<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended December 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8328
ANACOMP, INC.
Indiana 35-1144230
11550 North Meridian Street
Post Office Box 40888
Indianapolis, Indiana 46240
Registrant's Telephone Number is (317) 844-9666
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 and Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
The number of shares outstanding of the Common Stock of the registrant on
December 31, 1994, the close of the period covered by this report, was
45,895,285.
<PAGE> 2
ANACOMP, INC. AND SUBSIDIARIES
Index
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets
December 31, 1994 and September 30, 1994 ................ 2
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1994 and 1993............ 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1994 and 1993............ 4
Condensed Consolidated Statements of Stockholders' Equity
Three Months Ended December 31, 1994 and 1993............ 5
Notes to Condensed Consolidated Financial Statements..... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K........................... 14
SIGNATURES ............................................................ 15
</TABLE>
<PAGE> 3
CONDENSED CONSOLIDATED BALANCE SHEETS
Anacomp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
(Dollars in thousands, Dec. 31, Sept. 30,
except per share amounts) 1994 1994
<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 5,337 $ 19,871
Accounts and notes receivable, less allowances for
doubtful accounts of $3,447 and $3,550, respectively . . 118,496 117,441
Current portion of long-term receivables . . . . . . . . . 8,630 8,021
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 64,073 63,375
Prepaid expenses and other . . . . . . . . . . . . . . . . 7,048 5,421
Total current assets . . . . . . . . . . . . . . . . . . . . 203,584 214,129
Property and equipment, at cost less
accumulated depreciation and amortization . . . . . . . . . 57,750 66,769
Long-term receivables, net of current portion . . . . . . . . 20,042 16,383
Excess of purchase price over net assets of businesses
acquired and other intangibles, net. . . . . . . . . . . . . 276,969 279,607
Deferred tax asset, net of valuation allowance of $57,000 . . 28,000 29,000
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 51,784 52,751
$638,129 $658,639
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . $ 95,806 $ 45,222
Accounts payable . . . . . . . . . . . . . . . . . . . . . 79,686 82,790
Accrued compensation, benefits and withholdings . . . . . . 12,215 16,573
Accrued income taxes . . . . . . . . . . . . . . . . . . . 9,609 9,000
Accrued interest. . . . . . . . . . . . . . . . . . . . . . 11,792 19,701
Other accrued liabilities . . . . . . . . . . . . . . . . . 45,895 35,027
Total current liabilities . . . . . . . . . . . . . . . . . . 255,003 208,313
Long-term debt, net of current portion. . . . . . . . . . . . 300,001 366,625
Other noncurrent liabilities. . . . . . . . . . . . . . . . . 8,561 9,467
Total noncurrent liabilities. . . . . . . . . . . . . . . . . 308,562 376,092
Redeemable preferred stock, $.01 par value,
issued and outstanding 500,000 shares
(aggregate preference value of $25,000). . . . . . . . . . . 24,502 24,478
Stockholders' equity:
Common stock, $.01 par value, authorized 100,000,000
shares, 45,895,285 and 45,728,505 issued, respectively . . 459 457
Capital in excess of par value of common stock . . . . . . 182,223 181,843
Cumulative translation adjustment . . . . . . . . . . . . . (1,241) (269)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . (131,379) (132,275)
Total stockholders' equity. . . . . . . . . . . . . . . . . . 50,062 49,756
$638,129 $658,639
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Three months ended
(Dollars in thousands, December 31,
except per share amounts) 1994 1993
(Unaudited)
<S> <C> <C>
Revenues:
Services provided . . . . . . . . . . . . . . . . . . . . $ 54,880 $ 54,424
Equipment and supply sales . . . . . . . . . . . . . . . 102,317 84,359
157,197 138,783
Operating costs and expenses:
Costs of services provided . . . . . . . . . . . . . . . 38,122 37,274
Costs of equipment and supplies sold. . . . . . . . . . . 74,220 59,018
Selling, general and administrative expenses . . . . . . 24,447 21,848
136,789 118,140
Income from continuing operations before interest, other
income, income taxes, and cumulative effect of
accounting change . . . . . . . . . . . . . . . . . . . . 20,408 20,643
Interest income . . . . . . . . . . . . . . . . . . . . . . 475 777
Interest expense and fee amortization . . . . . . . . . . . (17,645) (16,610)
Other income (expense). . . . . . . . . . . . . . . . . . . 162 (270)
(17,008) (16,103)
Income from continuing operations before
income taxes and cumulative
effect of accounting change . . . . . . . . . . . . . . . 3,400 4,540
Provision for income taxes . . . . . . . . . . . . . . . . 1,800 2,400
