<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 June 30, 1996
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
Indicate by check mark whether the registrant has filed all reports required to
be filed by Section 12, 13 or 15(d) of the Securities and Exchange Act of 1934
subsequent to the distribution of securities under a plan confirmed by a court.
YES X NO
The number of shares outstanding of the Common Stock of the registrant on June
30, 1996, the close of the period covered by this report, was 10,000,000.
<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
June 30, 1996 and September 30, 1995 .................... 2
Condensed Consolidated Statements of Operations
One Month Ended June 30, 1996,
Two and Eight Months Ended May 31, 1996 and
Three and Nine Months Ended June 30, 1995................ 3
Condensed Consolidated Statements of Cash Flows
One Month Ended June 30, 1996,
Eight Months Ended May 31, 1996 and
Nine Months Ended June 30, 1995.......................... 5
Condensed Consolidated Statements of Stockholders' Equity
(Deficit) One Month Ended June 30, 1996,
Eight Months Ended May 31, 1996 and
Nine Months Ended June 30, 1995.......................... 6
Notes to Condensed Consolidated Financial Statements....... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ............. 17
PART II. OTHER INFORMATION
Item 2. Changes in Securities ..................................... 24
Item 6. Exhibits and Reports on Form 8-K........................... 24
SIGNATURES ............................................................ 27
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Reorganized Predecessor
Company Company
June 30, Sept. 30,
(Dollars in thousands, except per share amounts) 1996 1995
(Notes 2 & 3)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . $ 39,727 $ 19,415
Restricted cash . . . . . . . . . . . . . . . . . . . . . . 7,095 --
Accounts and notes receivable, less allowances for
doubtful accounts of $7,434 and $7,367, respectively . . . 62,705 90,091
Current portion of long-term receivables . . . . . . . . . 4,805 6,386
Inventories . . . . . . . . . . . . . . . . . . . . . . . . 37,931 53,995
Prepaid expenses and other. . . . . . . . . . . . . . . . . 4,912 5,306
Total current assets . . . . . . . . . . . . . . . . . . . . 157,175 175,193
Property and equipment, less accumulated depreciation . . . . 24,327 44,983
Long-term receivables, net of current portion . . . . . . . . 8,990 12,322
Excess of purchase price over net assets of businesses
acquired and other intangibles, net. . . . . . . . . . . . . -- 160,315
Reorganization value in excess of identifiable assets . . . . 262,744 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . 7,945 28,216
$461,181 $421,029
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current portion of long-term debt . . . . . . . . . . . . . $ 29,474 $389,900
Accounts payable . . . . . . . . . . . . . . . . . . . . . 51,422 57,368
Accrued compensation, benefits and withholdings . . . . . . 12,346 20,891
Accrued income taxes . . . . . . . . . . . . . . . . . . . 10,540 9,365
Accrued interest. . . . . . . . . . . . . . . . . . . . . . 6,351 40,746
Other accrued liabilities . . . . . . . . . . . . . . . . . 40,715 60,587
Total current liabilities . . . . . . . . . . . . . . . . . . 150,848 578,857
Long-term debt, net of current portion. . . . . . . . . . . . 232,644 --
Other noncurrent liabilities. . . . . . . . . . . . . . . . . 1,971 5,841
Total noncurrent liabilities. . . . . . . . . . . . . . . . . 234,615 5,841
Redeemable preferred stock
$.01 par value, 500,000 shares issued and
outstanding at September 30, 1995
(aggregate preference value of $25,000). . . . . . . . . . . -- 24,574
Stockholders' equity (deficit):
Preferred stock, 1,000,000 shares authorized, none issued . -- --
Common stock, $.01 par value, 20,000,000 and
100,000,000 authorized respectively, 10,000,000 and
46,187,625 issued, respectively. . . . . . . . . . . . . . 100 462
Capital in excess of par value . . . . . . . . . . . . . . 79,666 182,725
Cumulative translation adjustment . . . . . . . . . . . . . 324 1,329
Accumulated deficit . . . . . . . . . . . . . . . . . . . . (4,372) (372,759)
Total stockholders' equity (deficit). . . . . . . . . . . . . 75,718 (188,243)
$461,181 $421,029
======== ========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 4
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Company
One Two Three
Month Months Months
Ended Ended Ended
June 30, May 31, June 30,
(Dollars in thousands, except per share amounts) 1996 1996 1995
(Note 2 & 3)
<S> <C> <C> <C>
Revenues:
Services provided . . . . . . . . . . . . . . . $ 14,351 $ 31,012 $ 55,126
Equipment and supplies. . . . . . . . . . . . . 22,435 47,410 93,807
Total Revenues. . . . . . . . . . . . . . . . . . 36,786 78,422 148,933
Operating costs and expenses:
Costs of services provided . . . . . . . . . . 7,757 17,890 30,277
Costs of equipment and supplies sold . . . . . 17,134 36,629 71,464
Selling, general and administrative expenses . 5,702 15,780 36,140
Amortization of reorganization asset. . . . . . 6,416 -- --
Special charges . . . . . . . . . . . . . . . . -- -- 130,000
37,009 70,299 267,881
Income before interest, other income,
reorganization items, income taxes and
extraordinary credit . . . . . . . . . . . . . . (223) 8,123 (118,948)
Interest expense and fee amortization . . . . . . (2,920) (2,975) (18,310)
Other income (loss) . . . . . . . . . . . . . . . 71 968 (171)
(2,849) (2,007) (18,481)
Income (loss) before reorganization items,
income taxes and extraordinary credit . . . . . (3,072) 6,116 (137,429)
Reorganization Items (Note 5) . . . . . . . . . . . -- 116,090 --
Income (loss) before income taxes and
extraordinary credit. . . . . . . . . . . . . . (3,072) 122,206 (137,429)
Provision for income taxes. . . . . . . . . . . . 1,300 -- 1,400
Net income (loss) before extraordinary credit . . (4,372) 122,206 (138,829)
Extraordinary credit:
Gain on discharge of indebtedness, net of
taxes (Note 3). . . . . . . . . . . . . . . . . -- 52,442 --
Net income (loss) . . . . . . . . . . . . . . . . (4,372) 174,648 (138,829)
Preferred stock dividends and discount accretion. -- -- 540
Net income (loss) available to common . . . . . . $ (4,372)$ 174,648 $(139,369)
======== ======== =========
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Net loss available to common (Note 8). . . . . . $ (.44)
=========
See notes to condensed consolidated financial statements.
