<PAGE> 1
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, 1994 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) (Zip Code)
Registrant's telephone number, including area code: 317-844-9666
Securities registered pursuant to Section 12(b) of the Act:
<TABLE>
<CAPTION>
Name of each exchange
Title of each class on which registered
<S> <C>
Common Stock, $.01 par value ............................. New York, Chicago
Common Stock Purchase Rights.............................. New York, Chicago
13.875% Convertible Subordinated Debentures due
January 15, 2002 ...................................... New York
Common Share Warrants..................................... Chicago
</TABLE>
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this form 10-K. [ ]
The aggregate market value of voting stock held by non-affiliates of the
registrant as of November 15, 1994: Common stock par value $.01 per share,
$108,725,982.
Common Stock outstanding as of November 15, 1994 was 45,779,361.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement relating to the registrant's
1995 Annual Meeting of Shareholders to be held on January 27, 1995, have been
incorporated by reference into Part III of this Annual Report on Form 10-K.
<PAGE> 2
PART I
ITEM 1. Business
A. General
Anacomp, Inc., (Anacomp or the Company) is a leading information management
company which provides micrographics products and services, magnetics products
and electronic image management systems to a broad range of customers
worldwide. The Company's fiscal 1994 revenue was $ 593 million and operating
income (continuing operations income before interest, other income and taxes)
was $ 80 million. Approximately 29% of the Company's revenues are derived from
international business.
Anacomp was incorporated in Indiana in 1968. By 1986, Anacomp had become,
through acquisitions and internal growth, the leading company in the Computer
Output Microfilm (COM) data service center segment of the micrographics
industry. COM is a process for transferring large volumes of information
created by data processing directly from electronic form to microfilm.
Microfilm is a cost-effective alternative to the use of paper or electronic
files as a means of information storage and retrieval.
In 1987, Anacomp acquired the stock of DatagraphiX, Inc., the world's leading
manufacturer of COM systems, from General Dynamics Corporation. The
acquisition of DatagraphiX, which developed the first COM system in 1954, made
Anacomp the world's leading provider of COM products and services by adding COM
systems and maintenance to the Company's product line.
In 1988, the Company acquired Xidex Corporation, the leading manufacturer and
distributor of duplicate microfilm (a consumable supply used in the COM
process) and microfilm readers and reader/printers. Xidex was also a
manufacturer and marketer of computer tape products.
In the early 1990's, Anacomp, recognizing the evolution of technologies
competing with COM, modified its strategic objective to becoming a provider of
information and image management products and services. Today, in addition to
being the world's largest provider of COM solutions for image and information
management, Anacomp offers electronic image management products and services.
These include writable/erasable magneto-optical disks, CD-R (Compact Disk,
Recordable) optical disks and CD-ROM (Compact Disk, Read Only Memory) optical
disk storage systems. The Company is also a major manufacturer and distributor
of computer tape products used by data processing operations. Additionally,
Anacomp provides image and data conversion services whereby documents in human
readable form are scanned and digitized for storage on any of the various
electronic storage media.
Anacomp's strategy is to provide customers a blend of COM and electronic
storage media products and systems that will give them the most cost effective
integrated data and image management storage and retrieval solution.
<PAGE>3
B. The Information and Image Management Industry
The Information and Image Management (I & IM) industry consists of companies
whose products and services store information in a compacted format. The trend
toward increased emphasis on efficient management of information is driven by
several factors. First, companies understand that effective information
management is an important competitive advantage and allows them to better
serve their customers. Second, the increasing amounts of data processing
output and stored information have made cost-effective and flexible information
management more important. Finally, information itself is coming to be viewed
as a strategic corporate asset and managing this asset is therefore crucial.
The two major technologies applied in the I&IM industry are: (a)
micrographics, which includes COM and source document micrographics and
(b) electronic image management, which includes magnetic and optical
technologies for both data and image storage and retrieval.
Micrographics
Micrographics is the conversion of information stored on paper or in electronic
form to microfilm or microfiche. Anacomp's primary micrographics business is
the sale of COM services, systems, and related maintenance and supplies.
COM is a sophisticated application of micrographics in which information is
directly converted at high speed from magnetic or electronic forms to
microfilm. COM systems, also known as COM recorders, create an image which is
transferred to microfilm. During this process, the COM recorder organizes the
information and inserts indexing, output formatting, titling and other
retrieval aids tailored to specific customer applications.
COM recorders are data processing peripherals which record computer-generated
data and graphics onto microfilm or microfiche at high speeds. COM was
initially developed as an information management system that would reduce the
cost and increase the speed of computer output by "printing" computer-generated
data on microfilm. Since then, COM recorders have become a standard computer-
output peripheral.
Compared to paper, COM has a number of benefits. COM recorders can print
reports substantially faster than typical impact printers and multiple copies
can be made easily and economically on high-speed duplicators. COM has other
important cost advantages as well. A COM recorder can print a 1,000 page
report on just four 4" by 6" microfiche. Mailing COM reports represents a
substantial cost savings over the shipment and handling of paper output. With
correct indexing, retrieval of information is easier and faster with COM than
with paper storage.
Anacomp offers a complete line of micrographics services and products,
including: (i) COM processing services provided to customers on an outsourcing
contract basis; (ii) COM systems for users who perform their own data
conversion to microfilm; (iii) maintenance services for COM and other
micrographics equipment; (iv) source document microfilming services; and (v)
consumable supplies used by micrographics systems. Anacomp also sells certain
computer tape and other magnetic media products.
<PAGE> 4
Source document micrographics relates to the broad range of photographic,
mechanical and other technologies necessary to convert hard copy images to
microforms and then to store, retrieve, duplicate and reproduce such images.
Applications of source document micrographics include the transferring of paper
copy to a microform for more cost-effective storage.
By providing a full range of services, Anacomp can customize its offerings of
products and services to meet the specific needs of any customer. Once a
customer purchases a COM system from Anacomp, the Company has the opportunity
to provide follow-up service, including maintenance and supplies, as well as to
sell additional compatible hardware. Anacomp estimates that each dollar of COM
system sales generates 36 cents of annual supply revenue and 14 cents of annual
maintenance revenue.
Despite the continual decline in the cost of magnetic and optical storage media
and systems, micrographics technology is expected to retain significant cost
and functional advantages which will keep it competitive in a wide range of
applications beyond the year 2000. In addition, micrographics technology can
complement other storage media systems to meet the information management needs
of many companies.
Electronic Data and Image Management
Electronic data and image management is the application of various
technologies, including magnetic media and optical disks, to the storage and
retrieval of information and image data. Storage media include magnetic tape,
magnetic disks, writable/erasable magneto-optical disks, CD-R optical disks,
and CD-ROM optical disks. Data that is created during data processing
activities is directly written to the chosen media for later retrieval. Data
and images that are in human readable documents are scanned and digitized in
binary form and then recorded on the media of choice.
Electronic storage and management of image data provides users with improved
data retrieval access time and storage density as a trade off for increased
cost versus other storage technologies such as COM.
Anacomp's offerings in the electronic data and image management field include
systems incorporating magneto optical disks for use in large, high output
volume data centers, and CD-R storage systems intended for operations with only
a few users. The Company is also a major manufacturer and distributor of
magnetic storage media used by data processing operations, including open reel,
3480 cartridge and 3490 cartridge computer tape.
Anacomp, through its Image Conversion Services Division, provides data and
image conversion services where original source documents or other human
readable forms and images are scanned, digitized and stored in binary form on
any of a variety of magnetic or optical storage media.
<PAGE> 5
C. Description Of Business Units
Overview
The table below sets forth Anacomp's revenues by product line for the years
indicated:
<TABLE>
<CAPTION>
September 30,
(Dollars in thousands) 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Micrographics supplies,
readers and reader/printers.. $ 204,589 35% $ 223,120 38% $237,287 38%
Micrographics services........ 131,654 22 125,226 21 127,853 20
Maintenance services.......... 89,912 15 86,777 15 91,604 15
COM systems................... 59,149 10 75,900 13 76,845 12
Computer tape products........ 74,747 13 48,829 8 66,504 11
Other......................... 32,548 5 30,356 5 28,847 4
$ 592,599 100% $ 590,208 100% $628,940 100%
========= ==== ========= ==== ======== ====
</TABLE>
Micrographics Services
The Company operates 47 data service centers in the United States. Anacomp's
data service centers, which generally operate 24 hours per day every day of
the year, receive on a daily basis thousands of magnetic tapes from more than
8,000 customers. The data service centers then convert the information on
these tapes to 16mm microfilm or to microfiche, which are 4" x 6" microfilm
cards, each of which can store approximately 250 pages of computer output.
For the typical Anacomp data service center customer, an Anacomp salesperson
identifies potential COM applications through a survey performed at the
customer's site or observation of paper reports at a data processing location.
For example, a bank may need to transfer a computerized record of all checking
account activity to microfiche for distribution and use at various branch
locations. The Anacomp salesperson obtains information regarding any
specialized requirements, such as customer indexing, retrieval, rapid
turnaround, conversion frequency or distribution, and relays this information
to Anacomp's software programmers. The Anacomp data service center then
creates a test sample for the customer. Once the test sample is approved
by the customer, Anacomp establishes a regular schedule for gathering the
customer's tapes for processing. The COM data service center creates,
processes, duplicates, packages and returns the microfiche to the customer.
Turnaround time ranges from two hours to 36 hours depending on customer needs.
Through its data service centers, Anacomp also offers CD-R data storage
services. This offering is for customers who prefer their computer output
stored on CD-R optical disks instead of microfiche. As with COM customers,
Anacomp receives data on computer tape or via direct transmission and records
the data on CD-Rs.
<PAGE> 6
The data service center industry is highly fragmented with numerous small
operations in each major geographic market. Due to the emphasis on prompt
service, competition is primarily limited to data service centers within a 50-
mile radius of a customer. Anacomp and First Image Management Company (First
Image), a division of First Financial Management Corporation, are the two
largest U.S. data service center organizations. The remainder of the market
is served by numerous small, local data service centers.
The Company has been successful in acquiring data service centers located in
markets attractive to Anacomp and consolidating these operations with its
existing network where appropriate. Such acquisitions result in additional
volumes being serviced by Anacomp's existing data service centers, thereby
improving operating margins while maintaining competitive prices. Anacomp has
acquired 24 data service centers or the related COM services customers and
one microforms service center during the past three fiscal years.
In December 1993, Anacomp acquired two data service centers from First Image
in markets where Anacomp provides COM services to separate customer bases. In
January 1994, Anacomp acquired the COM services customers of 14 data service
centers from National Business Systems. These were also in markets where
Anacomp provides COM services. Consistent with past practices, all of these
operations were incorporated into existing Anacomp data service centers (See
Note 3 to the Consolidated Financial Statements). In September 1993, Anacomp,
as part of a comprehensive agreement, sold two data service centers to First
Image. These centers were in markets whose potential did not meet Anacomp's
requirements.
Image Conversion Services
In October 1994, Anacomp established Image Conversion Services as a separate
division. Anacomp operates 11 image conversion centers which provide
microforms services. Microforms services take two forms: the conversion of
both active and archival paper documents to microfilm (source document
microfilming), and the reproduction of large data bases, such as parts
catalogs, on microfilm (micropublishing). Anacomp works closely with its
customers to determine how best to convert records to microfilm or microfiche
and to index them so that the information is easily accessed.
This division also provides a service to record data and/or image management
information onto CD-ROMs, CD-Rs, magneto optical disk, magnetic tape or other
electronic storage media. The process involves taking a human readable
document, usually an original source paper document, scanning and digitizing
the data, and recording it on the chosen media for later retrieval.
Image Conversion Services personnel are trained to work closely with Anacomp's
COM sales force to identify COM customers who are potential users of image
conversion services. Additionally, the Image Conversion Services sales force
prospects for new business from non-Anacomp COM customers. Anacomp competes
with EDS, customer in-house installations, and numerous small regional
providers.
<PAGE> 7
COM Systems Anacomp is the world's leading manufacturer of COM systems,
manufacturing and marketing a complete line of COM recorders, processors
and duplicators, and related software.
The basic components of a COM recorder are relatively standard. An input
section receives data directly from a computer, from magnetic tape or any
other data storage device. The COM recorder interprets and converts the data
performing certain functions such as film manipulation, output formatting,
titling and index extraction. The data is converted into images and
transferred directly onto film and the finished microfilm and duplicates are
produced. Critical subassemblies for COM recorders and duplicators are
manufactured, assembled and tested at the Company's facilities in Poway,
California. Other components, such as tape drives, power supplies and frames
are purchased from outside vendors. Multiple sources for these components
exist.
Anacomp supplies a complete line of COM recorders covering all feature
possibilities, including wet or dry process technology, roll or cut fiche,
medium to high speed, stand-alone or integrated film processors and
duplicators, a PC-based operator control interface, and an electronic forms
generation capability on its laser-based system. All of the Company's COM
recorders are software compatible, which provides for customer transfer
throughout the product line.
In 1990, Anacomp introduced the XFP 2000 COM system. The XFP 2000 represents
the fourth generation of COM recorder technology. The XFP 2000 is the most
significant technological advance in the COM industry in the last decade,
permitting graphic as well as alphanumeric reproduction. The XFP 2000 is
faster and more reliable than previous COM recorders. When coupled with the
necessary software, the XFP 2000 can reproduce bit-mapped images and duplicate
the output of laser printers of various manufacturers onto microfiche. This
ability, which is not available in older generation COM recorders, allows
applications such as signatures, logos and photographs to be output to
microfiche.
In October 1991, Anacomp signed an agreement with Eastman Kodak to serve as
the Original Equipment Manufacturer (OEM) for Kodak's new COM recorder. The
six-year agreement calls for Anacomp to supply (subject to certain contractual
cancellation rights) between 600 and 1,500 specially modified XFP 2000s to
Kodak. Through September 1994, Kodak has purchased 149 XFPs under the
agreement, 25 of which were purchased in fiscal 1994.
In October 1992, Anacomp and Xerox Corp. announced a joint effort to develop
software that will enable the XFP 2000 to process and image Xerox high speed
printing data streams. This effort will result in the XFP 2000 being able to
output virtually all Xerox print data streams, including those containing
fonts, forms, logos, signatures and other images on microfiche. This software
is exected to be available during the first calendar quarter of 1995.
In November 1993, Anacomp and Pennant Systems, a division of IBM, announced a
joint effort to develop software which will allow Anacomp's XFP 2000 to
process and image IBM Advanced Function Presentation (AFP) formatted data.
This program will result in the XFP 2000 being able to interpret AFP data
streams, including, as with the Xerox program, those containing fonts, logos,
signatures and other images on microfiche. This software is expected to be
available during mid - 1995.
<PAGE> 8
The Company's primary competitors in the sale of COM systems are Kodak, Agfa-
Gevaert and Micrographic Technology Corporation (MTC). Competition is based
on such factors as price, product quality, product features and service.
Anacomp has the largest installed base of COM systems of any company
(approximately 58% of the machines in use) and accounts for approximately 70%
of all new COM system sales (inclusive of OEM unit sales). Because changing
from one manufacturer's COM system to another is difficult due to software
conversion and operator training costs, Anacomp's large installed base is an
important advantage. With an installed base that is more than twice as large
as its nearest competitor and a technologically advanced family of new
products, management believes that the Company has a strong competitive
position in the replacement and add-on market.
Optical Disk Systems
In November 1993, the Company announced an OEM agreement with IBM to produce
an extended data storage product that bridges the gap between on-line storage
and COM storage. The product, called XSTAR, features an OEM version of IBM's
3995 Optical Library Dataserver and will allow mainframe computer users to
store and retrieve data through desktop terminals or PCs while also supporting
storage via COM systems. XSTAR operates in IBM's MVS environment and
provides up to 377 gigabytes of machine-readable storage, equivalent to more
than 100 million pages. The system will support storage of data on mainframe
magnetic disk, industry standard 5.25-inch single or double density optical
disks as well as 3480/3490 cartridge tape and COM. Anacomp received its first
order in the fourth quarter of fiscal 1994 and has placed additional units
with selected customers for evaluation and possible sale.
In April 1994, Anacomp announced a joint product development program with
FileNet to develop a product known as VELLOS. As a document image storage and
retrieval system, VELLOS is based on either CD-R optical disks, or
writable/erasable magneto-optical disks. It operates as a client/server
system in the Unix environment with retrieval options in Windows. The system
is designed for small departmental multi-user applications. VELLOS is being
marketed exclusively by Anacomp through its Image Conversion Services
division, and Anacomp recorded its first sale in the fourth quarter of fiscal
1994.
Maintenance Services
Anacomp provides maintenance to 2,770 COM systems representing approximately
98% of its installed base (2,076 in the U.S. and 694 outside the U.S.)
through over 900 service employees operating worldwide. Anacomp provides 24-
hour service through a network of maintenance service centers and resident
service representatives. The maintenance organization offers installation,
ongoing maintenance and field technical support for existing and new
products. As additional COM systems are sold, the Company is able to
provide maintenance without adding maintenance centers or a significant
number of personnel, thereby resulting in increased maintenance margins. In
addition, the infrastructure is in place to compete for service contracts on
other COM products or selected data processing products. Historically, each
dollar of COM system sales has resulted in approximately 14 cents of annual
maintenance revenue.
Historically, competition in maintenance has been limited as most customers
tend to use the maintenance services of the vendor that installed their
system. However, some customers choose to use in-house maintenance staffs.
Thus, revenues are primarily a function of new COM system sales and the size
of the installed base. Anacomp has the largest installed base in the
industry.
<PAGE> 9
In March 1992, Anacomp acquired the COM maintenance service operations of
TRW, Inc. TRW was the last major third party provider of such services.
These operations expanded the Company's maintenance service base and created
new opportunities for COM system sales, COM data service back-up and
supplies sales. The TRW operations were integrated into Anacomp's existing
maintenance organization. As part of the September 1993 agreement between
Anacomp and First Image, Anacomp became First Image's exclusive COM system
maintenance provider in the United States.
Micrographics Supplies
Anacomp sells the most comprehensive line of micrographics supplies in the
world, offering duplicate microfilms, chemicals for microfilm processing,
original silver halide films, paper and toners for reader/printers,
micrographics lamps and bulbs, and other consumables. Anacomp's large
installed base of COM systems provides the Company with a ready market for
its consumable supplies although Anacomp also sells supplies outside of its
COM systems base. Historically, every dollar of COM system revenue has
generated approximately 36 cents of annual supply revenues. A majority of
the supplies sold consist of duplicate microfilm and private label
consumables incorporating proprietary chemistry and film developed
specifically for Anacomp's COM systems and for which, in most cases, Anacomp
is the sole supplier. Anacomp's duplicate microfilm market share is
estimated to be 73% and its primary competitor is Rexham. Beginning in
October 1994, Anacomp became the exclusive provider of duplicate microfilm
to First Image.
In March 1992, Anacomp formed a strategic alliance with SKC Limited and SKC
America, Inc. (collectively, SKC), member companies of the Sunkyong Group, a
worldwide $22 billion Korean general trading company and manufacturer of
petroleum-based products. In the first quarter of fiscal 1994, SKC
purchased Anacomp's Sunnyvale, California, duplicate microfilm manufacturing
facility. SKC now supplies Anacomp with substantial amounts of magnetic-
base polyester and coated duplicate microfilm. SKC also provides Anacomp
with a $25 million trade credit arrangement (See Note 4 to the Consolidated
Financial Statements).
