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 quarterly period ended December 31, 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
December 31, 1996, the close of the period covered by this report, was
13,700,764.
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
December 31, 1996 and September 30, 1996 2
Condensed Consolidated Statements of Operations
Three Months Ended December 31, 1996 and 1995 3
Condensed Consolidated Statements of Cash Flows
Three Months Ended December 31, 1996 and 1995 4
Condensed Consolidated Statements of
Stockholders' Equity
Three Months Ended December 31, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7
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
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries
<TABLE>
<CAPTION>
December 31, September 30,
(Dollars in thousands, except per share amounts) 1996 1996
- ---------------------------------------------------------------------- ----------------- -------------------
ASSETS (unaudited)
Current assets:
<S> <C> <C>
Cash and cash equivalents.................................... $ 71,574 $ 38,198
Restricted cash.............................................. 9,597 9,597
Accounts and notes receivable, less allowances for doubtful
accounts of $6,850 and $6,768, respectively............... 60,578 58,806
Current portion of long-term receivables..................... 4,928 4,690
Inventories.................................................. 29,968 31,856
Prepaid expenses and other................................... 5,781 4,383
----------------- -------------------
Total current assets............................................. 182,426 147,530
Property and equipment, at cost less accumulated
depreciation and amortization................................. 28,147 27,102
Long-term receivables, net of current portion.................... 9,479 10,632
Excess of purchase price over net assets of businesses
acquired and other intangibles, net............................ 4,386 2,285
Reorganization value in excess of identifiable assets............ 218,473 240,344
Other assets..................................................... 7,615 7,528
================= ===================
$450,526 $435,421
================= ===================
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Current portion of long-term debt............................ $ 43,897 $ 31,848
Accounts payable............................................. 49,242 48,090
Accrued compensation, benefits and withholdings.............. 13,238 13,728
Accrued income taxes......................................... 9,537 11,930
Accrued interest............................................. 6,893 10,586
Other accrued liabilities.................................... 33,859 36,814
----------------- -------------------
Total current liabilities........................................ 156,666 152,996
----------------- -------------------
Noncurrent liabilities:
Long-term debt, net of current portion....................... 217,170 217,044
Other noncurrent liabilities................................. 6,116 6,812
----------------- -------------------
Total noncurrent liabilities..................................... 223,286 223,856
----------------- -------------------
Stockholders' equity:
Preferred stock, 1,000,000 shares authorized, none issued.... -- --
Common stock, $.01 par value; 20,000,000 shares authorized;
13,700,764 and 10,099,050 issued respectively.............. 137 101
Capital in excess of par value............................... 104,856 80,318
Cumulative translation adjustment from May 31, 1996.......... 503 159
Accumulated deficit from May 31, 1996........................ (34,922) (22,009)
----------------- -------------------
Total stockholders' equity....................................... 70,574 58,569
================= ===================
$450,526 $435,421
================= ===================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
Anacomp, Inc. and Subsidiaries
Reorganized Predecessor
Company Company
----------------- -------------------
Three Months Three Months
Ended Ended
December 31, December 31,
(Amounts in thousands, except per share amounts) 1996 1995
- ---------------------------------------------------------------------- ----------------- -------------------
Revenues:
<S> <C> <C>
Services provided............................................ $ 45,425 $ 50,928
Equipment and supply sales................................... 71,028 79,337
----------------- -------------------
116,453 130,265
----------------- -------------------
Operating costs and expenses:
Costs of services provided................................... 24,107 27,838
Costs of equipment and supplies sold......................... 50,932 61,761
Selling, general and administrative expenses................. 21,448 24,447
Amortization of reorganization asset......................... 19,247 --
----------------- -------------------
115,734 114,046
----------------- -------------------
Income from operations before interest, other income, financial
restructuring costs, and income taxes........................... 719 16,219
----------------- -------------------
Interest income.................................................. 984 501
Interest expense and fee amortization............................ (9,802) (18,286)
Financial restructuring costs (See Note 3)....................... -- (2,801)
Other income (loss) (See Note 4)................................. (15) 6,620
----------------- -------------------
(8,833) (13,966)
----------------- -------------------
Income (loss) before income taxes ............................... (8,114) 2,253
Provision for income taxes....................................... 4,800 1,200
----------------- -------------------
Net income (loss) ............................................... (12,914) 1,053
Preferred stock dividends and discount accretion................. -- 540
----------------- -------------------
Net income (loss) available to common stockholders............... $ (12,914) $ 513