</TABLE> <PAGE> 5
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Company
One Eight Nine
Month Months Months
Ended Ended Ended
June 30, May 31, June 30,
(Dollars in thousands, except per share amounts) 1996 1996 1995
(Note 2 & 3)
<S> <C> <C> <C>
Revenues:
Services provided . . . . . . . . . . . . . . . $ 14,351 $130,202 $ 165,962
Equipment and supplies. . . . . . . . . . . . . 22,435 204,396 286,272
Total Revenues. . . . . . . . . . . . . . . . . . 36,786 334,598 452,234
Operating costs and expenses:
Costs of services provided . . . . . . . . . . 7,757 72,641 90,685
Costs of equipment and supplies sold . . . . . 17,134 156,526 214,438
Selling, general and administrative expenses . 5,702 63,826 105,162
Amortization of reorganization asset. . . . . . 6,416 -- --
Special charges . . . . . . . . . . . . . . . . -- -- 130,000
37,009 292,993 540,285
Income before interest, other income,
reorganization items, income taxes and
extraordinary credit . . . . . . . . . . . . . . (223) 41,605 (88,051)
Interest expense and fee amortization . . . . . . (2,920) (26,760) (52,310)
Other income (loss) . . . . . . . . . . . . . . . 71 8,544 (3,051)
(2,849) (18,216) (55,361)
Income (loss) before reorganization items,
income taxes and extraordinary credit . . . . . (3,072) 23,389 (143,412)
Reorganization Items (Note 5). . . . . . . . . . . -- 92,839 --
Income (loss) before income taxes and
extraordinary credit. . . . . . . . . . . . . . (3,072) 116,228 (143,412)
Provision for income taxes. . . . . . . . . . . . 1,300 3,700 2,800
Net income (loss) before extraordinary credit . . (4,372) 112,528 (146,212)
Extraordinary credit:
Gain on discharge of indebtedness, net of
taxes (Note 3). . . . . . . . . . . . . . . . . -- 52,442 --
Net income (loss) . . . . . . . . . . . . . . . . (4,372) 164,970 (146,212)
Preferred stock dividends and discount accretion. -- 540 1,619
Net income (loss) available to common . . . . . . $ (4,372) $164,430 $(147,831)
======== ======== =========
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE:
Net loss available to common (Note 8). . . . $ (.44)
=========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Reorganized
Company Predecessor Company
One Eight Nine
Month Months Months
Ended Ended Ended
June 30, May 31, June 30,
(Dollars in thousands) 1996 1996 1995
(Notes 2 & 3)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................................... $ (4,372) $ 164,970 $(146,212)
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Extraordinary gain.......................................... -- (52,442) --
Non cash reorganization items............................... -- (107,352) --
Special charges............................................. -- -- 130,000
Depreciation and amortization............................... 7,471 18,788 31,479
Other ...................................................... 649 997 1,087
Gain on sale of ICS Division................................ -- (6,202) --
Change in assets and liabilities:
Decrease in accounts and long-term receivables............ 3,175 24,734 12,253
Decrease (increase) in inventories and prepaid expenses... 2,433 11,174 (8,520)
Decrease (increase) in other assets....................... (36) 1,094 (8,867)
Decrease in accounts payable and accrued expenses......... (15,725) (5,077) (3,225)
Decrease in other noncurrent liabilities.................. (172) (5,899) (2,783)
Net cash provided by (used in) operating activities........ (6,577) 44,785 5,212
Cash flows from investing activities:
Proceeds from sale of ICS Division............................ -- 13,554 --
Proceeds from sale of other assets............................ -- -- 16,093
Purchases of property, plant and equipment.................... (519) (3,599) (10,420)
Payments to acquire companies and customer rights............. -- -- (1,475)
Net cash provided by (used in) investing activities....... (519) 9,955 4,198
Cash flows from financing activities:
Proceeds from issuance of common stock and warrants........... -- -- 698
Proceeds from revolving line of credit and
long-term borrowings......................................... -- 2,656 20,000
Principal payments on long-term debt ......................... (8,302) (15,332) (42,949)
Preferred dividends paid...................................... -- -- (1,031)
Net cash used in financing activities................... (8,302) (12,676) (23,282)
Effect of exchange rate changes on cash......................... 50 691 211
Increase (decrease) in cash and cash equivalents................ (15,348) 42,755 (13,661)
Cash and cash equivalents at beginning of period................ 62,170 19,415 19,871
Cash and cash equivalents at end of period......................$ 46,822 $ 62,170 $ 6,210
========= ========= =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ 699 $ 11,613 $ 34,182
Income taxes.................................................. $ 42 $ 1,606 $ 2,961
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 6
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
(Unaudited)
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
ONE MONTH ENDED JUNE 30,1996 - REORGANIZED COMPANY
(Notes 2 & 3)
Capital in Cumulative Retained
Common Excess of Translation Earnings
(Dollars in thousands) Stock Par Value Adjustment (Deficit) Total
<S> <C> <C> <C> <C>
BALANCE AT MAY 31,1996.............. $ 100 $ 79,666 $ -- $ -- $ 79,766
Translation adjustments for period.. -- -- 324 -- 324
Net loss for the period ............ -- -- -- (4,372) (4,372)
BALANCE AT JUNE 30, 1996 ........... $ 100 $ 79,666 $ 324 $ (4,372) $ 75,718
======== ========= ========= ========= =========
EIGHT MONTHS ENDED MAY 31,1996 - PREDECESSOR COMPANY
Capital in Cumulative Retained
Common Excess of Translation Earnings
(Dollars in thousands) Stock Par Value Adjustment (Deficit) Total
BALANCE AT SEPTEMBER 30, 1995 ...... $ 462 $ 182,725 $ 1,329 $(372,759) $(188,243)
Preferred stock conversion ......... 11 7,893 -- -- 7,904
Preferred stock dividends .......... -- -- -- (516) (516)
Accretion of redeemable preferred
stock discount ................... -- -- -- (24) (24)
Translation adjustments for period.. -- -- (1,560) -- (1,560)
NBS stock issuance.................. 11 (11) -- -- --
Reorganization ..................... (484) (190,607) 231 208,329 17,469
New stock issuance.................. 100 79,666 -- -- 79,766
Net income for the period........... -- -- -- 164,970 164,970
BALANCE AT MAY 31, 1996 ............ $ 100 $ 79,666 $ -- $ -- $ 79,766
======== ========= ========= ========= =========
NINE MONTHS ENDED JUNE 30, 1995 - PREDECESSOR COMPANY
Capital in Cumulative Retained
Common Excess of Translation Earnings
(Dollars in thousands) Stock Par value Adjustment (Deficit) Total
BALANCE AT SEPTEMBER 30, 1994 ...... $ 457 $181,843 $ (269) $(132,275) $ 49,756
Exercise of stock options .......... 1 50 -- -- 51
Shares issued for purchases under
the Employee Stock Purchase Plan.. 3 644 -- -- 647
Preferred stock dividends .......... -- -- -- (1,547) (1,547)
Accretion of redeemable preferred
stock discount ................... -- -- -- (72) (72)
Translation adjustments for period.. -- -- 2,451 -- 2,451
Graham stock issuances.............. 1 143 -- -- 144
Net loss for the period ............ -- -- -- (146,212) (146,212)
BALANCE AT JUNE 30, 1995............ $ 462 $182,680 $ 2,182 $(280,106) $ (94,782)
======== ======== ========= ========= =========
See notes to condensed consolidated financial statements.
