SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGEACT OF 1934.
For the transition period from ____________ to____________
Commission file number: 1-8328
Anacomp, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Indiana 35-1144230
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
12365 Crosthwaite Circle, Poway, California 92064
(619) 679-9797
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Principal Executive Offices)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (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 documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No
As of April 30, 1999, the number of outstanding shares of the registrant's
common stock, $.01 par value per share, was 14,214,860.
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION Page
Item 1. Financial Statements.
Condensed Consolidated Balance Sheets at
March 31, 1999 and September 30, 1998....... 2
Condensed Consolidated Statements of Operations
Three Months Ended March 31, 1999 and 1998.. 3
Condensed Consolidated Statements of Operations
Six Months Ended March 31, 1999 and 1998.... 4
Condensed Consolidated Statements of Cash Flows
Six Months Ended March 31, 1999 and 1998.... 5
Condensed Consolidated Statements of
Stockholders' Equity (Deficit) Six Months
Ended March 31, 1999........................ 6
Condensed Consolidated Statements of
Stockholders' Equity (Deficit) Three and Six
Months Ended March 31, 1999................. 6
Notes to the Condensed Consolidated Financial
Statements..................................... 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......... 10
Item 3. Quantitative and Qualitative Disclosures About
Market Risk....................................... 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................. 17
Item 2. Changes in Securities and Use of Proceeds......... 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K.................. 17
SIGNATURES.................................................. 18
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
March 31, September 30,
(in thousands) 1999 1998
------------- -------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $13,621 $17,721
Restricted cash 902 4,285
Accounts and notes receivable, net 63,411 63,288
Current portion of long-term receivables, net 5,860 5,642
Inventories 16,943 16,485
Net assets of discontinued operations 28,612 29,939
Prepaid expenses and other 9,420 10,269
------------- -------------
Total current assets 138,769 147,629
Property and equipment, net 43,271 35,092
Long-term receivables, net of current portion 7,540 9,002
Excess of purchase price over net assets of
businesses acquired
and other intangibles, net 118,664 120,654
Reorganization value in excess of identifiable
assets, net 44,819 83,819
Other assets 15,076 15,641
------------- -------------
$368,139 $411,837
============= =============
</TABLE>
<TABLE>
<CAPTION>
Liabilities and Stockholders' Equity (Deficit)
<S> <C> <C>
Current liabilities:
Current portion of long-term debt $1,089 $1,152
Accounts payable 18,526 28,961
Accrued compensation, benefits and withholdings 17,117 17,327
Accrued income taxes 15,281 15,197
Accrued interest 21,193 18,158
Other accrued liabilities 37,018 39,650
------------- -------------
Total current liabilities 110,224 120,445
------------- -------------
Long-term debt, net of current portion 338,530 338,884
------------- -------------
Stockholders' equity (deficit):
Preferred stock -- --
Common stock 142 143
Capital in excess of par value 108,463 109,486
Cumulative translation adjustment (from May 31,
1996) (2,261) 447
Accumulated deficit (from May 31, 1996) (186,959) (157,568)
------------- -------------
Total stockholders' deficit (80,615) (47,492)
------------- -------------
$368,139 $411,837
============= =============
</TABLE>
See the notes to the condensed consolidated financial statements
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
(in thousands, except per share amounts) 1999 1998
------------ ------------
<S> <C> <C>
Revenues:
Services provided $73,838 $50,934
Equipment and supply sales 38,704 40,380
------------ ------------
112,542 91,314
------------ ------------
Operating costs and expenses:
Costs of services provided 45,228 28,608
Costs of equipment and supplies sold 23,952 27,425
Selling, general and administrative expenses 23,385 22,948
Amortization of reorganization asset 17,946 17,808
Amortization of intangible assets 5,098 2,110
------------ ------------
115,609 98,899
------------ ------------
Operating loss from continuing operations (3,067) (7,585)
------------ ------------
Other income (expense):
Interest income 691 554
Interest expense and fee amortization (10,317) (7,957)
Other (860) (401)
------------ ------------
(10,486) (7,804)
------------ ------------
Loss before income taxes from continuing operations (13,553) (15,389)
Provision for income taxes 1,845 1,020
------------ ------------
Loss from continuing operations (15,398) (16,409)
Income from discontinued operations, net of income
taxes 520 554
------------ ------------
Net loss $(14,878) $(15,855)
============ ============
Basic loss per share from continuing operations $(1.08) $(1.18)
Basic income per share from discontinued operations .04 .04
------------ ------------
Basic net loss per share $(1.04) $(1.14)
============ ============
Shares used to compute basic income (loss) per
share 14,233 13,873
============ ============
</TABLE>
See the notes to the condensed consolidated financial statements
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
--------------------------
(in thousands, except per share amounts) 1999 1998
------------ ------------
Revenues:
<S> <C> <C>
Services provided $149,323 $99,440
Equipment and supply sales 77,584 84,348
------------ ------------
226,907 183,788
------------ ------------
Operating costs and expenses:
Costs of services provided 90,826 56,267
Costs of equipment and supplies sold 48,977 57,377
Selling, general and administrative expenses 47,827 44,558
Amortization of reorganization asset 35,891 35,616
Amortization of intangible assets 9,634 4,678
------------ ------------
233,155 198,496
------------ ------------
Operating loss from continuing operations (6,248) (14,708)
------------ ------------
Other income (expense):
Interest income 1,079 1,339
Interest expense and fee amortization (20,278) (15,878)
Other (631) (571)
------------ ------------
(19,830) (15,110)
------------ ------------
Loss before income taxes from continuing operations (26,078) (29,818)
Provision for income taxes 4,122 2,414
------------ ------------
Loss from continuing operations (30,200) (32,232)
Income from discontinued operations, net of income
taxes 809 1,009
------------ ------------
Net loss $(29,391) $(31,223)
============ ============
Basic loss per share from continuing operations $(2.12) $(2.33)
Basic income per share from discontinued operations .06 .07
------------ ------------
Basic net loss per share $(2.06) $(2.26)
============ ============
Shares used to compute basic income (loss) per
share 14,250 13,843
============ ============
</TABLE>
See the notes to the condensed consolidated financial statements
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------------
(in thousands) 1999 1998
------------- -------------
Cash flows from operating activities:
<S> <C> <C>
Net loss $(29,391) $(31,223)
Adjustments to reconcile net loss to net
cash provided by (used in) continuing
operations:
Income from discontinued operations (809) (1,009)
Depreciation and amortization 55,106 47,410
Non-cash compensation 573 502
Non-cash charge in lieu of taxes 3,108 2,290
Restricted cash requirements 3,383 3,381
(Gain) loss on sale of assets (618) 110
Change in assets and liabilities net of
effects from acquisitions:
Increase in accounts and long-term
receivables (1,296) (6,453)
Decrease (increase) in inventories and
prepaid expenses 223 (273)
Increase in other assets (937) (1,212)
Decrease in accounts payable and accrued
expenses (12,147) (20,190)
Decrease in other noncurrent liabilities (371) (512)
------------- -------------
Net cash provided by (used in)
continuing operations 16,824 (7,179)
Net operating cash provided by discontinued
operations 2,278 3,077
------------- -------------
Net cash provided by (used in)
operating activities 19,102 (4,102)
------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment (14,384) (4,780)
Capital expenditures of discontinued operations (165) (676)
Proceeds from sale of assets 2,732 --
Payments to acquire companies and customer
rights (9,533) (15,570)
------------- -------------
Net cash used in investing activities (21,350) (21,026)
------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of options and
warrants 382 1,102
Proceeds from employee stock purchases 782 905
Purchases of common stock (2,188) --
Principal payments on long-term debt (337) (3,698)
------------- -------------
Net cash used in financing activities (1,361) (1,691)
------------- -------------
Effect of exchange rate changes on cash (491) (438)
------------- -------------
Decrease in cash and cash equivalents (4,100) (27,257)
Cash and cash equivalents at beginning of period 17,721 58,060
------------- -------------
Cash and cash equivalents at end of period $13,621 $30,803
============= =============
Supplemental Information:
Cash paid for interest $15,712 $14,443
============= =============
Cash paid for income taxes $3,127 $2,292
============= =============
Assets acquired by assuming liabilities $490 $883
============= =============
</TABLE>
See the notes to the condensed consolidated financial statements
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY (DEFICIT)
(Unaudited)
<TABLE>
<CAPTION>
Cap.
in Cum.
(in thousands) Common excess of Translation Accum.
Stock par value Adj. Deficit Total
-------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance at September 30, $143 $109,486 $447 $(157,568)$(47,492)
1998
Common stock issued for the
exercise -- 382 -- -- 382
of options and warrants
Common stock issued for
employee stock purchases 1 781 -- -- 782
Common stock purchased (2) (2,186) -- -- (2,188)
Cumulative translation -- -- (2,708) -- (2,708)
adjustment
Net loss for six months -- -- -- (29,391) (29,391)
-------------------------------------------------
Balance at March 31, 1999 $142 $108,463 $(2,261) $(186,959)$(80,615)
=================================================
</TABLE>
ANACOMP, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
INCOME (LOSS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------------------------
(in thousands) 1999 1998
------------- -------------
<S> <C> <C>
Net loss $(14,878) $(15,855)
Translation adjustment (2,367) 488
------------- -------------
Comprehensive loss $(17,245) $(15,367)
============= =============
</TABLE>
<TABLE>
<CAPTION>
Six Months Ended
March 31,
---------------------------
(in thousands) 1999 1998
------------- -------------
<S> <C> <C>
Net loss $(29,391) $(31,223)
Translation adjustment (2,708) (119)
------------- -------------
Comprehensive loss $(32,099) $(31,342)
============= =============
</TABLE>
See the notes to the condensed consolidated financial statements
<PAGE>
ANACOMP, INC. AND SUBSIDIARIES
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements include the
accounts of Anacomp, Inc. ("Anacomp" or the "Company") and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have been
eliminated. These financial statements have not been audited but, in the opinion
of the Company's management, include all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the Company's financial
position, results of operations, and cash flows for all periods presented. These
financial statements should be read in conjunction with the Company's financial
statements and notes thereto for the year ended September 30, 1998, included in
the Company's 1998 Annual Report on Form 10-K. Interim operating results are not
necessarily indicative of operating results for the full year.
Note 2. Management Estimates and Assumptions
The Company's preparation of the accompanying condensed consolidated financial
statements in conformity with generally accepted accounting principles requires
its management to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period. Estimates have been prepared
on the basis of the most current available information and actual results could
differ from those estimates.
