-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GL4tr+RcWNo0DKBCdi9f5BRTznUI3OYkus5BhdA6o9zUm1gbq2zQwdBX/On5obeZ yo2nPgas6zAUvs2bzjf0aw== 0000006260-04-000013.txt : 20040514 0000006260-04-000013.hdr.sgml : 20040514 20040514160806 ACCESSION NUMBER: 0000006260-04-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ANACOMP INC CENTRAL INDEX KEY: 0000006260 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 351144230 STATE OF INCORPORATION: IN FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-08328 FILM NUMBER: 04807865 BUSINESS ADDRESS: STREET 1: 15378 AVENUE OF SCIENCE CITY: SAN DIEGO STATE: CA ZIP: 92128 BUSINESS PHONE: 8587163400 MAIL ADDRESS: STREET 1: 15378 AVENUE OF SCIENCE CITY: SAN DIEGO STATE: CA ZIP: 92128 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTEC INC DATE OF NAME CHANGE: 19740314 10-Q 1 f10qq2fy04.txt 10Q Q2 FY04 UNITED STATES 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, 2004 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________ TO____________ Commission File Number: 1-08328 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.) 15378 Avenue of Science, San Diego, California 92128-3407 (858) 716-3400 (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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X 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, 2004, the number of outstanding shares of the registrant's Class A common Stock, $.01 par value per share, was 4,039,900 and the number of outstanding shares of the registrant's Class B common Stock, $.01 par value per share, was 4,034.
ANACOMP, INC. AND SUBSIDIARIES INDEX PART I. FINANCIAL INFORMATION Page Item 1. Financial Statements: Condensed Consolidated Balance Sheets at March 31, 2004 (unaudited) and September 30, 2003............... 1 Unaudited Condensed Consolidated Statements of Operations Three Months Ended March 31, 2004 and 2003...................... 2 Unaudited Condensed Consolidated Statements of Operations Six Months Ended March 31, 2004 and 2003..................... 3 Unaudited Condensed Consolidated Statements of Cash Flows Six Months Ended March 31, 2004 and 2003........................ 4 Notes to the Condensed Consolidated Financial Statements (Unaudited) 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 11 Item 3. Quantitative and Qualitative Disclosures About Market Risk............... 24 Item 4. Controls and Procedures.................................................. 26 PART II. OTHER INFORMATION Item 1. Legal Proceedings........................................................ 26 Item 2. Changes in Securities and Use of Proceeds................................ 26 Item 4. Submission of Matters to a Vote of Security Holders...................... 26 Item 6. Exhibits and Reports on Form 8-K......................................... 27 SIGNATURES............................................................................... 28 INDEX TO EXHIBITS........................................................................ 29
PART I - FINANCIAL INFORMATION Item 1. Financial Statements ANACOMP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, September 30, (in thousands) 2004 2003 _________________ _________________ Assets (Unaudited) Current assets: Cash and cash equivalents........................................... $ 17,606 $ 18,390 Receivable on sale of Swiss subsidiaries............................ 1,286 1,262 Accounts receivable, net............................................ 28,621 29,847 Inventories, net.................................................... 2,652 3,174 Prepaid expenses and other.......................................... 4,837 4,798 _________________ _________________ Total current assets.................................................... 55,002 57,471 Property and equipment, net............................................. 17,347 18,398 Reorganization value in excess of identifiable net assets............... 73,098 73,363 Intangible assets, net.................................................. 7,837 8,829 Other assets............................................................ 7,628 6,880 _________________ _________________ $ 160,912 $ 164,941 ================= ================= Liabilities and Stockholders' Equity Current liabilities: Accounts payable.................................................... $ 9,581 $ 9,118 Accrued compensation, benefits and withholdings..................... 13,918 14,233 Deferred revenue.................................................... 9,278 7,784 Accrued income taxes................................................ 1,414 1,063 Other accrued liabilities........................................... 8,851 9,262 _________________ _________________ Total current liabilities............................................... 43,042 41,460 _________________ _________________ Long-term liabilities: Senior secured revolving credit facility............................ 1,416 5,917 Unfunded accumulated benefit obligation............................. 14,602 13,296 Other long-term liabilities......................................... 2,165 3,125 _________________ _________________ Total long-term liabilities............................................. 18,183 22,338 _________________ _________________ Stockholders' equity: Preferred stock..................................................... --- --- Common stock........................................................ 40 40 Additional paid-in capital.......................................... 97,200 97,000 Accumulated other comprehensive loss................................ (256) (891) Retained earnings................................................... 2,703 4,994 _________________ _________________ Total stockholders' equity.............................................. 99,687 101,143 _________________ _________________ $ 160,912 $ 164,941 ================= =================