</TABLE>
<PAGE> 7
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Anacomp, Inc. and Subsidiaries
NOTE 1. GENERAL:
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 Report on Form 10-K as of September 30, 1995,
as amended on July 29, 1996.
In the opinion of management, the accompanying interim financial
statements contain all material 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.
Due to the Restructuring and implementation of Fresh Start Reporting,
Condensed Consolidated Financial Statements for the new Reorganized
Company (period starting May 31, 1996) are not comparable to those of
the Predecessor Company. For financial reporting purposes, the
effective date of the bankruptcy is considered to be the close of
business on May 31, 1996.
A black line has been drawn on the accompanying Condensed Consolidated
Financial Statements to distinguish between the Reorganized Company and
the Predecessor Company.
NOTE 2. RECENT DEVELOPMENTS:
On May 20, 1996 (the "Confirmation Date"), the U.S. Bankruptcy Court
confirmed the Company's Third Amended Joint Plan of Reorganization (the
"Reorganization"), and on June 4, 1996, the Company emerged from
bankruptcy. Pursuant to the Reorganization, on such date certain
indebtedness of the Company was canceled in exchange for cash, new
indebtedness, and/or new equity interests, certain indebtedness was
reinstated, certain other prepetition claims were discharged, certain
claims were settled, executory contracts and unexpired leases were assumed
or rejected, and the members of a new Board of Directors of the Company
were designated. The Company simultaneously distributed to creditors
approximately $22.0 million in cash, $112.2 million principal amount of
its 11 5/8% Senior Secured Notes due 1999 (the "Senior Secured Notes") and
$160.0 million principal amount of its 13% Senior Subordinated Notes due
2002 (the "Senior Subordinated Notes"), equity securities consisting of
10.0 million shares of common stock and 362,694 warrants, each of which is
convertible into one share of common stock during the five year period
ending June 3, 2001 at an exercise price of $12.23 per share.
<PAGE> 8
As noted above, upon emerging from bankruptcy, the Company's Revolving
Loan, Multi-Currency Revolving Loan, Terms Loans, Series B Senior Notes,
15% Senior Subordinated Notes, 13.875% Convertible Subordinated Debentures
and 9% Convertible Subordinated Debentures were canceled. In addition,
the Company's 8.25% Cumulative Convertible Redeemable Exchangeable
Preferred Stock, Common Stock, Warrants and Stock Options were canceled.
In connection therewith, the Company issued new debt and equity securities
as mentioned above and described in more detail below:
Senior Secured Notes
In connection with the Reorganization, the Company issued $112.2 million
aggregate principal amount of 11 5/8% Senior Secured Notes due September
30, 1999. Interest is payable on March 31 and September 30 each year,
beginning on September 30, 1996. The Company is required to redeem a
portion of the notes at par on each interest payment date according to the
following schedule:
September 30, 1996 $14,288,000
March 31, 1997 $14,286,000
September 30, 1997 $16,163,000
March 31, 1998 $16,161,000
September 30, 1998 $17,100,000
March 31, 1999 $17,100,000
September 30, 1999 $17,092,000
The notes are redeemable at the option of the Company, in whole or in
part, at any time, at 100% of the principal amount thereof, plus accrued
and unpaid interest. The Company is required in certain circumstances to
make offers to purchase the Senior Secured Notes then outstanding at a
purchase price equal to 100% of the principal amount thereof, plus accrued
and unpaid interest, with the net cash proceeds of certain sales or other
distributions of assets by the Company or certain of its subsidiaries.
Also, upon a change of control, the Company is required to make an offer
to purchase the Senior Secured Notes then outstanding at a purchase price
equal to 100% of the principal amount thereof, plus accrued and unpaid
interest.
The Senior Secured Notes are senior secured obligations of the Company and
will rank pari passu with all other existing and future senior obligations
of the Company, and senior to all existing and future subordinated or
junior indebtedness of the Company. The collateral securing the Senior
Secured Notes consists of substantially all of the assets of the Company
and all future acquired assets of the Company to the extent such assets
are acquired by the Company without secured financing.
<PAGE> 9
The indenture related to the Senior Secured Notes contains covenants
limiting among other things, (i) the incurrence of additional indebtedness
by the Company and certain of its subsidiaries, (ii) the payment of
dividends on, and the redemption of, capital stock of the Company and
certain of its subsidiaries, (iii) the redemption of certain subordinated
obligations of the Company and certain of its subsidiaries and the making
of certain investments by the Company and certain of its subsidiaries,
(iv) the sale by the Company and certain of its subsidiaries of assets and
certain subsidiary stock, (v) transactions between the Company and its
affiliates, (vi) liens on the collateral securing the Senior Secured
Notes, (vii) consolidations and mergers and transfers of all or
substantially all of the Company's and certain of its subsidiaries' assets
and (viii) capital expenditures. All of the limitations and prohibitions
are subject to a number of qualifications and exceptions. The indenture
also contains a covenant requiring the Company to maintain a minimum
interest coverage ratio.
Senior Subordinated Notes
In connection with the Reorganization, the Company issued $160.0 million
aggregate principal amount of 13% Senior Subordinated Notes due 2002.
This debt was recorded at its estimated fair value of $146.3 million. The
difference between the aggregate principal amount and the fair value of
the debt will be accrued as a charge to interest expense over the life of
the debt. Interest is payable on June 30 and December 31 each year,
beginning on December 31, 1996. For the interest payable on December 31,
1996 and June 30, 1997, the Company will provide Payment-In-Kind ("PIK")
notes in satisfaction of its interest obligation rather than a cash
settlement. The PIK notes will have a principal amount corresponding to
the amount of interest due on the notes on the related interest payment
date.
The Company is required to redeem prior to June 30, 2001 the principal
amount of the Senior Subordinated Notes equal to the aggregate principal
amount of PIK notes issued prior to such date, plus any accrued and unpaid
interest on the PIK notes, at a redemption price equal to the price that
would be then applicable in the case of an optional redemption. The
remaining Senior Subordinated Notes are redeemable at the option of the
Company, in whole or in part, at any time, at various redemption prices
ranging from 103% to 101.5% of the principal amount thereof through
December 31, 2001. Thereafter, the Senior Subordinated Notes may be
redeemed at the aggregate principal amount thereof. Also, upon a change
in control, the Company is required to make an offer to purchase the
Senior Subordinated Notes then outstanding at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest.
The Senior Subordinated Notes are unsecured senior subordinated
obligations of the Company and rank pari passu with all other existing and
future subordinated obligations of the Company. The payment of principal
and interest is subordinated and subject to the prior payment in full of
the Company's senior indebtedness.
