheets of Anacomp,
Inc. (an Indiana corporation) and subsidiaries as of September 30, 1996 and
1995, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the four months ended September 30, 1996,
the eight months ended May 31, 1996 and the twelve months ended September 30,
1995 and 1994. These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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.
As more fully described in Note 2 to the consolidated financial statements,
effective June 4, 1996, the Company emerged from protection under Chapter 11 of
the U.S. Bankruptcy Code pursuant to a Reorganization Plan which was confirmed
by the Bankruptcy Court on May 20, 1996. In accordance with AICPA Statement of
Position 90-7, the Company adopted "Fresh Start Reporting" whereby its assets,
liabilities and new capital structure were adjusted to reflect estimated fair
values as of May 31, 1996. As a result, the consolidated financial statements
for the periods subsequent to May 31, 1996 reflect the Successor Company's new
basis of accounting and are not comparable to the Predecessor Company's
pre-reorganization consolidated financial statements.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anacomp,
Inc. and subsidiaries as of September 30, 1996 and 1995, and the results of
their operations and their cash flows for the four months ended September 30,
1996, the eight months ended May 31, 1996 and the twelve months ended September
30, 1995 and 1994 in conformity with generally accepted accounting principles.
As explained in Note 1 to the consolidated financial statements, effective
June 30, 1995, the Company changed its method of accounting for the measurement
of goodwill impairment.
Indianapolis, Indiana, Arthur Andersen LLP
November 15, 1996
30
CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
Reorganized Predecessor
Company Company
(Dollars in thousands, except per share amounts) As of September 30, 1996 1995
ASSETS
Current assets:
Cash and cash equivalents................................................. $ 38,198 $ 19,415
Restricted cash .......................................................... 9,597 ----
Accounts and notes receivable, less allowances for doubtful
accounts of $6,459 and $7,367, respectively......................... 58,806 90,091
Current portion of long-term receivables.................................. 4,690 6,386
Inventories............................................................... 31,856 53,995
Prepaid expenses and other................................................ 4,383 5,306
Total current assets.......................................................... 147,530 175,193
Property and equipment, at cost less accumulated depreciation and
amortization of $3,696 and $96,898, respectively......................... 27,102 44,983
Long-term receivables, net of current portion................................. 10,632 12,322
Excess of purchase price over net assets of businesses acquired
and other intangibles, net................................................ 2,285 160,315
Reorganization value in excess of identifiable assets (See Note 3) 240,344 ----
Other assets.................................................................. 7,528 28,216
$ 435,421 $ 421,029
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt......................................... $ 31,848 $ 389,900
Accounts payable.......................................................... 48,090 57,368
Accrued compensation, benefits and withholdings........................... 13,728 20,891
Accrued income taxes...................................................... 11,930 9,365
Accrued interest.......................................................... 10,586 40,746
Other accrued liabilities................................................. 36,814 60,587
Total current liabilities..................................................... 152,996 578,857
Long-term debt, net of current portion........................................ 217,044 ----
Other noncurrent liabilities.................................................. 6,812 5,841
Total noncurrent liabilities.................................................. 223,856 5,841
Commitments and contingencies (See Note 18)
Redeemable preferred stock, $.01 par value, issued and outstanding
500,000 shares (aggregate preference value of $25,000)........................ ---- 24,574
Stockholders' equity (deficit):
Preferred stock, 1,000,000 shares authorized, none issued................. ---- ----
Common stock, $.01 par value; 20,000,000 and 100,000,000 shares authorized
respectively; 10,099,050 and 46,187,625 issued, respectively.......... 101 462
Capital in excess of par value............................................ 80,318 182,725
Cumulative translation adjustment (from May 31, 1996 for Reorganized Company) 159 1,329
Accumulated deficit (from May 31, 1996 for Reorganized Company)........... (22,009) (372,759)
Total stockholders' equity (deficit).......................................... 58,569 (188,243)
$ 435,421 $ 421,029
See notes to consolidated financial statements.