================= ===================
Weighted average common shares outstanding....................... 12,818
=================
Earnings (loss) per common and common equivalent share:
Net loss available to common stockholders.................... $ (1.01)
=================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Anacomp, Inc. and Subsidiaries
Reorganized Predecessor
Company Company
---------------- ------------------
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------------------ ---------------- ------------------
Cash flows from operating activities:
<S> <C> <C>
Net income (loss)................................................ $(12,914) $1,053
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.................................. 22,967 8,017
Non-cash compensation.......................................... 259 --
Non-cash charge in lieu of taxes............................... 2,625 --
Gain on sale of ICS Division................................... -- (6,202)
Other.......................................................... 184 (455)
Change in assets and liabilities, net of acquisitions:
Decrease (increase) in accounts and long-term receivables... (534) 10,868
Decrease in inventories and prepaid expenses................ 2,318 5,057
Increase in other assets.................................... (225) (299)
Increase (decrease) in accounts payable and accrued
expenses................................................. 2,205 (8,727)
Decrease in other noncurrent liabilities.................... (605) (70)
---------------- ------------------
Net cash provided by operating activities................. 16,280 9,242
---------------- ------------------
Cash flows from investing activities:
Proceeds from sale of ICS Division............................... -- 13,554
Purchases of property, plant and equipment....................... (3,202) (1,161)
Payments to acquire companies and customer rights................ (3,379) --
---------------- ------------------
Net cash provided by (used in) investing activities....... (6,581) 12,393
---------------- ------------------
Cash flows from financing activities:
Proceeds from exercise of common stock rights ................... 24,574 --
Principal payments on long-term debt............................. (482) (13,705)
---------------- ------------------
Net cash provided by (used in) financing activities....... 24,092 (13,705)
---------------- ------------------
Effect of exchange rate changes on cash.............................. (415) (136)
---------------- ------------------
Increase in cash and cash equivalents................................ 33,376 7,794
Cash and cash equivalents at beginning of period..................... 38,198 19,415
---------------- ------------------
Cash and cash equivalents at end of period........................... $71,574 $27,209
================ ==================
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Reorganized Predecessor
Company Company
----------------------- ----------------------
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------- ----------------------- ----------------------
Cash paid during the period for:
<S> <C> <C>
Interest............................................. $ 269 $ 3,486
Income taxes......................................... $ 2,080 $ 606
</TABLE>
<TABLE>
<CAPTION>
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Reorganized Predecessor
Company Company
----------------------- ----------------------
Three Months Three Months
Ended Ended
December 31, December 31,
(Dollars in thousands) 1996 1995
- ------------------------------------------------------------- ----------------------- ----------------------
<S> <C> <C>
Assets acquired by assuming liabilities ................. $ 670 $ --
Interest on subordinated notes satisfied with
additional notes........................................ $ 11,960 $ --
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited)
Anacomp, Inc. and Subsidiaries
THREE MONTHS ENDED DECEMBER 31, 1996 - REORGANIZED COMPANY
Capital in Cumulative
Common excess of Translation Accumulated
(Dollars in thousands) Stock par value Adjustment Deficit Total
- ------------------------------------------------ -------------- ------------ ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1996 $101 $80,318 $159 $(22,009) $58,569
Common stock issued for exercise of rights 36 24,538 -- -- 24,574
Translation adjustments for period......... -- -- 344 -- 344
Other...................................... -- -- -- 1 1
Net loss for the period.................... -- -- -- (12,914) (12,914)
-------------- ------------ ------------- ---------------- -------------
BALANCE AT DECEMBER 31, 1996 $137 $104,856 $503 $(34,922) $70,574
============== ============ ============= ================ =============
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS ENDED DECEMBER 31, 1995 - PREDECESSOR COMPANY
Capital in Cumulative
Common excess of Translation Accumulated
(Dollars in thousands) Stock par value Adjustment Deficit Total
- ------------------------------------------------ -------------- ------------ ------------- ---------------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT SEPTEMBER 30, 1995 $462 $182,725 $1,329 $(372,759) $(188,243)
Preferred stock conversion................. 1 700 -- -- 701
Preferred stock dividends.................. -- -- -- (516) (516)
Accretion of redeemable preferred stock
discount................................. -- -- -- (24) (24)
Translation adjustments for period......... -- -- (796) -- (796)
Net income for the period.................. -- -- -- 1,053 1,053
============== ============ ============= ================ =============
BALANCE AT DECEMBER 31, 1995 $463 $183,425 $533 $(372,246) $(187,825)
============== ============ ============= ================ =============
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
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 for the fiscal year ended September 30, 1996.