Readers and Reader/Printers
Anacomp also designs, manufactures and markets a complete line of metal and
plastic microfiche/microfilm readers and reader/printers. Readers are
relatively simple, low-cost units (which sell for approximately $100 to $400
per unit) used to view microfilm. Reader/printers, which allow users to
print a paper copy of the microfilm or microfiche being viewed, sell for
approximately $1,250 to $6,300 per unit.
Anacomp is a supplier to Kodak, First Image and Bell & Howell for readers
and reader/printers. Anacomp's market share of the worldwide reader market
is estimated to be 63% with the remainder of the market held by EyeCom and
several small manufacturers, none of whom have more than 10% of the total
unit shipments. Anacomp's share of the reader/printer market is
approximately 20%. In the reader/printer market, Anacomp competes with
Canon, Minolta and Infographics.
<PAGE> 10
In April 1993, the Company announced the introduction of the MicroImage
Digital Scanner 300, a low-cost full-function workstation for digitizing and
electronically processing micrographic images on demand. The device scans
and digitizes micrographic images, allowing them to be viewed, edited or
enhanced on a personal computer screen. The digitized image then can be
sent electronically to a laser printer or fax machine, or distributed over
an electronic network to another image-capable device. Anacomp has
approximately 5% of the digital scanner market and competes with Kodak, 3M,
Canon and Minolta.
Computer Tape Products
The Company manufactures open reel tape as well as 3480 and 3490 computer
tape cartridges used in large mainframe computers such as IBM, Amdahl,
Unisys and NEC. It also manufactures a 1/2" tape cartridge for use with DEC
computers. The market for open reel tape is comprised of data processing
installations with large data storage needs. Demand for this product has
been declining and is expected to continue this trend at a rate of 30% per
year as 3480 and 3490 computer tape cartridges gain market share.
The computer tape cartridge market continues to develop as IBM and DEC
aggressively establish new standards. This process has resulted in the 3480
product being gradually replaced by 3490 computer tape cartridges. Demand
for 3480 computer tape cartridges is expected to decline by approximately 8%
per year while demand for 3490 computer tape cartridges is expected to grow by
35% per year. Anacomp has approximately 35% of the 3480 computer tape
cartridge market and competes with 3M (with approximately 35% market share),
BASF (with approximately 18% market share) and Memorex (approximately 10%
market share). In the 3490 computer tape cartridge market, Anacomp has
approximately 30% market share. Anacomp's competitors and their approximate
respective market shares for 3490 computer tape cartridges are 3M (50%),
BASF (15%) and Memorex (3%).
New installations as well as library conversions are the driving forces
behind the growth in the 3490 computer tape cartridge market. Price
competition in the computer tape cartridge market has resulted because of
the large amount of manufacturing capacity installed by all producers.
However, Anacomp's products consistently receive the highest possible
quality ratings from independent rating agencies.
In May 1994, Anacomp acquired Graham Acquisition Corporation which
manufactures open reel tape as well as 3480 and 3490 computer tape
cartridges at its Graham, Texas facility (See Note 3 to the Consolidated
Financial Statements). As a result of the acquisition, Anacomp now
manufacturers over 95% of the world's supply of open reel tape. In October
1994, Anacomp announced that the 3480 and 3490 computer tape cartridge
operations in the Omaha, Nebraska facility would be relocated to Graham,
Texas to lower manufacturing costs of this product.
<PAGE> 11
International
Approximately 29% of the Company's revenues are attributable to its
international operations. Anacomp has wholly-owned operating subsidiaries
in Germany, the United Kingdom, France, the Netherlands, Belgium, Italy,
Finland, Sweden, Denmark, Norway, Canada, Brazil and Japan. The Company's
international product and service offerings are virtually identical to those
in the U.S. market, except that data service centers are not operated in
foreign markets. The most significant markets are the United Kingdom (27%
of fiscal 1994 international sales), Germany (18%), France (12%), Canada
(6%) and the Benelux countries (5%). In countries where Anacomp does not
have subsidiaries, it sells COM systems and supplies through dealers and
agents. International sales in 1994 by product line include micrographics
supplies (36%), COM systems (12%), maintenance (19%) and computer tape and
other magnetics products (33%).
Customers in Western Europe and Canada are primarily in financial services,
retailing, health care, COM data service centers, manufacturing and
government agencies. Data service centers are the major customers for COM
applications in emerging international markets.
In Europe, Anacomp has an estimated 70% market share in COM system sales, an
approximate 50% share of the installed base of COM systems, an approximate
38% market share in maintenance and an approximate 33% market share in
supplies.
In the Americas (excluding the United States) and Asia, Anacomp's
approximate market shares are 63% in COM systems, 15% in maintenance and 39%
in supplies. Anacomp has an approximate 51% share of the installed base of
COM systems in these markets.
Anacomp's international supplies market share is significantly below the
U.S. level because these sales have historically been through dealers and
agents. Anacomp's international subsidiaries are gradually taking over
supplies sales from dealers and agents, enabling Anacomp to compete more
effectively with other manufacturers, especially European manufacturers.
Anacomp may establish subsidiaries in countries where it currently operates
through distributors. Competition varies by country with no company in the
world competing with Anacomp across all markets. For COM systems and
maintenance, the Company primarily competes with MTC and Agfa-Gevaert in
Germany and the United Kingdom; Agfa-Gevaert, MTC and Kodak in France; Kodak
and Agfa-Gevaert in Italy and Northern Europe; and Kodak, NCR and Fuji in Japan.
For supplies, the Company primarily competes with Kalle, Messerli
and Rexham in Germany, the United Kingdom and France; Rexham and Kalle in
Italy; Rexham and Messerli in Northern Europe; and Kodak and Fuji in Japan.
<PAGE> 12
D. Marketing and Customers
The Company has traditionally maintained separate sales forces for its data
service centers, COM systems and maintenance services, micrographics
supplies, computer tape products and international activities. In October
1994, Anacomp reorganized its domestic sales force. The data service
centers, COM systems, and direct channel supplies sales organizations were
merged and organized into two direct sales divisions covering the western
and eastern sections of the United States. Each division contains 14 Area
Business Units (ABU's) responsible for marketing COM services and COM
systems and related supplies, and electronic image management systems in
specific geographic areas of their division. The Maintenance Services
division and the sales forces selling through indirect channels were left
unchanged as independent operations. Additionally, the Company created Image
Conversion Services as a separate division that offers microfilm, CD-R, CD-
ROM and magnetic tape storage and retrieval solutions to customers. Sales
force compensation is based on: (i) maintaining recurring sales volumes
with existing customers, (ii) adding annual increments to these volumes and
(iii) gross margin earned on sales.
Area Business Units
Anacomp's Area Business Units employ over 170 sales people, including
managers, who are trained to sell the merits of COM to their customers'
senior management and to identify individual data processing applications
for which COM is the most appropriate output alternative. The salespeople
work with the customer to determine the best alternative between out-
sourcing to an Anacomp data service center and purchasing their own COM
systems for in-house operation. The Anacomp salespeople also market COM
system maintenance services, consumable supplies, readers and
reader/printers, source document micrographics products, and computer tape
products. Anacomp salespeople are also trained to identify customer
applications that are better suited for an optical disk storage solution and
to assist such customers to design an information and image management
system that provides the optimal mix of COM and optical storage solutions.
Principal customers for the Company's COM systems include banks, insurance
companies, financial service companies, retailers, healthcare providers, COM
data service centers, manufacturers and government agencies. Anacomp has
almost 900 active COM system customer sites. Principal customers for COM
services are similar to COM system customers with the exception of COM data
service centers. No single customer accounts for more than 10% of the
Company's revenues.
Maintenance
Anacomp's Maintenance Services division is made up of 500 service engineers
and managers, who provide geographic coverage through 10 districts in the
United States.
Indirect Supplies
Anacomp's indirect supplies operation consists primarily of the sale of
Anacomp manufactured products to dealers and distributors throughout the
United States and includes the sale of consumable supplies, readers and
reader/printers. The indirect operation maintains a sales force of
approximately 20 salespeople who provide geographic coverage throughout the
United States.
<PAGE> 13
Magnetic Media Anacomp's magnetics operation consists primarily of the sale
of Anacomp manufactured products to dealers and distributors throughout the
United States and includes the sale of computer tape and flexible diskette
products. The magnetics operation maintains a sales force of approximately
20 salespeople who provide geographic coverage throughout the United States.
International
International sales include micrographics products and services as well as
certain data processing related products. The Company employs 70 direct
salespeople in wholly-owned subsidiaries and has approximately 100
distributors in other countries. Approximately one-third of Anacomp's
installed base of COM systems is outside of the United States.
E. Engineering, Research and Development
The Company supports several engineering processes, including basic
technological research, COM system and related software product development,
and sustaining engineering support for existing customer installations. The
engineering department is located in Poway, California and employs
approximately 130 engineers and technicians. The operating costs associated
with all engineering programs (including research and development) amounted
to approximately $7.2 million in 1994, $7.9 million in 1993 and $8.3 million
in 1992. The majority of these costs relate to the continued software
development for the XFP 2000 COM recorder.
Management expects that its near-term engineering efforts will be
concentrated on adding additional software capabilities to its COM
recorders. Anacomp has intensified its development efforts aimed at
providing optical disk based storage technology solutions and expects to
continue to expand its efforts in this area over the next several years.
The Company's primary focus will be to provide a technology bridge between
COM and the newer optical disk technologies.
Anacomp owns several patents and licenses covering certain aspects of its
products and production processes. However, the Company believes that the
patent protection is of lesser significance than the knowledge and
experience of its management and personnel, and their abilities to develop
and market the Company's products.
F. Employees and Labor Relations
As of October 1994, Anacomp employed approximately 4,400 people who were
engaged in management, sales and services, manufacturing, computer and
micrographics operations. In October 1993, Anacomp employed approximately
4,200 people.
<PAGE> 14
G. 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 15 to the Consolidated
Financial Statements.
Item 2. Properties
Anacomp's principal administrative headquarters are located at 11550 North
Meridian Street, Carmel, Indiana (a suburb of Indianapolis). Anacomp's
micrographics manufacturing, engineering and product maintenance facilities
are located primarily in Poway, California (outside San Diego). Anacomp's
computer tape manufacturing and engineering facilities are located in Omaha,
Nebraska, Graham, Texas, and Bryn Mawr, Wales.
The following table indicates square footage:
<TABLE>
<CAPTION>
Operating Other Corporate
Facilities Facilities Facilities Total
<S> <C> <C> <C> <C>
United States:
Leased 982,000 629,000 74,000 1,685,000
Owned -- 168,000 -- 168,000
982,000 797,000 74,000 1,853,000
International:
Leased 160,000 -- -- 160,000
Owned 145,000 -- -- 145,000
305,000 -- -- 305,000
Total 1,287,000 797,000 74,000 2,158,000
========= ========= ========= =========
</TABLE>
Other Facilities consist primarily of leased space from discontinued operations
and property held for sale. Approximately 776,000 square feet of the Other
Facilities have been sublet to others and an additional 21,000 square feet is
vacant as of November 1994. Anacomp also leases standard 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 present agreements were terminated.
<PAGE> 15
Item 3. Legal Proceedings
Anacomp has been identified by the United States Environmental Protection Agency
(EPA) and state governmental agencies (State) as a potentially responsible party
pursuant to federal and/or state law for the costs associated with the
remediation undertaken or to be undertaken at various disposal sites located
in the United States. At most of these sites, Anacomp is one of many parties
identified by the EPA and/or the State; at others, it is one of a small
number of parties so identified. The liability for such remediation under
federal law and, in some instances, state law is strict, joint and several
where the alleged harm is indivisible. The actual liability, if any, of
Anacomp at these sites cannot be precisely determined at this time, but the
Company believes that any ultimate liability will not have a material adverse
effect upon its financial position or results of operations because adequate
liability estimates have been recorded in the Consolidated Balance Sheet.
Anacomp also is involved in various claims and lawsuits incidental to its
business and believes that the outcome of any of those matters will not have
a material adverse effect on its consolidated financial position or results
of operations.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted during the three months ended September 30, 1994, to a
vote of Anacomp's security holders through the solicitation of proxies or
otherwise.
EXECUTIVE OFFICERS OF THE REGISTRANT
The names, ages, positions with Anacomp and business background during the past
five years of Anacomp's executive officers are as follows:
Louis P. Ferrero, age 52, was elected Chairman of the Board and Chief Executive
Officer on January 25, 1985, was elected to the Office of the Chairman of the
Board and Chief Executive Officer on November 6, 1984, and was elected
President of the Company in May 1984. Mr. Ferrero currently serves on the
executive and nominating committees of the Board of Directors.
William C. Ater, age 54, was elected Vice President and Chief Administrative
Officer in February 1988. From March 1981 to February 1988, Mr. Ater served as
Vice President of Administration. He has served as Secretary since March 1985.
K. Gordon Fife, age 49, was elected Vice President of Tax on October 1, 1985.
Hasso Jenss, age 51, was elected Vice President - European Micrographics on
November 11, 1993. Prior to that, he served from October 1989 to October 1993
as Managing Director of Anacomp's German subsidiary.
P. Lang Lowrey, age 41, was elected Vice President - Magnetics Group in
November 1992. Prior to that, he served from October 1990 to October 1992
as Vice President - Worldwide Marketing Division. He was Vice President -
MultiproduX Division from December 1987 through September 1990.
<PAGE> 16
Thomas W. Murrel, age 54, was elected Vice President and General Manager of
Poway Operations in January 1993. Prior to that, he served from February 1988
to December 1992 as Vice President - Maintenance Division. From June 1987 to
February 1988, he served as Vice President - Product Service, DatagraphiX.
Jack R. O'Donnell, age 64, joined Anacomp in March 1992, as Executive Vice
President, Treasurer and Chief Financial Officer. Prior to joining Anacomp,
Mr. O'Donnell was an office managing partner with Arthur Andersen, an
international public accounting firm.
Michael H. Riley, Age 47, was elected Vice President, Product Development and
Marketing on November 12, 1994. From January 1993 to November 1994, he served
as Vice President, Product Planning and Marketing. Prior to that, he served
from 1990 to 1992 as Vice President of Information Systems Marketing and from
1989 to 1990 as Director of Product Management.
Gary M. Roth, age 52, was elected Vice President, Americas Asia Division in
November 1992. 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. From July 1982 to October 1988, he served
as Regional Vice President - COM Services Division.
Thomas R. Simmons, age 47, was elected Vice President, Direct Sales Division-
East on November 12, 1994. He had served as Vice President - Information
Systems Division since November 4, 1991. Prior to that, he served from 1987 to
1991 as Vice President - Micrographics Services Division.
Donald L. Viles, age 48, was elected Vice President and Controller of Anacomp
on October 1, 1985.
Michael P. Wessner, age 34, was elected Vice President - Strategic Resellers
Group on November 12, 1994. He had served as Vice President - Strategic
Resellers Division since November 1992. Prior to that, from October 1991 to
October 1992, he served as a Regional Vice President in the Strategic Resellers
Division. From November 1988 to October 1991, he was a Regional Vice President
in the MultiproduX Division. Mr. Wessner joined Anacomp in July 1985, and
served as a supplies sales representative until October 1988.
J. Frederick Williams, age 52, was elected Vice President, Direct Sales
Division-West on November 12, 1994. He had served as Vice President -
Micrographics Services Division since November 4, 1991. From October 1988
through October 1991, he served as a Regional Vice President in the
Micrographics Services Division. For the two years prior to that, he was Vice
President - Commercial and Government Services Division.
<PAGE> 17
J. Mark Woods, age 52, was elected President and Chief Operating Officer in
February, 1993. He had previously served as Executive Vice President and Chief
Operating Officer since May 1989. From August 1988 through April 1989, he
served as President of the Micrographics Group. He served as Executive Vice
President and Chief Operating Officer from January 1985 to August 1988. In
February 1988, Mr. Woods was elected a director of Anacomp. He currently
serves on the nominating committee of the Board of Directors.
Each of Anacomp's executive officers is elected for a term of one year and
until their successors are chosen and qualified or until their death,
resignation or removal. 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-1 of this Annual Report on Form 10-K.
Item 6. Selected Financial Data
Selected financial data appear on page A-1 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 appear on pages A-2 to A-7 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-8 to A-35 of this Annual Report on Form 10-K.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
There are no changes in or disagreements with accountants on accounting and
financial disclosures.
PART III
Item 10. Directors, Executive Officers, Promoters and Control Persons 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 Exchange Act of 1934" from its definitive Proxy Statement to be
delivered to the shareholders of the Company in connection with the 1995 Annual
Meeting of Shareholders to be held January 27, 1995. Certain information
relating to executive officers of the Company appears on pages 15, 16 and 17
hereof.
<PAGE> 18
Item 11. Executive Compensation
The Company hereby incorporates by reference the information contained under
the heading "Executive Compensation" from its definitive Proxy Statement to be
delivered to the shareholders of the Company in connection with the 1995 Annual
Meeting of Shareholders to be held January 27, 1995.
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" from
its definitive Proxy Statement to be delivered to the shareholders of the
Company in connection with the 1995 Annual Meeting of Shareholders to be held
on January 27, 1995.
Item 13. Certain Relationships and Related Transactions
There are no relationships and related transactions that require disclosure.
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, 1994 and 1993.
Consolidated Statements of Operations - Years Ended September 30,
1994, 1993, and 1992.
Consolidated Statements of Cash Flows - Years Ended September 30,
1994, 1993, and 1992.
Consolidated Statements of Stockholders' Equity - Years Ended
September 30, 1994, 1993, and 1992.
Notes to Consolidated Financial Statements.
2. Other than as described below, 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. The following schedules appear
in Appendix A to this Annual Report on Form 10-K and are filed as a
part hereof:
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other than Related Parties.
Schedule VIII - Valuation and Qualifying Accounts and Reserves.
(b) Reports on Form 8-K:
On May 6, 1994, a Form 8-K was filed to report the acquisition of Graham
Acquisition Corporation.
(c) The following exhibits are filed with this 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 (*):
<PAGE> 19
(3) Articles of Incorporation and Bylaws:
The Restated Articles of Incorporation of Anacomp amended effective
January 30, 1992, incorporated by reference to Anacomp's Form 10-K
Annual Report for the fiscal year ended September 30, 1992. The Bylaws
of Anacomp, amended January 29, 1990, are incorporated by reference to
Exhibit 3 (a) to Anacomp's Form 8-K dated January 31, 1990.
(4) Instruments defining the rights of security holders, including indentures:
(a) Indenture dated as of January 1, 1981, among Anacomp International
N.V., Anacomp and The Chase Manhattan Bank, N.A., as trustee,
relating to 9% Convertible Subordinated Debentures due 1996,
incorporated by reference to Exhibit No. 4(c) to Anacomp's Annual
Report on Form 10-K for its fiscal year ended June 30, 1981.
Anacomp International N.V., Anacomp, The Chase Manhattan Bank, N.A.,
and J. Henry Schroder Bank & Trust Company mutually agreed to
substitute J. Henry Schroder Bank & Trust Company as Trustee under
said Indenture.
(b) Indenture dated as of January 15, 1982, between Anacomp and American
Fletcher National Bank & Trust Company, as Trustee, incorporated by
reference to Exhibit (b) to Anacomp's Form S-16 Registration
Statement (File No. 2-75650) dated January 20, 1982, relating to
13.875% Convertible Subordinated Debentures due January 15, 2002.
Anacomp, American Fletcher National Bank & Trust Company and United
States Trust Company of New York mutually agreed to substitute
United States Trust Company of New York as Trustee under said
Indenture. (c) Indenture dated as of October 24, 1990, between
Anacomp and State Street Bank and Trust Company, as Trustee, for
$224,900,000 fully accreted value ($215,904,000 aggregate
principal amount) of 15% Senior Subordinated Notes due 2000.