Note 3. Reorganization Asset
As of May 31, 1996, the Company adopted Fresh Start Reporting, which resulted in
material changes to the consolidated balance sheet - including the valuation of
assets, intangible assets, and liabilities at fair market value, and the
valuation of equity based on the appraised reorganization value of the ongoing
business. The net result of the valuations was that the Company recognized an
asset captioned "Reorganization value in excess of identifiable assets"
("Reorganization Asset") totaling $267.5 million as of May 31, 1996. Net of
accumulated amortization, the Reorganization Asset was $47.2 million at March
31, 1999. Of this amount, $2.4 million was allocated to the Magnetics Solutions
Group division (the "Magnetics Division") and was included in "Net assets of
discontinued operations". The Reorganization Asset is being amortized over a
three and one-half year period beginning May 31, 1996 and will be fully
amortized by November 30, 1999.
Reorganization Asset amortization was $37.8 million and $37.5 million for the
six-month periods ended March 31, 1998 and 1998, respectively. Of these amounts,
$1.9 million was allocated to discontinued operations in each period. On a pro
forma basis for the six-month periods ended March 31, 1999 and 1998, excluding
Reorganization Asset amortization, the Company would have reported income from
continuing operations of $5.7 million and $3.4 million, basic net income per
share of $0.40 and $0.24, and diluted net income per share of $0.37 and $0.23,
respectively.
Note 4. Comprehensive Income
The Company adopted Financial Accounting Standards Board ("FASB") Statement No.
130 Reporting Comprehensive Income - effective October 1, 1998. This statement
requires the presentation of comprehensive income, as defined, as part of the
basic financial statements. Comprehensive income includes all changes in equity
during a period except those resulting from investments by and distributions to
owners.
<PAGE>
Note 5. First Image Acquisition
Effective June 1, 1998, the Company completed its acquisition (the
"Acquisition") of assets constituting substantially all of the business and
operations (the "First Image Businesses") of First Image Management Company
("First Image"), a division of First Financial Management Corporation ("FFMC"),
which in turn is a wholly owned subsidiary of First Data Corporation ("FDC").
The Company also assumed substantially all of the ongoing liabilities of the
First Image Businesses. The purchase price paid by the Company to FFMC was
$150.0 million, although a post-closing adjustment resulted in FFMC returning to
the Company $4.4 million to reflect a shortfall in the agreed-upon working
capital for the First Image Businesses. The Acquisition was accounted for as a
purchase and the excess of the purchase price over the estimated fair value of
net assets acquired (referred to as "goodwill") approximated $100.0 million,
which is being amortized over a 15-year period on a straight-line basis.
The First Image Businesses consisted of (i) image access services, primarily
Computer Output to Microfilm ("COM") and Compact Disc ("CD") services (the "IAS
Business"), (ii) document print and distribution services such as laser print
and mail and demand publishing services (the "DPDS Business"), and (iii)
document acquisition services such as health care and insurance claims entry and
data capture services (the "DAS Business"). The Company sold the DPDS Business
and the DAS Business during the three-month period ended September 30, 1998. The
Company retained and continues to operate the IAS Business, whose revenues and
earnings are included in the Company's results of operations for the six months
ended March 31, 1999.
Note 6. Inventories
<TABLE>
<CAPTION>
March 31, September
30,
-------------------------
1999 1998
-------------------------
<S> <C> <C>
Finished goods $9,410 $9,248
Work in process 1,539 2,071
Raw materials and supplies 5,994 5,166
-------------------------
$16,943 $16,485
=========================
</TABLE>
Note 7. Income Taxes
The Company's amortization of the Reorganization Asset is not deductible for
income tax purposes. Accordingly, the Company incurs income tax expense even
though it reports a pre-tax loss due to such amortization.
For the six months ended March 31, 1999 and 1998, income tax expense is reported
for the Company based upon an estimated effective tax rate of 42% of pretax
income before amortization of the Reorganization Asset. For the six months ended
March 31, 1999 and 1998, the limited tax benefit of the U.S. Federal net
operating loss carryforwards ("NOL") of the Company resulted in a reduction of
$3.3 million and $2.4 million, respectively, in the Company's Reorganization
Asset and did not reduce income tax expense.
Note 8. Loss Per Share
Basic earnings per share is computed based upon the weighted average number of
shares of the Company's common stock outstanding during the period presented.
Diluted earnings per share is computed based upon the weighted average number of
shares of common stock outstanding and dilutive common stock equivalents during
the period presented. Common stock equivalents include options granted under the
Company's stock option plans using the treasury stock method and shares of
common stock expected to be issued under the Company's employee stock purchase
plan. Common stock equivalents were not used to calculate diluted earnings per
share because of their anti-dilutive effect. There are no reconciling items in
calculating the numerator for basic and diluted earnings per share for any of
the periods presented.
<PAGE>
Note 9. Acquisitions
During the six months ended March 31, 1999, the Company acquired the customer
bases and other specified assets of eight businesses. Total consideration paid
at closing was $9.5 million, of which approximately $7.0 million was assigned to
goodwill. Three of the acquisition agreements include provisions for contingent
cash payments of up to approximately $700,000 in the aggregate.
Note 10. Subsequent Event - Sale of Magnetics Solutions Division
In February 1999, the Company adopted a plan to dispose of its Magnetics
Division, and on April 28, 1999, the Company signed a definitive agreement to
sell the Magnetics Division for a purchase price of up to $47.5 million. The
price includes $40.0 million in cash at closing, a $5.0 million subordinated
note, and incentive payments of up to $2.5 million based upon sales of magnetic
media products to the Company's customer base over the next two years. The
transaction, which is contingent upon financing and regulatory approval, is
expected to close within 45 days of the signing of the Definitive Agreement. The
Company expects to recognize a gain before taxes in excess of $10 million in the
third quarter as a result of the sale.
The assets and liabilities of the Magnetics Division have been reported
separately as "Net assets of discontinued operations" in the condensed
consolidated balance sheet as of March 31, 1999. The condensed consolidated
balance sheet as of September 30, 1998 has been restated to provide consistent
information. The net assets of the Magnetics Division are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
September
March 31, 30,
1999 1998
------------- -------------
<S> <C> <C>
Accounts and notes receivable $15,386 $15,821
Inventories 12,166 12,133
Property and equipment 6,121 6,657
Reorganization value in excess of
identifiable assets 2,359 4,412
Other assets 178 232
Accounts payable and other accrued
liabilities (7,598) (9,316)
------------- -------------
Net assets $28,612 $29,939
============= =============
</TABLE>
Similarly, the results of operations of the Magnetics Division have been
reported separately as "Income from discontinued operations, net of income
taxes" in the condensed consolidated statements of operations for the periods
ended March 31, 1999 and 1998.
The operating results of the discontinued operations are summarized as follows
(in thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
--------------------------- ---------------------------
1999 1998 1999 1998
------------- ----------- ------------- ------------
<S> <C> <C> <C> <C>
Revenues $25,962 $26,279 $50,544 $51,619
============= =========== ============= ============
Operating income $1,579 $1,634 $2,763 $3,094
Income taxes 1,059 1,080 1,954 2,085
------------- ----------- ------------- ------------
Net income $520 $554 $809 $1,009
============= =========== ============= ============
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Certain statements in this "Management's Discussion and Analysis of Financial
Condition and Results of Operations" constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements. Such risks, uncertainties and other important
factors include, among others: general economic and business conditions;
industry trends; industry capacity; competition; raw materials costs and
availability; currency fluctuations; the loss of any significant customers or
suppliers; changes in business strategy or development plans; availability,
terms and deployment of capital; availability of qualified personnel; changes
in, or the failure or inability to comply with, government regulation; and other
factors referenced in this report. These forward-looking statements speak only
as of the date of this report.
Pro Forma Statements of Operations
As of May 31, 1996, the Company adopted Fresh Start Reporting, which
resulted in material changes to the consolidated balance sheet. See Note 3 to
the accompanying Condensed Consolidated Financial Statements for a description
of the Company's Reorganization Asset. To facilitate a better understanding of
the Company's operating performance after the Reorganization Asset is fully
amortized, pro forma condensed consolidated statements of operations for the
three and six months ended March 31, 1999 and 1998 have been presented below.
The only difference from the Company's reported results is a pro forma
adjustment to exclude the amortization of the Reorganization Asset.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------------
(in thousands, except per share 1999 1998
amounts)
--------------------------------------
<S> <C> <C> <C> <C>
Revenues $112,542 100.0% $91,314 100.0%
------------ ------------
Cost of sales 69,180 61.5% 56,033 61.4%
Selling, general and administrative
expenses 23,385 20.8% 22,948 25.1%
Amortization of intangible assets 5,098 4.5% 2,110 2.3%
------------ ------------
Total operating costs and expenses 97,663 86.8% 81,091 88.8%
------------ ------------
Operating income from continuing
operations 14,879 13.2% 10,223 11.2%
Interest expense and other 10,486 9.3% 7,804 8.6%
------------ ------------
Income before income taxes from
continuing operations 4,393 3.9% 2,419 2.6%
Provision for income taxes 1,845 1.6% 1,020 1.1%
------------ ------------
Income from continuing operations 2,548 2.3% 1,399 1.5%
Income from discontinued operations 1,464 1,492
------------ ------------
Net income $4,012 $2,891
============ ============
Basic income from continuing
operations per share $0.18 $0.10
============ ============
Diluted income from continuing
operations per share $0.17 $0.09
============ ============
Shares used to compute basic income
per share 14,233 13,873
============ ============
Shares used to compute diluted
income per share 15,183 14,823
============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended March 31,
--------------------------------------
(in thousands, except per share 1999 1998
amounts)
--------------------------------------
<S> <C> <C> <C> <C>
Revenues $226,907 100.0% $183,788 100.0%
------------ ------------
Cost of sales 139,803 61.6% 113,644 61.8%
Selling, general and administrative
expenses 47,827 21.1% 44,558 24.2%
Amortization of intangible assets 9,634 4.2% 4,678 2.6%
------------ ------------
Total operating costs and expenses 197,264 86.9% 162,880 88.6%
------------ ------------
Operating income from continuing
operations 29,643 13.1% 20,908 11.4%
Interest expense and other 19,830 8.8% 15,110 8.2%
------------ ------------
Income before income taxes from
continuing operations 9,813 4.3% 5,798 3.1%
Provision for income taxes 4,122 1.8% 2,414 1.3%
------------ ------------
Income from continuing operations 5,691 2.5% 3,384 1.8%
Income from discontinued operations 2,698 2,883
------------ ------------
Net income $8,389 $6,267
============ ============
Basic income from continuing
operations per share $0.40 $0.24
============ ============
Diluted income from continuing
operations per share $0.37 $0.23
============ ============
Shares used to compute basic income
per share 14,250 13,843
============ ============
Shares used to compute diluted
income per share 15,200 14,793
============ ============
</TABLE>
Results of Operations
Three Months Ended March 31, 1999 vs. Three Months Ended March 31, 1998
General. Anacomp reported a net loss of $14.9 million for the three months
ended March 31, 1999, compared to a net loss of $15.9 million for the three
months ended March 31, 1998. Earnings from continuing operations before
interest, other income, taxes, depreciation and amortization ("EBITDA") were
$24.7 million, or 22.0% of revenues, for the three months ended March 31, 1999.