Income from continuing operations before
cumulative effect of accounting change . . . . . . . . . 1,600 2,140
Loss from discontinued operations, net of
income tax benefits . . . . . . . . . . . . . . . . . . . (164) (239)
Cumulative effect on prior years of a change in
accounting for income taxes . . . . . . . . . . . . . . . -- 8,000
Net income. . . . . . . . . . . . . . . . . . . . . . . . . 1,436 9,901
Preferred stock dividends and discount accretion . . . . . 540 540
Net income available to common stockholders . . . . . . . . $ 896 $ 9,361
======== ========
Earnings per common and common equivalent share:
Continuing operations (net of preferred stock
dividends and discount accretion) . . . . . . . . . . $ .02 $ .04
Discontinued operations . . . . . . . . . . . . . . . . . -- (.01)
Cumulative effect on prior years of a change in
accounting for income taxes . . . . . . . . . . . . . . -- .18
Net income. . . . . . . . . . . . . . . . . . . . . . . . $ .02 $ .21
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
Three months ended
December 31,
(Dollars in thousands) 1994 1993
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 1,436 $ 9,901
Adjustments to reconcile net income to net
cash used in operating activities:
Cumulative effect of a change in accounting for income taxes -- (8,000)
Depreciation and amortization............................... 11,515 9,278
Loss on disposition of assets............................... 72 69
Change in assets and liabilities, net of acquisitions:
Decrease (increase) in accounts and
long-term receivables................................... (6,297) 11,045
Decrease (increase) in inventories and prepaid expenses... (2,675) 459
Increase in other assets.................................. (3,588) (3,153)
Decrease in accounts payable and accrued expenses......... (8,217) (19,974)
Decrease in other noncurrent liabilities.................. (906) (921)
Net cash used in operating activities................... (8,660) (1,296)
Cash flows from investing activities:
Proceeds from sale of assets.................................. 14,519 7,018
Purchases of property, plant and equipment.................... (3,236) (3,039)
Payments to acquire companies and customer rights............. (542) (2,600)
Net cash provided by investing activities............... 10,741 1,379
Cash flows from financing activities:
Proceeds from issuance of common stock ....................... 238 559
Proceeds from revolving line of credit and
long-term borrowings........................................ 20,000 22,628
Principal payments on long-term debt.......................... (36,209) (19,771)
Preferred dividends paid...................................... (516) (516)
Net cash provided by (used in) financing activities .... (16,487) 2,900
Effect of exchange rate changes on cash......................... (128) (8)
Increase (decrease) in cash and cash equivalents................ (14,534) 2,975
Cash and cash equivalents at beginning of period................ 19,871 24,922
Cash and cash equivalents at end of period...................... $ 5,337 $ 27,897
======== ========
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest...................................................... $ 22,294 $ 21,775
Income taxes.................................................. $ 2,508 $ 460
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Anacomp, Inc., and Subsidiaries
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1994 Capital in
excess of
par value Cumulative Retained
Common of Common Translation earnings
(In thousands) Stock Stock Adjustment (deficit) Total
(Unaudited)
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1994 ...... $ 457 $181,843 $ (269) $(132,275) $ 49,756
Exercise of stock options .......... -- 14 -- -- 14
Shares issued for purchases under
the Employee Stock Purchase Plan.. 1 223 -- -- 224
Preferred stock dividends .......... -- -- -- (516) (516)
Accretion of redeemable preferred
stock discount ................... -- -- -- (24) (24)
Translation adjustments for period . -- -- (972) -- (972)
Graham Stock Issuances 1 143 -- -- 144
Net income for the period .......... -- -- -- 1,436 1,436
BALANCE AT DECEMBER 31, 1994........ $ 459 $182,223 $ (1,241) $(131,379) $ 50,062
======== ======== ========= ========= =========
THREE MONTHS ENDED DECEMBER 31, 1993 Capital in
excess of
par value Cumulative Retained
Common of Common Translation earnings
(In thousands) Stock Stock Adjustment (deficit) Total
(Unaudited)
BALANCE AT SEPTEMBER 30, 1993 ...... $ 406 $ 163,209 $ (4,744) $(145,072) $ 13,799
Exercise of stock options .......... 2 300 -- -- 302
Shares issued for purchases under
the Employee Stock Purchase Plan.. 1 256 -- -- 257
Preferred stock dividends .......... -- -- -- (516) (516)
Accretion of redeemable preferred
stock discount ................... -- -- -- (24) (24)
Translation adjustments for period . -- -- 192 -- 192