See the accompanying Notes to the Condensed Consolidated Financial Statements. ANACOMP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts) Three months ended Three months ended March 31, 2004 March 31, 2003 _________________ _________________ Revenues: Services........................................................... $ 40,050 $ 43,038 Equipment and supply sales......................................... 8,816 9,743 _________________ _________________ 48,866 52,781 _________________ _________________ Cost of revenues: Services........................................................... 26,581 28,914 Equipment and supply sales......................................... 6,097 6,689 _________________ _________________ 32,678 35,603 _________________ _________________ Gross profit........................................................... 16,188 17,178 Costs and expenses: Engineering, research and development.............................. 1,418 1,581 Selling, general and administrative................................ 13,503 13,634 Amortization of intangible assets.................................. 496 496 Restructuring charge............................................... 2,307 --- _________________ _________________ Operating (loss) income from continuing operations..................... (1,536) 1,467 _________________ _________________ Other income (expense): Interest income.................................................... 69 78 Interest expense and fee amortization.............................. (166) (631) Other.............................................................. (156) 90 _________________ _________________ (253) (463) _________________ _________________ (Loss) income from continuing operations before income taxes........... (1,789) 1,004 Provision for income taxes............................................. 378 547 _________________ _________________ (Loss) income from continuing operations............................... (2,167) 457 Loss on sale of discontinued operations, net of taxes.................. --- (200) _________________ _________________ Net (loss) income...................................................... $ (2,167) $ 257 ================= ================= Basic and diluted per share data: Basic and diluted net (loss) income from continuing operations..... $ (0.54) $ 0.11 Loss on sale of discontinued operations, net of taxes.............. --- (0.05) _________________ _________________ Basic and diluted net (loss) income................................ $ (0.54) $ 0.06 ================= ================= Shares used in computing basic and diluted net (loss) income per share. 4,044 4,039 ================= =================
See the accompanying Notes to the Condensed Consolidated Financial Statements. ANACOMP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
(in thousands, except per share amounts) Six months ended Six months ended March 31, 2004 March 31, 2003 _________________ _________________ Revenues: Services........................................................... $ 79,188 $ 85,863 Equipment and supply sales......................................... 17,101 19,889 _________________ _________________ 96,289 105,752 _________________ _________________ Cost of revenues: Services........................................................... 53,391 57,908 Equipment and supply sales......................................... 11,634 13,280 _________________ _________________ 65,025 71,188 _________________ _________________ Gross profit........................................................... 31,264 34,564 Costs and expenses: Engineering, research and development.............................. 2,859 3,433 Selling, general and administrative................................ 26,628 27,630 Reversal of environmental liability................................ (481) --- Amortization of intangible assets.................................. 992 992 Restructuring charges.............................................. 2,307 --- _________________ _________________ Operating (loss) income from continuing operations..................... (1,041) 2,509 _________________ _________________ Other income (expense): Interest income.................................................... 127 147 Interest expense and fee amortization.............................. (283) (1,394) Other.............................................................. (282) 28 _________________ _________________ (438) (1,219) _________________ _________________ (Loss) income from continuing operations before income taxes........... (1,479) 1,290 Provision for income taxes............................................. 