This compares to EBITDA of $16.7 million, or 18.3% of revenues for the three
months ended March 31, 1998.
Revenues. The Company's continuing revenues increased 23.2% from $91.3
million for the three months ended March 31, 1998, to $112.5 million for the
three months ended March 31, 1999. The Company experienced increased revenues of
$22.8 million in its Outsource Services business line primarily resulting from
the acquisition of the First Image IAS Business ("IAS Business") and the
inclusion of the IAS Business operating results for the three months ending
March 31, 1999. Digital service revenues, which are included in Outsource
Services, also increased significantly with quarterly revenues of $5.9 million.
The Company experienced increases in revenues of $3.2 million, or 33.0%,
in Output Systems for the three-month period ended March 31, 1999 compared to
the comparable period ended March 31, 1998. Of this increase, $1.3 million
represented sales of COM Systems and $1.9 million represented sales of Digital
Solutions. Offsetting this increase was a $4.4 million decline, or 15.3%, in
Micrographics Supplies revenues. The decrease in Micrographics Supplies revenues
was the result of the Company's discontinuance of the sale of duplicate
microfilm to the reseller market, as well as declining sales of original COM
microfilm and duplicate microfilm, which is consistent with long-term trends.
<PAGE>
Gross Margins. The Company's gross margins increased 22.9% from $35.3
million (38.6% of revenues) for the three months ended March 31, 1998, to $43.4
million (38.5% of revenues) for the three months ended March 31, 1999. Total
gross margins, as a percentage of revenue, remained level with the prior year.
Outsource Service margins, as a percentage of revenue, decreased 4.8 percentage
points from 1998 to 1999 principally because of decreases in average selling
prices for Outsource Service business and because of costs incurred for the
consolidation of IAS Business data centers. This decrease was offset by
increased gross margin percentages for COM Systems, Digital Solutions and
Micrographics Supplies.
Included in the cost of sales and services are engineering costs of $2.2
million and $2.5 million for the three-month periods ended March 31, 1999 and
1998, respectively. Of those amounts, $1.7 million and $0.9 million for those
periods, respectively, represent research and development activities
predominantly related to digital products. The remaining portion of the
engineering costs represents support costs for the Company's current product
offerings.
Selling, general and administrative expenses. Selling, general and
administrative ("SG&A") expenses increased 1.9% from $22.9 million (25.1% of
revenues) for the three months ended March 31, 1998 to $23.4 million (20.8% of
revenues) for the three months ended March 31, 1999. This increase is primarily
the result of operating costs of the IAS Business and of costs related to new
strategic marketing initiatives. SG&A costs, as a percentage of revenues,
decreased 4.3 percentage points primarily because of the added IAS Business
sales volume.
Amortization of intangible assets. Amortization of intangible assets
increased 141.6% from $2.1 million (2.3% of revenues) for the three months ended
March 31, 1998, to $5.1 million (4.5% of revenues) for the three months ended
March 31, 1999. This increase is principally the result of the amortization of
goodwill associated with the IAS Business acquisition in fiscal year 1998 and
the eight acquisitions completed in fiscal year 1999.
Interest Expense. Interest expense increased 29.7% from $8.0 million for
the three months ended March 31, 1998 to $10.3 million for the three months
ended March 31, 1999. This increase was the result of additional borrowings used
to finance the IAS Business acquisition.
Provision for Income Taxes. The Company's effective tax rate remained at
42% of taxable income for both periods presented. See Note 7 to the accompanying
Condensed Consolidated Financial Statements for further discussion.
Six Months Ended March 31, 1999 vs. Six Months Ended March 31, 1998
General. Anacomp reported a net loss of $29.4 million for the six months
ended March 31, 1999, compared to a net loss of $31.2 million for the six months
ended March 31, 1998. EBITDA was $49.2 million, or 21.7% of revenues, for the
six months ended March 31, 1999. This compares to EBITDA of $33.9 million, or
18.4% of revenues for the six months ended March 31, 1998.
Revenues. The Company's continuing revenues increased 23.5% from $183.8
million for the six months ended March 31, 1998, to $226.9 million for the six
months ended March 31, 1999. The Company experienced increased revenues of $49.8
million in its Outsource Services business line while experiencing decreased
revenues of $8.1 million in its Micrographic Supplies product line.
The increase in Outsource Service revenues resulted primarily from the
June 1, 1998 acquisition of IAS Business and the inclusion of its operating
results for the six months ending March 31, 1999. Digital Service revenues,
which are included in Outsource Services, also increased significantly with six
month revenues of $13.2 million.
The decrease in Micrographics Supplies revenues was the result of the
Company's discontinuance of the sale of duplicate microfilm to the reseller
market, as well as declining sales of original COM microfilm and duplicate
microfilm, which is consistent with long-term trends.
<PAGE>
Gross Margins. The Company's gross margins increased 24.2% from $70.1
million (38.2% of revenues) for the six months ended March 31, 1998, to $87.1
million (38.4% of revenues) for the six months ended March 31, 1999. Outsource
Service margins, as a percentage of revenue, decreased 3.8 percentage points
from 1998 to 1999 principally because of decreases in average selling prices for
Outsource Service business and because of costs incurred for the consolidation
of IAS Business data centers. This decrease was offset by increased gross margin
percentages for COM Systems and Micrographics Supplies.
Included in the cost of sales and services are engineering costs of $4.4
million and $5.0 million for the six-month periods ended March 31, 1999 and
1998, respectively. Of those amounts, $3.0 million and $1.9 million for those
periods represent research and development activities predominantly related to
digital products. The remaining portion of the engineering costs represents
support costs for the Company's current product offerings. The Company's digital
research and development activities have increased to an annual spending rate of
$6.5 million in fiscal 1999 compared to $2.5 million in the prior year.
Selling, general and administrative expenses. SG&A expenses increased 7.3%
from $44.6 million (24.2% of revenues) for the six months ended March 31, 1998
to $47.8 million (21.1% of revenues) for the six months ended March 31, 1999.
This increase resulted primarily from operating costs of the IAS Business. SG&A
costs, as a percentage of revenues, decreased 3.1 percentage points primarily
because of the added IAS Business sales volume.
Amortization of intangible assets. Amortization of intangible assets
increased 105.9% from $4.7 million (2.6% of revenues) for the six months ended
March 31, 1998, to $9.6 million (4.2% of revenues) for the six months ended
March 31, 1999. This increase is primarily related to the amortization of
goodwill associated with the IAS Business acquisition in fiscal year 1998 and
the eight acquisitions completed in fiscal year 1999.
Interest Expense. Interest expense increased 27.7% from $15.9 million for
the six months ended March 31, 1998 to $20.3 million for the six months ended
March 31, 1999. This increase was the result of additional borrowings used to
finance the acquisition of IAS Business.
Provision for Income Taxes. The Company's effective tax rate remained at
42% of taxable income for both periods presented. See Note 7 to the accompanying
Condensed Consolidated Financial Statements for further discussion.
Liquidity and Capital Resources
Anacomp's working capital at March 31, 1999 was $28.5 million, compared to
$27.2 million at September 30, 1998. Net cash provided by operating activities
was $19.1 million for the six months ended March 31, 1999, compared to a use of
$4.1 million in the comparable prior period. The current period benefited from
an increase in depreciation and amortization of approximately $7.7 million,
which was primarily the result of increased goodwill and depreciable assets from
the IAS Business acquisition. The remainder of the improvement resulted
primarily from a $13.3 million improvement in the use of working capital from
the prior year, specifically with respect to accounts receivable and current
liabilities.
Net cash used in investing activities was $21.4 million in the current
period, compared to $21.0 million in the comparable prior period. The decrease
in capital used to acquire companies and customer rights, along with the
proceeds from the sale of businesses, was offset by an increase in capital
expenditures that were primarily used to integrate the IAS Business.
Net cash used in financing activities decreased approximately $330,000
during the six months ended March 31, 1999 with respect to the same period in
the prior year. During the current period the issuance of common stock decreased
by $843,000 and the Company repurchased $2.2 million of common stock. In
addition, principal payments on long-term debt decreased by $3.4 million.
<PAGE>
The Company's cash balance (including restricted cash) as of March 31,
1999 was $14.5 million compared to $22.0 million at September 30, 1998. The
Company also has available an $80 million revolving credit facility. There were
no amounts outstanding under revolving credit facility as of March 31, 1999. The
Company borrowed $12.0 million on April 1, 1999 to fund the $18.2 million
semi-annual interest payment on its 10-7/8% Senior Subordinated Notes.
The Company has significant debt service obligations. As of March 31,
1999, the Company had $335 million of 10-7/8% Senior Subordinated Notes
outstanding. The notes are due in April 2004. 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 generated from
operations, cash on hand, cash to be received from the sale of the Magnetics
Division, and cash available under its revolving credit facility will be
sufficient to fund its debt service requirements, acquisition strategies, and
working capital requirements in the foreseeable future.
Year 2000
Anacomp has undertaken a comprehensive "year 2000" program for the
products that it sells or distributes in the marketplace. Under this program,
the Company has assessed all of its critical software and hardware products to
determine what remediation, if any, is necessary for the proper functioning of
these systems in the year 2000 and beyond. The Company has worked with its
outside suppliers to ensure that they will continue to support the products that
they supply to Anacomp for resale, including the performance by the suppliers of
any required year 2000 remediation. Anacomp has also analyzed and updated for
year 2000 purposes certain software and hardware systems that it uses
internally. The Company continues to consider year 2000 issues for all new
products and services as well as those in development or included in business
acquisitions.
State of Readiness. Anacomp's overall state of readiness can be assessed
by describing its specific readiness in four key areas, namely its products and
services, its suppliers' products and services, its internal systems, and its
products in development.