<PAGE> 10
The indenture related to the Senior Subordinated Notes contains covenants
limiting, among other things, (i) the incurrence of additional
indebtedness by the Company and certain of its subsidiaries, (ii) the
payment of dividends on, and the redemption of, capital stock of the
Company and certain of its subsidiaries, (iii) the redemption of certain
subordinated obligations of the Company and certain of its subsidiaries
and the making of certain investments of the Company and certain of its
subsidiaries, (iv) the sale by the Company and certain of its subsidiaries
of assets and certain subsidiary stock, (v) transactions between the
Company and its affiliates, (vi) sale/leaseback transactions by the
Company and certain of its subsidiaries, (vii) consolidations and mergers
and transfers of all or substantially all of the Company's and certain of
its subsidiaries' assets and (viii) capital expenditures. All of the
limitations and prohibitions are subject to a number of qualifications and
exceptions. The indenture also contains a covenant requiring the Company
to maintain a minimum interest coverage ratio.
New Common Stock and Warrants
In connection with the Reorganization, the Company issued 10.0 million
shares of Common Stock to certain creditors. In addition, the Company
also issued 362,694 warrants to certain creditors and previous common and
preferred stockholders. Each warrant is convertible into one share of new
common stock at an exercise price of $12.23 per share. The warrants
expire on June 3, 2001. In addition, the Plan of Reorganization approved
for future issuance to 810,811 shares of additional new Common Stock to
the management of the Company.
New Preferred Stock
The Board of Directors of the Company has the ability, at its discretion,
to create one or more series of Preferred Stock and shall determine the
preferences, limitations, and relative voting and other rights of one or
more series of Preferred Stock.
NOTE 3. FRESH START REPORTING:
As of May 31, 1996, the Company adopted Fresh Start Reporting in
accordance with the American Institute of Certified Public Accountant's
Statement of Position 90-7 "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code", ("SOP 90-7"). Fresh Start
Reporting resulted in material changes to the Condensed Consolidated
Balance Sheet, including valuation of assets, intangible assets (including
goodwill) and liabilities at fair market value and valuation of equity
based on the appraised reorganization value of the ongoing business.
The reorganization value of $350.0 million (the approximate fair value )
was based on the consideration of many factors and various valuation
methods, including discounted cash flows, selected publicly traded company
market multiples, selected acquisition transaction multiples and other
applicable ratios and valuation techniques believed by management and its
financial advisors to be representative of the Company's business and
industry. The excess of the reorganization value over the fair value of
identifiable assets and liabilities is reported as "Reorganization value
in excess of identifiable assets" in the accompanying Condensed
Consolidated Balance Sheets and is being amortized over a three and a half
year period.
<PAGE> 11
The Reorganization and the adoption of Fresh Start Reporting resulted in the
following adjustments to the Company's Condensed Consolidated Balance Sheet
for the period ended May 31, 1996:
<TABLE>
<CAPTION>
Predecessor Reorganized
Company Reorganization and Company
May 31, Fresh Start Adjustments May 31,
(Dollars in thousands) 1996 Debit Credit 1996
<S> <C> <C> <C> <C>
ASSETS
Total Current Assets......................$179,457 $ -- $ 1,881 (a) $177,576
Property and equipment (net).............. 35,619 -- 10,754 (b) 24,865
Long-term receivables..................... 9,411 -- -- 9,411
Excess of purchase price over net
assets of businesses acquired and
other intangibles........................ 153,864 -- 124,864 (c) --
29,000 (d)
Reorganization value in excess of
identifiable assets...................... -- 269,460 (e) -- 269,460
Other Assets.............................. 12,862 -- 4,384 (f) 7,878
600 (g)
$391,213 $269,460 $171,483 $489,190
======== ======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of long-term debt........$380,554 $379,256 (h)$ 36,076 (i) $ 37,374
Accrued interest......................... 52,696 48,500 (h) -- 4,196
Accounts payable and
other accrued liabilities .............. 130,179 -- 2,673 (j) 132,852
Total Current Liabilities................. 563,429 427,756 38,749 174,422
Total Noncurrent Liabilities.............. 5,130 -- 229,872 (i) 235,002
Redeemable preferred stock and
accrued dividends........................ 18,241 18,241 (k) -- --
Stockholders' Equity (Deficit):
Common stock............................. 484 484 (l) 100 (m) 100
Capital in excess of par value........... 190,607 190,607 (l) 79,666 (m) 79,666
Cumulative translation adjustment........ (231) -- 231 (l) --
Retained earnings (deficit)..............(386,447) 29,000 (d) 334,005 (l) --
81,442 (n)
$391,213 $666,088 $764,065 $489,190
======== ======== ======== ========
</TABLE>
<PAGE> 12
Explanations of adjustment columns of the balance sheet are as follows:
(a) To adjust current assets to fair market value.
(b) To adjust property and equipment to estimated current market value. The
market value of property and equipment will be determined upon completion
of an appraisal currently in process. Further adjustments may be
required, but are not expected to be material.
(c) To reflect the write-off of excess of purchase price over net assets of
businesses acquired and other intangibles.
(d) To provide income tax expense for gain on discharge of indebtedness,
reflected as a reduction in the goodwill of the Predecessor Company
related to the utilization of pre-acquisition NOL's.
(e) To establish the reorganization value in excess of identifiable assets.
The reorganization value in excess of identifiable assets is calculated
below:
<TABLE>
<CAPTION>
<S> <C>
New debt $270,234
New equity 79,766
Reorganization Value $350,000
Plus: Fair value of identifiable liabilities 139,190
Less: Fair value of identifiable assets (219,730)
$269,460
========
</TABLE>
(f) To adjust other long-term assets to current market value.
(g) To write-off the remaining debt issue costs.
(h) To reflect the cancellation of the old debt and related accrued interest.
(i) To reflect issuance of new current and long-term debt.
(j) To adjust current liabilities to fair market value.
(k) To reflect the cancellation of the old preferred stock.
(l) To reflect the elimination of stockholders' equity of the Predecessor
Company.
(m) To reflect the issuance of 10,000,000 shares of new common stock (par
value $.01).
(n) To reflect extraordinary gain resulting from discharge of indebtedness.
The extraordinary gain, net of taxes is calculated below:
<TABLE>
<CAPTION>
<S> <C>
Historical carrying value of old debt securities $379,256
Historical carrying value of related accrued interest 48,500
Unamortized of old deferred financing costs (600)
Market value of consideration exchanged for the old debt:
Plan securities (face value $279,691) (265,948)
New common stock (10.0 million new shares issued) (79,766)
81,442
Tax provision (29,000)
Extraordinary gain $ 52,442
========
</TABLE>
<PAGE> 13
The following unaudited Pro Forma Condensed Financial Information for the
nine months ended June 30, 1996 and 1995, have been prepared giving effect
to the sale of the Image Conversion Services ("ICS") Division and the
consummation of the Reorganization, including adjustments to interest
expense and intangible asset amortization. The Condensed Financial
Information was prepared as if the Pro Forma adjustments had occurred on
October 1, 1995 and October 1, 1994, repectively. This information does
not purport to be indicative of the results which would have been obtained
had such transactions in fact been completed as of the date hereof and for
the periods presented or that may be obtained in the future.