Incorporated by reference to Exhibit 4(a) to Anacomp's Form 8-K
dated October 31, 1990.
(d) Warrant Agreement dated as of October 24, 1990, between Anacomp and
Manufacturers Hanover Trust Company as Warrant Agent. Incorporated
by reference to Exhibit 4(f) to the October 31, 1990, Form 8-K.
(e) Rights Agreement dated as of February 4, 1990, between Anacomp and
Manufacturers Hanover Trust Company, as Rights Agent. Incorporated
by reference to Exhibit 1 to Anacomp's Form 8-K dated February 6,
1990.
(f) First Supplemental Indenture dated as of March 22, 1993, between
Anacomp, Inc. and State Street Bank and Trust Company, as Trustee,
relating to Anacomp's 15% Senior Subordinated Notes due 2000.
Incorporated by reference to Anacomp's Annual Report on Form 10-K
for its fiscal year ended September 30, 1993.
<PAGE> 20
(10) Material Contracts:
(a) Employment Agreement between Anacomp and Louis P. Ferrero, effective
October 1, 1992, incorporated by reference to Anacomp's Form 10-K
Annual Report for the fiscal year ended September 30, 1992.
(b) Employment Agreement between Anacomp and J. Mark Woods, effective
October 1, 1990, incorporated by reference to Anacomp's Form 10-K
Annual Report for the fiscal year ended September 30, 1990.
(c) Second Amendment to Employment Agreement between Anacomp and P. Lang
Lowrey III, effective September 30, 1992, incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1992. Original Employment Agreement dated March 15,
1990, as amended on December 17, 1990, incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1990.
(d) Employment Agreement between Anacomp and Thomas R. Simmons,
effective October 1, 1992. Incorporated by reference to Anacomp's
Annual Report on Form 10-K for its fiscal year ended September 30,
1993.
(e) Employment Agreement between Anacomp and Jack R. O'Donnell,
effective March 1, 1992, incorporated by reference to Anacomp's Form
10-K Annual Report for the fiscal year ended September 30, 1992.
(f) Letter Agreement between Anacomp, Inc. and Louis P. Ferrero, dated
September 3, 1991, incorporated by reference to Anacomp's Form 10-K
Annual Report for the fiscal year ended September 30, 1991.
(g) Anacomp, Inc. Restricted Stock Bonus Plan, incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1985.
(h) Anacomp, Inc. Deferred Compensation Plan, incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1985.
(i) Anacomp, Inc. Stock Option Plan (1986), incorporated by reference to
Anacomp's Proxy Statement dated February 3, 1986.
(j) Anacomp, Inc. Stock Option Plan (1987), incorporated by reference to
Anacomp's Proxy Statement dated January 5, 1987.
(k) Anacomp, Inc. Stock Option Plan (1988), incorporated by reference to
Anacomp's Proxy Statement dated January 12, 1988.
(l) Anacomp, Inc. Stock Option Plan (1989), incorporated by reference to
Anacomp's Proxy Statement dated January 13, 1989.
(m) Anacomp, Inc. Deferred Stock Option Plan, incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1988.
<PAGE> 21
(n) Anacomp, Inc. Executive Deferred Compensation Plan, incorporated by
reference to Anacomp's Form 10-K Annual Report for the fiscal year
ended September 30, 1988.
(o) Amended and Restated Master Agreement dated as of March 22, 1993
among Anacomp, Inc., the Multicurrency Borrowers, the Lenders, the
Multicurrency Lenders, the Series A Purchasers, the Series B
Purchasers, The First National Bank of Chicago, as Multicurrency
Agent, and Citibank, N.A. as Agent, Administrative Agent and
Collateral Agent. Incorporated by reference to Anacomp's Form 10-K
Annual Report for the fiscal year ended September 30, 1993.
(p) Multicurrency Credit Agreement dated as of March 22, 1993, among
Anacomp, Inc., Anacomp, S.A., Xidex S.A.R.L., Anacomp GmbH, Xidex
GmbH, Anacomp Italia SRL, Anacomp A.B., Anacomp Holdings, Ltd.,
Anacomp Ltd., and Xidex Ltd. Incorporated by reference to Anacomp's
Form 10-K Annual Report for the fiscal year ended September 30,
1993.
(q) Consent dated as of March 22, 1993, among Anacomp, Inc., the
Lenders, the Series A Purchasers, the Series B Purchasers, and
Citibank, N.A. as Collateral Agent. Incorporated by reference to
Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1993.
(r) Credit Agreement dated as of October 24, 1990, among Anacomp, the
Lenders party thereto and Citibank, N.A. as Agent. Incorporated by
reference to Exhibit 28(b) to the October 31, 1990, Form 8-K.
(s) Series A Senior Note Purchase Agreement dated as of October 24,
1990, among Anacomp, the Series A Purchasers party thereto and
Citibank, N.A. Incorporated by reference to Exhibit 28(c) to the
October 31, 1990, Form 8-K.
(t) Amendment to the Credit Agreement and Series A Senior Note Purchase
Agreement (both dated as of October 24, 1990) dated February 21,
1992, among Anacomp, the Lenders party thereto and Citibank, N.A. as
Agent. Incorporated by reference to Anacomp's Form 10-K Annual
Report for the fiscal year ended September 30, 1992.
(u) Amendment No. 3 to Credit Agreement, dated as of March 22, 1993,
among Anacomp, Inc., the Lenders, and Citibank, N.A., as Agent.
Incorporated by reference to Anacomp's Form 10-K Annual Report for
the fiscal year ended September 30, 1993.
(v) Amendment No. 2 to Series A Senior Note Purchase Agreement, dated as
of March 22, 1993, among Anacomp, Inc., the Series A Purchasers and
Citibank, N.A., as Administrative Agent. Incorporated by reference
to Anacomp's Form 10-K Annual Report for the fiscal year ended
September 30, 1993.
<PAGE> 22
(w) Series B Senior Note Purchase Agreement dated as of October 24,
1990, among Anacomp and the Series B Purchasers party thereto.
Incorporated by reference to Exhibit 28(d) to the October 31, 1990,
Form 8-K.
(x) Amendment No. 1 to Series B Senior Note Purchase Agreement, dated as
of March 22, 1993, among Anacomp, Inc. and the Series B Purchasers.
Incorporated by reference to Anacomp's Form 10-K Annual Report for
the fiscal year ended September 30, 1993.
(y) Amended and Restated Master Supply Agreement dated October 8, 1993,
among Anacomp, SKC America, Inc. and SKC Limited. Incorporated by
reference to Anacomp's Form 10-K Annual Report for the fiscal year
ended September 30, 1993.
(z) Consolidation Agreement dated October 8, 1993, between Anacomp, Inc.
and SKC America, Inc. Incorporated by reference to Anacomp's Form
10-K Annual Report for the fiscal year ended September 30, 1993.
(aa) Stock Purchase Agreement dated as of April 8, 1994 between Anacomp,
Inc and Graham Acquisition Corporation. Incorporated by reference
to Anacomp's Form 8-K dated May 6, 1994.
(ab) *Amendment No. 1 to Amended and Restated Master Agreement dated as of
July 1, 1994 among Anacomp, Inc., the Multicurrency Borrowers, the
Lenders, the Multicurrency Lenders, the Series A Purchasers, the
Series B Purchasers, the First National Bank of Chicago, as
Multicurrency Agent, and Citibank, N.A. as Agent, Administrative
Agent and Collateral Agent.
(ac) *Amendment No. 2 to Amended and Restated Master Agreement dated as of
December 2, 1994 among Anacomp, Inc., the Multicurrency Borrowers,
the Lenders, the Multicurrency Lenders, the Series A Purchasers, the
Series B Purchasers, the First National Bank of Chicago, as
Multicurrency Agent, and Citibank, N.A. as Agent, Administrative
Agent and Collateral Agent.
(11)*Statement re: computation of per share earnings.
(21)*Subsidiaries of the registrant.
(23)*Consent of independent public accountants.
(27)*Financial data schedule (Required for electronic filing only).
<PAGE> 23
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/ Louis P. Ferrero
Louis P. Ferrero,
Chairman of the Board and
Chief Executive Officer
December 7, 1994
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 7, 1994 By: /s/ Louis P. Ferrero
Louis P. Ferrero,
Chairman of the Board and
Chief Executive Officer
Dated: December 7, 1994 By: /s/ Jack R. O'Donnell
Jack R. O'Donnell, Executive Vice
President, Treasurer and Chief
Financial Officer
Dated: December 7, 1994 By: /s/ Donald L. Viles
Donald L. Viles, Vice President
and Controller
Dated: December 7, 1994 By: /s/ J. Mark Woods
J. Mark Woods, President,
Chief Operating Officer and Director
Dated: December 7, 1994 By: /s/ Clark A. Johnson
Clark A. Johnson, Director
Dated: December 7, 1994 By: /s/ Richard E. Neal
Richard E. Neal, Director
Dated: December 7, 1994 By: /s/ Roger S. Palamara
Roger S. Palamara, Director
Dated: December 7, 1994 By: /s/ Paul G. Roland
Paul G. Roland, Director
Dated: December 7, 1994 By: /s/ Frederick W. Zuckerman
Frederick W. Zuckerman, Director
<PAGE> 24
APPENDIX A
ANNUAL REPORT ON FORM 10-K
ANACOMP, INC.
CONTENTS
<TABLE>
<CAPTION>
<S> <C>
Page
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . A-1
Market Price and Dividend Information . . . . . . . . . . . . . . . A-1
Management's Discussion and Analysis of Financial Condition
and Results of Operations. . . . . . . . . . . . . . . . . . A-2
Report of Independent Public Accountants. . . . . . . . . . . . . . A-8
Consolidated Balance Sheets - September 30, 1994 and 1993 . . . . . A-9
Consolidated Statements of Operations - Years Ended September 30,
1994, 1993 and 1992 . . . . . . . . . . . . . . . . . . . . A-10
Consolidated Statements of Cash Flows - Years Ended September 30,
1994, 1993 and 1992. . . . . . . . . . . . . . . . . . . . A-11
Consolidated Statements of Stockholders' Equity - Years
Ended September 30, 1994, 1993 and 1992. . . . . . . . . . . A-13
Notes to Consolidated Financial Statements . . . . . . . . . . . . A-14
Schedule II - Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other Than Related
Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . A-34
Schedule VIII - Valuation and Qualifying Accounts and Reserves . . A-35
</TABLE>
<PAGE> 25
ANACOMP, INC., AND SUBSIDIARIES
SELECTED FINANCIAL DATA
The following Selected Financial Data should be read in conjunction with
Item 1 - Business of Part I and the Notes to the Consolidated Financial
Statements.
<TABLE>
<CAPTION>
(Dollars in thousands, Fiscal Year Ended September 30,
except per share amounts) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Revenues from continuing operations. . . . . . . $ 592,599 $ 590,208 $ 628,940 $ 635,361 $ 652,238
Income from continuing operations
before extraordinary credits and
cumulative effect of accounting change . . . . 7,796 13,025 19,867 19,711 5,509
Loss from discontinued operations. . . . . . . . (841) (1,334) (1,646) (1,606) (2,067)
Extraordinary credits. . . . . . . . . . . . . . -- 6,900 8,700 11,100 6,134
Cumulative effect on prior years of a change
in accounting for income taxes. . . . . . . . . 8,000 -- -- -- --
Net income . . . . . . . . . . . . . . . . . . . 14,955 18,591 26,921 29,205 9,576
Earnings per common and common equivalent share:
Continuing operations . . . . . . . . . . . .12 .26 .42 .42 .09
Discontinued operations . . . . . . . . . . (.02) (.04) (.04) (.04) (.05)
Extraordinary credits. . . . . . . . . . . . -- .17 .21 .27 .16
Cumulative effect on prior years of a change
in accounting for income taxes . . . . . . .17 -- -- -- --
Net income . . . . . . . . . . . . . . . . . .27 .39 .59 .65 .20
Earnings per common share assuming full dilution:
Continuing operations . . . . . . . . . . . .12 .26 .42 .42 .09
Discontinued operations . . . . . . . . . . (.02) (.04) (.04) (.04) (.05)
Extraordinary credits. . . . . . . . . . . . -- .17 .20 .26 .16
Cumulative effect on prior years of a change
in accounting for income taxes . . . . . . .17 -- -- -- --
Net income . . . . . . . . . . . . . . . . . .27 .39 .58 .64 .20
Cash dividends per common share. . . . . . . . . -- -- -- -- --
Current assets . . . . . . . . . . . . . . . . . 214,129 218,011 244,434 238,222 257,606
Current liabilities . . . . . . . . . . . . . . 208,313 187,082 198,685 203,259 189,748
Working capital. . . . . . . . . . . . . . . . . 5,816 30,929 45,749 34,963 67,858
Total assets . . . . . . . . . . . . . . . . . . 658,639 643,548 681,561 686,062 717,513
Long-term debt . . . . . . . . . . . . . . . . . 366,625 404,738 429,140 451,314 510,905
Redeemable preferred stock . . . . . . . . . . . 24,478 24,383 24,287 24,191 24,095
Stockholders' equity (deficit) . . . . . . . . . 49,756 13,799 8,290 (25,017) (58,580)
</TABLE>
MARKET PRICE AND DIVIDEND INFORMATION
Anacomp, Inc.'s common stock is traded on the New York and Chicago Stock
Exchanges under the ticker symbol "AAC."
The high and low closing prices (as reported by NYSE) for the Company's common
stock for each quarter during the last two fiscal years were as follows:
<TABLE>
<CAPTION>
FISCAL YEAR 1994 FISCAL YEAR 1993
High Low High Low
<S> <C> <C> <C> <C>
First Quarter $ 4.13 $ 2.88 $ 4.50 $ 3.00
Second Quarter 4.13 3.50 4.63 3.50
Third Quarter 4.25 3.00 3.88 2.50
Fourth Quarter 3.25 2.50 3.00 2.50
</TABLE>
The Company's borrowing agreements prohibit the payment of cash dividends
on common shares.
The number of stockholders of record as of November 15, 1994, was 9,810.
<PAGE> 26
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
General
Anacomp's fiscal 1994 revenues totalled $592.6 million compared to $590.2
million in fiscal 1993. As discussed below, Anacomp acquired Graham Acquisition
Corporation (Graham), a manufacturer of computer tape cartridges and open reel
tape, in early May 1994. The Graham acquisition contributed $22.4 million to
1994 revenues. Anacomp also acquired the COM services customer base of 14 data
service centers from National Business Systems (NBS) in early January 1994
which contributed $9.1 million to 1994 revenues. Excluding the contributions
from these two acquisitions, fiscal 1994 revenues decreased $29.1 million from
fiscal 1993 principally due to decreased sales of COM systems, duplicate film,
and retrieval devices.
Revenues in 1993 were down $38.7 million compared to the prior year. The
continued maturing of certain of Anacomp's computer tape products caused
approximately one-half of the decline, with another quarter attributable to
unfavorable currency fluctuations compared to the prior year. The balance is
generally attributable to the continued weakness in the European economies.
Revenues in 1992 were down $6.5 million from fiscal 1991's $635.4 million.
Micrographics services, maintenance services, COM systems and computer tape
products all enjoyed revenue increases ranging from 2-13% in 1992.
Micrographics supplies revenues, however, decreased 8%, primarily reflecting a
decline in film and chemistry sales, most of which occurred in the indirect
channels.
Selling, general and administrative costs in 1994 decreased $4.3 million , due
in part to the receipt of insurance proceeds related to EPA liabilities.
Selling, general and administrative costs in 1993 decreased $3.5 million
primarily as a result of favorable settlements of certain facility lease
obligations.
Operating margins (continuing operations income before interest, other income,
income taxes and extraordinary credits) as a percent of revenue were 13.4% in
1994 compared to 15% in 1993. Accordingly, operating income decreased $9.0
million in 1994. The decrease is largely attributable to a change in product
mix as the relatively less profitable computer tape products represent a
greater portion of total sales. Operating income decreased $11.7 million from
1992 to 1993, generally in proportion to the decline in revenues. Operating
margins were 15.9% in 1992.
Operating income decreased $5.2 million in 1992, in part due to the $6.4
million reduction in revenue. In addition, Anacomp completed two major factory
consolidations during the third and fourth quarters in which its manufacturing
operations in Hartford, Wisconsin, and its ten separate manufacturing
facilities around San Diego county were relocated to a single site in Poway,
California (outside San Diego). One-time costs associated with these moves
totalled more than $3.2 million and are reflected in 1992's operating income.
<PAGE> 27
The table below sets forth Anacomp's revenues by product line for the years
indicated:
<TABLE>
<CAPTION>
September 30,
(Dollars in thousands) 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Micrographics supplies,
readers and reader/printers.. $204,589 35% $223,120 38% $237,287 38%
Micrographics services........ 131,654 22 125,226 21 127,853 20
Maintenance services.......... 89,912 15 86,777 15 91,604 15
COM systems................... 59,149 10 75,900 13 76,845 12
Computer tape products........ 74,747 13 48,829 8 66,504 11
Other......................... 32,548 5 30,356 5 28,847 4
-------- ---- -------- ---- -------- ----
$592,599 100% $590,208 100% $628,940 100%
======== ==== ======== ==== ======== ====
</TABLE>
Micrographics Supplies, Readers and Reader/Printers
Micrographics supplies revenues decreased 8% in 1994, principally due to
reduced demand for duplicate film and readers and reader/printers. Duplicate
film sales are expected to improve in 1995 with the addition of a U.S. data
service center customer.
During the fourth quarter of fiscal 1993, Anacomp introduced the Digital
Scanner 300 (DS 300), a low-cost workstation for scanning and digitizing
microfiche and microfilm images, which can then be viewed, edited, or enhanced
on a personal computer screen. The DS 300 contributed $1 million of revenue
in fiscal 1994, which was less than expected. However, each quarter's sales
increased during the year and further increases are expected in fiscal 1995, as
a result of product improvements and better identification of the user markets.
Micrographics supplies revenues decreased from $237.3 million in 1992 to $223.1
million in 1993, a 6% decline. However, approximately 2% is attributable to
currency fluctuations, and another 2% is attributable to the loss in mid - 1992
of the recently regained customer mentioned above. Micrographics supplies
revenues declined 8.5% in 1992. Anacomp believes the decrease in 1992
resulted principally from the generally weak worldwide economic conditions.
During 1992, Anacomp entered into a long-term supply agreement with SKC Limited
and SKC America, Inc. (collectively, SKC), members of the Sunkyong Group of
Korea (See Note 4 of the Consolidated Financial Statements). SKC was Anacomp's
primary source for polyester, the basic raw material for duplicate microfilm
and computer tape products. In the first quarter of fiscal 1994, SKC purchased
Anacomp's Sunnyvale, California, duplicate microfilm manufacturing facility and
became Anacomp's sole supplier of duplicate microfilm. In connection
therewith, SKC invested several million dollars to consolidate and enhance the
Sunnyvale facilities to improve both productivity and quality, the benefits of
which are now enjoyed by Anacomp and its customers.
<PAGE> 28
Micrographics supplies operating profits were down in fiscal 1994 in proportion
to the decline in revenue. In 1993, micrographics supplies operating margins
were down 2-3%, due in part to currency fluctuations affecting both revenues
and costs, as well as pricing competition in certain product lines.
Micrographics supplies operating profits were down in fiscal 1992 in proportion
to the decline in revenues, excluding approximately $2 million of costs
associated with the factory relocation.