Anacomp has completed the assessment, remediation and year 2000 testing
phases of nearly all supported products and services, including those
responsible for generating the material portion of its revenues. Anacomp
summarizes the status of each completed product or service in a written report
to the Company's year 2000 steering committee for archiving in the Company's
year 2000 database. These processes have been reviewed and approved by a third
party consultant retained for this purpose.
The implementation phase of the Company's year 2000 project depends upon
the response of the Company's customers who may require upgrades or migration
paths. Anacomp is in the process of communicating with identified customers and
has no reason to believe that all customers who require upgrades or migration
will not receive them. To this end, Anacomp has offered and continues to offer
financial incentives to encourage early responses and to avoid peak demand
loads, although no assurance can be made that the demand will be spread
sufficiently to eliminate delays in implementation. Anacomp has also launched
its "Analog as a Fail Safe" campaign to educate customers about the value of
microfilm as a way to minimize the risk of the year 2000. Although customers may
divert expenditures away from these microfilm products and services in order to
fund other year 2000 remediation, Anacomp encourages customers to consider these
products and services as a cost-effective backup to digital storage because the
retrieval of data stored on microfilm does not require digital technology.
Anacomp has categorized approximately 850 of its suppliers into one of
four categories depending upon the criticality of the product or service and the
amount of time necessary to implement the contingency plans that Anacomp has
identified. If a supplier does not declare its readiness to Anacomp in enough
time to permit implementation of its contingency plans before December 31, 1999,
Anacomp may replace the supplier, have the supplier hold additional inventory of
the supplier's products, or implement alternative contingency plans depending
upon the product or service provided.
<PAGE>
As of April 30, 1999, Anacomp had received written responses to Anacomp's
year 2000 readiness questionnaire from approximately 90% of the 165 suppliers
that Anacomp deems critical to its operations. Anacomp has either received
declarations of readiness from, or established contingency plans for, all
critical suppliers. For example, Anacomp is currently interviewing alternative
sources of key products as part of its contingency planning but has no reason to
believe that any of its critical suppliers will not be ready in time.
For those Anacomp products that incorporate the products of a third party
supplier, Anacomp continues to request that its suppliers disclose test
procedures and results. Anacomp has also requested that its vendors in the human
resources area, such as its retirement, health and insurance providers, respond
in writing as to their readiness, but there can be no assurance that such
vendors will either respond or achieve readiness in a timely fashion.
Anacomp has identified all internal software and hardware products used in
its corporate headquarters in Poway, California, including those used to
assimilate and report financial information and to handle billing, collections
and electronic commerce. In those instances where remediation or renovation was
required, Anacomp has either completed or has nearly completed such remediation
or renovation. Anacomp is in the process of completing the documentation of such
efforts for its year 2000 archives.
The Company continues to develop new products and services and to acquire
new businesses. Anacomp develops and tests each new product, sometimes with the
assistance of an outside consultant, for year 2000 readiness. Businesses that
Anacomp acquires, such as First Image, are subject to the same assessment,
remediation, testing and implementation phases as those described above.
Costs. Total expenditures on its year 2000 project, including costs of
outside parties such as consultants and attorneys, costs of hardware and
software remediation, and internal labor, travel and out of pocket expenses,
were approximately $0.3 million and $2.3 million for fiscal year 1997 and 1998,
respectively, and is estimated to be $1.2 million in fiscal year 1999. These
figures include estimates from the engineering, manufacturing, legal and
information technology departments of the Company.
Risks. There can be no assurance that the Company and its vendors and
suppliers will be able to identify all year 2000 issues before problems manifest
themselves or to complete all remediation in the required time frame. Further,
it is possible that the future level of expenses in the Company's remediation
efforts could rise significantly.
The Company relies upon the continuous provision of services from third
parties such as electrical and telecommunication utilities around the world, and
the Company plans to enhance its electronic data transmission capabilities. Any
sustained disruption of service or capability could adversely impact the
Company's ability to operate its business. Finally, there can be no assurance
that, if left unremedied, the products or services that the Company sells or
distributes would remain competitive in the marketplace or the products that the
Company uses internally would not have a material effect upon the ability of the
Company to report its financial results.
Contingency Plans. In those instances where the Company determines that
year 2000 problems with its operational facilities may not be identified or
remediated in time, the Company believes that its business will still be able to
function without substantial interruption. For example, COM services provided in
a data center that experiences a loss of power due to a third party utility's
failure to identify or remediate an isolated year 2000 problem could be shifted
to another data center without substantial interruption. In addition, electronic
transmission of data could be replaced with manual delivery of data upon
completion of certain modifications. In those instances where an installed COM
customer experiences a year 2000 problem while operating its own COM equipment,
Anacomp could offer its COM services to the customer at one of its data centers
upon completion of certain modifications. This seamless nature of many of
Anacomp's products and services forms the basis of Anacomp's ongoing contingency
planning.
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company does not have any significant financial instruments other than
fixed rate indebtedness. The general level of U.S. interest rates, the LIBOR
rate or both affects the Company's revolving credit facility. However, the
Company had no amounts outstanding under this revolving credit facility on March
31, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and its subsidiaries are potential or named defendants in
several lawsuits and claims arising in the ordinary course of business. While
the outcome of such claims, lawsuits or other proceedings against the Company
cannot be predicted with certainty, management expects that any liability under
the foregoing, to the extent not provided for through insurance or otherwise,
will not have a material adverse effect on the financial conditions or results
of operations of the Company.
On August 29, 1997, Access Solutions International, Inc. ("ASI") filed a
complaint for patent infringement in the U.S. District Court, District of Rhode
Island, against Data/Ware Development, Inc. ("Data/Ware"), of which Anacomp is
the successor by merger, and The Eastman Kodak Company ("Kodak"). The complaint
seeks injunctive relief and unspecified damages, including attorney's fees, for
the alleged infringement by Data/Ware and Kodak of ASI's United States Letters
Patent No. 4,775,969 for "Optical Disk Storage Format, Method and Apparatus for
Emulating a Magnetic Tape Drive" and No. 5,034,914 for "Optical Disk Storage
Method and Apparatus with Buffered Interface." The Company has assumed the
defense of this matter on behalf of both Data/Ware and Kodak, although the
Company has also requested indemnification from the principal selling
shareholder of Data/Ware. Discovery in this matter continues, with any trial to
occur probably not before the third calendar quarter of 1999. Although there can
be no assurance as to the eventual outcome of this matter, the Company believes
that it has numerous meritorious defenses and intends to pursue them vigorously.
Item 2. Changes in Securities and Use of Proceeds.
(c) Unregistered Securities - Pursuant to the 1996 Non-employee Director Stock
Option Plan (Amended and Restated as of December 1, 1997), non-employee
directors of the Company may elect to receive their annual retainer in the form
of options to acquire common stock of the Company. Pursuant to such elections,
during the three-month period ending March 31, 1999, an aggregate of 1,875
options was granted to directors in lieu of aggregate cash compensation of
$9,375. The issuance of such options was effected in reliance upon the private
placement exemption set forth in Section 4 (2) of the Securities Act of 1933, as
amended, on the basis of the directors' familiarity with the business and
affairs of the Company. No underwriting fees or discounts were applicable to the
transactions. The options are first exercisable six months after the date of
grant and remain exercisable through the tenth anniversary of the grant date, at
an exercise price of $18.625 per share.
Item 4. Submission of Matters to a Vote of Security Holders.
At the Company's Annual Meeting of Shareholders held on February 8, 1999,
the Company's shareholders: (i) approved amendments to and a restatement of the
Company's 1996 Long-Term Incentive Plan to, among other matters, increase by
1,000,000 the number of shares of the Company's common stock issuable
thereunder, by a vote of 8,908,639 shares in favor to 2,477,524 opposed, with
2,461,977 shares abstaining; and (ii) approved an amendment to the Company's
Amended and Restated Articles of Incorporation to increase the authorized common
stock issuable thereunder from 20,000,000 to 40,000,000, by a vote of 12,752,
848 shares in favor to 1,085,463 opposed, with 9,829 shares abstaining.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibit 3.1 - Amended and Restricted Articles of Incorporation of the
Company as of February 8, 1999.
Exhibit 3.2 - Amended and Restricted Bylaws of the Company as of February
9, 1998.
Exhibit 27.1 - Financial Data Schedule.
(b) The Company filed no reports on Form 8-K during the quarter ended March
31, 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ANACOMP, INC.
/s/ David B. Hiatt
David B. Hiatt
Executive Vice President and
Chief Financial Officer
Date: May 13, 1999
AMENDED AND RESTATED ARTICLES OF INCORPORATION
OF
ANACOMP, INC.
ARTICLE I
NAME
The name of the Corporation is Anacomp, Inc.
ARTICLE II
PURPOSES AND POWERS
Section 1. Purposes of the Corporation. The purposes for which the
Corporation is formed are to transact any or all lawful business permitted by
applicable law and for which corporations may now or hereafter be incorporated
under the Corporation Law.
Section 2. Powers of the Corporation. The Corporation shall have (a) all
powers now or hereafter authorized by or vested in corporations pursuant to the
provisions of the Corporation Law, (b) all powers now or hereafter vested in
corporations by common law or any other statute or act, and (c) all powers
authorized by or vested in the Corporation by the provisions of these Restated
Articles of Incorporation or by the provisions of its Bylaws as from time to
time in effect.
ARTICLE III
TERM OF EXISTENCE
The period during which the Corporation shall continue is perpetual.
ARTICLE IV
REGISTERED OFFICE AND AGENT
The street address of the Corporation's registered office at the time of
adoption of these Amended and Restated Articles of Incorporation is One North
Capitol Avenue, Indianapolis, Indiana 46204, and the name of its registered
agent at such office at the time of adoption of these Amended and Restated
Articles of Incorporation is C T Corporation System.
ARTICLE V
SHARES
The total number of shares that the Corporation has authority to issue
shall be 41,000,000 shares consisting of 40,000,000 common shares (the "Common
Shares"), and 1,000,000 preferred shares (the "Preferred Shares"). The
Corporation's shares shall have a par value of one cent per share. The
Corporation shall have the power to issue fractional shares or scrip in the
manner and to the extent now or hereafter permitted by the laws of the State of
Indiana.