In the opinion of management, the accompanying interim Condensed
Consolidated 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 the interim periods presented. Certain amounts in the prior
interim consolidated financial statements have been reclassified to conform to
the current period presentation.
Due to the Company's Reorganization and implementation of Fresh Start
Reporting, The 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 Reorganized Company's emergence from 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. 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.
The cost of the inventories is distributed as follows:
<TABLE>
<CAPTION>
December 31, September 30,
(Dollars in thousands) 1996 1996
----------------------------------------------------------- ------------------- -----------------
<S> <C> <C>
Finished goods....................................... $18,228 $22,557
Work in process...................................... 3,335 2,748
Raw materials and supplies........................... 8,405 6,551
=================== =================
$29,968 $31,856
=================== =================
</TABLE>
<PAGE>
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.
Restricted Cash
Restricted cash represents cash reserved as collateral for letters of
credit issued by the Company or cash held in escrow primarily to secure certain
contingent obligations of the Company. The contingent obligations are primarily
related to environmental liabilities and certain insurance policies.
NOTE 3. FINANCIAL RESTRUCTURING COSTS:
On April 6, 1995, Anacomp announced that it had withdrawn its proposed
offering of $225 Senior Secured Notes and a related offer to purchase up to $50
million of the Company's outstanding 15% Senior Subordinated Notes. The offering
would have deferred an aggregate of $153 million in scheduled principal payments
in fiscal years 1995 through 1998, thereby providing Anacomp with increased
liquidity and additional cash for product development. Costs directly related to
these activities of $2.8 million for the three months ended December 31, 1995
are included as "Financial restructuring costs" in the accompanying Condensed
Consolidated Statements of Operations.
NOTE 4. 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.
NOTE 5. INCOME TAXES:
Income tax expense is reported for the Predecessor Company based on the
actual effective tax rate for the three month period ended December 31, 1995.
For this period, the U.S. Federal tax rate is zero because the U.S. tax
provision of $1.3 million was offset by a corresponding reduction to the
valuation allowance.
Amortization of "Reorganization value in excess of identifiable assets" is
not deductible for income tax purposes. Accordingly, the Reorganized Company
incurs income tax expense even though it reports a pre-tax loss due to such
amortization. <PAGE>
For the three months ended December 31, 1996, income tax expense is
reported for the Reorganized Company based upon an estimated effective tax rate
for fiscal 1997 of 43%. Also for the three months ended December 31, 1996, the
limited tax benefit of the U.S. Federal net operating loss carryforwards
("NOLs") of the Reorganized Company resulted in a credit of $2.6 million to
"Reorganization value in excess of identified assets" and does not reduce income
tax expense.
At December 31, 1996, the Reorganized Company had NOLs of approximately
$122 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. NOLs available to offset taxable income for fiscal year 1997 is
estimated to be $17 million.