Net income for the period .......... -- -- -- 9,901 9,901
BALANCE AT DECEMBER 31, 1993........ $ 409 $ 163,765 $ (4,552) $(135,711) $ 23,911
======== ========= ========= ========= =========
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
ANACOMP, INC. AND SUBSIDIARIES
1. The condensed consolidated financial statements included herein have
been prepared by Anacomp, Inc. (Anacomp or the Company) and its wholly-
owned subsidiaries without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared
in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations; however,
the Company believes that the disclosures are adequate to make the
information presented not misleading. The condensed consolidated
financial statements included herein should be read in conjunction with
the financial statements and the notes thereto included in the Company's
Annual Report to Stockholders and its Report on Form 10-K as of
September 30, 1994.
In the opinion of management, the accompanying interim financial
statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the consolidated
financial condition, results of operations, and changes in financial
position and stockholders' equity of Anacomp and its subsidiaries for
interim periods. Certain amounts in the prior interim consolidated
financial statements have been reclassified to conform to the current
period presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Consolidation
The consolidated financial statements include the accounts of Anacomp,
Inc. and its wholly-owned subsidiaries. Material intercompany
transactions have been eliminated.
Foreign Currency Translation
Substantially all assets and liabilities of Anacomp's international
operations are translated at the period-end exchange rates; income and
expenses are translated at the average exchange rates prevailing during
the period. 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.
<PAGE> 8
Revenue Recognition
Revenues from sales of products and services or from lease of equipment
under sales-type leases are principally recorded based on shipment of
products or performance of services. To a lesser extent (3% and 1% of
consolidated revenues for the three months ending December 31, 1994 and
1993 respectively), revenue is recognized for certain COM system
customers upon the transfer of ownership risk to such customers,
including the completion of the manufacture of the equipment to a
specific order, transfer of title to such customers and customer
commitment for payment. Under sales-type leases, 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. Revenue from maintenance contracts is
recognized in earnings on a pro rata basis over the period of the
agreement.
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis.
<TABLE>
<CAPTION>
The cost of the inventories is distributed as follows:
Dec. 31, Sept. 30,
(In thousands) 1994 1993
<S> <C> <C>
Finished goods ..................... $ 38,368 $ 41,661
Work in process .................... 7,551 5,903
Raw materials and supplies ......... 18,154 15,811
$ 64,073 $ 63,375
======== ========
</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.
Research and Development
The costs associated with research and development programs are expensed
as incurred.
Included in "Other assets" on the accompanying Condensed Consolidated
Balance Sheets are unamortized deferred software costs. 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 period 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.
<PAGE> 9
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 period by determining net realizable value.
Sale/Leaseback Transactions
Anacomp enters into sale/leaseback transactions relating to COM systems
installed in the Company's data service centers. Part of the proceeds
were treated as fixed asset sales and the remainder as sales of
equipment. Revenues of $3,530,000 and $750,000 were recorded in the
three months ended December 31, 1994 and 1993 respectively. All profits
are deferred and are being recognized over the applicable leaseback
periods.
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.
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.
3. Income tax expense is reported during interim periods using an estimated
annual effective tax rate for the the taxable jurisdictions in which the
Company operates.
At December 31, 1994 the Company had U.S. federal net operating loss
carryforwards ("NOL's") of approximately $200 million available to
offset future taxable income. These NOL's expire commencing in 1996.
4. The computation of earnings per common and common equivalent 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 and exercise of warrants.
<PAGE> 10
The fully diluted per share computation reflects the effect of common
shares contingently issuable upon the exercise of warrants in periods in
which such exercise would cause dilution. 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.