Micrographics Services
Micrographics services revenues, predominantly COM services through Anacomp's
47 U.S. data service centers, increased 5% in 1994, decreased 2% in 1993 and
increased 6% in 1992, on volume increases of 10%, 13% and 14% in 1994, 1993,and
1992, respectively. As previously mentioned, the increase in fiscal 1994 is due
to the acquisition of the COM services customer base of 14 data service centers
from NBS. The revenue decline in 1993 is due to the absence of certain
government contracts which expired in 1992 and were not replaced, as well as
reduced prices. The volume growth is both from new customers and increased
services to existing customers. Operating margins as a percent of revenue in
1994 were down approximately 2% as reductions in average selling prices
exceeded reductions in production costs. In 1993 and 1992, reductions in
operating costs kept margins steady in spite of price competition.
Maintenance Services
Maintenance revenues are derived principally from COM recorders and
duplicators. Such revenues increased $3.1 million in 1994, decreased $4.8
million in 1993, and increased $1.7 million in 1992. The improvement in 1994 is
largely the result of the addition of a U.S. data service center company to
Anacomp's customer base. Approximately one-half of the decline in 1993 is
caused by currency fluctuations. The remainder is in part the result of the
improved capacity and efficiency of the XFP 2000, which allows customers to
produce more volume on fewer machines. Operating margins were modestly reduced
in 1994 after remaining level in 1993 and 1992.
COM Systems
COM systems revenues were off 22% because of a decline in sales of XFP 2000 COM
systems from 293 systems in 1993 to 187 systems in 1994. These results were
partially due to reduced OEM shipments (25 systems in 1994 versus 67 in 1993).
Introduction of the Xerox Compatibility Feature (XCF), which was released to
beta sites in October 1994 and will be available in the first calendar quarter
of 1995, should positively influence 1995 sales of XFP 2000 COM systems. XCF
is the result of a two-year development effort between Anacomp and Xerox. The
feature adds to Anacomp's XFP 2000 imaging platform the capability to process
and image to microfilm Xerox high speed printing data streams.
In November 1993, Anacomp announced a joint effort with Pennant, the IBM
Printing Systems Company, to integrate IBM's Advanced Function Presentation
(AFP) capabilities with COM recorders. The availability is scheduled for
spring 1995 and is expected to further bolster XFP 2000 sales.
COM systems revenues were up slightly in 1993 after consideration of currency
effects. COM systems revenues grew over 7% in 1992, bolstered by sales of 212
XFP 2000 COM systems, an 84% increase over 1991's 115.
<PAGE> 29
Operating margins as a percent of revenue improved in 1994, in spite of reduced
revenues, as a result of higher average selling prices. Operating margins in
1993 improved significantly both as a result of higher XFP volumes and from the
benefits of the facility consolidations that took place in 1992.
Operating margins in 1992 were essentially unchanged from the prior years,
excluding costs associated with the San Diego facility consolidation. During
the fourth quarter of fiscal 1992, Anacomp consolidated its San Diego-based
manufacturing, engineering, maintenance and product marketing operations into a
newly constructed facility in Poway, California, just outside San Diego. The
move consolidated 10 different sites around San Diego county and involved
approximately 1,000 employees. In connection with the move, Anacomp expensed
approximately $1.2 million in the fourth quarter.
In early November 1993, Anacomp announced the signing of an OEM agreement with
the IBM Storage Systems Division to produce an extended data storage product
that bridges the gap between on-line data and long-term COM storage. Anacomp's
XSTAR features an OEM version of IBM Storage Systems Division's 3995 Optical
Library Dataserver and will allow mainframe computer users to store and
retrieve data through desktop terminals or PCs while also supporting permanent
storage via COM systems. Anacomp received its first order in the fourth
quarter of fiscal 1994 and has placed additional units with selected customers
for evaluation and possible sale.
Computer Tape Products
Anacomp's acquisition of Graham in May 1994 was the primary reason for a 53%
increase in computer tape revenues over 1993. Graham manufactures computer
tape cartridges and open reel tape at its facility in Graham, Texas. Anacomp
will shift all of its U. S. production of those products from its Omaha,
Nebraska plant to the Graham facility during the first half of fiscal 1995.
The costs associated with this relocation will not be significant. The
consolidation is expected to produce operating synergies.
Computer tape revenues decreased $17.7 million in 1993. Almost half of the
decrease is due to the completion of a one-time OEM arrangement which
contributed $9.7 million in revenues in 1992 and only $1.1 million in 1993. In
addition, Anacomp and its competitors experienced decreased demand for 3480 and
TK 50-52 cartridges, as well as open reel tape, as these products continue to
mature. Anacomp introduced in mid-1993 the high compression 3490E cartridge
which contributed over $8 million of revenues in 1994.
Computer tape revenues increased $7.7 million, or 13%, in 1992, primarily the
result of the one-time OEM arrangement discussed above, which contributed an
incremental $4.5 million. In addition, sales of 3480 cartridges increased 14%.
The added revenues in 1994 increased operating profits and improved
manufacturing efficiencies. The reduced revenues in 1993 resulted in a
significant reduction in that year's operating profits. In 1992, operating
profits also declined in spite of increased revenues, due principally to
increased pricing pressures in the marketplace.
Other Revenues
Other revenues increased in 1994 and 1993 due to improved sales of flexible
diskette products and media. The decline in 1992 was due to the maturing of
certain of Anacomp's computer storage products.
<PAGE> 30
Interest
The reduction in interest expense in 1994 resulted from lower debt levels which
was partly offset by the increase in short-term interest rates. Interest
expense in 1993 and 1992 continued to decline as a result of debt repayments as
well as reduced interest rates.
Other Income (Expense)
Other income (expense) is principally foreign exchange gains and losses
incurred by the foreign subsidiaries.
Income Taxes
Income taxes as a percentage of income from continuing operations were 54% in
1994, 43% in 1993, and 44% in 1992. In 1994 and 1993, income tax expense was
reduced $1.2 million and $3.7 million, respectively, as a result of favorable
settlement and disposition of previously established tax reserves. In 1992,
the effective tax rate was reduced by the receipt of $1.2 million in state tax
refunds, and by the inclusion in income of certain foreign exchange gains which
were not subject to tax.
As described in Note 10 to the accompanying financial statements, the effective
tax rate is higher than the U.S. statutory rate due to amortization of goodwill
not deductible for tax purposes, and generally higher foreign tax rates.
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. See Note 10 to the Consolidated
Financial Statements for a further discussion of the effect on the Company's
Financial Statements.
Discontinued Operations
The loss from discontinued operations represents the accretion of interest (net
of taxes) on the present value of obligations recorded in prior years for
unfavorable lease commitments and future lease costs discussed in Note 1 to the
Consolidated Financial Statements.
Liquidity and Capital Resources
In 1994, Anacomp continued to invest in data service center retooling, to make
important acquisitions such as Graham and NBS, and to make significant
investments in software including XCF and AFP. At the same time, short and
long-term debt was reduced over $27 million. These requirements were met
primarily from operating cash flow. In addition, common stock was issued in
each of the major acquisitions, inventory turnover rates were improved and
certain data service center equipment was sold under sale/leaseback
arrangements which generated approximately $12 million during the year.
<PAGE> 31
As disclosed in the accompanying Consolidated Statements of Cash Flows, net
cash provided by operating activities was $52.7 million for fiscal 1994
compared to $45.9 million for the prior year. Net cash used in investing
activities increased $21.1 million primarily due to the Graham and NBS business
acquisitions in the current year and the decline in proceeds from sale of
assets. Net cash used in financing activities decreased $13.0 million due
primarily to reduced debt fees and long-term debt payments.
The Company has experienced positive cash flow from operations for the last
several years and anticipates positive cash flow will continue in the future.
In addition, the debt agreements provide $70 million in revolving credit
facilities, over $17 million of which was available at September 30, 1994.
Anacomp believes the positive cash flow from operations, amounts available from
sale/leaseback of data service center equipment, and the availability of
amounts under the revolving credit agreement will adequately fund operations,
debt reductions and planned capital expenditures in fiscal 1995. In October
1994, Anacomp sold $19.3 million of data service center equipment of which
$14.3 million of the proceeds were used to prepay debt. Anacomp believes that
it could generate additional liquidity, if needed, through equity offerings,
debt offerings or conversion of existing assets to cash. The revolving credit
facilities expire in October, 1995. In connection with their extension or
replacement, Anacomp intends to explore refinancing some or all of the
remaining senior credit facilities.
Management does not believe that the effects of inflation will have a material
impact on the Company. Neither is management aware of changes in prices of
materials or other operating costs, or in the selling prices of Anacomp's
products and services that will materially affect the Company.
Accounting Pronouncements
In October 1994, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 119, which addresses the disclosure of
derivative financial instruments and fair value of financial instruments.
Adoption of this standard is required in fiscal 1995. The Company, based upon
existing practices, does not expect adoption of FAS 119 to have a material
adverse effect on its financial statements in the year of the adoption.
<PAGE> 32
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, 1994 and 1993, and
the related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended September 30, 1994. These
financial statements and schedules referred to below are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with 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.
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, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
September 30, 1994, in conformity with generally accepted accounting principles.
As explained in Note 1 to the financial statements, effective October 1, 1993,
the Company changed its method of accounting for income taxes.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in Item 14(a) 2 are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in the audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Indianapolis, Indiana ARTHUR ANDERSEN LLP
December 7, 1994
<PAGE> 33
CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands,
except per share amounts) September 30, 1994 1993
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 19,871 $ 24,922
Accounts and notes receivable, less allowances for doubtful
accounts of $3,550 and $4,245, respectively . . . . . . . . . . . . 117,441 109,251
Current portion of long-term receivables . . . . . . . . . . . . . . 8,021 7,489
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,375 69,192
Prepaid expenses and other . . . . . . . . . . . . . . . . . . . . . 5,421 7,157
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . 214,129 218,011
Property and equipment, at cost less accumulated depreciation and
amortization of $100,574 and $105,523, respectively . . . . . . . . . 66,769 66,399
Long-term receivables, net of current portion . . . . . . . . . . . . . 16,383 17,619
Excess of purchase price over net assets of businesses acquired
and other intangibles, net. . . . . . . . . . . . . . . . . . . . . . 279,607 296,426
Deferred tax asset, net of valuation allowance of $57,000. . . . . . . 29,000 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,751 45,093
$658,639 $643,548
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . . . . . . $ 45,222 $ 34,355
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 82,790 67,246
Accrued compensation, benefits and withholdings . . . . . . . . . . . 16,573 16,452
Accrued income taxes . . . . . . . . . . . . . . . . . . . . . . . . 9,000 11,502
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,701 20,089
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . 35,027 37,438
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . 208,313 187,082
Long-term debt, net of current portion. . . . . . . . . . . . . . . . . 366,625 404,738
Other noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . 9,467 13,546
Total noncurrent liabilities. . . . . . . . . . . . . . . . . . . . . . 376,092 418,284
Commitments and contingencies (Note 11)
Redeemable preferred stock, $.01 par value, issued and outstanding
500,000 shares (aggregate preference value of $25,000). . . . . . . . 24,478 24,383
Stockholders' equity:
Common stock, $.01 par value; authorized 100,000,000 shares;
45,728,505 and 40,629,524 issued, respectively. . . . . . . . . . . 457 406
Capital in excess of par value of common stock . . . . . . . . . . . 181,843 163,209
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . (269) (4,744)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . (132,275) (145,072)
Total stockholders' equity. . . . . . . . . . . . . . . . . . . . . . . 49,756 13,799
$658,639 $643,548
======== ========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 34
CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands,
except per share amounts) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
Revenues:
Services provided . . . . . . . . . . . . . . . . . . . . . . . $ 223,511 $ 213,302 $ 220,544
Equipment and supply sales . . . . . . . . . . . . . . . . . . 369,088 376,906 408,396
592,599 590,208 628,940
Operating costs and expenses:
Costs of services provided . . . . . . . . . . . . . . . . . . 156,214 141,998 147,040
Costs of equipment and supplies sold. . . . . . . . . . . . . . 264,269 262,754 281,268
Selling, general and administrative expenses . . . . . . . . . 92,539 96,822 100,330
513,022 501,574 528,638
Income from continuing operations before interest, other income,
income taxes, extraordinary credit, and cumulative
effect of accounting change . . . . . . . . . . . . . . . . . . 79,577 88,634 100,302
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . 3,144 3,042 3,081
Interest expense and fee amortization . . . . . . . . . . . . . . (65,633) (66,526) (69,101)
Other income (expense). . . . . . . . . . . . . . . . . . . . . . (192) (2,225) 985
(62,681) (65,709) (65,035)
Income from continuing operations before
income taxes, extraordinary credit, and cumulative effect
of accounting change. . . . . . . . . . . . . . . . . . . . . . 16,896 22,925 35,267
Provision for income taxes . . . . . . . . . . . . . . . . . . . 9,100 9,900 15,400
Income from continuing operations before
extraordinary credit and cumulative effect of accounting change 7,796 13,025 19,867
Loss from discontinued operations, net of income tax benefits . . (841) (1,334) (1,646)
Extraordinary credit - reduction of income taxes arising from
utilization of tax loss carryforwards . . . . . . . . . . . . . -- 6,900 8,700
Cumulative effect on prior years of a change in accounting
for income taxes. . . . . . . . . . . . . . . . . . . . . . . . 8,000 -- --
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,955 18,591 26,921
Preferred stock dividends and discount accretion . . . . . . . . 2,158 2,158 2,158
Net income available to common stockholders . . . . . . . . . . . $ 12,797 $ 16,433 $ 24,763
========= ========= =========
Earnings per common and common equivalent share:
Continuing operations (net of preferred stock dividends
and discount accretion) . . . . . . . . . . . . . . . . . $ .12 $ .26 $ .42
Discontinued operations . . . . . . . . . . . . . . . . . . (.02) (.04) (.04)
Extraordinary credit. . . . . . . . . . . . . . . . . . . . -- .17 .21
Cumulative effect on prior years of a change in
accounting for income taxes . . . . . . . . . . . . . . . .17 -- --
Net income. . . . . . . . . . . . . . . . . . . . . . . . . $ .27 $ .39 $ .59
========= ========= =========
Earnings per common share assuming full dilution:
Continuing operations (net of preferred stock dividends
and discount accretion) . . . . . . . . . . . . . . . . . . $ .12 $ .26 $ .42
Discontinued operations . . . . . . . . . . . . . . . . . . . (.02) (.04) (.04)
Extraordinary credit. . . . . . . . . . . . . . . . . . . . . -- .17 .20
Cumulative effect on prior years of a change in
accounting for income taxes . . . . . . . . . . . . . . . .17 -- --
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . $ .27 $ .39 $ .58
========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 35
CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 14,955 $ 18,591 $ 26,921
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization............................... 40,649 38,208 39,847
Cumulative effect of a change in accounting for
income taxes .............................................. (8,000) -- --
Loss (gain) on disposition of assets ....................... 776 (721) 979
Change in assets and liabilities net of effects
from acquisitions:
Decrease in accounts and long-term receivables............ 2,345 323 163
Decrease (increase) in inventories and prepaid expenses... 15,254 1,308 (1 680)
Increase in other assets.................................. (11,349) (5,329) (913)
Increase in accounts payable and accrued expenses......... 2,377 1,125 5,474
Decrease in other noncurrent liabilities.................. (4,323) (7,613) (11,156)
Net cash provided by operating activities............... 52,684 45,892 59,635
Cash flows from investing activities:
Proceeds from sale of assets.................................. 7,805 15,956 7,794
Purchases of property, plant and equipment.................... (18,868) (20,726) (18,755)
Proceeds from notes receivable................................ -- 1,343 6,027
Payments to acquire companies and customer rights............. (14,565) (1,114) (6,830)
Net cash used in investing activities................... (25,628) (4,541) (11,764)
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants........... 1,484 2,262 2,532
Proceeds from revolving line of credit and
long-term borrowing.......................................... 39,000 39,799 51,951
Principal payments on long-term debt.......................... (71,095) (77,958) (89,757)
Preferred dividends paid...................................... (2,062) (2,062) (2,062)
Payments related to the issuance of debt and equity........... -- (7,707) (507)
Net cash used in financing activities................... (32,673) (45,666) (37,843)
Effect of exchange rate changes on cash......................... 566 (644) 42
Increase (decrease) in cash and cash equivalents................ (5,051) (4,959) 10,070
Cash and cash equivalents at beginning of year.................. 24,922 29,881 19,811
Cash and cash equivalents at end of year........................ $ 19,871 $ 24,922 $ 29,881
========== ========== ==========
</TABLE>
<PAGE> 36
[CAPTION]
<TABLE>
Supplemental disclosures of cash flow information:
(Dollars in thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
Cash paid (refunded) during the year for:
Interest ..................................................... $ 57,781 $ 59,552 $ 64,120
Income taxes.................................................. 2,007 3,468 (3,041)
</TABLE>
Supplemental schedule of non-cash investing and financing activities:
During 1994, 1993, and 1992 the Company acquired companies and rights
to provide future services. In conjunction with these acquisitions, the
purchase price consisted of the following:
<TABLE>
<CAPTION>
(Dollars in thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
Cash paid .................................................... $ 14,565 $ 1,114 $ 6,830
Credit memos issued .......................................... 3,085 150 1,500
Notes payable issued.......................................... 4,290 3,170 1,272
Stock issued.................................................. 17,201 -- --
Total fair value of acquisitions............................ $ 39,141 $ 4,434 $ 9,602
========== ========== =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 37
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Anacomp, Inc. and Subsidiaries Capital in
excess of
par value Cumulative
Year ended September 30, Common of common translation
(In thousands) 1994, 1993 and 1992 stock stock adjustment Deficit Total
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1991. . . . . . . . . . . . . . . $ 387 $157,128 $ 3,736 $(186,268) $ (25,017)
Common stock issued for purchases under the
Employee Stock Purchase Plan . . . . . . . . . . . . . . 3 991 -- -- 994
Restricted Stock Bonus Plan Right of First Refusal . . . . -- 55 -- -- 55
Exercise of stock options . . . . . . . . . . . . . . . . 7 1,476 -- -- 1,483
Preferred stock dividends. . . . . . . . . . . . . . . . . -- -- -- (2,062) (2,062)
Accretion of redeemable preferred stock discount . . . . . -- -- -- (96) (96)
Translation adjustments for year . . . . . . . . . . . . . -- -- 4,464 -- 4,464
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,548 -- -- 1,548
Net income for the year . . . . . . . . . . . . . . . . . . -- -- -- 26,921 26,921
BALANCE AT SEPTEMBER 30, 1992. . . . . . . . . . . . . . . 397 161,198 8,200 (161,505) 8,290
Common stock issued for purchases under the
Employee Stock Purchase Plan . . . . . . . . . . . . . . 4 1,253 -- -- 1,257
Exercise of stock options . . . . . . . . . . . . . . . . 5 997 -- -- 1,002
Preferred stock dividends. . . . . . . . . . . . . . . . . -- -- -- (2,062) (2,062)
Accretion of redeemable preferred stock discount . . . . . -- -- -- (96) (96)
Translation adjustments for year . . . . . . . . . . . . . -- -- (12,944) -- (12,944)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . -- (239) -- -- (239)
Net income for the year . . . . . . . . . . . . . . . . . . -- -- -- 18,591 18,591
BALANCE AT SEPTEMBER 30, 1993. . . . . . . . . . . . . . . 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 year . . . . . . . . . . . . . -- -- 4,475 -- 4,475
NBS stock issuance . . . . . . . . . . . . . . . . . . . . 20 7,380 -- -- 7,400
Graham stock issuance. . . . . . . . . . . . . . . . . . . 25 9,776 -- -- 9,801
Net income for the year . . . . . . . . . . . . . . . . . -- -- -- 14,955 14,955
BALANCE AT SEPTEMBER 30, 1994. . . . . . . . . . . . . . . $ 457 $181,843 $ (269) $(132,275) $ 49,756
======== ======== ======== ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE> 38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Anacomp, Inc. and Subsidiaries
NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements include the accounts of Anacomp, Inc.