ARTICLE VI
TERMS OF SHARES
Section 1. General Terms of All Shares. The Corporation shall have the
power to acquire (by purchase, redemption, or otherwise), hold, own, pledge,
sell, transfer, assign, reissue, cancel or otherwise dispose of the shares of
the Corporation in the manner and to the extent now or hereafter permitted by
the laws of the State of Indiana, including the power to purchase, redeem, or
otherwise acquire the Corporation's own shares, directly or indirectly and
without pro rata treatment of the owners of holders of any class or series of
shares, unless, after giving effect thereto, the Corporation would not be able
to pay its debts as they become due in the usual course of business or the
Corporation's total assets would be less than its total liabilities and without
regard to any amounts that would be needed, if the Corporation were to be
dissolved at the time of the purchase, redemption, or other acquisition, to
satisfy the preferential rights upon dissolution of shareholders whose
preferential rights are superior to those of the holders of the shares of the
Corporation being purchased, redeemed, or otherwise acquired, unless otherwise
expressly provided with respect to a series of Preferred Shares in the
provisions of these Amended and Restated Articles of Incorporation adopted by
the Board of Directors pursuant to Section 3(a) of Article VI hereof describing
the terms of such series. Shares of the Corporation purchased, redeemed, or
otherwise acquired by it shall constitute authorized and issued but not
outstanding shares, unless the Board of Directors shall at any time adopt a
resolution providing that such shares constitute authorized but issued shares.
The Board of Directors of the Corporation may dispose of, issue, and sell
shares in accordance with, and in such amounts as may be permitted by, the laws
of the State of Indiana and the provisions of these Amended and Restated
Articles of Incorporation and for such consideration, at such price or prices,
at such time or times and upon such terms and conditions (including the
privilege of selectively repurchasing the same) as the Board of Directors of the
Corporation shall determine to be adequate, without the authorization or
approval by any shareholders of the Corporation. When disposed of, issued or
sold, such shares will be fully paid and non-assessable. Shares may be disposed
of, issued, and sold to such persons, firms, or corporations as the Board of
Directors may determine, without any preemptive or other right on the part of
the owners or holders of other shares of the Corporation of any class or kind to
acquire such shares by reason of their ownership of such other shares.
The Corporation shall have the power to declare and pay dividends or other
distributions upon the issued and outstanding shares of the Corporation, subject
to the limitation that a dividend or other distribution may not be made if,
after giving it effect, the Corporation would not be able to pay its debts as
they become due in the usual course of business or the Corporation's total
assets would be less than its total liabilities and without regard to any
amounts that would be needed, if the Corporation were to be dissolved at the
time of the dividend or other distribution, to satisfy the preferential rights
upon dissolution of shareholders whose preferential rights are superior to those
of the holders of shares receiving the dividend or other distribution, unless
otherwise expressly provided with respect to a series of Preferred Shares in the
provisions of these Amended and Restated Articles of Incorporation adopted by
the Board of Directors pursuant to Section 3(a) of this Article VI describing
the terms of such series. The Board of Directors may base a determination that a
distribution is not prohibited either on financial statements prepared on the
basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. The Corporation shall have the power to issue shares of one class
or series as a share dividend or other distribution in respect of that class or
series or one or more other classes or series without the approval of the
holders of either of those classes or series, except as may be otherwise
provided with respect to a series of Preferred Shares in the provisions of these
Amended and Restated Articles of Incorporation adopted by the Board of Directors
pursuant to Section 3(a) of this Article VI describing the terms of such series.
Section 2. Terms of Common Shares. The Common Shares shall be equal in
every respect insofar as their relationship to the Corporation is concerned, but
such equality of rights shall not imply equality of treatment as to redemption
or other acquisition of shares by the Corporation. Subject to the rights of the
holders of any issued and outstanding Preferred Shares under this Article VI,
the holders of Common Shares shall be entitled to share ratably in such
dividends or other distributions (other than purchases, redemptions, or other
acquisitions of Common Shares of the Corporation), if any, as are declared and
paid from time to time on the Common Shares at the discretion of the Board of
Directors. In the event of any liquidation, dissolution, or winding up of the
Corporation, either voluntary or involuntary, after payment shall have been made
to the holders of the Preferred Shares of the full amount to which they shall be
entitled under this Article VI, the holders of Common Shares shall be entitled,
to the exclusion of the holders of the Preferred Shares of any and all series,
to share, ratably according to the number of shares of Common Shares held by
them, in all remaining assets of the Corporation available for distribution to
its shareholders.
Section 3. Terms of Preferred Shares.
(a) Preferred Shares may be issued from time to time in one or more
series, each such series to have such distinguishing designation and such
preferences, limitations, and relative voting and other rights as shall be set
forth in these Amended and Restated Articles of Incorporation. Subject to the
requirements of the Corporation Law and subject to all other provisions of these
Amended and Restated Articles of Incorporation, the Board of Directors of the
Corporation may create one or more series of Preferred Shares and shall
determine the preferences, limitations, and relative voting and other rights of
one or more series of Preferred Shares before the issuance of any shares of that
series by the adoption of an amendment to these Amended and Restated Articles of
Incorporation that specifies the terms of that series of Preferred Shares. All
shares of a series of Preferred Shares must have preferences, limitations and
relative voting and other rights identical to those of other shares of the same
series. No series of Preferred Shares need have preferences, limitations or
relative voting or other rights identical with those of any other series of
Preferred Shares.
Before issuing any shares of a series of Preferred Shares, the Board of
Directors shall adopt an amendment to these Amended and Restated Articles of
Incorporation, which shall be effective without any shareholder approval or
other action, that fixes and sets forth the distinguishing designation of such
series; the number of shares that shall constitute such series, which number may
be increased or decreased (but not below the number of shares thereof then
outstanding) from time to time by action of the Board of Directors; and the
preferences, limitations, and relative voting and other rights of the series.
Authority is hereby expressly vested in the Board of Directors, by such
amendment, to fix all of the preferences or rights, and any qualifications,
limitations, or restrictions of such preferences or rights, of such series to
the full extent permitted by the Corporation Law; provided, however, that no
such preferences, rights, qualifications, limitations, or restrictions shall be
in conflict with these Amended and Restated Articles of Incorporation or any
amendment thereof.
(b) Preferred Shares of any series that have been redeemed (whether
through the operation of a sinking fund or otherwise) or purchased by the
Corporation, or that, if convertible, have been converted into shares of the
Corporation of any other class or series, may be reissued as a part of such
series or of any other series of Preferred Shares, subject to such limitations
(if any) as may be fixed by the Board of Directors with respect to such series
of Preferred Shares in accordance with Section 3(a) of this Article VI.
ARTICLE VII
VOTING RIGHTS
Section 1. Common Shares. Except as otherwise provided by the Corporation
Law and subject to such shareholder disclosure and recognition procedures (which
may include sanctions for noncompliance therewith to the fullest extent
permitted by the Corporation Law) as the Corporation may by action of the Board
of Directors establish, the Common Shares have unlimited voting rights. At every
meeting of the shareholders of the Corporation every holder of Common Shares
shall be entitled to one (1) vote in person or by proxy for each Common Share
standing in such holder's name on the stock transfer records of the Corporation.
Section 2. Preferred Shares. Except as required by the Corporation Law or
by the provisions of these Amended and Restated Articles of Incorporation
adopted by the Board of Directors pursuant to Section 3(a) of Article VI hereof
describing the terms of Preferred Shares or a series thereof, the holders of
Preferred Shares shall have no voting rights or powers. Preferred Shares shall,
when validly issued by the Corporation, entitle the record holder thereof to
vote as and on such matters, but only as and on such matters as the holders
thereof are entitled to vote under the Corporation Law or under the provisions
of these Amended and Restated Articles of Incorporation adopted by the Board of
Directors pursuant to Section 3(a) of Article VI hereof describing the terms of
Preferred Shares or a series thereof (which provisions may provide for special,
conditional, limited, or unlimited voting rights, including multiple or
fractional votes per share, or for no right to vote, except to the extent
required by the Corporation Law) and subject to such shareholder disclosure and
recognition procedures (which may include sanctions for noncompliance therewith
to the fullest extent permitted by the Corporation Law) as the Corporation may
by action of the Board of Directors establish.
Section 3. Non-voting Equity Securities. Notwithstanding anything to the
contrary set forth in this Article VII, the Corporation shall not issue any
non-voting equity securities; provided, however, that this provision, included
in these Amended and Restated Articles of Incorporation in compliance with
Section 1123(a)(6) of the United States Bankruptcy Code of 1978, as amended (the
"Bankruptcy Code"), shall have no force and effect beyond that required by
Section 1123(a)(6) of the Bankruptcy Code and shall be effective only for so
long as Section 1123(a)(6) of the Bankruptcy Code is in effect and applicable to
the Corporation.
ARTICLE VIII
DIRECTORS
Section 1. Number. The Board of Directors at the time of adoption of these
Amended and Restated Articles of Incorporation is composed of seven (7) members.
The number of Directors shall be fixed by, or fixed in accordance with, the
Bylaws. The Bylaws may also provide for staggering the terms of the members of
the Board of Directors by dividing the total number of Directors into two (2) or
three (3) groups (with each group containing one-half (1/2) or one third (1/3)
of the total, as near as may be) whose terms of office expire at different
times.
Section 2. Election of Directors by Holders of Preferred Shares. The
holders of one (1) or more series of Preferred Shares may be entitled to elect
all or a specified number of Directors, but only to the extent and subject to
limitations as may be set forth in the provisions of these Amended and Restated
Articles of Incorporation adopted by the Board of Directors pursuant to Section
3(a) of Article VI hereof describing the terms of the series of Preferred
Shares.
Section 3. Vacancies. Vacancies occurring in the Board of Directors
shall be filled in the manner provided in the Bylaws or, if the Bylaws do
not provide for the filling of vacancies, in the manner provided by the
Corporation Law.
Section 4. Removal of Directors. Any or all of the members of the Board of
Directors may be removed, for good cause, at a meeting of the shareholders
called expressly for that purpose, by the affirmative vote of the holders of a
majority of the outstanding shares then entitled to vote at an election of
Directors. However, a Director elected by the holders of a series of Preferred
Shares as authorized by Section 2 of Article VIII may be removed only by the
affirmative vote of the holders of a majority of the outstanding shares of that
series then entitled to vote at an election of Directors. Directors may not be
removed in the absence of good cause or by the Board of Directors.
Section 5. Liability of Directors. A Director's responsibility to the
Corporation shall be limited to discharging his duties as a Director, including
his duties as a member of any committee of the Board of Directors upon which he
may serve, in good faith, with the care an ordinarily prudent person in a like
position would exercise under similar circumstances, and in a manner the
Director reasonably believes to be in the best interests of the Corporation, all
based on the facts then known to the Director.