812 1,105 _________________ _________________ (Loss) income from continuing operations............................... (2,291) 185 Gain on sale of discontinued operations, net of taxes.................. --- 8,184 _________________ _________________ Net (loss) income...................................................... $ (2,291) $ 8,369 ================= ================= Basic and diluted per share data: Basic and diluted (loss) income from continuing operations......... $ (0.57) $ 0.05 Gain on sale of discontinued operations, net of taxes.............. --- 2.03 _________________ _________________ Basic and diluted net (loss) income................................ $ (0.57) $ 2.08 ================= ================= Shares used in computing basic and diluted net (loss) income per share. 4,044 4,039 ================= =================
See the accompanying Notes to the Condensed Consolidated Financial Statements. ANACOMP, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands) Six months ended Six months ended March 31, 2004 March 31, 2003 _________________ _________________ Cash flows from operating activities: Net (loss) income.................................................. $ (2,291) $ 8,369 Adjustments to reconcile net (loss) income to net cash provided by operating activities: Gain on sale of discontinued operations.......................... --- (8,184) Depreciation and amortization.................................... 6,227 7,627 Amortization of debt fees, premiums, and discounts............... 80 344 Non-cash compensation............................................ 231 58 Non-cash restructuring charges................................... 55 --- Changes in assets and liabilities: Accounts and other receivables................................. 1,202 2,428 Inventories.................................................... 522 659 Prepaid expenses and other assets.............................. (798) 1,791 Accounts payable, accrued expenses and other liabilities....... (76) (7,851) _________________ _________________ Net cash provided by operating activities..................... 5,152 5,241 _________________ _________________ Cash flows from investing activities: Purchases of property and equipment................................ (2,099) (1,518) Proceeds from sale of discontinued operations, net................. --- 13,398 _________________ _________________ Net cash (used in) provided by investing activities........... (2,099) 11,880 _________________ _________________ Cash flows from financing activities: Principal payments on revolving line of credit, net................ (4,500) (18,610) _________________ _________________ Net cash used in financing activities......................... (4,500) (18,610) _________________ _________________ Effect of exchange rate changes on cash and cash equivalents........... 663 583 _________________ _________________ Decrease in cash and cash equivalents.................................. (784) (906) Cash and cash equivalents at beginning of period....................... 18,390 15,561 _________________ _________________ Cash and cash equivalents at end of period............................. $ 17,606 $ 14,655 ================= ================= Supplemental Disclosures of Cash Flow Information: Cash paid for interest............................................... $ 104 $ 1,010 ================= ================= Cash paid for income taxes........................................... $ 412 $ 627 ================= =================
See the accompanying Notes to the Condensed Consolidated Financial Statements. 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 and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The financial statements, except for the balance sheet as of September 30, 2003, have not been audited, but in the opinion of management include all adjustments (consisting of normal recurring adjustments and an adjustment to our estimated environmental liability in the first quarter of fiscal 2004) necessary for a fair presentation of our financial position, results of operations and cash flows for all periods presented. These financial statements should be read in conjunction with the financial statements and notes thereto for the year ended September 30, 2003, included in our fiscal 2003 Annual Report on Form 10-K. Interim operating results are not necessarily indicative of operating results for the full year or for any other period. Preparation of the accompanying condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires 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 periods presented. Estimates have been prepared on the basis of the most current available information and actual results could differ from those estimates. We account for our employee stock option plans in accordance with APB Opinion No. 25, under which compensation expense is recognized only to the extent the exercise price of the option is less than the fair market value of a share of stock at the date of grant (the intrinsic value method). Accordingly, we have adopted the disclosure only requirements of Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure." Had employee compensation costs for these plans been determined based on their fair value on their grant date in accordance with SFAS No. 123, our net results would have been as follows (in thousands, except per share amounts): For the three months ended March 31:
2004 2003 _____________ __________ Net (loss) income as reported...................................... $ (2,167) $ 257 Deduct: Total stock-based employee compensation expense determined under fair value method for all awards granted since December 31, 2001, net of related tax effects ................. (152) (159) _____________ __________ Pro forma net (loss) income........................................ $ (2,319) $ 98 ============= ========== Basic and diluted net (loss) income per share: As reported.................................................. $ (0.54) $ 0.06 Pro forma.................................................... $ (0.57) $ 0.02
For the six months ended March 31:
2004 2003 _____________ __________ Net (loss) income as reported...................................... $ (2,291) $ 8,369 Deduct: Total stock-based employee compensation expense determined under fair value method for all awards granted since December 31, 2001, net of related tax effects .......................... (304) (321) _____________ __________ Pro forma net (loss) income........................................ $ (2,595) $ 8,048 ============= ========== Basic and diluted net (loss) income per share: As reported.................................................. $ (0.57) $ 2.08 Pro forma.................................................... $ (0.64) $ 1.99
Note 2. Company Reorganization On October 19, 2001, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, together with a prepackaged plan of reorganization, with the U.S. Bankruptcy Court for the Southern District of California. The U.S. Bankruptcy Court confirmed the plan on December 10, 2001, and we emerged from bankruptcy effective December 31, 2001. The Court issued its final decree on September 27, 2002 closing the Chapter 11 case. There are no remaining claims or unrecorded obligations related to the bankruptcy proceedings. Note 3. Fresh Start Reporting Our enterprise value after reorganization at December 31, 2001 was determined based on the consideration of many factors and resulted in a reorganization value (over the fair value of identifiable net assets) of $73.1 million, as adjusted, and is reported as "Reorganization value in excess of identifiable net assets." Although the asset will not be subject to future amortization (in accordance with SFAS) No. 142, "Goodwill and Other Intangible Assets"), it will be subject to, at a minimum, annual impairment testing. In developing the assumptions underlying the enterprise valuation, management considered historical results as well as its best estimates of expected future market conditions based on information available as of December 31, 2001. Actual future events and results could differ substantially from management's estimates, assumptions and projections. Unfavorable changes compared to our projections used for Fresh Start Reporting purposes could result in future impairments of our reorganization asset and identifiable intangible assets. As a result of Fresh Start Reporting, identifiable intangible assets were valued and consist of the following to be amortized over the useful lives indicated:
(dollars in thousands; unaudited) Life in Years March 31, 2004 _______________________________________________________________________ _____________ ______________ Customer contracts and related customer relationships.................. 10 $ 7,600 Digital technology and intellectual property........................... 3 3,100 COM technology and intellectual property............................... 10 1,300 COM production software................................................ 5 300 ______________ Total.................................................................. 12,300 Less: accumulated amortization......................................... (4,463) ============== $ 7,837 ==============
Note 4. Senior Secured Revolving Credit Facility Effective November 24, 2003, we entered into a two-year revolving credit agreement with Fleet National Bank and Union Bank of California. Effective March 26, 2004, we signed an amendment to the revolving credit agreement. The amendment modified certain financial covenants to accommodate our current restructuring activities (See Note 7) and business plans, reduced the maximum commitment to $17.5 million and provides limited ability to purchase Anacomp Class B Common Stock. The amended credit agreement provides for a standby letter of credit sublimit of up to $10.0 million. Availability is limited to the lesser of (a) the maximum commitment of $17.5 million or (b) the borrowing base. The new credit facility bears interest at a base rate equal to the higher of (a) the annual rate of interest announced from time to time by Fleet National Bank as its best rate, or (b) one-half of one percent above the Federal Funds Effective Rate, for the portion of the facility equal to the borrowing base. The borrowing base equals 80% of eligible accounts, which include U.S. and Canadian accounts receivable. The amended credit facility is secured by virtually all Anacomp assets and 65% of the capital stock of our foreign subsidiaries. The amended credit facility contains covenants relating to limitations on the