31
CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries
Reorganized
Company Predecessor Company
Four Months Eight Months Twelve Months
Ended Ended Ended
September 30, May 31, September 30,
(Dollars in thousands, except per share amount) 1996 1996 1995 1994
REVENUES:
Services provided.................................................... $ 59,055 $130,202 $219,881 $223,511
Equipment and supply sales............................................ 92,487 204,396 371,308 369,088
151,542 334,598 591,189 592,599
OPERATING COSTS AND EXPENSES:
Costs of services provided........................................... 31,858 72,641 126,493 122,628
Costs of equipment and supplies sold................................. 70,097 156,526 290,842 274,575
Selling, general and administrative expenses......................... 29,688 63,826 132,459 115,819
Amortization of reorganization asset................................. 25,663 ---- ---- ----
Special charges (See Note 1)......................................... ---- ---- 136,889 ----
Restructuring charges (See Note 6)................................... ---- ---- 32,695 ----
157,306 292,993 719,378 513,022
Income (loss) before interest, other income, reorganization items, income taxes,
extraordinary credit and cumulative
effect of accounting change.......................................... (5,764) 41,605 (128,189) 79,577
Interest income.......................................................... 997 1,576 2,000 3,144
Interest expense and fee amortization.................................... (12,869) (26,760) (70,938) (67,174)
Financial restructuring costs (See Note 7)............................... ---- ---- (5,987) ----
Other income (expense)................................................... 27 6,968 (212) (192)
(11,845) (18,216) (75,137) (64,222)
Income (loss) before reorganization items, income taxes,
extraordinary credit, and cumulative effect of accounting change..... (17,609) 23,389 (203,326) 15,355
Reorganization items (See Note 4) ....................................... ---- 92,839 ---- ----
Income (loss) before income taxes, extraordinary credit and cumulative effect
of accounting change................................................. (17,609) 116,228 (203,326) 15,355
Provision for income taxes............................................... 4,400 3,700 35,000 8,400
Income (loss) before extraordinary credit and
cumulative effect of accounting change............................... (22,009) 112,528 (238,326) 6,955
Extraordinary credit - gain on discharge of indebtedness, net of taxes
(See Note 3) ........................................................ ---- 52,442 ---- ----
Cumulative effect on prior years of a change in accounting
for income taxes..................................................... ---- ---- ---- 8,000
Net income (loss)........................................................ (22,009) 164,970 (238,326) 14,955
Preferred stock dividends and discount accretion......................... ---- 540 2,158 2,158
Net income (loss) available to common stockholders....................... $(22,009) $164,430 $(240,484) $12,797
EARNINGS (LOSS) PER COMMON AND
COMMON EQUIVALENT SHARE $(2.19)
See notes to consolidated
financial statements.