NOTE 6. 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.
NOTE 7. ACQUISITIONS:
During the three months ended December 31, 1996, the Company acquired the
customer bases and other specified assets of three businesses: Archive Storage,
Inc. ("ASI"), Precision Data Services, Inc. ("PDS") and Integra Technologies
Corporation ("ITC").
ASI is a Massachusetts company that specializes in the long-term
storage of critical business records. The ASI purchase price consisted of
$180,000 cash paid at closing, the assumption of a $70,000 debt obligation,
and a contingent cash payment of up to $500,000 based upon future earnings
of Anacomp's storage business.
PDS is a service bureau in New York specializing in Computer Output to
Microfilm ("COM"). The PDS purchase price consisted of $1.7 million cash
paid at closing.
ITC is a Massachusetts company that provides maintenance services
relating to ITC equipment sold for the cleaning, testing, certifying and
degaussing of computer tape. The ITC purchase price consisted of $1.5
million cash paid at closing, the assumption of a $600,000 deferred revenue
liability, and a contingent cash payment of up to $2.7 million based upon
future revenues of the ITC business.
NOTE 8. RIGHTS OFFERING:
On October 30, 1996, the Company completed a rights offering to its
existing shareholders that resulted in the issuance of 3.6 million shares of
common stock. For each share of Anacomp common stock held as of the close of
business on September 18, 1996, the Company distributed 0.36 rights to purchase
an additional share of common stock at a subscription price of $6.875 per share.
The Company will use the proceeds of the rights offering, approximately $25
million, for the acquisition of businesses, assets and technologies.
<PAGE>
NOTE 9. SUBSEQUENT EVENTS:
Subsequent to December 31, 1996, the Company acquired all of the common
stock of two businesses: COM S.r.l. and Data/Ware Development, Inc.
COM S.r.l. is a service bureau in Milan, Italy specializing in
Computer Output to Microfilm ("COM"). The COM S.r.l. purchase price
consisted of $460,000 cash paid at closing, and represents the Company's
first European service bureau.
Data/Ware Development, Inc. is a California based company that
manufactures and markets CD output systems, optical storage controllers,
and mainframe connectivity solutions. The Data/Ware purchase price
consisted of $11.2 million cash paid at closing, and contingent cash and/or
stock payments of up to $3.2 million based upon future operating results of
the Data/Ware business over the next two years.
On January 22, 1997, the Company reached a multi-year product and marketing
agreement with FileNet Corp to provide Windows(R) NT-based software applications
for integrated information delivery. FileNet Corp's newest suite of document
management and workflow software, a set of integrated, open, componentized and
complementary solutions, will serve as the platform for vertical applications
developed and marketed by the Company under the name Concerto(TM). In connection
with this agreement the Company is required to prepay software license fees of
$1.0 million to FileNet Corp. during the second quarter of fiscal 1997.
On January 27, 1997, the Company reached an agreement with Lehman Brothers
for the refinancing of the Company's 11-5/8% Senior Secured Notes. Lehman
Brothers has agreed to underwrite a new $80 million debt facility, consisting of
$55 million in term loans and a revolver of up to $25 million. The Company
intends to pre-pay the next principal installment of approximately $14.3 million
on its existing Senior Secured Notes, which had a balance outstanding of $97.9
million at December 31, 1996. On February 28, 1997, the Company will use
available cash and borrowings under the new senior debt facility to redeem the
balance of the Senior Secured Notes, reducing the Company's senior debt to $55
million in new term loans and leaving the $25 million revolver undrawn.
Accordingly, $42.9 million of senior secured notes outstanding at December 31,
1996 are reflected as current portion of long-term debt in the accompanying
Condensed Consolidated Balance Sheet. This agreement replaces the former
agreement with Lehman Brothers reached on November 20, 1996 to underwrite a
similar debt facility, as noted in the Company's Report on Form 10-K for the
fiscal year ended September 30, 1996.
On February 3, 1997, the Company's shareholders approved the Anacomp, Inc.