<TABLE>
<CAPTION>
Anacomp, Inc. and Subsidiaries
Unaudited Pro Forma Condensed Financial Information
Pro Forma Pro Forma
Nine Months Nine Months
Ended Ended
Dollars in thousands June 30, 1996 June 30, 1995
<S> <C> <C>
Total revenues $ 369,881 $ 436,566
Operating costs and expenses $ 373,568 $ 574,272
Loss before interest, other income,
reorganization items, income taxes and
extraordinary credit $ (3,687) $ (137,706)
Interest expense and fee amortization $ (30,805) $ (32,292)
Net loss available to common $ (35,777) $ (169,862)
</TABLE>
NOTE 4. COMPONENTS OF CERTAIN BALANCE SHEET ACCOUNTS:
Inventories
Inventories are stated at the lower of cost or market, cost being
determined by methods approximating the first-in, first-out basis. In
accordance with Fresh Start Reporting, inventories were reflected at
fair market value as of May 31, 1996.
<TABLE>
<CAPTION>
The cost of the inventories is distributed as follows:
June 30, Sept. 30,
(Dollars in thousands) 1996 1995
<S> <C> <C>
Finished goods ..................... $ 26,010 $ 38,702
Work in process .................... 3,430 4,955
Raw materials and supplies ......... 8,491 10,338
$ 37,931 $ 53,995
======== ========
</TABLE>
Restricted Cash
Restricted cash represents cash reserved as collateral for letters of
credit issued by the Company primarily to secure certain contingent
obligations of the Company. The contingent obligations are primarily
related to environmental liabilities and certain insurance policies.
<PAGE> 14
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. In accordance with Fresh Start Reporting,
property and equipment were reflected at fair market values as of May
31, 1996.
NOTE 5. REORGANIZATION ITEMS:
In accordance with SOP 90-7, expenses resulting from the Chapter 11
reorganization should be reported separately as reorganization items in
the Condensed Consolidated Statements of Operations, and are summarized
below:
Reorganization Items:
<TABLE>
<CAPTION>
Two Eight
Months Ended Months Ended
May 31, 1996 May 31, 1996
<S> <C> <C>
Write-off of deferred debt
issue costs and discounts $ -- $ (17,551)
Adjustment of assets and
liabilities to fair market value 124,903 124,903
Financial restructuring costs (9,008) (14,944)
Interest earned on accumulated cash 195 431
$ 116,090 $ 92,839
========= =========
</TABLE>
NOTE 6. SALE OF ICS DIVISION:
Effective November 1, 1995 Anacomp sold its Image Conversion Services
Division ("ICS") for approximately $13.5 million which resulted in a net
gain to the Company of $6.2 million. The proceeds from this sale were
used to reduce the principal balance on certain senior debt. The ICS
Division performed source document microfilm services at several
facilities around the country generating approximately $20.0 million of
revenues per year.
<PAGE> 15
NOTE 7. INCOME TAXES
Income tax expense is reported for the Predecessor Company based on
the actual effective tax rate for the eight month period ended May 31,
1996. Also for the eight months ended May 31, 1996, the U.S. Federal
tax benefit of the domestic loss was offset by a corresponding
increase to the valuation allowance. Accordingly, the income tax
provision for the Predecessor Company relates entirely to foreign
taxes.
Income tax expense is reported for the Reorganized Company based on a
40% effective tax rate for the interim period. For the one month
ended June 30, 1996, the income tax provision relates entirely to
domestic income taxes. The limited tax benefit of the U.S. Federal
net operating loss carryforwards ("NOLs") of the Reorganized Company
is credited to "Reorganization value in excess of identified assets"
and does not reduce income tax expense.
At June 30, 1996, the Reorganized Company had NOLs of approximately
$158 million available to offset future taxable income. Usage of
these NOLs by the Reorganized Company is limited to approximately $4
million annually. However, the Reorganized Company may authorize the
use of other tax planning techniques to utilize a portion of the
remaining NOLs before they expire. In any event, the Reorganized
Company expects that substantial amounts of the NOLs will expire
unused.
NOTE 8. EARNINGS (LOSS) PER SHARE:
The computation of earnings (loss) per common and common equivalent
share is based upon the weighted average number of common shares
outstanding during the periods plus (in the periods in which they have
a dilutive effect) the effect of common shares contingently issuable,
primarily from stock options and exercise of warrants.
Fully diluted earnings (loss) per share are the same as primary
earnings per share for the periods presented.
The weighted average number of common shares outstanding and net
income (loss) per common share for periods prior to May 31, 1996 have
not been presented because, due to the restructuring and
implementation of Fresh Start Reporting, they are not comparable to
subsequent periods.
<PAGE> 16
NOTE 9. SUBSEQUENT EVENTS:
On July 15, 1996, the Reorganized Company purchased certain assets of
Com Products, Inc for approximately $4.3 million consisting of $3.8
million in cash and $500,000 in a note payable due within 12 months.
Com Products sold micrographics equipment and supplies consisting
primarily of film for COM recorders.
On July 22, 1996, the Company's Board of Directors approved an
employee stock plan (the "Stock Plan"). The Stock Plan granted non-
qualified stock options to management to purchase 947,500 shares of
common stock. Such options vest during the period from June 30, 1997
through June 30, 2003. The Stock Plan also awarded to other key
employees 100,250 shares of restricted stock that can be traded after
September 30, 1997.
On July 29, 1996, the Reorganized Company filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission for
the resale by holders of the new Common Stock, 11 5/8% Senior Secured
Notes due 1999 and 13% Senior Subordinated Notes due 2002.
On August 1, 1996, the Reorganized Company filed a Registration
Statement on Form S-1 with the Securities and Exchange Commission to
authorize the issuance of rights to its shareholders to purchase
additional Anacomp common stock. The net proceeds from the Rights
Offering, anticipated to be approximately $24.6 million, will be used
for the acquisition of businesses and technologies.