following: o additional debt; o permitted acquisitions; and o liens and dividends. The amended credit facility also is subject to a leverage ratio covenant, minimum liquidity and limits on annual capital expenditures. In addition, we are required to remit to the Bank Group the net proceeds of any significant capital asset sale. Except as noted, the banks must approve any buyback or open market purchases of our common stock. On May 11, 2004, we signed a letter of intent for a new 5 year, $50 million credit agreement with Wells Fargo Foothill. The new larger credit facility is expected to include greater availability and flexibility for acquisitions, stock buybacks and working capital. We expect the proposed facility will become effective approximately July 1, 2004. Note 5. Sale of Switzerland and Other Operations We completed a sale of our Switzerland operations and subsidiaries on October 18, 2002. The acquiring company assumed operational responsibility effective October 1, 2002. Under the terms of the sale agreement, we sold all of the outstanding shares of our two Swiss subsidiaries, Cominformatic AG and Anacomp Technical Services AG, to edotech Ltd. (a UK company) at a sales price of CHF 26.7 million (Swiss francs). As of March 31, 2004, all proceeds have been received from the sale except for CHF 1.8 million. On April 26, 2004, we received CHF 1.5 million (or just over $1 million) upon the expiration of certain indemnification claim periods. The remaining CHF 300,000 is currently being held in escrow pending resolution of an as yet unresolved contingency. Effectively, all of the net proceeds (i.e. sales price less sale costs) received have been used to reduce the balance outstanding under the terms of our 2002 Amended and Restated Revolving Credit Agreement, as amended. We recorded a gain on the sale of the Swiss operations that is shown separately as "Gain on sale of discontinued operations, net of taxes" in the Condensed Consolidated Statement of Operations for the six months ended March 31, 2003. Note 6. Income Taxes Our provision for income taxes consists of the following:
Six months ended Six months ended (in thousands) March 31, 2004 March 31, 2003 _________________________________________ __________________ _________________ Federal.................................. $ --- $ --- State.................................... 30 20 Foreign.................................. 782 1,085 __________________ _________________ $ 812 $ 1,105 ================== =================
Due to our reorganization, we had Cancellation of Debt ("COD") income of $265.4 million in fiscal year 2002. As a result, we were required to reduce, for federal income tax purposes, certain tax attributes, including net operating loss carryforwards and property basis by the amount of the COD. These adjustments were determined at the end of our fiscal year ending September 30, 2002. A deferred tax liability has been recorded for COD, book intangible assets and certain temporary differences. A deferred tax asset has been recorded for tax goodwill in excess of book reorganization asset, certain temporary differences, net operating losses and other tax basis carryforwards. We have recorded a valuation allowance in the amount of $39.8 million in order to fully offset the net deferred tax asset. At March 31, 2004, our most significant deferred tax assets and liabilities related to temporary differences for the tax basis of intangible assets. These timing differences were realized, offset and reversed with no impact on the net value of the deferred tax asset at March 31, 2004. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized in future years. Management periodically reviews the need for valuation allowances based upon our results of operations and when management determines that it is more likely than not that the utilization of these assets will not occur before they expire. Note 7. Restructuring Activities Anacomp continues to experience revenue declines in Computer Output to Microfiche (COM)/Other Output Services, CD/Digital, COM Professional Services, and Equipment/Supplies product lines. Due to this ongoing trend, we initiated significant changes in fiscal 2004 to align our cost structure and infrastructure through the consolidation and downsizing of facilities and adjustments to our worldwide workforce. We recorded restructuring charges totaling $2.4 million in the second quarter of fiscal 2004. As a result of a facility-related refinement to the restructuring plan, we now estimate total fiscal 2004 restructuring charges of approximately $9 million. Consequently, we now expect to obtain savings of over $9 million annually as a result of these actions compared to current operational expenditure levels. Adjustments to our workforce (affecting approximately 49 employees) during the quarter resulted in a $1.9 million current quarter charge. All affected employees were notified and have left the Company. The remaining accrued but unpaid liability of $1.5 million, as of March 31, 2004, is expected to be paid by November 2004. Also included in the $2.4 million charge is $0.4 million of facility closure costs, including future lease payments and incremental travel and relocation costs incurred as a result of our consolidation efforts. At