In discharging his duties, a Director is entitled to rely on information,
opinions, reports, or statements, including financial statements and other
financial data, if prepared or presented by:
(a) One (1) or more officers or employees of the Corporation whom the
Director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to the
matters the Director reasonably believes are within such person's
professional or expert competence; or
(c) A committee of the Board of which the Director is not a member if
the Director reasonably believes the Committee merits confidence;
but a Director is not acting in good faith if the Director has knowledge
concerning the matter in question that makes reliance otherwise permitted by
this Section 5 unwarranted. A Director may, in considering the best interests of
the Corporation, consider the effects of any action on shareholders, employees,
suppliers, and customers of the Corporation, and communities in which offices or
other facilities of the Corporation are located, and any other factors the
Director considers pertinent.
Directors shall be immune from personal liability for any action taken as
a Director, or any failure to take any action, to the fullest extent permitted
by the applicable provisions of the Corporation Law from time to time in effect
and by general principles of corporate law.
Section 6. Nonmonetary Factors in Acquisition Proposals. In connection
with the exercise of its judgment in determining what is in the best interests
of the Corporation and its stockholders when evaluating a proposal by another
person or persons to acquire some material part or all of the business or
properties of the Corporation (whether by merger, consolidation, purchase of
assets, stock reclassification, or recapitalization, spin-off, liquidation, or
otherwise) or to acquire some material part or all of the stock of the
Corporation (whether by a tender or exchange offer or some other means), the
Board of Directors of the Corporation may, in addition to considering the
adequacy of the consideration to be paid in connection with any such
transaction, consider all of the following factors and any other factors that it
deems relevant: (a) the social and economic effects of the transaction on the
Corporation and its subsidiaries and their employees, customers, and creditors
and the communities in which the Corporation and its subsidiaries operate or are
located; (b) the business and financial condition and earnings prospects of the
acquiring person or persons, including, but not limited to, debt service and
other existing or likely financial obligations of the acquiring person or
persons and their affiliates and associates, the possible effect of such
conditions upon the Corporation and its subsidiaries and the communities in
which the Corporation and its subsidiaries operate or are located; and (c) the
competence, experience, and integrity of the acquiring person or persons and its
or their management and affiliates and associates.
ARTICLE IX
PROVISIONS FOR REGULATION OF BUSINESS
AND CONDUCT OF AFFAIRS OF CORPORATION
Section 1. Bylaws. The Board of Directors shall have the exclusive power
to make, alter, amend, or repeal, or to waive provisions of, the Bylaws of the
Corporation by the affirmative vote of a majority of the number of Directors
then in office at the time, except as provided by the Corporation Law. All
provisions for the regulation of the business and management of the affairs of
the Corporation not stated in these Amended and Restated Articles of
Incorporation shall be stated in the Bylaws. The Board of Directors may also
adopt Emergency Bylaws of the Corporation and shall have the exclusive power
(except as may otherwise be provided therein) to make, alter, amend, or repeal,
or to waive provisions of, the Emergency Bylaws by the affirmative vote of a
majority of the entire number of Directors at the time.
Section 2. Indemnification of Officers, Directors, and Other Eligible
Persons.
(a) To the extent not inconsistent with applicable law, every Eligible
Person shall be indemnified by the Corporation against all Liability
and reasonable Expense that may be incurred by him in connection
with or resulting from any Claim:
(i) if such Eligible Person is Wholly Successful with respect to
the Claim, or
(ii) if not Wholly Successful, then if such Eligible Person is
determined, as provided in either Section 2(f) or 2(g), to
have acted in good faith, in what he reasonably believed to be
in the best interests of the Corporation or at least not
opposed to its best interests and, in addition, with respect
to any criminal Claim is determined to have had reasonable
cause to believe that his conduct was lawful or had no
reasonable cause to believe that his conduct was unlawful.
The termination of any Claim, by judgment, order, settlement (whether with or
without court approval), or conviction or upon a plea of guilty of or nolo
contendere, or its equivalent, shall not create a presumption that an Eligible
Person did not meet the standards of conduct set forth in clause (ii) of this
subsection (a). The actions of an Eligible Person with respect to an employee
benefit plan subject to the Employee Retirement Income Security Act of 1974
shall be deemed to have been taken in what the Eligible Person reasonably
believed to be the best interests of the Corporation or at least not opposed to
its best interests if the Eligible Person reasonably believed he was acting in
conformity with the requirements of such Act or he reasonably believed his
actions to be in the interests of the participants in or beneficiaries of the
plan.
(b) The term "Claim" as used in this Section 2 shall include every
pending, threatened, or completed claim, action, suit, or proceeding and all
appeals thereof (whether brought by or in the right of this Corporation or any
other corporation or otherwise), civil, criminal, administrative, or
investigative, formal or informal, in which an Eligible Person may become
involved, as a party of otherwise: (i) by reason of his being or having been an
Eligible Person, or (ii) by reason of any action taken or not taken by him in
his capacity as an Eligible Person, whether or not he continued in such capacity
at the time such Liability or Expense shall have been incurred.
(c) The term "Eligible Person" as used in this Section shall mean every
person (and the estate, heirs, and personal representative of such person) who
is or was a Director, officer, employee, or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee,
agent, or fiduciary of another foreign or domestic corporation, partnership,
joint venture, trust, employee benefit plan, or other organization or entity,
whether for profit or not. An Eligible Person shall also be considered to have
been serving an employee benefit plan at the request of the Corporation if his
duties to the Corporation also imposed duties on, or otherwise involved services
by, him to the plan or to participants in or beneficiaries of the plan.
(d) The terms "Liability" and "Expense" as used in this Section 2 shall
include, but shall not be limited to, counsel fees and disbursements and amounts
of judgments, fines, or penalties against (including excise taxes assessed with
respect to an employee benefit plan), and amounts paid in settlement by or on
behalf of, an Eligible Person.
(e) The term "Wholly Successful" as used in this Section 2 shall mean (i)
termination of any Claim against the Eligible Person in question without any
finding of liability or guilt against him, (ii) approval by a court, with
knowledge of the indemnity herein provided, of a settlement of any Claim, or
(iii) the expiration of a reasonable period of time after making or threatened
making of any Claim without the institution of the same, without any payment or
promise made to induce a settlement.
(f) Every Eligible Person claiming indemnification hereunder (other than
one who has been Wholly Successful with respect to any Claim) shall be entitled
to indemnification (i) if special independent legal counsel, which may be
regular counsel of the Corporation or other disinterested person or persons (who
may be members of the Board of Directors), in either case selected by the Board
of Directors, whether or not a disinterested quorum exists (such counsel or
person or persons being hereinafter called the "Referee"), shall deliver to the
Corporation a written finding that such Eligible Person has met the standards of
conduct set forth in clause (ii) of Section 2(a), and (ii) if the Board of
Directors, acting upon such written finding, so determines. The Board of
Directors shall, if an Eligible Person is found to be entitled to
indemnification pursuant to the preceding sentence, also determine the
reasonableness of the Eligible Person's Expenses. The Eligible Person claiming
indemnification shall, if requested, appear before the Referee, answer questions
that the Referee deems relevant, and shall be given ample opportunity to present
to the Referee evidence upon which he relies for indemnification. The
Corporation shall, at the request of the Referee, make available facts,
opinions, or other evidence in any way relevant to the Referee's finding that
are within the possession or control of the Corporation.
(g) If an Eligible Person claiming indemnification pursuant to Section
2(f) is found not to be entitled thereto, or if the Board of Directors fails to
select a Referee under Section 2(f) within a reasonable amount of time following
a written request of an Eligible Person for the selection of a Referee, or if
the Referee or the Board of Directors fails to make a determination under
Section 2(f) within a reasonable amount of time following the selection of a
Referee, the Eligible Person may apply for indemnification with respect to a
Claim to a court of competent jurisdiction, including a court in which the Claim
is pending against the Eligible Person. On receipt of an application, the court,
after giving notice to the Corporation and giving the Corporation ample
opportunity to present to the court any information or evidence relating to the
claim for indemnification that the Corporation deems appropriate, may order
indemnification if it determines that the Eligible Person is entitled to
indemnification with respect to the Claim because such Eligible Person met the
standards of conduct set forth in clause (ii) of Section 2(a). If the court
determines that the Eligible Person is entitled to indemnification, the court
shall also determine the reasonableness of the Eligible Person's Expenses.
(h) The right of indemnification provided in this Section 2 shall be in
addition to any rights to which any Eligible Person may otherwise be entitled.
Irrespective of the provisions of this Section 2, the Board of Directors may, at
any time and from time to time, (i) approve indemnification of any Eligible
Person to the full extent permitted by the provision of applicable law at the
time in effect, whether on account of past or future transactions, and (ii)
authorize the Corporation to purchase and maintain insurance on behalf of any
Eligible Person against any Liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability.
(i) Expenses incurred by an Eligible Person with respect to any Claim may
be advanced by the Corporation (by action of the Board of Directors, whether or
not a disinterested quorum exists) prior to the final disposition thereof upon
receipt of any undertaking by or on behalf of the recipient to repay such amount
unless he is determined to be entitled to indemnification.
(j) The provisions of this Section 2 shall be deemed to be a contract
between the Corporation and each Eligible Person, and an Eligible Person's
rights hereunder shall not be diminished or otherwise adversely affected by any
repeal, amendment, or modification of this Section 2 that occurs subsequent to
such person becoming an Eligible Person.
(k) The provisions of this Section 2 shall be applicable to Claims made or
commenced after the adoption hereof, whether arising from acts or omissions to
act occurring before or after the adoption hereof.
Section 3. Amendment or Repeal. Except as otherwise expressly provided for
in these Amended and Restated Articles of Incorporation, the Corporation shall
be deemed, for all purposes, to have reserved the right to amend, alter, change
or repeal any provision contained in these Amended and Restated Articles of
Incorporation to the extent and in the manner now or hereafter permitted or
prescribed by statute, and all rights herein conferred upon shareholders are
granted subject to such reservation.
AMENDED AND RESTATED BYLAWS
OF
ANACOMP, INC.
As of February 9, 1998
ARTICLE I
MEETINGS OF SHAREHOLDERS
Section 1.1 Annual Meetings. Annual meetings of the shareholders of the
Corporation shall be held at such hour and at such place within or without the
State of Indiana as shall be designated by the Board of Directors.