Fully diluted earnings per share are the same as primary earnings per
share for the periods presented.
5. On January 23, 1995, the Company filed a Registration Statement with the
Securities and Exchange Commission relating to a proposed public
offering of $225 million of Senior Secured Notes due 2002 (the Notes).
The Registration Statement relating to these securities was filed with
the Securities and Exchange Commission but has not yet become effective.
These securities may not be sold nor may offers to buy be accepted prior
to the time the Registration Statement becomes effective and the
offering will only be made pursuant to a prospectus.
The net proceeds will be used to retire approximately $201.7 million of
Anacomp's indebtedness and trade payables and to pay expenses related
thereto. The remainder of the net proceeds, approximately $7.4 million,
will be retained by the Company for general corporate purposes.
<TABLE>
<CAPTION>
The estimated sources and uses of the funds are as follows:
<S> <C>
(In thousands)
Sources:
Senior Secured Notes due 2002 . . . . . . . . . $225,000
Uses: ========
Revolving Loan due 1995 . . . . . . . . . . . . $ 32,000
Multicurrency Revolving Loan due 1995 . . . . . 29,800
Term Loans due 1996 . . . . . . . . . . . . . . 17,600
12.25% Series B Senior Notes due 1997 . . . . . 65,000
13 7/8% Convertible Subordinated
Debentures due January 15, 2002. . . . . . . . 23,200
9% Convertible Subordinated Debentures
due January 15, 1996 . . . . . . . . . . . . . 10,500
SKC Trade Payable due 2001 . . . . . . . . . . . 25,000
Graham Note payable at 10% due July 15, 1997 . . 3,500
Refinancing Fees and Expenses . . . . . . . . . 11,000
General Corporate Purposes . . . . . . . . . . . 7,400
Total . . . . . . . . . . . . . . . . . . . . $225,000
========
</TABLE>
In connection with the offering, the Company is soliciting consents from
the holders of the Company's 15% Senior Subordinated Notes due 2000 in
order to modify or eliminate certain provisions of the indenture
relating to such Subordinated Notes necessary to permit, among other
things, the public offering.
The Company expects to incur approximately $11 million of costs in
connection with the offering, including consent fees paid to holders of
the 15% Notes, which amounts will be capitalized and amortized over the
term of the related notes.
<PAGE> 11
Also in connection with the offering, the Company will write-off
approximately $2.6 million of previously deferred debt issuance costs
and $2.3 million of original issue discount on the 13 7/8% Convertible
Subordinated Debentures and pay approximately $5 million of "make-whole"
payments to the Series B Senior Note holders. These costs will be
reflected in Anacomp's income statement as an extraordinary loss in the
period the related debt is extinguished with the proceeds from the
Notes.
6. On January 20, 1995 the Company issued 71,876 shares of common stock
pursuant to the Stock Purchase Agreement dated April 8, 1994 between the
Company and Graham Acquisition Corporation ("Graham Shareholders"). The
shares represent a portion of the contingent deferred purchase price
payable in connection with the Company's acquisition of Graham. The
Graham Shareholders transferred their right to the common shares to
Carlisle Companies, Inc. ("Carlisle") pursuant to the agreement dated
May 4, 1994 between Carlisle and Graham Shareholders. The Company
intends to file a Registration Statement with the Securities and
Exchange Commission relating to the sale by Carlisle of the 71,876
shares of common stock. The Company will not receive any proceeds from
this offering.
<PAGE> 12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
General
Total revenues for the three months ended December 31, 1994 increased $18.4
million over the same period of the prior year. The increase is largely the
result of contributions from two acquisitions made in fiscal 1994:
approximately $13.8 million from the Graham Magnetics acquisition which was
completed in May 1994, and $2.7 million from the acquisition of the COM
services customer base of 14 data service centers of National Business
Systems, Inc. ("NBS"), which was effective January 3, 1994.
Costs of services provided as a percent of services revenue were 69% in
the first quarter of fiscal 1995, compared to 68% in the first quarter of
fiscal 1994. Costs of equipment and supplies sold as a percent of
equipment and supplies sales were 73% in the first quarter of fiscal 1995
compared to 70% in the first quarter of fiscal 1994. The increase is
primarily due to the relatively greater proportion of magnetic sales in the
current period as a result of the Graham Magnetics acquisition and the lower
average gross margins on such sales.