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Recent Developments
On June 4, 1996, the Company emerged from bankruptcy proceedings under its
Third Amended Joint Plan of Reorganization (the "Reorganization"). On such
date, the Company canceled its existing secured debt and subordinated debt,
including 15% Senior Subordinated Notes, 13.875% Convertible Subordinated
Debentures and 9% Convertible Subordinated Debentures, and its equity
securities, including common stock, common stock purchase rights, preferred
stock and warrants, and distributed to its creditors approximately $22.0
million in cash, $112.2 million principal amount of its 11 5/8% Senior Secured
Notes due 1999 (the "Senior Secured Notes"), $160.0 principal amount of its
13% Senior Subordinated Notes due 2002 (the "Senior Subordinated Notes"), 10.0
million shares of new common stock, par value $.01 per share, and warrants to
purchase 362,694 shares of common stock at a price of $12.23 per share for a
period of five years from June 4, 1996. The Plan of Reorganization resulted
in a reduction of approximately $173.0 million in principal and accrued
interest on the Company's debt obligations and in liquidation amount and
accrued interest on its preferred stock.
The process began January 5, 1996, when Anacomp filed a Prenegotiated Plan
with the U.S. Bankruptcy Court in Delaware under Chapter 11 of the Bankruptcy
Code. The Company was in default under substantially all of its debt
agreements as a result of its failure to make $89.7 million of principal
payments scheduled for April 26, 1995 and October 26, 1995 on the senior
secured credit facilities (including $60.0 million relating to the revolving
loan agreement which expired on October 26, 1995), $11.4 million of principal
and interest payments on the 9% Convertible Subordinated Debentures which were
due January 15, 1996, $34.1 million of interest payments scheduled for May 1,
1995 and November 1, 1995 on its Senior Subordinated Notes, and $3.2 million
of interest payments scheduled for July 15, 1995 and January 15, 1996 on the
13.875% Subordinated Debentures, as well as certain financial covenant
violations, and the cross-default provisions of the other debt agreements.
On March 28, 1996, the U.S. Bankruptcy Court approved the Company's disclosure
statement on the financial restructuring plan and gave the Company permission
to distribute the disclosure statement and solicit votes on the Plan of
Reorganization.
To facilitate a meaningful comparison of the Company's quarterly and year-to -
date operating performance in fiscal years 1996 and 1995, the following
discussion of results of operations on a consolidated basis is presented on a
traditional comparative basis for all periods. Consequently, the current
year's information presented below does not comply with accounting
requirements for companies upon emergence from bankruptcy which calls for
separate reporting for the newly reorganized company and the predecessor
company.
<PAGE> 18
Three Months Ended June 30, 1996 Compared to the
Three Months Ended June 30, 1995
Results of Operations
On May 20, 1996 (the "Confirmation Date"), the Company's Plan was confirmed by
the United States Bankruptcy Court and the Company emerged from bankruptcy on
June 4, 1996 (the "Effective Date"). As a result of the reorganization and
the recording of the restructuring transaction and implementation of Fresh
Start Reporting, the Company's results of operations after June 4, 1996, are
not comparable to results reported in prior periods. See Note 3 "Fresh Start
Reporting" for information on consummation of the Plan of Reorganization and
implementation of Fresh Start Reporting.
<TABLE>
<CAPTION>
CONSOLIDATED RESULTS OF OPERATIONS
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenues:
Services provided ...................... $ 45,363 $ 55,126 $144,553 $ 165,962
Equipment and supplies.................. 69,845 93,807 226,831 286,272
Total Revenues......................... 115,208 148,933 371,384 452,234
Operating costs and expenses:
Costs of services provided.............. 25,647 30,277 80,398 90,685
Costs of equipment and supplies sold.... 53,763 71,464 173,660 214,438
Selling, general and administrative..... 21,482 36,140 69,528 105,162
Reorganization amortization............. 6,416 -- 6,416 --
Special charges ........................ -- 130,000 -- 130,000
107,308 267,881 330,002 540,285
Income (loss) before interest, other income,
reorganization items, income taxes and
extraordinary credit.................... 7,900 (118,948) 41,382 (88,051)
Interest income.......................... 701 471 1,633 1,554
Interest expense and fee amortization.... (5,895) (18,310) (29,680) (52,310)
Other income (loss)...................... 338 (642) 6,982 (4,605)
(4,856) (18,481) (21,065) (55,361)
Income (loss) before reorganization items,
income taxes and extraordinary credit... 3,044 (137,429) 20,317 (143,412)
Reorganization items..................... 116,090 -- 92,839 --
Income (loss) before income taxes and
extraordinary credit.................... 119,134 (137,429) 113,156 (143,412)
Provision for income taxes............... 1,300 1,400 5,000 2,800
Net income (loss) before
extraordinary credit.................... 117,834 (138,829) 108,156 (146,212)
Extraordinary credit:
Gain on discharge of indebtedness....... 52,442 -- 52,442 --
Net income (loss) ....................... 170,276 (138,829) 160,598 (146,212)
Preferred stock dividends and
discount accretion ..................... -- 540 540 1,619
Net income (loss) available to
common stockholders..................... $170,276 $(139,369) $160,058 $(147,831)
======== ========= ======== =========
</TABLE>
<PAGE> 19
General
Net income available to common stockholders was $170.3 million for the three
months ended June 30, 1996 compared to a net loss of $139.4 million for the
three months ended June 30, 1995. Operating income (income before interest,
other income, reorganization items, and income taxes) was $7.9 million
compared to $11.1 million (excluding special charges of $130.0 million) for
the same period of the prior year. As a percentage of total revenues,
operating income was 6.8% for fiscal 1996 and 7.4% for fiscal 1995. Earnings
before interest, other income, reorganization items, extraordinary credit,
special charges, taxes, depreciation and amortization ("EBITDA") was $19.5
million compared to $19.8 million for the same period of the prior year. The
three months ended June 30, 1996 include reorganization income of $116.1
million. The current period also includes $52.4 million extraordinary gain
resulting from the discharge of indebtedness. The three months ended June 30,
1995 include special charges of $130.0 million representing a write-off of
goodwill of $108.0 million and $22.0 million of cost associated with software
investments.
Total revenues for the third quarter of $115.2 million represent a $33.7
million decrease from the third quarter of the prior year. Approximately
$18.4 million of the decrease is due to the discontinuance or downsizing of
certain product lines including Image Conversion Services ("ICS") ($5.7
million), flexible diskette media ($7.1 million), reader and reader printer
products ($3.5 million) and source document film ($2.1 million).
Costs of services provided as a percent of services revenue were 56% for the
three months ended June 30, 1996 and 55% for the three months ended June 30,
1995. Costs of equipment and supplies sold as a percent of equipment and
supplies sales were 77% for the three months ended June 30, 1996 compared to
76% in the same period of the prior year.
Selling, general and administrative expenses ("S,G&A") were 19% of revenue for
the three months ended June 30, 1996 compared to 24% for the three months
ended June 30, 1995. The decrease in S,G&A reflects the cost reductions
implemented late in fiscal 1995 as part of the Company's Reorganization.