Section 1.2 Special Meetings. Special meetings of the shareholders of the
Corporation may be called at any time by the Board of Directors or the
President. In calling such a special meeting of shareholders, the Board of
Directors or the President, as the case may be, calling a special meeting of
shareholders shall set the date, time, and place of such meeting, which may be
held within or without the State of Indiana.
Section 1.3 Notices. A written notice, stating the date, time, and place
of any meeting of the shareholders, and in the case of a special meeting
containing a description of the purpose or purposes for which such meeting is
called, shall be delivered or mailed by the Secretary of the Corporation, to
each shareholder of record of the Corporation entitled to notice of or to vote
at such meeting no fewer than ten (10) nor more than sixty (60) days before the
date of the meeting, or as otherwise provided by the Indiana Business
Corporation Law ("Corporation Law"). Notice of shareholders' meetings, if
mailed, shall be mailed, postage prepaid, to each shareholder at his address
shown in the Corporation's current record of shareholders. Only business within
the purpose or purposes described in the meeting notice may be conducted at a
special meeting of shareholders.
A shareholder or his proxy may at any time waive notice of any meeting of
shareholders if the waiver is in writing and is delivered to the Corporation for
inclusion in the minutes or filing with the Corporation's records. A
shareholder's attendance at a meeting, whether in person or by proxy, (a) waives
objection to lack of notice or defective notice of the meeting, unless the
shareholder or his proxy at the beginning of the meeting objects to holding the
meeting or transacting business at the meeting, and (b) waives objection to
consideration of a particular matter at the meeting that is not within the
purpose or purposes described in the meeting notice, unless the shareholder or
his proxy objects to considering the matter when it is presented. Each
shareholder who has in the manner above provided waived notice or objection to
notice of the shareholders' meeting shall be conclusively presumed to have been
given due notice of such meeting, including the purpose or purposes thereof.
If an annual or special shareholders' meeting is adjourned to a different
date, time or place, notice need not be given of the new date, time, or place if
the new date, time or place is announced at the meeting before adjournment,
unless a new record date is or must be established for the adjourned meeting.
The Board of Directors must fix a new record date if the meeting is adjourned to
a date more than one hundred twenty (120) days after the date fixed for the
original meeting.
Section 1.4 Voting. Except as otherwise provided by the Corporation Law or
the Corporation's Articles of Incorporation, each share of the capital stock of
any class of the Corporation that is outstanding at the record date and
represented in person or by proxy at the annual or special meeting shall entitle
the record holder thereof, or his proxy, to one (1) vote on each matter voted on
at the meeting.
Section 1.5 Quorum. Unless the Corporation's Articles of Incorporation or
the Corporation Law provide otherwise, at all meetings of shareholders a
majority of the votes entitled to be cast on a matter, represented in person or
by proxy, constitutes a quorum for action on the matter. Action may be taken at
a shareholders' meeting only on matters with respect to which a quorum exists;
provided, however, that any meeting of shareholders, including annual and
special meetings and any adjournments thereof, may be adjourned to a later date
although less than a quorum is present. Once a share is represented for any
purpose at a meeting, it is deemed present for quorum purposes for the remainder
of the meeting and for any meeting held pursuant to an adjournment of that
meeting unless a new record date is or must be set for that adjourned meeting.
Section 1.6 Vote Required to Take Action. If a quorum exists as to a
matter to be considered at a meeting of shareholders, action on such matter
(other than the election of Directors) is approved if the votes properly cast
favoring the action exceed the votes properly cast opposing the action, unless
the Corporation's Articles of Incorporation or the Corporation Law require a
greater number of affirmative votes. Directors shall be elected by a plurality
of the votes properly cast.
Section 1.7 Record Date. Only such persons shall be entitled to notice or
to vote, in person or by proxy, at any shareholders' meeting as shall appear as
shareholders upon the books of the Corporation as of such record date as the
Board of Directors shall determine, which date may not be earlier than the date
seventy (70) days immediately preceding the meeting unless otherwise permitted
by the Corporation Law. In the absence of such determination, the record date
shall be the fiftieth (50th) day immediately preceding the date of such meeting.
Unless otherwise provided by the Board of Directors, shareholders shall be
determined as of the close of business on the record date.
Section 1.8 Proxies. A shareholder may vote his shares either in person or
by proxy. A shareholder may appoint a proxy to vote or otherwise act for the
shareholder (including authorizing the proxy to receive, or to waive, notice of
any shareholders' meetings within the effective period of such proxy) by signing
an appointment form, either personally or by the shareholder's attorney-in-fact.
An appointment of a proxy is effective when received by the Secretary or other
officer or agent authorized to tabulate votes and is effective for eleven (11)
months unless a longer period is expressly provided in the appointment form. The
proxy's authority may be limited to a particular meeting or may be general and
authorize the proxy to represent the shareholder at a meeting of shareholders
held within the time provided in the appointment form. An appointment of a proxy
is revocable by the shareholder unless the appointment form conspicuously states
that it is irrevocable and the appointment is coupled with an interest. Subject
to the Corporation Law and to any express limitation on the proxy's authority
appearing on the face of the appointment form, the Corporation is entitled to
accept the proxy's vote or other action as that of the shareholder making the
appointment.
ARTICLE II
DIRECTORS
Section 2.1 Number and Term. The business of the Corporation shall be
managed by a Board of Directors consisting of at least six Directors and no more
than twelve Directors. The exact number of Directors of the Corporation shall be
fixed by the Board of Directors within the range established by the preceding
sentence, and may be changed within that range from time to time by the Board of
Directors. Each Director shall be elected for a term of office to expire at the
annual meeting of shareholders next following his election. Despite the
expiration of a Director's term, the Director shall continue to serve until his
successor is elected and qualified or until the earlier of his death,
resignation, disqualification, or removal, or until there is a decrease in the
number of Directors. Any vacancy in the Board of Directors, from whatever cause
arising, including any increase in the size of the Board of Directors as fixed
by the Board of Directors, shall be filled by selection of a successor by a
majority vote of the remaining members of the Board of Directors (even if less
than a quorum); provided, however, that if such vacancy or vacancies leave the
Board of Directors with no members or if the remaining members of the Board of
Directors are unable to agree upon a successor or determine not to select a
successor, such vacancy may be filled by a vote of the shareholders at a special
meeting called for that purpose or at the next annual meeting of shareholders.
The term of a Director elected or selected to fill a vacancy shall expire at the
end of the term for which such Director's predecessor was elected.
The Directors and each of them shall have no authority to bind the
Corporation except when acting as a Board of Directors or as a committee of the
Board of Directors to the extent permitted in Section 2.7 hereof.
A majority of the members of the Board of Directors may elect from among
its members a Chairman of the Board or up to two members to be each a
Co-Chairman of the Board. The Chairman of the Board shall preside at all
meetings of the shareholders and the Board of Directors at which he is present.
In addition, the Chairman of the Board shall have and may exercise all the
powers and duties that are incident to his position that are delegated to him
from time to time by the Board of Directors. Each Co-Chairman of the Board shall
have and may exercise all the powers and duties that a single Chairman of the
Board could have or exercise, and any reference to Chairman of the Board herein
shall, if applicable, include each Co-Chairman of the Board. The Chairman of the
Board may be an officer of the Corporation.
Section 2.2 Quorum and Vote Required to Take Action. At least one third of
the whole Board of Directors (the size of which shall be determined in
accordance with the latest action of the Board of Directors fixing the number of
Directors) shall be necessary to constitute a quorum for the transaction of any
business, except the filling of vacancies. If a quorum is present when a vote is
taken, the affirmative vote of a majority of the Directors present shall be the
act of the Board of Directors, unless the act of a greater number is required by
the Corporation Law, the Corporation's Articles of Incorporation, or these
Bylaws.
Section 2.3 Annual and Regular Meetings. The Board of Directors shall meet
annually, without notice, on the same day as the annual meeting of the
shareholders, for the purpose of transacting such business as properly may come
before the meeting. Other regular meetings of the Board of Directors, in
addition to said meeting, may be held without notice of the date, time, place or
purpose of the meeting or on such dates, at such times, and at such places as
shall be fixed by resolution adopted by the Board of Directors or otherwise
communicated to the Directors. The Board of Directors may at any time alter the
date for the next regular meeting of the Board of Directors.
Section 2.4 Special Meetings. Special meetings of the Board of Directors
may be called by any member of the Board of Directors upon not less than
twenty-four (24) hours' notice given to each Director of the date, time and
place of the meeting, which notice need not specify the purpose or purposes of
the special meeting. Such notice may be communicated in person (either in
writing or orally), by telephone, telegraph, teletype or other form of wire or
wireless communication or by mail, and shall be effective at the earlier of the
time of its receipt or, if mailed, five (5) days after its mailing. Notice of
any meeting of the Board of Directors may be waived in writing at any time if
the waiver is signed by the Director entitled to the notice and is filed with
the minutes or corporate records. A Director's attendance at or participation in
a meeting waives any required notice to the Director of the meeting, unless the
Director at the beginning of the meeting (or promptly upon the Director's
arrival) objects to holding the meeting or transacting business at the meeting
and does not thereafter vote for or assent to action taken at the meeting.
Section 2.5 Written Consents. Any action required or permitted to be taken
at any meeting of the Board of Directors may be taken without a meeting if the
action is taken by all members of the Board of Directors. The action must be
evidenced by one (1) or more written consents describing the action taken,
signed by each Director, and included in the minutes or filed with the corporate
records reflecting the action taken. Action taken under this Section 2.5 is
effective when the last Director signs the consent, unless the consent specifies
a different prior or subsequent effective date, in which case the action is
effective on or as of the specified date. A consent signed under this Section
2.5 has the effect of a meeting vote and may be described as such in any
document.
Section 2.6 Participation by Conference Telephone. The Board of Directors
may permit any or all Directors to participate in a regular or special meeting
by, or through the use of, any means of communication, such as conference
telephone, by which all Directors participating may simultaneously hear each
other during the meeting. A Director participating in a meeting by such means
shall be deemed to be present in person at the meeting.
Section 2.7 Committees.
(a) The Board of Directors may create one (1) or more committees and
appoint members of the Board of Directors to serve on them, by resolution of the
Board of Directors adopted by a majority of all the Directors in office when the
resolution is adopted. Each committee may have one (1) or more members, and all
the members of a committee shall serve at the pleasure of the Board of
Directors.