1997 Qualified Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
Stock Purchase Plan allows qualified employees to purchase shares of the
Company's common stock at the lower of 85% of the fair market value at the date
of purchase or 85% of the fair market value on the first day of the offering
period. A maximum of 500,000 shares of common stock is available for purchase
under the Stock Purchase Plan.
On February 3, 1997, the Company's shareholders approved the Anacomp, Inc.
1996 Long-Term Incentive Plan (the "Incentive Plan"). The Company has reserved
1,450,000 shares of its common stock for issuance in connection with options and
awards under this plan.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
General
Anacomp reported a net loss of $12.9 million for the three months ended
December 31, 1996, compared to net income of $1.1 million for the three months
ended December 31, 1995. Included in the net loss for the three months ended
December 31, 1996 is non-cash amortization of the Company's reorganization value
asset of $19.2 million and receipt of a one-time $3.6 million prepayment
relating to a long-standing OEM purchase agreement with Kodak.
Pursuant to the 1990 OEM agreement noted above, Kodak was obligated to
purchase an additional 151 XFP 2000 systems by October 1997 or pay a cash
penalty to the Company. In an amendment to this agreement, the Company accepted
the $3.6 million prepayment and a commitment to purchase an additional 41 XFP
2000 systems by October 1997.
Included in net income for the three months ended December 31, 1995 is a
$6.2 million gain on the sale of the Image Conversion Services Division ("ICS")
and $2.8 million of financial restructuring costs. Earnings before interest,
other income, reorganization items, financial restructuring costs, taxes,
depreciation and amortization ("EBITDA") was $23.3 million for the three months
ended December 31, 1996 compared to $23.1 million for the three months ended
December 31, 1995. Excluding the Kodak prepayment, EBITDA was $19.7 million for
the current period.
Total revenues for the first quarter of $116.5 million represents a $13.8
million decrease from the first quarter of the prior year. Approximately $5.5
million of the decrease is due to the discontinuance and downsizing of product
lines, including ICS ($1.5 million), reader and reader printer products ($2.4
million), source document film ($.7 million) and micrographics accessories ($.9
million). The remaining $8.3 million decrease in revenues is due to the general
downward trend in both the micrographics and magnetics product lines.
Cost of services provided as a percentage of services revenue was 53% for
the three months ended December 31, 1996, compared to 55% for the same period of
the prior year. Cost of equipment and supplies sold as a percentage of equipment
and supplies sales, excluding the one-time $3.6 million payment noted above, was
76% for the three months ended December 31, 1996, compared to 78% for the same
period of the prior year.
Selling, general and administrative expenses were 19% of revenue in 1996
and 1995, excluding the one-time $3.6 million payment noted above.
Interest expense and fee amortization of $9.8 million for the three months
ended December 31, 1996, decreased significantly over the prior year, due to the
Company's improved debt structure as a result of the Reorganization in fiscal
1996.
Products and Services
Output services revenues decreased $2.4 million for the three months ended
December 31, 1996 compared to the same three months of fiscal 1996, excluding
the effect of the ICS sale. COM services volumes decreased 1% and average
selling prices decreased 10%. Data center acquisitions and several large
customer gains have contributed to both the stabilization of volumes and the
decrease in average selling prices. The acquired data centers contributed
volumes, but at significantly lower average selling prices. The large customer
gains received favorable pricing due to their volumes. Gross margins as a
percentage of revenue decreased by 1% due to the aforementioned impact of lower
average selling prices.
Technology services (primarily maintenance) revenues decreased $2.0 million
for the three months ended December 31, 1996, primarily due to the effect of
replacing older generation COM systems with the XFP, which has a capacity
significantly greater than the older COM systems. Gross margins as a percentage
of revenue improved five percentage points as a result of decreased personnel
and supply costs. Personnel costs decreased as planned reductions in the work
force were made to bring headcount in line with the declining base of COM
recorders under maintenance.