Products and Services
Micrographics services revenues decreased $3.3 million for the three months
ended June 30, 1996 compared to the same three months of fiscal 1995,
excluding the effect of the ICS sale. COM services volumes, which comprise
over 90% of this category, decreased 14% and average selling prices increased
approximately 4%. The decrease in volume is the continuation of a trend that
the Company has experienced over recent periods. Gross margins as a percent
of revenue were unchanged.
Maintenance service revenues decreased $1.0 million primarily due to the
effect of replacing older generation COM systems with the XFP which has a
capacity significantly greater than the previous generation systems. Gross
margins as a percent of revenue were unchanged.
<PAGE> 20
COM systems revenues for the three months ended June 30, 1996 decreased
$5.8 million compared to the same period of the prior year. The Company sold
or leased 39 XFP 2000 COM systems to third party users in each of the three
month periods ended June 30, 1996 and 1995. The decrease in revenues is
attributable to the mix and pricing of new and used system sales. Of the 39
systems sold in the three months ended June 30, 1996, 16 systems were new and
23 were used. For the three months ended June 30, 1995, 38 systems were new,
and only 1 system was used. Gross margins as a percent of revenue decreased
for the quarter compared to the prior period, due to lower selling prices.
Micrographics supplies and equipment revenues for the three months ended June
30, 1996 decreased $13.0 million compared to the same period of the prior
year, principally as a result of the discontinuance or downsizing of product
lines mentioned above. Micrographics supplies and equipment gross margins as
a percent of revenue improved 5% as a result of changes in product mix due
primarily to the sale and downsizing of product lines.
Magnetics revenues decreased $6.4 million for the three months ended June 30,
1996 compared to the same three months of fiscal 1995. The decline is
attributable to the closure of the Omaha, Nebraska factory which produced
flexible diskette media as well as decreased unit sales of open reel tape.
Magnetics gross margins as a percent of revenue increased slightly.
Nine Months Ended June 30, 1996 Compared With
Nine Months Ended June 30, 1995
Results of Operations
General
Net income available to common stockholders was $160.1 million for the nine
months ended June 30, 1996, compared to a loss of $147.8 million for the
comparable period of the prior year. Included in the year-to-date income for
the nine months ended June 30, 1996 was $92.8 million of reorganization
income. The current period also includes an $52.4 million extraordinary gain
on the discharge of indebtedness. Operating income (income before interest,
other income, reorganization items and income taxes) decreased $600,000
compared to the same period of the prior year excluding special charges of
$130.0 million in fiscal 1995. As a percentage of total revenues, operating
income was 11% for fiscal 1996 and 9% for fiscal 1995. EBITDA was $66.2
million compared to $67.9 million for the same period in the prior year.
Total revenues for the nine months ended June 30, 1996 decreased $80.8 million
over the same period of the prior year. The decrease is primarily due to the
discontinuance or downsizing of certain product lines including ICS ($14.2
million), flexible diskette media ($16.8 million), reader and reader printer
products ($8.9 million) and source document film ($5.6 million).
<PAGE> 21
Costs of services provided as a percent of services revenue were 56% for the
nine months ended June 30, 1996 and 55% for the nine months ended June 30,
1995. Costs of equipment and supplies sold as a percent of equipment and
supplies sales were 77% in the current period compared to 75% in the same
period of the prior year. The increase in costs of equipment and supplies
sold is primarily due to product mix and increased costs of raw materials.
Selling, general and administrative ("S,G&A") expenses were 19% of revenue in
the current period compared to 23% in the same period of the prior year. The
decrease in S,G&A reflects the cost reductions implemented late in fiscal 1995
as part of the Company's Reorganization.
Interest expense and fee amortization was $30.0 million for the nine months
ended June 30, 1996 compared to $52.3 million in the prior period. The
decrease in interest expenses relates to the discontinuance of interest
accrued on the Company's subordinated debt subsequent to the bankruptcy
proceedings.
Other income for the first nine months of fiscal 1996 includes a $6.2 million
gain on the sale of the ICS Division in November 1995. This compares
favorably to a $630,000 loss on the sale of an idle facility and expenses of
$3.2 million relating to a failed refinancing in the first nine months of
fiscal 1995.
Products and Services
Micrographics services revenues decreased $6.2 million in the first nine
months of fiscal 1996 compared to the same nine months of fiscal 1995
excluding the effect of the ICS sale. COM services volumes decreased 7%, and
average selling prices increased slightly. The decrease in volume is a
continuation of a trend that the Company has experienced over recent periods.
Operating margins as a percent of revenue decreased slightly as the reduction
in selling prices exceeded reductions in production costs.
Maintenance service revenues decreased $2.4 million, primarily due to the
effect of replacing older generation COM systems with the XFP which has a
capacity significantly greater than the previous generation systems. Gross
margins as a percent of revenue decreased slightly.
COM systems revenues for the first nine months of fiscal 1996 decreased $14.2
million compared to the same period of the prior year. The Company sold or
leased 91 XFP 2000 COM systems to third party users in the current period
compared to 115 systems in the same period of the prior year. The first nine
months of fiscal 1995 included $3.5 million of sales of equipment for Anacomp
data centers under sale and leaseback arrangements compared to zero in the
current period. Gross margins as a percent of revenue decreased slightly.
<PAGE> 22
Micrographics supplies and equipment revenues for the first nine months
decreased $29.3 million compared to the same period of the prior year,
primarily as a result of the discontinuance and downsizing of product lines
mentioned above. Micrographics supplies and equipment gross margins as a
percent of revenue increased 4%.
Magnetics revenues decreased $16.4 million in the first nine months of fiscal
1996 compared to the same nine months of fiscal 1995. The decrease is
attributable to the closure of the Omaha, Nebraska factory which produced
flexible diskette media, as well as reduced sales of open reel tape.
Magnetics gross margins as a percent of revenue decreased slightly period to
period.
Liquidity and Capital Resources
The Company's cash balance as of June 30, 1996 was $39.7 million compared to
$19.4 million at September 30, 1995. The increase in the Company's cash
balance is due primarily to the non-payment of subordinated debt principal and
interest during the bankruptcy proceedings. On June 4, 1996, the effective
date of the Company's Plan of Reorganization, approximately $22.0 million of
cash was used to pay $7.5 million against the Senior Secured Notes, and to pay
certain professional fees, Senior Secured Debt fees and other trade claims.
Anacomp's working capital at June 30, 1996, excluding the current portion of
long-term debt and accrued interest, amounted to $43.8 million compared to
$27.0 million at September 30, 1995. To facilitate comparison of cash flow
activity for fiscal year 1996 to fiscal year 1995, cash flows for the eight
months ended May 31, 1996 and for the one month ended June 30, 1996, as
disclosed in the accompanying Condensed Consolidated Statements of Cash Flows,
have been combined for the following discussion. Net cash provided by
operating activities increased to $38.2 million for the nine months ended June
30, 1996 compared to $5.2 million in the comparable prior period due, in part,
to significant reductions in receivables and inventories as well as the non-
payment of interest on subordinated debt prior to the reorganization. Net
cash provided by investing activities increased to $10.0 million in the
current period, compared to $4.2 million in the comparable prior period,
primarily as a result of reduced capital expenditures. Net cash used in
financing activities in the current period includes a $13.0 million repayment
of debt with proceeds from the sale of the ICS Division.