(b) To the extent specified by the Board of Directors in the resolutions
creating a committee, each committee may exercise all of the authority of the
Board of Directors; provided, however, that a committee may not:
(1) authorize dividends or other distributions as defined by the
Corporation Law, except a committee may authorize or approve a
reacquisition of shares if done according to a formula or method
prescribed by the Board of Directors;
(2) approve or propose to shareholders action that is required to be
approved by shareholders;
(3) fill vacancies on the Board of Directors or on any of its
committees;
(4) amend the Corporation's Articles of Incorporation;
(5) adopt, amend, repeal, or waive provision of these Bylaws, or
(6) approve a plan of merger not requiring shareholder approval.
(c) Except to the extent inconsistent with the resolutions creating a
committee, Section 2.1 thorough 2.6 of these Bylaws, which govern meetings,
action without meetings, notice and waiver of notice, quorum and voting
requirements, and telephone participation in meetings of the Board of Directors
apply to the committee and its members as well.
ARTICLE III
OFFICERS
Section 3.1 Designation, Selection, and Terms. The officers of the
Corporation shall consist of the President and the Secretary. The Board of
Directors may also elect Vice Presidents, Assistant Secretaries, a Treasurer,
Assistant Treasurers, and such other officers or assistant officers as it may
from time to time determine by resolution creating the office and defining the
duties thereof. In addition, the President may, from time to time, create and
appoint such assistant officers as he deems desirable. The officers of the
Corporation shall be elected by the Board of Directors (or appointed by the
President as provided above) and need not be selected from among the members of
the Board of Directors. Any two (2) or more offices may be held by the same
person. All officers shall serve at the pleasure of the Board of Directors and,
with respect to officers appointed by the President, also at the pleasure of
such officer. The election or appointment of an officer does not itself create
contract rights.
Section 3.2 Removal and Vacancies. The Board of Directors may remove any
officer at any time with or without cause. An officer appointed by the President
may also be removed at any time, with or without cause, by such officer.
Vacancies in such offices, however occurring, may be filled by the Board of
Directors at any meeting of the Board of Directors (or by appointment by the
President, to the extent provided in Section 3.1 of these Bylaws).
Section 3.3 President. The President, who need not be chosen from among
the Directors, shall be the Chief Executive Officer of the Corporation and shall
have general and active, executive management of the operations of the
Corporation, subject, however, to the control of the Board of Directors. He
shall, in general, perform all duties incident to the office of President and
such other duties as from time to time may be assigned to him by the Board of
Directors.
Section 3.4 Secretary. The Secretary shall be the custodian of the books,
papers, and records of the Corporation and of its corporate seal, if any, and
shall be responsible for seeing that the Corporation maintains the records
required by the Corporation Law (other than accounting records) and that the
Corporation files with the Indiana Secretary of State the annual report required
by the Corporation Law. The Secretary shall be responsible for preparing minutes
of the meetings of the shareholders and of the Board of Directors and for
authenticating records of the Corporation, and he shall perform all of the other
duties usual in the office of the Secretary of a corporation.
ARTICLE IV
CHECKS
All checks, drafts, or other orders for payment of money shall be signed
in the name of the Corporation by such officers or persons as shall be
designated from time to time by resolution adopted by the Board of Directors and
included in the minute book of the Corporation.
ARTICLE V
LOANS
Such of the officers of the Corporation as shall be designated from time
to time by any resolution adopted by the Board of Directors and included in the
minute book of the Corporation shall have the power, with such limitations
thereon as may be fixed by the Board of Directors, to borrow money in the
Corporation's behalf, to establish credit, to discount bills and papers, to
pledge collateral, and to execute such notices, bonds, debentures, or other
evidences of indebtedness, and such mortgage, trust indentures, and other
instruments in connection therewith, as may be authorized from time to time by
such Board of Directors.
ARTICLE VI
EXECUTION OF DOCUMENTS
The President, or any officer designed by him, may, in the Corporation's
name, sign all deeds, leases, contracts, or similar documents that may be
authorized by the Board of Directors unless otherwise directed by the Board of
Directors or otherwise provided herein or in the Corporation's Articles of
Incorporation, or as otherwise required by law.
ARTICLE VII
STOCK
Section 7.1 Execution. Certificates for shares of the capital stock of the
Corporation shall be signed (either manually or in facsimile) by two officers
designated from time to time by the Board of Directors and the seal of the
Corporation (or a facsimile thereof), if any, may be thereto affixed. The
Corporation may issue and deliver any such certificate notwithstanding that any
such officer who shall have signed, or whose facsimile signature shall have been
imprinted on, such certificate shall have ceased to be such officer.
Section 7.2 Contents. Each certificate shall state on its face the name of
the Corporation and that it is organized under the laws of the State of Indiana,
the name of the person to whom it is issued, and the number and class and the
designation of the series, if any, of shares the certificate represents, and,
whenever the Corporation is authorized to issue more than one class of shares or
different series within a class, each certificate issued after the effectiveness
of such authorization shall further state conspicuously on its front or back
that the Corporation will furnish the shareholder, upon his written request and
without charge, a summary of the designations, relative rights, preferences, and
limitations applicable to each class and series and the authority of the Board
of Directors to determine variations in rights, preferences and limitations for
future series.
Section 7.3 Transfers. Except as otherwise provided by law or by
resolution of the Board of Directors, transfers of shares of the capital stock
of the Corporation shall be made only on the books of the Corporation by the
holder thereof in person or by duly authorized attorney, on payment of all taxes
thereon and surrender for cancellation of the certificate or certificates for
such shares (except as hereinafter provided in the case of loss, destruction, or
mutilation of certificates) properly endorsed by the holder thereof or
accompanied by the proper evidence of succession, assignment, or authority to
transfer and delivered to the Secretary or an Assistant Secretary.
Section 7.4 Stock Transfer Records. There shall be entered upon the stock
records of the Corporation the number of each certificate issued; the name and
address of the registered holder of such certificate; the number, kind, and
class or series of shares represented by such certificate; the date of issue;
whether the shares are originally issued or transferred; the registered holder
from whom transferred; and such other information as is commonly required to be
shown by such records. The stock records of the Corporation shall be kept at its
principal office, unless the Corporation appoints a transfer agent or registrar,
in which case the Corporation shall keep at its principal office a complete and
accurate shareholders' list giving the name and addresses of all shareholders
and the number and class of shares held by each. If a transfer agent is
appointed by the Corporation, shareholders shall give written notice of any
change in their addresses from time to time to the transfer agent.
Section 7.5 Transfer Agents and Registrars. The Board of Directors may
appoint one or more transfer agents and one or more registrars and may require
each stock certificate to bear the signature of either or both.
Section 7.6 Loss, Destruction, or Mutilation of Certificates. The holder
of any of the capital stock of the Corporation shall immediately notify the
Corporation of any loss, destruction, or mutilation of the certificate therefor,
and the Board of Directors may, in its discretion, cause to be issued to him a
new certificate or certificates of stock upon the surrender of the mutilated
certificate, or, in the case of loss or destruction, upon satisfactory proof of
such loss or destruction. The Board of Directors may, in its discretion, require
the holder of the lost or destroyed certificate or his legal representative to
give the Corporation a bond in such sum and in such form, and with such surety
or sureties as it may direct, to indemnify the Corporation, its transfer agents,
and its registrars, if any, against any claim that may be made against them or
any of them with respect to the capital stock represented by the certificate or
certificates alleged to have been lost or destroyed, but the Board of Directors
may, in its discretion, refuse to issue a new certificate or certificate, save
upon the order of a court having jurisdiction in such matters.
Section 7.7 Form of Certificates. The form of the certificate of shares of
the capital stock of the Corporation shall conform to the requirements of
Section 7.2 of these Bylaws and be in such printed form as shall from time to
time be approved by resolution of the Board of Directors.
Section 7.8 Direct Registration System. Nothing in these Bylaws shall be
construed as limiting the authority of the Board of Directors of the Company to
authorize a direct registration system whereby the registration of the issuance
and transfer of any or all of the shares of any or all classes of capital stock
of the Company (or of any or all series of such shares) may be entered in the
Company's stock records in book-entry form without the issuance of certificates
therefor.
ARTICLE VIII
SEAL
The corporate seal of the Corporation shall, if the Corporation elects to
have one, be in the form of a disc, with the name of the Corporation on the
periphery thereof and the word "SEAL" in the center. However, the use of a
corporate seal or an impression thereof is not required and does not affect the
validity of any instrument whatsoever.
ARTICLE IX
MISCELLANEOUS
Section 9.1 Corporation Law. The provision of the Corporation Law, as
amended, applicable to all matters relevant to, but not specifically covered by,
these Bylaws are hereby, by reference, incorporated in and made a part of these
Bylaws.
Section 9.2 Fiscal Year. The fiscal year of the Corporation shall end
on the 30th of September of each year.
Section 9.3 Business Combination Chapter Applicable. The provisions of the
Business Combinations Chapter of the Corporation Law (Indiana Code 23-1-43) are
applicable to the Corporation. The provisions of the Control Shares Acquisition
Chapter of the Corporation Law (Indiana Code 23-1-42) are inapplicable to
"control share acquisitions" (as therein defined) of shares of the Corporation.
Section 9.4 Definition of Articles of Incorporation. The term "Articles of
Incorporation" as used in these Bylaws means the Articles of Incorporation of
the Corporation, as amended and restated from time to time.
Section 9.5 Amendments. These Bylaws may be rescinded, changed, or
amended, and provisions hereof may be waived, at any meeting of the Board of
Directors by the affirmative vote of a majority of the number of Directors then
in office at the time, except as otherwise required by the Corporation's
Articles of Incorporation or by the Corporation Law.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM ANACOMP
INC.'S MARCH 31,1999 FORM 10-Q QUARTERLY REPORT AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 14,523
<SECURITIES> 0
<RECEIVABLES> 70,261
<ALLOWANCES> 6,850
<INVENTORY> 16,943
<CURRENT-ASSETS> 138,769
<PP&E> 52,871
<DEPRECIATION> 9,600
<TOTAL-ASSETS> 368,139
<CURRENT-LIABILITIES> 109,135
<BONDS> 339,619
0
0
<COMMON> 142
<OTHER-SE> (80,757)
<TOTAL-LIABILITY-AND-EQUITY> 368,139
<SALES> 77,584
<TOTAL-REVENUES> 226,907
<CGS> 48,977
<TOTAL-COSTS> 233,155
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,728
<INCOME-PRETAX> (26,078)
<INCOME-TAX> 4,122
<INCOME-CONTINUING> (30,200)
<DISCONTINUED> 809
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (29,391)
<EPS-PRIMARY> (2.06)
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