(Anacomp or the Company) and its wholly-owned subsidiaries. Material
intercompany transactions have been eliminated. Certain amounts in the prior
year consolidated financial statements have been reclassified to conform to the
current presentation.
Foreign Currency Translation
Substantially all assets and liabilities of Anacomp's international operations
are translated at the year-end exchange rates; income and expenses are
translated at the average exchange rates prevailing during the year.
Translation adjustments are accumulated in a separate section of stockholders'
equity. Foreign currency transaction gains and losses are included in net
income.
Segment Reporting
Anacomp operates in a single business segment - providing equipment, supplies
and services for information management, including storage, processing and
retrieval.
Revenue Recognition
Sales of products and services are recorded based on shipment of products or
performance of services. Revenue from maintenance contracts is deferred and
recognized in earnings on a pro rata basis over the period of the agreement.
Revenues from the lease of equipment under sales-type leases are also
recognized as shipments are made. Accordingly, the present value of all
payments due under the lease contracts is recorded as revenue, cost of sales is
charged with the book value of the equipment plus installation costs, and
future interest income is deferred and recognized over the lease term.
Inventories
Inventories are stated at the lower of cost or market, cost being determined by
methods approximating the first-in, first-out basis.
The cost of the inventories is distributed as follows:
<TABLE>
<CAPTION>
(In thousands) September 30, 1994 1993
<C> <S> <S>
Finished goods ..................... $ 41,661 $ 38,289
Work in process .................... 5,903 7,105
Raw materials and supplies ......... 15,811 23,798
$ 63,375 $ 69,192
======== ========
</TABLE>
Property and Equipment
Property and equipment are carried at cost. Depreciation and amortization of
property and equipment are generally provided under the straight-line method
for financial reporting purposes over the shorter of the estimated useful lives
or the lease terms. Tooling costs are amortized over the total estimated units
of production, not to exceed three years.
<PAGE> 39
Research and Development
The costs associated with research and development programs are expensed as
incurred, and amounted to $2,973,000 in 1994, $2,525,000 in 1993, and
$1,849,000 in 1992.
Included in "Other assets" on the accompanying Consolidated Balance Sheets are
unamortized deferred software costs of $19,745,000 and $14,134,000 as of
September 30, 1994 and 1993, respectively. Deferred software costs are the
capitalized costs of software products to be sold with COM systems in future
periods. The unamortized costs are evaluated for impairment each year by
determining net realizable value. Such costs are amortized under the straight-
line method or over the estimated units of sale, not to exceed five years. See
Note 12 for the amortization expense recorded during the past three years.
Intangibles
Excess of purchase price over net assets of businesses acquired is amortized
primarily on the straight-line method over 40 years. Other intangibles
represent the purchase of the rights to provide microfilm or maintenance
services to certain customers and are being amortized on a straight-line basis
over 10 years. The unamortized costs are evaluated for impairment each year by
determining net realizable value. Balances are as follows:
<TABLE>
<CAPTION>
(In thousands) September 30, 1994 1993
<S> <C> <C>
Excess of purchase price over net
assets of businesses acquired ..... $ 320,200 $ 342,663
Other intangibles .................. 37,277 21,580
357,477 364,243
Less accumulated amortization ...... (77,870) (67,817)
$ 279,607 $ 296,426
========== ==========
</TABLE>
At September 30, 1994, the aggregate amortization of intangibles by year
through fiscal year 1999 are: 1995, $12,954,000; 1996, $12,627,000; 1997,
$12,137,000; 1998, $11,586,000; and 1999, $10,998,000.
Accrued Lease Reserves
Other noncurrent liabilities include acquisition reserves established for
unfavorable facility lease commitments, vacant facilities and related future
lease costs. Total obligations recorded for these unfavorable lease
commitments and future lease and related costs at their estimated present value
were $12,460,000 and $19,402,000 at September 30, 1994 and 1993, respectively.
The current portion of these obligations was $3,427,000 and $6,081,000 as of
September 30, 1994 and 1993, respectively and is included in "Other accrued
liabilities". The accretion recorded related to these obligations, net of tax
effects, is included in "Loss from discontinued operations" in the Consolidated
Statements of Operations.
Sale/Leaseback Transactions
Anacomp entered into sale/leaseback transactions of $11,870,000 in 1994 and
$9,858,000 in 1993 relating to COM systems installed in the data service
centers. Part of the proceeds were treated as fixed asset sales and the
remainder as sales of equipment. Revenues of $5,620,000 and $4,739,000 were
recorded respectively. All profits were deferred and are being recognized over
the applicable leaseback periods. In October 1994, Anacomp entered into
additional sale/leaseback transactions of $19,320,000 relating to COM systems
installed in the data service centers.
<PAGE> 40
Income Taxes
In general, Anacomp's practice is to reinvest the earnings of its foreign
subsidiaries in those operations and to repatriate these earnings only when it
is advantageous to do so. It is expected that the amount of U.S. federal tax
resulting from a repatriation will not be significant. Accordingly, deferred
tax is not being recorded related to undistributed foreign earnings.
In February 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (FAS
109). FAS 109 mandates the liability method for computing deferred income
taxes and requires that the benefit of certain loss carryforwards be estimated
and recorded as an asset unless it is "more likely than not" that the benefit
will not be realized. Another principal difference is that changes in tax
rates and laws will be reflected in income from continuing operations in the
period such changes are enacted.
Anacomp adopted FAS 109 in the first quarter of fiscal 1994. Under FAS 109,
the Company has recorded a significant deferred tax asset to reflect the
benefit of loss carryforwards that could not be recognized under prior
accounting rules. The recording of this asset reduced goodwill and increased
income as discussed in more detail in Note 10.
Consolidated Statements of Cash Flows
Anacomp considers all highly liquid investments purchased with an original
maturity of three months or less to be cash equivalents. These temporary
investments, primarily repurchase agreements and other overnight investments,
are recorded at cost, which approximates market, and totalled $8,000,000,
$14,000,000, and $8,000,000 at September 30, 1994, 1993 and 1992, respectively.
NOTE 2.
FAIR VALUES OF FINANCIAL INSTRUMENTS:
Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value information
for certain financial instruments. The carrying amounts for trade receivables
and payables are considered to be their fair values. The carrying amounts and
fair values of the Company's other financial instruments at September 30, 1994,
and 1993, are as follows:
<TABLE>
<CAPTION>
September 30, 1994 September 30, 1993
Carrying Fair Carrying Fair
(In thousands) Amount Value Amount Value
Long Term Debt:
<S> <C> <C> <C> <C>
Revolving Loan $ 23,000 $ 23,000 $ 18,000 $ 18,000
Multicurrency Revolving Loan 20,665 20,665 21,468 21,468
Term Loans 40,261 40,261 59,087 59,087
Series A Senior Notes 3,548 3,548 12,537 12,537
Series B Senior Notes 67,500 74,410 75,000 85,840
15% Senior Subordinated Notes 219,384 249,357 218,490 260,884
13.875% Convertible
Subordinated Debentures 20,922 23,232 20,723 23,232
9% Convertible
Subordinated Debentures 10,479 10,479 10,479 10,479
Redeemable Preferred Stock 24,478 19,371 24,383 19,500
</TABLE>
<PAGE> 41
The estimated fair values of Long-Term Debt and Redeemable Preferred Stock are
based on quoted market values or discounted future cash flows using current
interest rates.
NOTE 3.
ACQUISITIONS:
During the three years ended September 30, 1994, Anacomp made the acquisitions
set forth below, each of which has been accounted for as a purchase. The
consolidated financial statements include the operating results of each
business from the date of acquisition. Pro forma results of operations have
not been presented because the effects of these acquisitions were not
significant.
Fiscal 1994
During fiscal 1994, Anacomp acquired 16 data service centers or the
related customer base (all were incorporated with existing Anacomp
service centers), a computer tape products company and the customer
base of a micrographics supplies business. Total consideration for
these acquisitions was $39,141,000 of which approximately $24,173,000
has been assigned to excess of purchase price over net assets of
businesses acquired and other intangible assets. In connection with
these acquisitions, Anacomp issued $17,201,000 of its common stock and
increased debt and accrued liabilities by $4,290,000.
National Business Systems
One of the acquisitions included above was the purchase of the COM
services customer base of 14 data service centers operated by National
Business Systems (NBS). The acquisition was effective on January 3,
1994, and the acquisition cost consisted of the following (in
thousands):
<TABLE>
<CAPTION>
<S> <C>
Cash paid to NBS shareholders.............. $ 7,400
Common stock issued to NBS shareholders.... 7,400
Acquisition costs incurred................. 416
$15,216
=======
</TABLE>
Anacomp issued 1,973,000 common shares to the NBS shareholders using
$3.75 per share. As part of the acquisition agreement, Anacomp agreed
to provide stock price protection at the end of two years on those
shares so designated by the NBS shareholders (1,128,000 of the shares
issued are subject to this protection).
On January 3, 1996, Anacomp will recalculate the share price based on
the average closing price of Anacomp stock for the 30 consecutive
trading days ending on December 29, 1995. The revised price will be
used to adjust the number of issued shares which are subject to the
price protection. However, the revised price to be used for the
revaluation will not be higher than 150% or lower than 50% of the
original $3.75 per share price.
<PAGE> 42
If the per share price reached the 150% maximum, NBS shareholders
would return 376,000 shares to Anacomp. If the per share price reached
the 50% minimum, Anacomp would issue 1,128,000 additional shares to
the NBS shareholders. The adjustment in the number of shares issued in
connection with the NBS acquisition will not affect the recorded
purchase price. Contingently issuable shares under the above
arrangement are measured at each reporting period based on the market
price of the Company's stock at the close of the period being reported
on, and are considered in the computation of earnings per share.
Graham Magnetics
Another of the acquisitions included above was the purchase of Graham
Acquisition Corporation (Graham), a computer tape products company.
The acquisition was effective on May 4, 1994, and the acquisition cost
consisted of the following (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Common stock issued to Graham shareholders. $ 8,515
Common stock issued for a note payable..... 1,286
Issuance of note payable to a creditor..... 4,240
Cash paid to retire bank debt.............. 5,540
Acquisition costs incurred................. 689
$20,270
=======
</TABLE>
Anacomp issued 2,129,000 common shares to the Graham shareholders
based on an agreed upon per share price. However, to determine the
acquisition cost, the shares were valued at the market price on the
date of closing.
Contingent consideration of $7,600,000 is payable in Anacomp common
stock and will be based upon defined future earnings through September
1997. The contingent consideration will be computed based upon an
agreed upon formula using a minimum stock price of $2.00 per share and
will be issuable beginning in January 1995. The contingent
consideration is not included in the acquisition cost total above but
is recorded when the future earnings requirements have been met. The
contingent consideration amount for fiscal 1994 is estimated to be
approximately $144,000.
Anacomp also issued 360,000 common shares to a Graham creditor at
$3.57 per share to reduce the note payable to $4,240,000. The note is
unsecured and bears interest at 10%. Principal payments of $345,000
plus accrued interest are payable quarterly beginning July 15, 1994.
The note holder may at any time require Anacomp to prepay any amount
of the note by issuing common stock. The shares of common stock to be
issued will equal the prepayment amount divided by $3.57. The current
outstanding note balance subject to prepayment was $3,895,000 at
September 30, 1994.
Anacomp has reserved 3,800,000 shares of authorized common stock for
the contingent acquisition consideration and 1,091,000 shares of
authorized common stock for the contingent prepayment of the note.
<PAGE> 43
Fiscal 1993
During fiscal 1993, Anacomp acquired four micrographics service
centers (all four were merged with existing Anacomp service centers)
and certain assets of a microfilm reader maintenance services business
for a total consideration of $4,434,000, of which approximately
$1,904,000 has been assigned to excess of purchase price over net
assets of businesses acquired and other intangible assets.
Fiscal 1992
During fiscal 1992, Anacomp acquired four micrographics service
centers and one microforms service center (all five were merged with
existing Anacomp service centers) and certain selected assets of a
computer output microfilm maintenance services business, for a total
consideration of $9,602,000, of which approximately $6,356,000 has
been assigned to excess of purchase price over net assets of
businesses acquired and other intangible assets.
NOTE 4.
SKC AGREEMENT:
In March 1992, Anacomp entered into a ten-year supply agreement (the
Supply Agreement) with SKC America, Inc., a New Jersey corporation
(SKCA), and SKC Limited (SKCL), an affiliated corporation of SKCA
organized pursuant to the laws of the Republic of Korea. SKCA and
SKCL are collectively referred to as SKC. Pursuant to the Supply
Agreement, Anacomp purchases substantially all of its requirements
for magnetic-base polyester and coated duplicate microfilm from SKC.
SKC is providing Anacomp with a $25 million trade credit arrangement
which expires December 31, 2001. The trade credit arrangement may be
terminated prior to the expiration in the event Anacomp restructures
or refinances substantially all of its subordinated debt or in the
event Anacomp breaches the Supply Agreement. The trade credit
arrangement bears interest at 2.5% over the prime rate of The First
National Bank of Boston (7.75% as of September 30, 1994).
In October 1993, the Supply Agreement was extended to December 2003
and amended to include finished microfilm products manufactured by SKC
exclusively for Anacomp. Concurrent with the modification of the
Supply Agreement, SKC purchased Anacomp's Sunnyvale, California,
duplicate microfilm manufacturing operation for $900,000, payable over
five years. At September 30, 1994, $720,000 is due from SKC. Costs
of $3,392,000 associated with this Supply Agreement have been deferred
and are being amortized over the life of the Supply Agreement.
<PAGE> 44
NOTE 5
PROPERTY AND EQUIPMENT:
Property and equipment consist of the following:
<TABLE>
<CAPTION>
Estimated Useful September 30,
(In thousands) Life in Years 1994 1993
<S> <C> <C> <C>
Land and buildings............. 10 - 40 $ 7,590 $ 8,206
Office furniture .............. 3 - 12 12,553 11,647
Manufacturing equipment
and tooling.................. 2 - 10 28,901 34,048
Field support spare parts ..... 4 - 7 25,555 27,921
Leasehold improvements ........ Term of Lease 12,826 15,957
Equipment leased to others .... 2 - 4 1,824 2,797
Processing equipment .......... 3 - 12 78,094 71,346
167,343 171,922
Less accumulated depreciation
and amortization ............. (100,574) (105,523)
$ 66,769 $ 66,399
======== ========
</TABLE>
NOTE 6.
LONG-TERM RECEIVABLES:
<TABLE>
<CAPTION>
Long-term receivables consist of the following:
(In thousands) September 30, 1994 1993
<S> <C> <C>
Lease contracts receivable ............................. $21,160 $21,634
Other lease receivables................................. -- 204
Notes receivable from asset sales ...................... 1,015 856
Other .................................................. 2,229 2,414
24,404 25,108
Less current portion ................................... (8,021) (7,489)
$16,383 $17,619
======= =======
</TABLE>
Other long-term receivables include $1,116,000 and $1,243,000 at September 30,
1994 and 1993, respectively, due from an officer.
Lease contracts receivable result from customer leases of products under
agreements which qualify as sales-type leases. Annual future lease payments
under sales-type leases are as follows:
<TABLE>
<CAPTION>
<S> <C>
(In thousands) Year ended September 30,
1995........................................... $ 9,003
1996.......................................... 6,354
1997.......................................... 5,211
1998.......................................... 2,618
1999.......................................... 1,541
24,727
Less deferred interest ........................ (3,567)
$21,160
=======
</TABLE>
<PAGE> 45
NOTE 7.
LONG-TERM DEBT:
<TABLE>
<CAPTION>
Long-term debt is comprised of the following:
(In thousands) September 30, 1994 1993
<S> <C> <C>
Revolving Loan at 7.81% and 5.94%, respectively......... $ 23,000 $ 18,000
Multicurrency Revolving Loan
at 7.67% and 8.40% respectively....................... 20,665 21,468
Term Loans at 7.56% and 6.06%, respectively............. 40,261 59,087
Series A Senior Notes at 7.56% and 6.06%, respectively.. 3,548 12,537
Series B Senior Notes at 12.25%......................... 67,500 75,000
15% Senior Subordinated Notes (net of unamortized
discount of $ 5,516 and $6,410 respectively)........... 219,384 218,490
13.875% Convertible Subordinated Debentures due
January 15, 2002 (net of unamortized discount of
$2,309 and $2,508 respectively)....................... 20,922 20,723
9% Convertible Subordinated Debentures due
January 15, 1996....................................... 10,479 10,479
Installment note payable at 10% due July 15, 1997....... 3,895 --
Other................................................... 2,193 3,309
411,847 439,093
Less current portion.................................... (45,222) (34,355)
$ 366,625 $ 404,738
========= ========
</TABLE>
On March 26, 1993, the Company completed amendments to its Senior Credit
Agreements and its 15% Senior Note Indenture. The provisions of these
amendments include the elimination of the requirement for the Company to make
Additional Amortization Payments as defined, allowance for the Company to use
up to 50% of its annual Excess Cash Flow to repurchase subordinated debt and
the creation of a Multicurrency Revolving Loan due in October 1995. The
amendments also reduced the existing Revolving Loan from $50 million to $43
million at March 26, 1993 with a further reduction to $40 million on
September 30, 1994 and provide for a final due date of October 1995.
Additionally, the amendments provided for the Company to retain specified
sale proceeds in connection with the sale/leaseback of certain fixed assets
and rescheduled the remaining amortization payments due on the Term Loan in
a manner favorable to the Company.
The Revolving Loan carries an interest rate of 275 basis points over the one- ,
two-, three - or six-month reserve adjusted London Interbank Offered Rate
(LIBOR), selected at the Company's option.
The Multicurrency Revolving Loan is available to the Company and certain of its
foreign subsidiaries in U.S. Dollars, British Pounds, French Francs, German
Marks, Italian Lira and Swedish Krona in an equivalent amount of $30 million,
and carries an interest rate of 275 basis points over the one-, two-,
three - or six-month reserve adjusted London Interbank Offered Rate (LIBOR) of
the borrowed currency, selected at the Company's option.
<PAGE> 46
The Term Loans and Series A Senior Notes carry an interest rate of 275 basis
points over the three-month LIBOR and have scheduled installment payments of
$10.3 million in October 1994; $12.5 million in April 1995; $12.5 million in
October 1995; and $8.5 million in April 1996.
The Series B Senior Notes carry an interest rate of 12.25% and require semi-
annual installment payments commencing April 26, 1994, in amounts increasing
from 10% to 16.67% of the original principal amount.
In addition to scheduled payments, the Company is required to make annual
prepayments of the Revolving Loan, the Term Loans and Series A Senior and Series
B Senior Notes (the Senior Debt) in amounts between 50% and 75% of the Company's
Excess Cash Flow, as defined, depending on the amount of Excess Cash Flow used
to repurchase subordinated debt per the provisions of the March 1993 Senior
Debt Agreement amendments. Also, subject to certain exceptions, 100% of
proceeds from the sale of assets must be applied to repayment of the Senior
Debt.