Selling, general and administrative expenses were 16% of revenue in both
periods.
Interest expense and fee amortization includes $1.4 million of accelerated
amortization of debt fees as a result of accelerated debt paydowns that
occurred in the first quarter. In addition to scheduled debt paydowns of
$13.1 million, $20.5 million of Term Loan and Series A Notes were repaid
during the first quarter.
Products and Services
COM systems revenues increased $4.9 million with the sale or operating lease
of 77 systems to third party users in the first quarter of fiscal 1995,
compared to 56 systems in the first quarter of fiscal 1994. These sales
included 18 systems to Eastman Kodak under an Original Equipment
Manufacturer agreement, and 10 systems to First Image Management Company
("First Image"). These systems, for which risk of ownership has
transferred, are held by the Company and will be shipped at these customers'
direction during calendar 1995. There can be no assurance that either First
Image or Eastman Kodak will purchase additional XFP 2000 systems during
calendar 1995. Eastman Kodak purchased 18 systems under the same
arrangements in the first quarter of fiscal 1994. Also included in COM
systems revenues is $3.5 million of sales of equipment for Anacomp data
centers under sale and leaseback arrangements in the current period compared
to $750,000 in the same period of the prior year. Operating margins as a
percent of revenue were essentially unchanged compared to the first quarter
of fiscal 1994, excluding the effect of the sale and leaseback revenues for
which all profits are deferred and recognized over the leaseback period.
Micrographics supplies and equipment revenues decreased 2% in the first
quarter of fiscal 1995 compared to the first quarter of fiscal 1994.
<PAGE> 13
Original film sales decreased 2% while duplicate film sales increased 8%.
The duplicate film increase is due primarily to the reacquisition of First
Image as a customer and the addition of Eastman Kodak's European duplicate
film requirements. Retrieval products sales were level compared to the same
period of fiscal 1994. Micrographics supplies and equipment operating
margins as a percent of revenue were up slightly.
Micrographics services revenues increased 5% in the first quarter of fiscal
1995 compared to the first quarter of fiscal 1994 on an 18% increase in
volume, 14% of which is attributable to the NBS acquisition. COM service
revenues were adversely affected by a decline in average selling prices.
Operating margins as a percent of revenue decreased 3% as the reduction in
selling prices exceeded reductions in production costs.
Maintenance services revenues decreased 6% in part due to reduced pricing to
a major customer. Operating margins as a percent of revenue improved
slightly.
Magnetics revenues increased $2.0 million, or 11%, in the first quarter of
fiscal 1995 compared to the first quarter of fiscal 1994, in addition to the
$13.8 million contribution from the acquisition of Graham Magnetics. The
increase was due in part to increased sales of diskette media, or "cookies".
Magnetics operating margins as a percent of revenue improved 4% in the first
quarter compared to the same period of the prior year, due in part to
operating efficiencies resulting from the Graham acquisition.
Liquidity and Capital Resources
On January 23, 1995, Anacomp filed a Registration Statement with the
Securities and Exchange Commission to register $225 million of Senior
Secured Notes due 2002 (the "Notes"). Salomon Brothers Inc will be lead
manager and Smith Barney Inc. will be co-manager of the offering.
The net proceeds from the offering will be used to retire $176.7 million of
debt representing substantially all of Anacomp's debt other than the 15%
Senior Subordinated Notes ( the "15% Notes"), including the revolving credit
facilities which mature in October, 1995. The Company will also repay the
$25 million trade payable owed to SKC America, Inc. The Company expects to
incur approximately $11 million of costs in connection with the offering,
including consent fees paid to holders of the 15% Notes, which amounts will
be capitalized and amortized over the term of the related notes.
Also in connection with the offering, the Company will write-off
approximately $2.6 million of previously deferred debt issuance costs and
$2.3 million of original issue discount on the 13 7/8% Convertible
Subordinated Debentures and pay approximately $5 million of "make-whole"
payments to the Series B Senior Note holders. These costs will be reflected
in Anacomp's income statement as an extraordinary loss in the period the
related debt is extinguished with the proceeds from the Notes.
The Company is soliciting consents from the holders of the 15% Notes in
order to modify or eliminate certain provisions of the indenture to permit,
among other things, the Notes offering.