COM systems revenues for the three months ended December 31, 1996 decreased
$2.0 million compared to the same period of the prior year. The decrease in
revenue is attributable to a decrease in the number of systems sold and the mix
and pricing of new and used systems. The Company sold or leased 20 XFP 2000 COM
systems to third party users in the current period, with a mix of 13 new units
and 7 used units. For the same period in the prior year, the Company sold or
leased 28 systems, with a mix of 27 new units and 1 used unit. Gross margin as a
percentage of revenue improved primarily due to the result of manufacturing
efficiencies realized during fiscal 1996.
Digital systems revenues for the three months ended December 31, 1996 were
$1.6 million. The sale of two XSTAR digital systems accounted for $1.5 million
of the revenue total. There were no digital systems sold for the same period of
the prior year.
Micrographics supplies revenues for the three months ended December 31,
1996 decreased $6.6 million compared to the same period of the prior year. As
previously mentioned, part of this decrease is due to the discontinuance or
downsizing of reader and reader printer products ($2.4 million), source document
film ($.7 million) and micrographics accessories ($.9 million). The other major
components of the decrease were duplicate film sales and Original COM film
sales, which is consistent with long-term trends. Gross margins as a percentage
of revenue were comparable between periods.
Magnetic media revenues for the three months ended December 31, 1996
decreased $4.2 million compared to the same period of the prior year. The
decline is due mainly to the decreased unit sales in open reel tape, 3480 tape
cartridges and 3490E tape cartridges. Magnetics gross margins as a percentage of
revenue increased in the current period principally due to increases in sales
price on selected products and increased sales on higher margin products.
Liquidity and Capital Resources
Anacomp's working capital at December 31, 1996, excluding the current
portion of long-term debt, was $69.7 million, compared to $26.4 million at
September 30, 1996. Net cash provided by operating activities increased to $16.3
million for the first three months of fiscal 1997, compared to $9.2 million in
the comparable prior period. Net cash used in investing activities was $6.6
million in the current period, compared to net cash provided by investing
activities of $12.4 million in the comparable prior period. This change was
primarily the result of the Company using $3.4 million of cash for acquisitions
in the current period while the Company generated $13.5 million in cash from the
sale of the ICS Division in the prior period. Also, the Company increased its
capital expenditures for property, plant and equipment to $3.2 million during
the current period.
Net cash provided by financing activities increased to $24.1 million for
the three months ended December 31, 1996, compared to cash used in financing
activities of $13.7 million in the comparable prior period. This increase was
primarily due to the Company's successful rights offering of approximately 3.6
million shares of common stock which provided approximately $24.6 million in
cash in the current period, and debt repayments of $13.7 million included in the
prior period.
The Company's cash balance (including restricted cash) as of December 31,
1996 was $81.2 million, compared to $47.8 million at September 30, 1996,
primarily due to cash generated from the rights offering noted above.
The Company has significant debt service obligations. The ability of the
Company to meet its debt service and other obligations will depend upon its
future performance and is subject to financial, economic and other factors, some
of which are beyond its control. However, the Company believes that cash on hand
and cash generated from operations will be sufficient to fund its debt service
requirements, acquisition strategies and working capital requirements in the
foreseeable future.
Subsequent to December 31, 1996, the Company reached an agreement with
Lehman Brothers for the refinancing of the Company's 11-5/8% Senior Secured
Notes. Under the planned refinancing, the Company intends to pre-pay the next
principal installment of approximately $14.3 million on its existing Senior
Secured Notes, which had a balance outstanding of $97.9 million at December 31,
1996. On February 28, 1997, the Company will use available cash and borrowings
under the new senior debt facility to redeem the balance of the Senior Secured
Notes, reducing the Company's senior debt to $55 million in new term loans and
leaving a new $25 million revolver undrawn.
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
PART II: OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(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, 1996
<PAGE>
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 13th day of February, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANACOMP,
INC.'S DECEMBER 31, 1996 FORM 10-Q QUARTERLY REPORT AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
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<ALLOWANCES> 6,850
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