March 31, 2004, $0.3 million of these amounts remained unpaid and we expect that payments (non-cancelable facility lease payments) will continue through June 2007. We recorded restructuring charges totaling $2.9 million in the third and fourth quarters of fiscal 2003. Adjustments to our workforce (affecting approximately 178 employees) totaled $2.5 million, and all affected employees were notified and have departed the Company. The remaining accrued but unpaid liability of $0.1 million, as of March 31, 2004, is expected to be paid by December 31, 2004. Also included in the $2.9 million charge is $0.4 million of facility closure costs, including incremental travel and relocation costs incurred as a result of our consolidation efforts. At March 31, 2004, $0.1 million of this amount remained unpaid and we expect that payments (non-cancelable facility lease payments) will continue through December 2007. In the second quarter of fiscal 2004, we were able to negotiate an early termination of one of our leased facilities included in the 2003 restructuring charges. The termination resulted in a reduced obligation for this facility, and we have therefore recorded a favorable adjustment of $49 thousand. The restructuring reserves are included as a component of "Other accrued liabilities" in the accompanying Condensed Consolidated Balance Sheets. The following table presents the activity and balances of the fiscal 2004 and fiscal 2003 restructuring reserves from September 30, 2003 to March 31, 2004 (in thousands):
Fiscal 2004 Restructuring ______________________________________________________________________________________________________________ Cash Payments and September 30, 2003 Additions Deductions March 31, 2004 __________________ ____________ __________________ _______________ Employee Separations $ --- $ 1,911 $ 393 $ 1,518 Facility Closing --- 445 105 340 __________________ ____________ __________________ _______________ $ --- $ 2,356 $ 498 $ 1,858 ================== ============ ================== ===============
Fiscal 2003 Restructuring ______________________________________________________________________________________________________________ Cash Payments and September 30, 2003 Additions Deductions March 31, 2004 __________________ ____________ __________________ _______________ Employee Separations $ 1,510 $ --- $ 1,376 $ 134 Facility Closing 253 (49) 214 88 __________________ ____________ __________________ _______________ $ 1,763 $ (49) $ 1,590 $ 222 ================== ============ ================== ===============
Note 8. Inventories
Inventories consist of the following: (in thousands) March 31, 2004 September 30, 2003 __________________________________________________________________ ________________ ___________________ Finished goods, including purchased film........................ $ 323 $ 593 Consumable spare parts and supplies............................. 2,329 2,581 ________________ ____________________ $ 2,652 $ 3,174 ================ ====================
Note 9. Defined Benefit Plan We have retirement plans in place for our United Kingdom and German subsidiaries that qualify as defined benefit plans. The plans provide benefits based primarily on years of service and employee compensation levels. Funding policy for the plans is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus additional amounts as we may determine to be appropriate. Plan assets are held in trust and consist primarily of equity securities. In addition, our balance sheet includes assets with a fair value of $4.7 million and $4.0 million as of March 31, 2004 and 2003, respectively, held specifically to meet pension obligations in Germany. These additional assets do not technically qualify as pension assets under U.S. GAAP definitions and are, therefore, included as a component of "Other assets" in the accompanying Condensed Consolidated Balance Sheets. The unfunded accumulated benefit obligation liability and other assets described above are calculated as of September 30, 2003. The amounts reported on the March 31, 2004 Condensed Consolidated Balance Sheets primarily reflect the impact of changes in exchange rates during that time. As of March 31, 2004, the unfunded accumulated benefit obligation for both plans in total was $14.6 million. The recent under funding of pension plans is primarily due to decreases in actual investment returns, a decrease in the assumed discount rates, and an increase in life expectancy. The Company evaluates its actuarial assumptions on an annual basis. These assumptions are revised based on an evaluation of long-term trends and market conditions in each country that may have an impact on the cost of providing retirement benefits. Components of the net periodic benefit cost were as follows:
Three months ended Three months ended (in thousands) March 31, 2004 March 31, 2003 _______________________________________ ___________________ ___________________ Service cost $ 259 $ 221 Interest cost 524 434 Expected return on plan assets (364) (312) Recognized actuarial loss 81 76 ___________________ ___________________ Net periodic benefit cost $ 500 $ 419 =================== ===================