<PAGE> 14
During the first quarter, Anacomp repaid $33.7 million of Term, Series A and
Series B long-term debt with proceeds from sale and leaseback transactions
of data service center equipment ($13.0 million), drawdowns on the revolving
credit lines ($18.1 million), and available cash reserves ($2.6 million).
Anacomp's working capital at December 31, 1994, excluding the current
portion of long-term debt which is intended to be refinanced as discussed
above, amounted to $44 million compared to $51 million at September 30,
1994. As disclosed in the Consolidated Statements of Cash Flows, net cash
used in operating activities increased to $8.7 million for the first quarter
compared to $1.3 million in the comparable prior period, as increased sales
in the current year resulted in relatively higher levels of accounts
receivable. Net cash provided by investing activities increased to $10.7
million in the current quarter, compared to $1.4 million in the comparable
prior period, primarily as a result of the sale and leaseback of data
service center equipment. Net cash used in financing activities increased
as a result of the debt paydowns described above.
If the proposed Notes offering is not completed, the Company intends to
generate additional liquidity through alternative debt offerings, equity
offerings, or conversion of existing assets to cash. The Company believes
that such sources, along with operating cash flow, will adequately fund
operations, debt service, and planned capital expenditures over the next 12
months.
<PAGE> 15
ANACOMP, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
PAGE NUMBER
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
<S> <C>
(a) Exhibits
(11) Computation of Earnings per Common Share. 16
(27) Financial data schedule (required for electronic
filing only)
(b) Reports on Form 8-K
There were no reports on Form 8-K filed during the
quarter ended December 31, 1994.
</TABLE>
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities and 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.
/s/ Donald L. Viles
Donald L. Viles
Vice President and
Chief Accounting Officer
Dated this 14th day of February, 1995.
<PAGE> 1
EXHIBIT 11
Anacomp, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three months ended
December 31,
(In thousands, except per share amounts) 1994 1993
(Unaudited)
<S> <C> <C>
Earnings per Common Share:
Net income available to common stockholders.... $ 896 $ 9,361
======= =======
Shares:
Weighted average number of shares
outstanding .................................. 45,843 40,799
Adjustments:
Assumed issuances under acquisition
contingencies................................ 1,134 --
Assumed issuances under stock option
and stock purchase plans..................... 532 2,783
Total shares ..................................... 47,509 43,582
======= =======
Earnings per common share......................... $ .02 $ .21
======= =======
</TABLE>
<PAGE> 2
EXHIBIT 11
Anacomp, Inc. and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARE
ASSUMING FULL DILUTION
<TABLE>
<CAPTION>
Three months ended
December 31,
(In thousands, except per share amounts) 1994 1993
(Unaudited)
<S> <C> <C>
Earnings per Common Share:
Net income available to common stockholders.... $ 896 $ 9,361
======= =======
Shares:
Weighted average number of shares
outstanding .................................. 45,843 40,799
Adjustments:
Assumed issuances under acquisition
contingencies................................ 1,134 --
Assumed issuances under stock option
and stock purchase plans..................... 628 3,656
Total shares ..................................... 47,605 44,455
======= =======
Earnings per common share......................... $ .02 $ .21
======= =======
</TABLE>
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 DECEMBER 31, 1994 FORM 10-Q QUARTERLY REPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> DEC-31-1994
<CASH> 5,337
<SECURITIES> 0
<RECEIVABLES> 118,496
<ALLOWANCES> 3,447
<INVENTORY> 64,073
<CURRENT-ASSETS> 203,584
<PP&E> 158,798
<DEPRECIATION> 101,048
<TOTAL-ASSETS> 638,129
<CURRENT-LIABILITIES> 255,003
<BONDS> 308,562
0
24,502
<OTHER-SE> 50,062
<TOTAL-LIABILITY-AND-EQUITY> 638,129
<SALES> 102,317
<TOTAL-REVENUES> 157,197
<CGS> 74,220
<TOTAL-COSTS> 136,789
<OTHER-EXPENSES> 637
<LOSS-PROVISION> 110
<INTEREST-EXPENSE> 17,645
<INCOME-PRETAX> 3,400
<INCOME-TAX> 1,800
<INCOME-CONTINUING> 1,600
<DISCONTINUED> (164)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 896
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