The 15% Senior Subordinated Notes (the 15% Notes) were issued in 224,900 units
of $1,000 and 30.351 detachable warrants to purchase Anacomp Common Stock at
$1.873 per share. The 15% Notes are callable given 30 days notice beginning
November 1995, at 107.5% of the fully accreted value, and declining to 100% of
the fully accreted value by November 1998. Mandatory sinking fund payments of
$72,000,000 are due November 1998, and November 1999. After the Term Loans and
the Series A Senior Notes and Series B Senior Notes are fully repaid and cash
collateralization of any remaining Revolving Credit Facility Commitment occurs,
additional prepayments equal to 75% of Excess Cash Flow, as defined, are also
required.
The Master Agreement, which covers the Term Loans, the Revolving Credit
Commitments, and the Series A Senior Notes and Series B Senior Notes, gives the
Senior Creditors a security interest in all of the assets of Anacomp; contains
various limitations on advances and investments made by the Company; prohibits
or restricts, without prior approval of the Senior Creditors, mergers,
acquisitions, change of control, certain types of lease transactions, payment
of dividends on Anacomp Common Stock, and voluntary payment in cash of any
principal amount of Anacomp's subordinated debt; and contains certain other
restrictive covenants related to net worth, cash flow, fixed charges, debt
incurrence, capital expenditures and the current ratio. Subsequent to
September 30, 1994, Anacomp completed an amendment to the Master Agreement
lowering the Interest Coverage Ratio covenant for September 30, 1994, and all
of fiscal year 1995. Based on information currently available, the Company is
uncertain as to whether it will be able to satisfy certain of the restrictive
covenants in place as of September 30, 1995. The Company believes that in
connection with the replacement of the revolving credit facilities which expire
in October 1995, these restrictive covenants will be modified or eliminated such
that the Company expects to be in compliance with its covenants under the debt
agreements in place at that time. The Master Agreement also provides for the
availability of letters of credit in an amount up to $15,000,000. As of
September 30, 1994, letters of credit for approximately $9,000,000 have been
issued which reduce the amount of available revolver.
In conjunction with entering into the SKC Supply Agreement discussed in Note 4,
Anacomp sought and received from its senior lenders certain amendments to its
senior loan documents including certain financial covenant adjustments.
<PAGE> 47
The 15% Notes are subordinated to the payment in full of the principal and
interest on all Senior indebtedness. The 15% Notes rank pari passu to the
remaining 12.25% Notes and 8.25% Senior Subordinated Notes (if and when issued)
discussed in Note 8. Additionally, they are senior to the outstanding 9%
Convertible Subordinated Debentures due 1996 and the 13.875% Convertible
Subordinated Debentures due 2002.
The 15% Note Indenture contains covenants relating to net worth, and limitations
on restricted payments, liens, transactions with affiliates, incurrence of
additional debt, asset sales, acquisitions, and change of control. The 15% Note
holders will be granted a security interest in all of Anacomp's assets upon the
repayment of all Senior Secured Indebtedness.
The 13.875% Convertible Subordinated Debentures require mandatory sinking fund
payments of $3,750,000 annually commencing January 15, 1999, unless sufficient
debentures have been converted or repurchased by Anacomp. The debentures are
convertible into 1,327,542 shares of Anacomp Common Stock at a conversion price
of $17.50 per common share, and allow optional redemption at a price of 100% at
any time. Anacomp International, N.V. a wholly-owned Netherlands Antilles
subsidiary, has issued the 9% Convertible Subordinated Debentures due January
15, 1996, guaranteed by Anacomp. The 9% debentures are convertible into
663,227 shares of Anacomp Common Stock at a conversion price of $15.80 per
common share. In the event of certain changes affecting United States or
Netherlands Antilles taxation, the interest rate will be increased for any
taxes required to be withheld or, at Anacomp's option, all debentures
outstanding may be redeemed at 100% of the principal amount plus accrued
interest.
The maturities of long-term debt in each of the next five years and thereafter
will be as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended September 30, (In thousands)
1995.......................................... $ 45,222
1996.......................................... 87,505
1997.......................................... 22,510
1998.......................................... 11,294
1999.......................................... 74,561
2000 and thereafter........................... 170,755
$ 411,847
==========
</TABLE>
NOTE 8.
REDEEMABLE PREFERRED STOCK:
Anacomp issued in a private placement in 1987, 500,000 shares of 8.25%
Cumulative Convertible Redeemable Exchangeable Preferred Stock (the Preferred
Shares). Each Preferred Share has a preference value of $50 and is convertible
into Anacomp common stock at a conversion price of $7.50. The redeemable
preferred stock was recorded at fair value on the date of issuance less issue
costs. The excess of the preference value over the carrying value is being
accreted by periodic charges to retained earnings over the life of the issue.
The Preferred Shares may be redeemed by Anacomp at prices declining from
105.78% to 100% of preference value, or earlier if the price of Anacomp common
stock remains at 160% of the conversion price for 20 of 30 consecutive trading
days. On March 15, 2000 and 2001, Anacomp must redeem at the preference value
125,000 shares each year unless a sufficient number of shares has already been
redeemed or converted. All remaining outstanding shares must be redeemed by
March 1, 2002.
<PAGE> 48
At any dividend payment date after March 15, 1990, Anacomp may exchange the
Preferred Shares for an equal face amount of 8.25% Senior Subordinated Notes due
March 1, 2002 (the Exchange Debentures). Except for certain shareholder rights,
the Exchange Debentures will carry terms similar to the Preferred Shares. There
were no such exchanges as of September 30, 1994.
NOTE 9.
CAPITAL STOCK:
Shareholder Rights Plan
The Company has a Shareholder Rights Plan which was adopted by the Board of
Directors on February 4, 1990. The Rights Plan provides that each share of the
Company's common stock has associated with it a Common Stock Purchase Right.
Each right entitles the registered holder to purchase from the Company one-
tenth of a share of Anacomp common stock, par value $.01 per share, at a cash
exercise price of $3.20 subject to adjustment.
The rights will be exercisable only if a person or group acquires beneficial
ownership of 15% or more of the outstanding shares of common stock of Anacomp,
or announces a tender or exchange offer upon consummation of which, such person
or group would beneficially own 30% or more of the Company's common stock. If
any person acquires 15% of Anacomp's common stock, the rights would entitle
stockholders (other than the 15% acquiror) to purchase at $32 (as such price
may be adjusted) a number of shares of Anacomp's common stock which would have
a market value of $64 (as such amount may be adjusted). In the event that
Anacomp is acquired in a merger or other business combination, the rights would
entitle the stockholders (other than the acquiror) to purchase securities of
the surviving company at a similar discount.
Anacomp can redeem the rights at $.001 per right at any time until the tenth
day following the announcement that a 15% ownership position has been acquired.
Under certain circumstances set forth in the Rights Plan, the decision to
redeem shall require the concurrence of a majority of the Continuing Directors
(as such term is defined in the Rights Plan). The rights expire February 26,
2000.
Preferred Stock
Anacomp has authorized 1,000,000 shares of preferred stock, of which 500,000
shares of redeemable preferred stock were issued and outstanding at September
30, 1994 and 1993 (see Note 8).
Stock Option Plans
Anacomp's stock option plans provide that the exercise price of the options be
determined by the Board of Directors (the "Board"), and in no case be less than
100% of fair market value at the time of grant for qualified options, or less
than the par value of the stock for non-qualified options. An option may be
exercised subject to such restrictions as the Board may impose at the time the
option is granted. In any event, each option shall terminate not later than 10
years after the date on which it is granted, except for certain non-qualified
options which shall terminate not later than 20 years after the date on which
granted.
<PAGE> 49
Shares available for grant under the plans were 725,827 and 895,145 at
September 30, 1994 and 1993, respectively. Options outstanding, of which
3,310,464 are exercisable as of September 30, 1994, are as follows:
<TABLE>
<CAPTION>
Option Price
Shares Per Share
<S> <C> <C> <C>
Outstanding at September 30, 1992 3,680,709 $ 1.000 -$ 7.875
Granted . . . . . . . . . . . . . . . . . 1,308,834 2.750 - 9.000
Cancelled . . . . . . . . . . . . . . . . (72,839) 2.000 - 7.875
Expired . . . . . . . . . . . . . . . . . (38,701) 2.000 - 7.875
Exercised . . . . . . . . . . . . . . . . (463,475) 2.000 - 3.500
Outstanding at September 30, 1993 4,414,528 1.000 - 9.000
Granted . . . . . . . . . . . . . . . . . 205,381 2.750 - 4.000
Cancelled . . . . . . . . . . . . . . . . (81,908) 1.000 - 7.875
Expired . . . . . . . . . . . . . . . . . (23,096) 2.000 - 7.875
Exercised . . . . . . . . . . . . . . . . (306,646) 1.000 - 3.375
Outstanding at September 30, 1994 4,208,259 $ 1.000 -$ 9.000
========= =================
</TABLE>
Warrants
In October 1990, Anacomp issued 6,825,940 warrants to holders of the 15% Senior
Subordinated Notes. Each warrant entitles the holder to purchase one common
share at a price of $1.873 and is exercisable through the date of expiration,
November 11, 2000. Anacomp filed a shelf registration statement with respect
to the warrants which became effective on February 25, 1991.
Restricted Stock Bonus Plan
In December 1984, Anacomp adopted a Restricted Stock Bonus Plan (the "Plan")
allowing for the issuance of up to 2,800,000 shares of Anacomp common stock to
certain employees as determined by the Compensation Committee of the Board.
The purposes of the Plan are to assist Anacomp in retaining key employees, to
provide additional motivation for those employees to continue their best
efforts on behalf of Anacomp and to conserve cash. At September 30, 1994,
1,246,819 shares were issued and outstanding under the Plan. All issued and
outstanding shares related to the plan were awarded from 1985 through 1988.
All vesting in the shares was completed by September 30, 1988. No shares have
been issued since 1988. Anacomp retained a right of first refusal to
repurchase these shares at market value on the date of sale less 80% of market
value on the date of grant.
At the time the shares were granted, they were recorded at 20% of the market
value at the date of grant. This cost was amortized as compensation expense
over the various vesting periods involved. When the stock is offered to the
Company for resale in the marketplace, the Company will record the difference
between the proceeds from the sale of the shares and the amount paid to the
employee as paid in capital.
<PAGE> 50
Other Items
Under an Employee Stock Purchase Plan, Anacomp may offer to sell common stock
to its employees. Purchases of these shares are made by employee participants
periodically at 85% of the market price on the date of offer or exercise,
whichever is lower.
At September 30, 1994, approximately 23,900,000 shares of Anacomp common stock
are reserved for exercise of stock options, conversion of convertible
subordinated debentures, purchases by stock purchase plan participants,
conversion of preferred stock, exercise of warrants, Graham acquisition
agreement requirements and other corporate purposes.
NOTE 10.
INCOME TAXES:
The components of income from continuing operations before income taxes and
extraordinary credits were:
<TABLE>
<CAPTION>
(In thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
United States . . . . . . . . . . . . . . . . $ 8,684 $13,195 $18,594
Foreign . . . . . . . . . . . . . . . . . . . 8,212 9,730 16,673
$16,896 $22,925 $35,267
======= ======= =======
</TABLE>
The components of income tax expense after utilization of net operating loss
carryforwards, the adjustment of the tax reserves and discontinued operations
are summarized below:
<TABLE>
<CAPTION>
(In thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
Federal ..................................... $ 200 $ 6,900 $ 7,200
Foreign ..................................... 3,300 4,800 6,400
State ....................................... 800 1,900 1,800
4,300 13,600 15,400
Tax reserve adjustment........................ (1,200) (3,700) --
Deferred...................................... 6,000 -- --
Continuing operations......................... 9,100 9,900 15,400
Discontinued operations....................... (700) (1,100) (1,200)
Extraordinary credit, reduction of income
taxes arising from carryforward of prior
year's operating losses ..................... -- (6,900) (8,700)
$ 8,400 $ 1,900 $ 5,500
======== ======= =======
</TABLE>
<PAGE> 51
The following is a reconciliation of the United States federal statutory rate
to the rate used for the provision for income taxes:
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Year ended September 30, 1994 1993 1992
U.S. statutory rate .................. 35.0 % 34.8 % 34.0 %
Tax reserve adjustment................ (7.1)% (16.2)% --
Nontaxable foreign exchange gains..... -- -- (3.1)%
Refunds from state tax audits
(net of federal income tax).......... -- -- (2.2)%
State and foreign income taxes (net
of federal income tax benefit)....... 5.9 % 6.0 % 4.7 %
Other foreign taxes (difference
between foreign and U.S. rates) ..... 2.7 % 4.4 % 3.1 %
Nondeductible amortization and
write-off of intangible assets....... 18.8 % 13.0 % 8.3 %
Other ................................ (1.4)% 1.2 % (1.1)%
53.9 % 43.2 % 43.7 %
===== ====== ======
</TABLE>
The Company adopted FAS 109 in the first quarter of fiscal 1994 and recorded a
deferred tax asset of $95 million representing the 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 a net $35 million. Recognition of the deferred tax
asset reduced goodwill by $27 million and provided a cumulative effect
increase to income of $8 million. During 1994, the net deferred tax asset was
reduced to $29 million, reflecting usage of the asset to reduce income taxes
payable by $6 million. Future utilization, if any, of NOLs and tax credits
for which a valuation allowance was provided, will further reduce goodwill up
to $37 million, increase accrued income taxes up to $13 million and increase
capital in excess of par value up to $7 million.
The components of deferred tax assets and liabilities at September 30, 1994
and October 1, 1993 are as follows:
<TABLE>
<CAPTION>
September 30 October 1
Net Deferred Tax Asset (in thousands) 1994 1993
<S> <C> <C>
Tax effects of future tax deductible
differences related to:
Inventory reserves.......................... $ 2,600 $ 2,900
Depreciation................................ 1,600 1,400
Building reserves........................... 5,000 7,400
EPA reserve................................. 2,300 3,400
Sale/leaseback of assets.................... 900 1,800
Other net deductible differences............ 4,100 4,300
Tax effects of future taxable differences
related to:
Leases...................................... (4,500) (4,600)
Capitalized software........................ (6,000) (4,600)
Net tax effects of future differences 6,000 12,000
</TABLE>
<PAGE> 52
<TABLE>
<CAPTION>
<S> <C> <C>
Tax effects of carryforward benefits:
Federal net operating loss carryforwards.... 73,000 80,000
Federal general business tax credits........ 3,000 3,000
Foreign tax credits ........................ 4,000 --
Tax effects of carryforwards.................. 80,000 83,000
Tax effects of future differences
and carryforwards........................... 86,000 95,000
Less valuation allowance...................... (57,000) (60,000)
Net deferred tax asset........................ $ 29,000 $ 35,000
========= =========
</TABLE>
At September 30, 1994, the Company has NOLs of approximately $200 million
available to offset future taxable income. This amount will increase to $217
million as certain timing differences reverse in future periods. The Company
also has tax credit carryforwards of $3 million available to reduce future tax
liabilities, including $1 million of preacquisition tax credits. The NOLs
expire commencing in 1995 ($2 million) with remaining amounts in various
periods through 2007. The tax credit carryforwards expire substantially in
1997.
During 1994 and 1993, the Company settled various income tax matters,
including issues associated with the 1988 Xidex acquisition. Settlement of
these issues and other considerations resulted in a favorable adjustment to
federal and foreign tax reserves of $1.2 million and $3.7 million,
respectively. The adjustments are reflected as a credit to the income tax
expense from continuing operations.
In 1993 and 1992 the provisions for income taxes include amounts which are
offset by the utilization of federal and foreign NOLs. The tax benefits
from utilization of NOLs is reported as an extraordinary credit in the
Consolidated Statements of Operations. The net tax provisions result from
foreign and state income taxes which cannot be reduced by NOLs from prior years.
In addition to the cumulative effect adjustment on the statement of
operations, the adoption of FAS 109 reduced goodwill amortization expense by
$773,000 during 1994. Accordingly, income from continuing operations and net
income increased by these same amounts. Earnings per common and common
equivalent share increased by $.02.
If FAS 109 had been adopted beginning October 1, 1991, the following pro forma
results would have been reported for the periods ended (in thousands except
per share amounts):
<TABLE>
<CAPTION>
September 30
1994 1993 1992
Pro forma Pro forma Pro forma
<S> <C> <C> <C>
Income from continuing operations $ 7,754 $13,756 $20,598
Net income 6,913 12,422 42,552
Earnings per common and common
equivalent share .10 .24 .97
</TABLE>
<PAGE> 53
NOTE 11.
COMMITMENTS AND CONTINGENCIES:
Anacomp has commitments under long-term operating leases, principally for
building space and data service center equipment. Lease terms generally cover
periods from five to twelve years. The following summarizes the future minimum
lease payments under all non-cancelable operating lease obligations, including
the unfavorable lease commitments and vacant facilities discussed in Note 1,
which extend beyond one year:
<TABLE>
<CAPTION>
(In thousands) Year ended September 30,
<S> <C>
1995 ....................................................... $ 28,097
1996 ....................................................... 23,693
1997 ....................................................... 15,360
1998 ....................................................... 11,357
1999 ....................................................... 5,768
2000 and thereafter ........................................ 31,846
$116,121
Less liabilities recorded as of September 30, 1994
related to unfavorable lease commitments and future
lease costs for vacant facilities......................... (12,330)
$103,791
========
</TABLE>
The total of future minimum rentals to be received under noncancellable
subleases related to the above leases is $8,740,000. No material losses in
excess of the liabilities recorded are expected in the future.
In October 1992, Anacomp and Xerox Corp. announced a joint effort to develop a
Xerox Compatibility Feature (XCF) that will enable the XFP 2000 to process and
image Xerox high speed printing data streams. This effort will result in the
XFP 2000 being able to output virtually all Xerox print data streams, including
those containing fonts, forms, logos, signatures and other images on
microfiche. At September 30, 1994, $350,000 remains to be paid related to
services to be performed.
Anacomp also executed a software license agreement with Xerox to use the XCF.
The agreement obligates Anacomp to pay Xerox $1,277,000 as a prepayment for 100
software license fees. The payment is due upon final acceptance of the XCF
scheduled for January 1995.
In November 1993, Anacomp and Pennant Systems, a division of IBM, announced a
joint effort to develop software which will allow Anacomp's XFP 2000 to process
and image IBM Advanced Function Presentation (AFP) formatted data. This program
will result in the XFP 2000 being able to interpret AFP data streams, including,
as with the Xerox program, those containing fonts, logos, signatures and other
images on microfiche.
<PAGE> 54
As consideration for the development of the AFP, Anacomp agreed to pay Pennant
Systems a development fee of $6,500,000 payable quarterly from January 1994,
through April 1995. At September 30, 1994 $5,250,000 remains to be paid; $2.5
million has been accrued; and $2.75 million relates to services to be performed.
Anacomp also must pay Pennant Systems royalty payments for the licensed system
installations over the next six years. The minimum royalty payments for years
one through three are $1,500,000 per year and $1,000,000 per year for years
four through six. In addition, Anacomp must pay Pennant Systems for ongoing
system support which begins in December 1995 and continues for 10 years. The
minimum system support payments over the 10 year period are $5,671,000.
During 1994, the Company sold $5.9 million of lease receivables. Under the
terms of the sales, the purchasers have recourse to the Company should the
receivables prove to be uncollectible. The amount of the recourse at September
30, 1994 is $3.4 million.
Anacomp also is involved in various claims and lawsuits incidental to its
business and believes that the outcome of any of those matters will not have a
material adverse effect on its consolidated financial position or results of
operations.
NOTE 12.