57
CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries Reorganized
Company Predecessor Company
Four Months Ended Eight Months Twelve Months
Ended Ended
September 30, May 31, September 30,
(Dollars in thousands) 1996 1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................... $ (22,009) $ 164,970 $ (238,326) $ 14,955
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
Extraordinary credit................................................. ---- (52,442) ---- ----
Non-cash reorganization items........................................ ---- (107,352) ---- ----
Depreciation and amortization........................................ 31,610 18,788 43,375 40,649
Cumulative effect of a change in accounting for income taxes......... ---- ---- ---- (8,000)
Provision (benefit) for losses on accounts receivable................ 482 110 2,742 (695)
Provision for inventory valuation.................................... ---- ---- 10,956 ----
Non-cash charge in lieu of taxes..................................... 1,300 ---- ---- ----
Deferred taxes....................................................... ---- ---- 29,000 6,000
Special charges (See Note 1)......................................... ---- ---- 136,889 ----
Gain on sale of ICS Division......................................... ---- (6,202) ---- ----
Other................................................................ (175) 997 6,308 776
Restricted cash requirements............................................. (2,755) (6,842) ---- ----
Change in assets and liabilities net of effects from acquisitions:
Decrease in accounts and long-term receivables..................... 5,637 24,624 30,948 3,040
Decrease (increase) in inventories and prepaid expenses............ 10,416 11,174 (1,612) 15,254
Decrease (increase) in other assets................................ 1 1,094 (8,207) (11,349)
Increase (decrease) in accounts payable and accrued expenses....... (17,283) (5,077) 11,465 (3,623)
Increase (decrease) in other noncurrent liabilities................ 4,671 (5,899) (3,626) (4,323)
Net cash provided by operating activities......................... 11,895 37,943 19,912 52,684
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of other assets..................................... ---- ---- 18,777 7,805
Proceeds from sale of ICS Division..................................... ---- 13,554 ---- ----
Purchases of property, plant and equipment............................. (2,224) (3,599) (14,372) (18,868)
Payments to acquire companies and customer rights...................... (3,844) ---- (1,262) (14,565)
Net cash provided by (used in) investing activities............... (6,068) 9,955 3,143 (25,628)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock and warrants.................... (139) ---- 743 1,484
Proceeds from revolving line of credit and long-term borrowing......... ---- 2,656 22,529 39,000
Principal payments on long-term debt................................... (22,646) (15,332) (45,859) (71,095)
Preferred dividends paid............................................... ---- ---- (1,031) (2,062)
- ----------------------------------------------------------------------------
Net cash used in financing activities............................. (22,785) (12,676) (23,618) (32,673)
- ----------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH.................................... (172) 691 107 566
- ----------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS........................... (17,130) 35,913 (456) (5,051)
- ----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................... 55,328 19,415 19,871 24,922
- ----------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................. $ 38,198 $ 55,328 $ 19,415 $ 19,871
- ----------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Reorganized
Company Predecessor Company
Four Months Eight Months Twelve Months
Ended Ended Ended
September 30, May 31, September 30,
(Dollars in thousands) 1996 1996 1995 1994
Cash paid during the period for:
Interest............................................................... $ 5,581 $ 11,613 $ 39,426 $ 57,781
Income taxes........................................................... $ 2,942 $ 3,045 $ 4,128 $ 2,007
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
See Note 3 for discussion of non-cash activity related to Fresh Start
Reporting and the Reorganization. During 1996, 1995, and 1994 the Company
acquired companies and rights to provide future services. In conjunction with
these acquisitions, the purchase price consisted of the following:
Reorganized
Company Predecessor Company
Four Months Eight Months Twelve Months
Ended Ended Ended
September 30, May 31, September 30,
(Dollars in thousands)
Cash paid.............................................................. $ 3,844 $ ---- $ 1,262 $ 14,565
Credit memos issued.................................................... ---- ---- ---- 3,085
Notes payable issued................................................... 500 ---- ---- 4,290
Stock issued........................................................... ---- ---- ---- 17,201
Total fair value of acquisitions....................................... $ 4,344 $ ---- $ 1,262 $ 39,141
See notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Anacomp, Inc. and Subsidiaries
Capital in Cumulative
Common stock excess of translation Accumulated
(Dollars in thousands) par value adjustment Deficit Total
BALANCE AT SEPTEMBER 30, 1993 - Predecessor Company.......... $406 $163,209 $(4,744) $(145,072) $13,799
Common stock issued for purchases under the
Employee Stock Purchase Plan............................... 3 872 ---- ---- 875
Exercise of stock options.................................... 3 606 ---- ---- 609
Preferred stock dividends.................................... ---- ---- ---- (2,062) (2,062)
Accretion of redeemable preferred stock discount............. ---- ---- ---- (96) (96)
Translation adjustments for twelve months.................... ---- ---- 4,475 ---- 4,475
NBS stock issuance........................................... 20 7,380 ---- ---- 7,400
Graham stock issuance......................................... 25 9,776 ---- ---- 9,801
Net income for the twelve months..............................