Prior to the Chapter 11 filing, the Company was experiencing a liquidity
shortfall caused by continued declining revenues and a highly leveraged
balance sheet. Upon emergence from bankruptcy proceedings the Company's pre-
petition liquidity problems were improved.
<PAGE> 23
While the reorganization significantly reduced the Company's debt obligations,
the Company remains highly leveraged after the Effective Date. The Company's
management believes that the Company will have sufficient cash flow from
operations to pay interest on all of its outstanding debt as those payments
become due. However, the Company's ability to meet its debt service
obligations will depend on a number of factors, including its ability to
achieve the results of its business plan.
The Company has announced plans to offer transferable subscription rights for
common stock to its existing stockholders. The rights will entitle
stockholders to subscribe for and purchase common stock at approximately 80%
of the market price at the time of the offering. The net proceeds available
to the Company from the Rights Offering is expected to be approximately $24.6
million. Such net proceeds will be used to finance prospective acquisitions
of businesses and technologies. These acquisitions will strengthen the
ability of the Company to achieve the results of its business plan .
<PAGE> 24
ANACOMP, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES
On June 4, 1996, the Company emerged from bankruptcy proceedings under
its Third Amended Joint Plan of Reorganization (the "Plan of
Reorganization"). On such date, the Company canceled its existing
secured debt and subordinated debt, including 15% Senior Subordinated
Notes, 13.875% Convertible Subordinated Debentures and 9% Convertible
Subordinated Debentures, and its equity securities, including common
stock, common stock purchase rights, preferred stock and warrants, and
distributed to its creditors approximately $22.0 million in cash, $112.2
million principal amount of its 11-5/8% Senior Secured Notes due 1999
(the "Senior Secured Notes"), $160.0 principal amount of its 13% Senior
Subordinated Notes due 2002 (the "Senior Subordinated Notes"), 10.0
million shares of new common stock, par value $.01 per share, and
warrants to purchase 362,694 shares of common stock at a price of $12.23
per share for a period of five years from June 4, 1996. The Plan of
Reorganization resulted in a reduction of approximately $173.0 million in
principal and accrued interest on the Company's debt obligations and a
liquidation amount and accrued interest on its preferred stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
2.1 -- Third Amended Joint Plan of Reorganization of the Company
and certain of its subsidiaries.(1)
3.1 -- Amended and Restated Articles of Incorporation of the
Company.(2)
3.2 -- Amended and Restated By-laws of the Company.(2)
4.1 -- Indenture, dated as of June 4, 1996, between the Company
and The Bank of New York, as trustee (the "Senior Secured
Trustee"), relating to the Company's 11-5/8% Senior
Secured Notes due 1999.(2)
4.2 -- Application by the Company for Exemption from Section
314(d) of the Trust Indenture Act of 1939, as amended,
pursuant to Section 304(d) and Rule 4d-7 thereunder.(2)
4.3 -- Indenture, dated as of June 4, 1996, between the Company
and IBJ Schroder Bank & Trust Company, as trustee,
relating to the Company's 13% Senior Subordinated Notes
due 2002.(2)
<PAGE> 25
4.4 -- Warrant Agreement, dated as of June 4, 1996, between the
Company and Chase Mellon Shareholder Services, L.L.C.(2)
4.5 -- Security and Pledge Agreement, dated as of June 4, 1996,
by the Company, in favor of the Senior Secured Trustee.(2)
4.6 -- First Leasehold Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing, dated June 4, 1996,
made by Anacomp, Inc., as grantor, in favor of Chicago
Title Insurance Company, as trustee, for the benefit of
The Bank of New York, as beneficiary.(2)
4.7 -- First Deed of Trust, Assignment of Rents, Security
Agreement and Fixture Filing, dated June 4, 1996 made by
Anacomp, Inc., as grantor, in favor of Chicago Title
Insurance Company, as trustee, for the benefit of The Bank
of New York, as beneficiary.(2)
10.1 -- Amended and Restated Employment Agreement, effective
September 24, 1995, between Anacomp, Inc. and P. Lang
Lowrey III.(3)
10.2 -- First Amendment to Amended and Restated Employment
Agreement, effective October 1, 1995, between Anacomp,
Inc. and P. Lang Lowrey III.(3)
10.3 -- Letter Agreement, dated November 16, 1995 between Anacomp,
Inc. and P. Lang Lowrey III.(3)
10.4 -- Employment Agreement, effective March 1, 1992, between
Anacomp, Inc. and Thomas R. Simmons.(4)
10.5 -- Common Stock Registration Rights Agreement, dated as of
June 4, 1996, by and among the Company and Holders
Registrable shares.(2)
10.6 -- Senior Secured Note Registration Rights Agreement, dated
as of June 4, 1996 by and among the Company and the
Holders of Registrable Notes.(2)
10.7 -- Senior Subordinated Note Registration Rights Agreement
dated as of June 4, 1996, by and among the Company and
Holders of Registrable Notes.(2)
10.8 -- Amended and Restated Master Supply Agreement, dated
October 8, 1993, among Anacomp, Inc., SKC America, Inc.
and SKC Limited.(4)
21.1 -- Subsidiaries.(2)
27.1 -- Financial Data Schedules (Required for electronic filing
only).
<PAGE> 26
(1) Previously filed and incorporated by reference to the Company's
Form 8-A filed with the Securities and Exchange Commission on
May 15, 1996 (File No. 0-7641)
(2) Previously filed and incorporated by reference to the Company's
Form 8-K filed with the Securities and Exchange commission on
June 19, 1996 (File No. 1-8328)
(3) Previously filed and incorporated by reference to the Company's
Form 10-K for the year ended September 30, 1995.
(4) Previously filed and incorporated by reference to the Company's
Form 10-K for the year ended September 30, 1993.
(b) Reports on Form 8-K
On June 3, 1996, a Form 8-K was filed to announce that the United
States Bankruptcy Court had entered an order confirming the
Company's Third Amended Joint Plan of Reorganization as of May 20,
1996.
On June 18, 1996 a Form 8-K was filed to announce the consummation
of the Third Amended Joint Plan of Reorganization effective June 4,
1996, and to file all related documents in connection with the
Plan.
<PAGE> 27
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
Executive Vice President and
Chief Financial Officer
Dated this 14th day of August, 1996
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 JUNE 30, 1996 FORM 10-Q QUARTERLY REPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-END> JUN-30-1996
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