SUPPLEMENTARY INCOME STATEMENT INFORMATION:
<TABLE>
<CAPTION>
(In thousands) Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
From continuing operations:
Maintenance and repairs ...................... $ 12,759 $ 11,765 $12,227
Depreciation and amortization:
Property and equipment ..................... 17,524 17,149 20,531
Deferred software costs..................... 3,673 2,873 1,619
Intangible assets........................... 13,418 12,984 12,419
Rent and lease expense ....................... 19,371 19,312 18,825
</TABLE>
NOTE 13.
OTHER ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
Other accrued liabilities consist of the following:
(In thousands) September 30, 1994 1993
<S> <C> <C>
Deferred profit on sale/leaseback transactions.. $ 9,165 $ 4,890
EPA reserve..................................... 6,420 9,530
Accrued lease reserve........................... 3,427 6,081
Other .......................................... 16,015 16,937
$35,027 $37,438
======= =======
</TABLE>
Xidex was designated by the United States Environmental Protection Agency (EPA)
as a potentially responsible party for investigatory and cleanup costs incurred
by state and federal authorities involving locations included on a list of
EPA's priority sites for investigation and remedial action under the federal
Comprehensive Environmental Response, Compensation, and Liability Act. The EPA
reserve noted above relates to its estimated liability for cleanup costs for
the aforementioned locations and other sites. No material losses are expected
in excess of the liabilities recorded above.
<PAGE> 55
NOTE 14.
EARNINGS PER SHARE:
The computation of earnings per share is based upon the weighted average number
of common shares outstanding during the period plus (in periods in which they
have a dilutive effect) the effect of common shares contingently issuable,
primarily from stock options, exercise of warrants and acquisitions. Fully
diluted earnings per share also reflect additional dilution related to stock
options due to the use of the market price at the end of the period, when
higher than the average price for the period.
The weighted average number of common and common equivalent shares used to
compute earnings per share is:
<TABLE>
<CAPTION>
Year ended September 30, 1994 1993 1992
<S> <C> <C> <C>
For earnings per common and
common equivalent share ....... 46,691,337 42,749,933 41,712,865
For earnings per share
assuming full dilution ........ 46,890,599 42,964,380 42,771,365
</TABLE>
NOTE 15.
INTERNATIONAL OPERATIONS:
Anacomp's international operations are conducted principally through
subsidiaries, a substantial portion of whose operations are located in Western
Europe. Information as to U.S. and international operations for the years
ended September 30, 1994, 1993 and 1992 is as follows:
1994
<TABLE>
<CAPTION>
(In thousands) U.S. International Elimination Consolidated
<S> <C> <C> <C> <C>
Customer sales ........... $421,339 $171,260 $ -- $592,599
Inter-geographic ......... 23,726 -- (23,726) --
Total sales .............. $445,065 $171,260 $ (23,726) $592,599
======== ======== ========= ========
Operating income ......... $ 60,794 $ 18,783 $ -- $ 79,577
======== ======== ========= ========
Identifiable assets ...... $551,147 $107,492 $ -- $658,639
======== ======== ========= ========
</TABLE>
<PAGE> 56
1993
<TABLE>
<CAPTION>
(In thousands) U.S. International Elimination Consolidated
<S> <C> <C> <C> <C>
Customer sales ........... $414,726 $175,482 $ -- $590,208
Inter-geographic ......... 26,101 -- (26,101) --
Total sales .............. $440,827 $175,482 $(26,101) $590,208
======== ======== ======== ========
Operating income ......... $ 66,883 $ 21,751 $ -- $ 88,634
======== ======== ======== ========
Identifiable assets ...... $539,328 $104,220 $ -- $643,548
======== ======== ======== ========
</TABLE>
1992
<TABLE>
<CAPTION>
(In thousands) U.S. International Elimination Consolidated
<S> <C> <C> <C> <C>
Customer sales ........... $433,951 $194,989 $ -- $628,940
Inter-geographic ......... 35,806 -- (35,806) --
Total sales .............. $469,757 $194,989 $(35,806) $628,940
======== ======== ======== ========
Operating income ......... $ 71,312 $ 28,990 $ -- $100,302
======== ======== ======== ========
Identifiable assets ...... $569,132 $112,429 $ -- $681,561
======== ======== ======== ========
</TABLE>
<PAGE> 57
NOTE 16.
QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
(In thousands, First Second Third Fourth
except per share amounts) Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Fiscal 1994
Revenues .............................. $138,783 $146,263 $145,123 $162,430
Gross profit .......................... 42,491 41,857 40,656 47,112
Income from continuing operations...... 2,140 1,071 2,260 2,325
Loss from discontinued operations ..... (239) (214) (200) (188)
Cumulative effect on prior years of a
change in accounting for income taxes. 8,000 -- -- --
Net income ............................ $ 9,901 $ 857 $ 2,060 $ 2,137
======== ======== ======== ========
Earnings per common share
(primary):
Before discontinued operations,
extraordinary credit and
cumulative effect of
accounting change............. $ .04 $ .01 $ .04 $ .04
Net income...................... .21 .01 .03 .03
Earnings per common share
(fully diluted):
Before discontinued operations,
extraordinary credit and
cumulative effect of
accounting change............. $ .04 $ .01 $ .04 $ .04
Net income...................... .21 .01 .03 .03
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Fiscal 1993
Revenues .............................. $141,152 $144,284 $140,409 $164,363
Gross profit .......................... 42,039 44,689 43,686 55,042
Income from continuing operations...... 1,674 1,850 2,447 7,054
Loss from discontinued operations ..... (362) (349) (338) (285)
Extraordinary credit - reduction of
income taxes arising from utilization
of tax loss carryforwards............. 700 900 1,100 4,200
Net income............................. $ 2,012 $ 2,401 $ 3,209 $ 10,969
======== ======== ======== ========
Earnings per common share
(primary):
Before discontinued operations
and extraordinary credit...... $ .03 $ .03 $ .04 $ .16
Net income...................... .04 .04 .06 .25
Earnings per common share
(fully diluted):
Before discontinued operations
and extraordinary credit...... $ .03 $ .03 $ .04 $ .16
Net income...................... .04 .04 .06 .25
</TABLE>
<PAGE> 58
<TABLE>
<CAPTION>
SCHEDULE II
ANACOMP, INC. AND SUBSIDIARIES
Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees Other than Related Parties
(In thousands)
Balance at Deductions Balance at
Beginning Amounts Amounts End of Period
Name of Debtor of Period Additions Collected Amortized Current Not Current
<S> <C> <C> <C> <C> <C> <C>
Year ended
September 30, 1994:
Louis P. Ferrero
Officer [1]. . . . . . . . $ 1,243 $ -- $ 127 $ -- $ -- $ 1,116
======= ======= ======= ======= ======= =======
Year ended
September 30, 1993:
Louis P. Ferrero
Officer [1]. . . . . . . . $ 1,300 $ -- $ 57 $ -- $ -- $ 1,243
======= ======= ======= ======= ======= =======
Year ended
September 30, 1992:
Louis P. Ferrero
Officer [1]. . . . . . . . $ 1,800 $ -- $ 500 $ -- $ -- $ 1,300
P. Lang Lowrey III
Officer [2]. . . . . . . . 400 -- 400 -- -- --
$ 2,200 $ -- $ 900 $ -- $ -- $ 1,300
======= ======= ======= ======= ======= =======
</TABLE>
[1] In fiscal 1988, Anacomp provided Mr. Ferrero an interest-free loan of
$1,800,000 due two years after the termination of Mr. Ferrero's employment
with Anacomp. The Board of Directors awarded Mr. Ferrero a bonus of
$500,000 in fiscal 1992 which was used to reduce the loan balance to
$1,300,000. Mr. Ferrero is also required to use a portion of his annual
bonus to repay the loan.
[2] In March 1990, Anacomp made a non-recourse loan of $400,000 to Mr. Lowrey,
then Vice President - Worldwide Marketing Division. The loan was stated
to bear interest at 8% payable at the time the principal on the loan was
repaid. The loan was repaid in December 1991, and all interest due was
waived.
<PAGE> 59
SCHEDULE VIII
ANACOMP, INC. AND SUBSIDIARIES
Valuation and Qualifying Accounts and Reserves
(In thousands)
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning Accounting costs and end of
Description of period change expenses Deductions period
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1994:
Deferred tax asset valuation
allowance. . . . . . . . . . . . . $ -- $ 60,000 [1] $ -- $ 3,000 [2] $57,000
Allowance for doubtful accounts . . 4,245 -- (268) 427 [3] 3,550
$ 4,245 $ 60,000 $ (268) $ 3,427 $60,550
======= ======== ======= ======= =======
Year ended September 30, 1993:
Allowance for doubtful accounts . . $ 7,365 $ -- $ 669 $ 3,789 [3] $ 4,245
======= ======== ======= ======= =======
Year ended September 30, 1992:
Allowance for doubtful accounts . . $ 8,619 $ -- $ (674) $ 580 [3] $ 7,365
======= ======== ======= ======= =======
</TABLE>
[1] Estimate of deferred tax asset not expected to be realized upon adoption
of FAS 109.
[2] Reduction in available NOL.
[3] Uncollectible accounts written off, net of recoveries.
<PAGE> 60
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Sequential
Number Page Number
<S> <C>
(10) Material Contracts
(ab) Amendment No. 1 to Amended and Restated Master Agreement 61
dated as of July 1, 1994 among Anacomp, Inc., the
Multicurrency Borrowers, the Lenders, the Multicurrency
Lenders, the Series A Purchasers, the Series B
Purchasers, the First National Bank of Chicago, as
Multicurrency Agent, and Citibank, N.A. as Agent,
Administrative Agent and Collateral Agent.
(ac) Amendment No. 2 to Amended and Restated Master Agreement 74
dated as of December 2, 1994 among Anacomp, Inc., the
Multicurrency Borrowers, the Lenders, the Multicurrency
Lenders, the Series A Purchasers, the Series B
Purchasers, the First National Bank of Chicago, as
Multicurrency Agent, and Citibank, N.A. as Agent,
Administrative Agent and Collateral Agent.
(11) Statement re: computation of per share earnings 86
(21) Subsidiaries of the registrant 87
(23) Consent of independent public accountants 88
(27) Financial data schedule (Required for electronic filing only) 89
</TABLE>
<PAGE> 1
AMENDMENT NO. 1
TO AMENDED AND RESTATED MASTER AGREEMENT
Amendment No. 1 dated as of July 1, 1994 (the "Amendment") to the Amended and
Restated Master Agreement referred to below, among Anacomp, Inc. (the
"Company"), the Multicurrency Borrowers, each of the Lenders, the Multicurrency
Lenders, the Series A Purchasers and the Series B Purchasers (as each such term
is hereinafter defined) party hereto, The First National Bank of Chicago
("First Chicago"), as multicurrency agent (the "Multicurrency Agent") and
Citibank, N.A. ("Citibank"), as agent, administrative agent and collateral
agent (the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Multicurrency Borrowers party thereto (the
"Multicurrency Borrowers"), the Lenders party thereto (the "Lenders"), the
Multicurrency Lenders party thereto (the "Multicurrency Lenders"), the Series A
Purchasers party thereto (the "Series A Purchasers"), the Series B Purchasers
party thereto (the "Series B Purchasers"), the Multicurrency Agent and the
Collateral Agent are parties to the Amended and Restated Master Agreement,
dated as of March 22, 1993 (the "Amended and Restated Master Agreement")
(unless otherwise defined herein, all capitalized terms used herein shall have
the same meaning as set forth in the Amended and Restated Master Agreement);
WHEREAS, the Company has requested the Senior Creditors make certain clarifying
and other amendments to Section 5.5(c) of the Amended and Restated Master
Agreement;
WHEREAS, Section 5.5(c) generally prohibits the Company from selling,
conveying, transferring, leasing or otherwise disposing of its assets with
certain specified exceptions, including the sale or other disposition in the
ordinary course of business;
WHEREAS, the Company has stated that in the ordinary course of its business the
purchasers of the Company's inventory often request that the Company assist
them in providing financing for such purchasers' acquisition of inventory;
WHEREAS, the Company has stated that in the past it has provided, for an
interim period, lease financing for its customers in connection with the sale
of its inventory, which lease financing arrangements and related inventory the
Company has subsequently sold to a third party financing entity;
WHEREAS, the Company intends to continue to provide such leasing financings to
its customers in connection with the sale of its inventory;
WHEREAS, the third party financing entity previously used by the Company was no
longer able to provide such financing and the Company has found a new third
party financing company and desires to transfer for the Fair Market Value
thereof certain documentation, receivable assets and related inventory relating
to certain lease financing arrangement made by the Company with certain
purchasers of its inventory;
<PAGE> 2
WHEREAS, the Company desires to lease certain owned real property not in use in
its business;
NOW, THEREFORE, the parties hereto hereby agree as follows:
ARTICLE I
AMENDMENT SECTION 1.01. Consent to Amended and Restated Master Agreement. The
Amended and Restated Master Agreement is hereby amended as follows:
(a) Section 1.1 is hereby amended by adding in the appropriate alphabetical
order:
"Idle Property" means real property owned by the Company not currently used in,
or necessary to be used in, the Company's business.
"Inventory Lease Arrangement" means a lease or use arrangement (including the
related lease or use agreement and the receivable asset) entered into by the
Company with a prospective purchaser of its inventory in connection with the
sale of such inventory (including inventory equipment) in the ordinary course
of business, which lease arrangement is intended to be provided by the Company
for an interim period, until such time as the Company may sell or otherwise
dispose of the lease or use arrangement to a third party financing company,
for the Fair Market Value thereof.
(b) Section 5.5(c)(i) is hereby amended by adding at the end thereof before
the comma the following:
"; provided that the sale or disposition of Inventory Lease Arrangements
(including the related inventory and inventory equipment) for the Fair Market
Value thereof shall be considered the sale or disposition of inventory in the
ordinary course of business"
(c) Section 5.5(c)(ii) is hereby amended by adding at the end thereof before
the comma the following:
"and the lease of Idle Property" (d) The Majority Creditors hereby consent to
(i) the release by the Collateral Agent of its Lien, on assets disposed of by
the Company pursuant to Section 5.5(c)(i) and Section 5.5(c)(ii) and (ii) the
execution, delivery and filing by the Collateral Agent of such documents and
instruments as may be necessary or appropriate in the opinion of the
Collateral Agent in order to give effect to the foregoing release.
<PAGE> 3
ARTICLE II
CONDITIONS TO EFFECTIVENESS
SECTION 2.01. Conditions to Effectiveness. This Amendment is
subject to the following conditions precedent:
(a) the Collateral Agent shall have received (i) counter-parts of this
Amendment executed by the Company and the Majority Creditors, each of which
counter-parts, in the case of the Majority Creditors, shall have the box
labeled "consented" checked, and (ii) an acknowledgement and confirmation of
this Amendment executed by the Guarantor Subsidiaries;
(b) the Collateral Agent shall have determined that this Amendment shall not
have been vetoed by Senior Creditors holding the requisite percentage of Senior
Secured Indebtedness specified in Section 8.1(a)(iv);
(c) the Collateral Agent shall have received a Certificate of a Responsible
Officer of the Company, and such other evidence reasonably requested by the
Collateral Agent, certifying that the representations and warranties set forth
in Section 3.01 hereof are true and correct in all material respects on and as
of the effective date hereof; and
(d) the representations and warranties set forth in Section 3.01 hereof shall
be true and correct in all material respects on and as of the effective date
hereof.
ARTICLE III
MISCELLANEOUS SECTION 3.01. Representations and Covenants of the Company. The
Company hereby represents and warrants to the Senior Creditors
party hereto that:
(a) Due Authorization, No Conflicts, Etc. The execution, delivery and
performance by the Company of this Amendment and any and all other agreements,
instruments and documents to be executed and/or delivered by either the Company
pursuant hereto or in connection herewith, and the consummation by the Company
of the transactions contemplated hereby or thereby: (i) are within the
Company's corporate powers; (ii) have been duly authorized by all necessary
corporate action, including, without limitation, the consent of stockholders
where required; (iii) do not and will not (1) contravene either the Company's
or any of its Subsidiaries' respective certificate of incorporate or by-laws or
other comparable governing documents (2) violate any Requirement of Law, or any
order or decree of any court or Governmental Authority, or (3) conflict with or
result in the breach of, or constitute a default under, or result in the
termination of, any Contractual Obligation of either the Company or any of its
Subsidiaries; and (iv) do not require the consent, authorization by, or
approval of, or notice to, or filing or registration with, any Governmental
Authority or any other Person.
<PAGE> 4
(b) Due Execution, Etc. This Amendment has been duly executed and delivered
by the Company and the Multicurrency Borrowers and duly acknowledged, executed
and delivered by the Guarantor Subsidiaries and constitute the legal, valid and
binding obligation of the Company, the Multicurrency Borrowers and the
Guarantor Subsidiaries, enforceable against them in accordance with its terms.
(c) Inventory Lease Arrangement. The Company hereby represents that it has
provided Inventory Lease Arrangements for its customers in connection with the
sale of its inventory (including inventory equipment) which Inventory Lease
Arrangements the Company has generally transferred for the Fair Market Value
thereof to a third party financing entity. The Company hereby covenants and
agrees that any Inventory Lease Arrangement entered into by the Company will be
entered into, solely in connection with the sale of its inventory (including
inventory equipment) in the ordinary course of its business, and that such
Inventory Lease Arrangement will be acquired with the intention of selling or
otherwise transferring such Inventory Lease Arrangement, and such Inventory
Lease Arrangement will be sold or otherwise transferred as promptly as
reasonably possible, to a third party financing entity, for the Fair Market
Value thereof.
(d) Leases. The Company shall provide the Collateral Agent with a copy of
each lease entered into by the Company or any Domestic Subsidiary of the
Company, as lessor, in connection with Idle Property. The Company shall not,
and shall not permit its Domestic Subsidiaries to, enter into a lease relating
to Idle Property which lease is subject to a Mortgage if such lease has a
reasonable likelihood of having a Material Adverse Effect.
SECTION 3.02. Effect on the Credit Documents.
(a) Except for the matters specifically amended herein, the Amended and
Restated Master Agreement, the Collateral Documents and each other Credit
Document, shall remain and continue to be in full force and effect in
accordance with its terms, and the Amended and Restated Master Agreement, each
Collateral Document and each other Credit Document is hereby ratified,
confirmed and acknowledged by each party thereto.
(b) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Collateral Agent, the
Agent or the Administrative Agent or any other Secured Creditor under the
Amended and Restated Master Agreement, the Collateral Documents or any of the
other Credit Documents, nor, except as specifically provided for herein,
constitute an amendment to, a waiver of, or a consent to non-compliance with,
any provision of the Amended and Restated Master Agreement, any of the
Collateral Documents or any of the other Credit Documents.
<PAGE> 5 SECTION 3.03. Execution in Counterparts. This Amendment may be
executed in any number of counterparts and by different parties here to in
separate counterparts, each of which when so executed and delivered shall be
deemed to be an original, and all of which taken together shall constitute one
and the same instrument.
SECTION 3.04. Governing Law. This amendment shall be governed by, and
construed in accordance with, the internal laws (as opposed to conflict of law
provisions) of the state of New York.
SECTION 3.05. Headings. Section headings in this Consent are included herein
for convenience of reference only and shall not constitute a part of this
Consent for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
ANACOMP, INC.
By:______________________________
Name:
Title:
Multicurrency Borrowers
ANACOMP, INC.
By:______________________________
Name:
Title:
ANACOMP, S.A.
<PAGE> 6
By:
Name:
Title:
XIDEX S.A.R.L.
By:
Name:
Title:
ANACOMP GMBH
By:
Name:
Title:
XIDEX GMBH
By:
Name:
Title:
ANACOMP ITALIA SRL
By:
Name:
Title:
ANACOMP A.B. By:
Name:
Title:
ANACOMP HOLDINGS, LTD.
By:
Name:
Title:
ANACOMP LTD.
By:
Name:
Title:
XIDEX LTD.
<PAGE> 7
By:
Name:
Title:
Collateral Agent
CITIBANK, N.A.
as Agent, Administrative Agent
and Collateral Agent
By:
Name:
Title:
Multicurrency Agent
THE FIRST NATIONAL BANK
OF CHICAGO
By:
Name:
Title:
Lenders
Consented
Vetoed
CITIBANK, N.A.
By:______________________________
Name:
Title:
Consented
Vetoed
BANK OF SCOTLAND
By:______________________________
Name:
Title:
<PAGE> 8 Consented
Vetoed
THE BANK OF TOKYO TRUST COMPANY
By:______________________________
Name:
Title:
Consented
Vetoed
BANK ONE, INDIANAPOLIS, N.A.
By:______________________________
Name:
Title:
Consented
Vetoed
COMPAGNIE FINANCIERE DE CIC ET DEL'UNION EUROPEENNE
By:______________________________
Name:
Title:
Consented
Vetoed
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
<PAGE> 9
Consented
Vetoed
MERRILL LYNCH PRIME FUND, INC.
By:______________________________
Name:
Title:
Consented
Vetoed
PILGRIM PRIME RATE TRUST
c/o THE PILGRIM GROUP
By:______________________________
Name:
Title:
Consented
Vetoed
BANK POLSKA KASA OPIEKI, S.A.
By:______________________________
Name:
Title: Multicurrency Lenders
Consented
Vetoed
CITIBANK, N.A.
By:______________________________
Name:
Title:
<PAGE> 10
Consented
Vetoed
THE FIRST NATIONAL BANK OF CHICAGO
By:______________________________
Name:
Title:
Series A Purchasers
Consented
Vetoed
ACE USA LEASING (RM)
By:______________________________
Name:
Title:
Consented
Vetoed
CENTRAL LEASING (USA) INC.
By:______________________________
Name:
Title:
Consented
Vetoed
STICHTING RESTRUCTURED OBLIGATIONS
BACKED BY SENIOR ASSETS (ROSA 2)
Chancellor Senior Secured
Management, Inc., as Portfolio
Advisor
By:______________________________
Name:
Title:
<PAGE> 11
Consented
Vetoed
DELTEC SECURITIES CORPORATION
By:______________________________
Name:
Title: Consented
Vetoed
DIAMOND LEASE COMPANY LTD.
By:______________________________
Name:
Title:
Consented
Vetoed
IBJ LEASING (HONG KONG) LIMITED
By:______________________________
Name:
Title:
Consented
Vetoed
NICHIJUKIN (UK) LIMITED
By:______________________________
Name:
Title:
<PAGE> 12
Series B Purchasers
Consented
Vetoed
ABCDS & Co.
(as Nominee for IDS Financial
Services)
By: _____________________________
Name:
Title:
Consented
Vetoed
BOGEY & CO.
(as Nominee for Sun America Life)
By: _____________________________
Name:
Title:
Consented
Vetoed
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:______________________________
Name:
Title:
Consented
Vetoed
MERRILL LYNCH SENIOR HIGH INCOME
PORTFOLIO, II, INC. By: _____________________________
Name:
Title:
Consented
Vetoed
POLLY & CO
(as Nominee for Safeco HY Bond Fund)
By: _____________________________
Name:
Title:
Consented
Vetoed
PRESIDENTIAL LIFE INSURANCE COMPANY
By:______________________________
Name:
Title:
<PAGE> 13
Consented
Vetoed
SALKED & CO.
(as Nominee for IDS
Financial Services)
By:______________________________
Name:
Title:
Consented
Vetoed
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By:______________________________
Name:
Title:
The foregoing Amendment is hereby acknowledged and the contents thereof are
hereby confirmed this ____ day of ________, 1994:
Guarantor Subsidiaries
ANACOMP, INC. (As Successor In Interest To Xidex Corporation)
ANACOMP CALIFORNIA, INC. (formerly Sun-Flex Company, Inc.)
FLORIDA A.A.C. CORPORATION
STROMBERG DATAGRAPHIX INTERNATIONAL CORP.
ELECTRONIC DATA PREPARATION CORPORATION
KALVAR MICROFILM, INC.
XIDEX DEVELOPMENT COMPANY
By:_______________________________
Name: Title:
<PAGE> 14
AMENDMENT NO. 2
TO AMENDED AND RESTATED MASTER AGREEMENT
Amendment No. 2 dated as of December 2, 1994 (the "Amendment") to the Amended
and Restated Master Agreement referred to below, among Anacomp, Inc. (the
"Company"), the Multicurrency Borrowers, each of the Lenders, the Multicurrency
Lenders, the Series A Purchasers and the Series B Purchasers (as each such term
is hereinafter defined) party hereto, The First National Bank of Chicago
("First Chicago"), as multicurrency agent (the "Multicurrency Agent") and
Citibank, N.A. ("Citibank"), as agent, administrative agent and collateral
agent (the "Collateral Agent").
W I T N E S S E T H:
WHEREAS, the Company, the Multicurrency Borrowers party thereto (the
"Multicurrency Borrowers"), the Lenders party thereto (the "Lenders"), the
Multicurrency Lenders party thereto (the "Multicurrency Lenders"), the Series A
Purchasers party thereto (the "Series A Purchasers"), the Series B Purchasers
party thereto (the "Series B Purchasers"), the Multicurrency Agent and the
Collateral Agent are parties to the Amended and Restated Master Agreement,
dated as of March 22, 1993 (the"Amended and Restated Master Agreement") (unless
otherwise defined herein, all capitalized terms used herein shall have the same
meaning as set forth in the Amended and Restated Master Agreement);
WHEREAS, the Company has requested the Senior Creditors make certain amendments
to Section 3.6 of the Amended and Restated Master Agreement;
WHEREAS, Section 3.6 sets forth certain Interest Coverage Ratios to be complied
with by the Company;
WHEREAS, the Company does not currently believe it will be able to comply with
the Interest Coverage Ratios set forth in the Amended and Restated Master
Agreement for the twelve month period ending on the last day of each Fiscal
Quarter beginning with the Fiscal Quarter ended September 30, 1994 and
thereafter;
<PAGE> 15
NOW, THEREFORE, the parties hereto hereby agree as
follows:
ARTICLE I
AMENDMENT
SECTION 1.01. Amendment Amended and Restated Master Agreement. The Amended and
Restated Master Agreement is hereby amended by deleting Section 3.6 in its
entirety and replacing it as follows:
3.6 Interest Coverage Ratio. The Company shall not permit its Interest
Coverage Ratio, for any twelve-month period ending on the last day of each
Fiscal Quarter specified below to be less than the ratio set forth opposite
such day:
Twelve Month Period Ending on
Last Day of Each Fiscal
Minimum Interest
<TABLE>
<CAPTION>
Period Ending Coverage Ratio
<S> <C>
September 30, 1992
through and including
June 30, 1993 1.90:1.00
September 30, 1993 through and including
June 30, 1994 1.90:1.00
September 30, 1994
through and including
December 31, 1994 1.80:1.00
March 31, 1995 1.85:1.00
June 30, 1995 1.90:1.00
September 30, 1995
and thereafter 2:00:1:00
<PAGE> 16
ARTICLE II
CONDITIONS TO EFFECTIVENESS
SECTION 2.01. Conditions to Effectiveness. This Amendment is subject to the
following conditions precedent:
(a) the Collateral Agent shall have received (i) counter-parts of this
Amendment executed by the Company and the Majority Creditors, each of which
counter-parts, in the case of the Majority Creditors, shall have the box
labeled "consented" checked, and (ii) an acknowledgement and confirmation of
this Amendment executed by the Guarantor Subsidiaries;
(b) the Collateral Agent shall have determined that this Amendment shall not
have been vetoed by Senior Creditors holding the requisite percentage of Senior
Secured Indebtedness specified in Section 8.1(a)(iv);
(c) the Collateral Agent shall have received a Certificate of a Responsible
Officer of the Company, and such other evidence reasonably requested by the
Collateral Agent, certifying that the representations and warranties set forth
in Section 3.01 hereof are true and correct in all material respects on and as
of the effective date hereof; and
(d) the representations and warranties set forth in Section 3.01 hereof shall
be true and correct in all material respects on and as of the effective date
hereof; and
(e) the Senior Creditors shall have received an amendment fee in an amount
equal to 1/8 of 1% of their outstanding Term Loan Notes, Series C Term Notes,
Series B Senior Notes, Revolving Credit Commitment and Multicurrency
Commitment.
<PAGE> 17
ARTICLE III
MISCELLANEOUS
SECTION 3.01. Representations and Covenants of the Company. The Company hereby
represents and warrants to the Senior Creditors party hereto that:
(a) Due Authorization, No Conflicts, Etc. The execution, delivery and
performance by the Company of this Amendment and any and all other agreements,
instruments and documents to be executed and/or delivered by either the Company
pursuant hereto or in connection herewith, and the consummation by the Company
of the transactions contemplated hereby or thereby: (i) are within the
Company's corporate powers; (ii) have been duly authorized by all necessary
corporate action, including, without limitation, the consent of stockholders
where required; (iii) do not and will not (1) contravene either the Company's
or any of its Subsidiaries' respective certificate of incorporate or by-laws or
other comparable governing documents (2) violate any Requirement of Law, or any
order or decree of any court or Governmental Authority, or (3) conflict with or
result in the breach of, or constitute a default under, or result in the
termination of, any Contractual Obligation of either the Company or any of its
Subsidiaries; and (iv) do not require the consent, authorization by, or
approval of, or notice to, or filing or registration with, any Governmental
Authority or any other Person.
(b) Due Execution, Etc. This Amendment has been duly executed and delivered
by the Company and the Multicurrency Borrowers and duly acknowledged, executed
and delivered by the Guarantor Subsidiaries and constitute the legal, valid and
binding obligation of the Company, the Multicurrency Borrowers and the
Guarantor Subsidiaries, enforceable against them in accordance with its terms.
<PAGE> 18
SECTION 3.02. Effect on the Credit Documents.
(a) Except for the matters specifically amended herein, the Amended and
Restated Master Agreement, the Collateral Documents and each other Credit
Document, shall remain and continue to be in full force and effect in
accordance with its terms, and the Amended and Restated Master Agreement, each
Collateral Document and each other Credit Document is hereby ratified,
confirmed and acknowledged by each party thereto.
(b) The execution, delivery and effectiveness of this Amendment shall not
operate as a waiver of any right, power or remedy of the Collateral Agent, the
Agent or the Administrative Agent or any other Secured Creditor under the
Amended and Restated Master Agreement, the Collateral Documents or any of the
other Credit Documents, nor, except as specifically provided for herein,
constitute an amendment to, a waiver of, or a consent to non-compliance with,
any provision of the Amended and Restated Master Agreement, any of the
Collateral Documents or any of the other Credit Documents.
SECTION 3.03. Execution in Counterparts. This Amendment may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed to
be an original, and all of which taken together shall constitute one and the
same instrument.
SECTION 3.04. Governing Law. This amendment shall be governed by, and
construed in accordance with, the internal laws (as opposed to conflict of law
provisions) of the state of New York.
SECTION 3.05. Headings. Section headings in this Consent are included herein
for convenience of reference only and shall not constitute a part of this
Consent for any other purpose.
IN WITNESS WHEREOF, the parties hereto have caused this Consent to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.
ANACOMP, INC.
By:______________________________
Name:
Title:
Multicurrency Borrowers
<PAGE> 19
ANACOMP, INC.
By:______________________________
Name:
Title:
ANACOMP, S.A. By:
Name:
Title:
XIDEX S.A.R.L.
By:
Name:
Title:
ANACOMP GMBH
By:
Name:
Title:
XIDEX GMBH
By:
Name:
Title:
<PAGE> 20
ANACOMP ITALIA SRL
By:
Name:
Title:
ANACOMP A.B.
By:
Name:
Title:
ANACOMP HOLDINGS, LTD.
By:
Name:
Title:
ANACOMP LTD.
By:
Name:
Title:
XIDEX LTD.
By:
Name:
Title: <PAGE> 21
Collateral Agent
CITIBANK, N.A.
as Agent, Administrative Agent
and Collateral Agent
By:
Name:
Title:
Multicurrency Agent
THE FIRST NATIONAL BANK
OF CHICAGO
By:
Name:
Title:
Lenders
Consented
Vetoed
CITIBANK, N.A.
By:______________________________
Name:
Title:
Consented
Vetoed
BANK OF SCOTLAND
By:______________________________
Name:
Title:
<PAGE> 22
Consented
Vetoed
THE BANK OF TOKYO TRUST COMPANY
By:______________________________
Name:
Title:
Consented
Vetoed
BANK ONE, INDIANAPOLIS, N.A.
By:______________________________
Name:
Title:
Consented Vetoed
MERRILL LYNCH PRIME RATE PORTFOLIO
By: Merrill Lynch Asset Management, L.P.,
as Investment Advisor
By:____________________________________
Name:
Title:
Consented
Vetoed
COMPAGNIE FINANCIERE DE CIC ET DE
L'UNION EUROPEENNE
By:______________________________
Name:
Title:
<PAGE> 23
Consented
Vetoed
THE FIRST NATIONAL BANK OF BOSTON
By:______________________________
Name:
Title:
Consented
Vetoed
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By:______________________________
Name:
Title:
Consented
Vetoed
PILGRIM PRIME RATE TRUST
c/o THE PILGRIM GROUP
By:______________________________
Name:
Title:
Consented
Vetoed
BANK POLSKA KASA OPIEKI, S.A.
By:______________________________
Name:
Title:
Multicurrency Lenders
Consented
Vetoed CITIBANK, N.A.
By:
Name:
Title:
Consented
Vetoed
THE FIRST NATIONAL BANK OF CHICAGO
By:
Name:
Title:
<PAGE> 24
Series B Purchasers
Consented
Vetoed
ABCDS & Co.
(as Nominee for IDS Trust Company)
By: _____________________________
Name:
Title:
Consented
Vetoed
BOGEY & CO.
(as Nominee for Sun America Life)
By: _____________________________
Name:
Title:
Consented
Vetoed
JOHN HANCOCK MUTUAL LIFE
INSURANCE COMPANY
By:______________________________
Name:
Title:
Consented
Vetoed
SENIOR HIGH INCOME PORTFOLIO,II, INC.
By: _____________________________
Name:
Title:
<PAGE> 25
Consented
Vetoed
POLLY & CO
(as Nominee for Safeco HY Bond Fund)
By: _____________________________
Name: Title:
Consented
Vetoed
PRESIDENTIAL LIFE INSURANCE COMPANY
By:______________________________
Name:
Title:
Consented
Vetoed
SALKED & CO.
(as Nominee for IDS Financial Services)
By:______________________________
Name:
Title:
Consented
Vetoed
TEACHERS INSURANCE AND ANNUITY
ASSOCIATION OF AMERICA
By:______________________________
Name:
Title:
The foregoing Amendment is hereby acknowledged and the contents thereof are
hereby confirmed this ____ day of ________, 1994:
Guarantor Subsidiaries
ANACOMP, INC. (As Successor In Interest To Xidex Corporation)
ANACOMP CALIFORNIA, INC. (formerly Sun-Flex Company, Inc.)
FLORIDA A.A.C. CORPORATION
STROMBERG DATAGRAPHIX INTERNATIONAL CORP.
ELECTRONIC DATA PREPARATION CORPORATION
KALVAR MICROFILM, INC.
XIDEX DEVELOPMENT COMPANY
By:_______________________________
Name:
Title:
</TABLE>
<PAGE> 1
EXHIBIT 11
CALCULATIONS OF EARNINGS PER COMMON AND COMMON EQUIVALENT
SHARE AND EARNINGS PER COMMON SHARE ASSUMING FULL DILUTION
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Year Ended September 30,
1994 1993 1992
Common and Common and Common and
common Fully common Fully common Fully
equivalent diluted equivalent diluted equivalent diluted
<S> <C> <C> <C> <C> <C> <C>
Net income available
to common stockholders. . . . $ 12,797 $ 12,797 $ 16,433 $ 16,433 $ 24,763 $ 24,763
========= ========= ========= ========= ========= =========
Weighted average number of
shares outstanding . . . . . 43,570 43,570 40,199 40,199 39,217 39,217
Adjustments:
Assumed issuances under
acquisition contingencies 309 309 -- -- -- --
Assumed issuances under stock
option and stock purchase
plans . . . . . . . . . . . . 1,151 1,232 1,389 1,485 1,986 1,986
Assumed exercise of warrants 1,661 1,780 1,162 1,280 510 1,568
46,691 46,891 42,750 42,964 41,713 42,771
========= ========= ========= ========= ========= =========
Earnings per common share . . $ .27 $ .27 $ .39 $ .39 $ .59 $ .58
========= ========= ========= ========= ========= =========
</TABLE>
<PAGE> 1
EXHIBIT 21
SIGNIFICANT SUBSIDIARIES OF ANACOMP, INC.
<TABLE>
<CAPTION>
<S> <C> <C>
Percentage of
State or Country Voting Securities
Name of Incorporation Owned *
Anacomp, GmbH Germany 100%
Anacomp, Ltd. United Kingdom 100%
Anacomp, S.A. France 100%
Xidex (U.K.) Ltd. United Kingdom 100%
* Directly or indirectly
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated December 7, 1994, included in this Form 10-K into the
Company's previously filed Registration Statement File No.2-96027, File No.2-
70438, File No.2-75588, File No.2-81024, File No.2-96028, File No.2-98182, File
No.33-3343, File No.33-5375, File No.33-16750, File No.33-27223, File No.33-
31178, File No.33-31645, File No.2-58406, File No.2-73543, File No.2-96029,
File No.33-5374, File No.33-5373, File No.33-19723, File No.33-22643, File
No.33-22644, File No.33-28943, File No.33-28944, File No.33-38211, File No.33-
52951 and File No.33-53271.
Indianapolis, Indiana ARTHUR ANDERSEN LLP
December 7, 1994
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM ANACOMP, INC.'S SEPTEMBER 30, 1994 FORM 10-K ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1994
<PERIOD-END> SEP-30-1994
<CASH> 19,871
<SECURITIES> 0
<RECEIVABLES> 117,441
<ALLOWANCES> 3,550
<INVENTORY> 63,375
<CURRENT-ASSETS> 214,129
<PP&E> 167,343
<DEPRECIATION> 100,574
<TOTAL-ASSETS> 658,639
<CURRENT-LIABILITIES> 208,313
<BONDS> 376,092
0
24,478
<OTHER-SE> 49,756
<TOTAL-LIABILITY-AND-EQUITY> 658,639
<SALES> 369,088
<TOTAL-REVENUES> 592,599
<CGS> 264,269
<TOTAL-COSTS> 513,022
<OTHER-EXPENSES> 2,952
<LOSS-PROVISION> 695
<INTEREST-EXPENSE> 65,633
<INCOME-PRETAX> 16,896
<INCOME-TAX> 9,100
<INCOME-CONTINUING> 7,796
<DISCONTINUED> (841)
<EXTRAORDINARY> 0
<CHANGES> 8,000
<NET-INCOME> 12,797
<EPS-PRIMARY> .27
<EPS-DILUTED> .27
</TABLE>