Six months ended Six months ended (in thousands) March 31, 2004 March 31, 2003 _______________________________________ ___________________ ___________________ Service cost $ 510 $ 442 Interest cost 1,031 868 Expected return on plan assets (715) (624) Recognized actuarial loss 159 152 ___________________ ___________________ Net periodic benefit cost $ 985 $ 838 =================== ===================
Total employer contributions paid during the three and six months ended March 31, 2004 were $0.6 million and $0.8 million, respectively. Additional employer contributions of approximately $0.3 million are expected to be paid during the remainder of fiscal 2004. Note 10. Foreign Currency Contracts On October 15, 2002, we entered into a Swiss Franc (CHF) forward contract to protect the value of the expected cash receipts from the sale of our Switzerland operations. The contract protected Anacomp against an exchange rate above 1.5425. The forward contract expired in April and Anacomp received just over $1 million (See Note 5). The "Other income (expense)" category of our Condensed Consolidated Statement of Operations for the six months ended March 31, 2004 included the recognition of $19 thousand of exchange gain from currency fluctuations related to the Swiss receivable, the forward contract and sale costs. Note 11. Comprehensive income Comprehensive income consists of the following components:
Three months ended Three months ended (in thousands) March 31, 2004 March 31, 2003 ___________________________________________ ___________________ ___________________ Net (loss) income.......................... $ (2,167) $ 257 Change in foreign currency translation..... (238) 271 Amortization of unfunded accumulated benefit obligation...................... --- 48 ___________________ ___________________ Comprehensive (loss) income................ $ (2,405) $ 576 =================== ===================
Six months ended Six months ended (in thousands) March 31, 2004 March 31, 2003 ___________________________________________ ___________________ ___________________ Net (loss) income.......................... $ (2,291) $ 8,369 Change in foreign currency translation..... 635 198 Amortization of unfunded accumulated benefit obligation...................... --- 96 ___________________ ___________________ Comprehensive (loss) income................ $ (1,656) $ 8,663 =================== ===================
Note 12. Income or Loss Per Share Basic income or loss per share is computed based upon the weighted average number of shares of Anacomp's common stock outstanding during the period. For the six months ended March 31, 2004, potentially dilutive securities included outstanding warrants to purchase 783,077 shares of Class B Common Stock, which were issued as part of the reorganization. The shares subject to these warrants were excluded from diluted income per share as they were anti-dilutive using the treasury stock method. Note 13. Recent Accounting Pronouncements In December 2003, the Financial Accounting Standards Board ("FASB") issued SFAS No. 132R, "Employers' Disclosures about Pensions and Other Postretirement Benefits." This Statement revises Statement No. 132 in order to improve financial statement disclosures for defined benefit plans. The standard requires disclosure of more details about plan assets, obligations, cash flows, benefit costs, and other relevant information. Disclosures in interim financial statements are also expanded to require information about various elements of pension and other postretirement benefit costs. This Statement is effective for financial statements with fiscal years ending after December 15, 2003, and the interim provisions are required for periods beginning after December 15, 2003. The adoption of this Statement has not had a material impact on our results of operations or financial condition. In July 2003, the Emerging Issues Task Force ("EITF") finalized a consensus on Issue No. 03-5, "Applicability of AICPA Statement of Position 97-2, Software Revenue Recognition, to Non-Software Deliverables in an Arrangement Containing More-Than-Incidental Software" ("SOP 72"), effective for arrangements entered into in the first reporting period (annual or interim) beginning after August 13, 2003. This Issue considers whether the provisions of SOP 97-2, particularly the Vendor Specific Objective Evidence ("VSOE") requirements, apply to all deliverables in an arrangement containing more-than-incidental software or only to the software elements of the arrangement. The EITF concluded that in an arrangement that includes software that is more than incidental to the products or services as a whole, software as well as software-related elements (these elements include non-software deliverables for which software deliverables are essential to their functionality) are included within the scope of SOP 97-2. The adoption of this consensus has not had a material effect on our results of operations or financial condition. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This Quarterly Report, including the following section regarding "Management's Discussion and Analysis of Financial Condition and Results of Operations," contains "forward-looking statements" as defined under the Private Securities Litigation Reform Act of 1995 and within the safe harbors of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "may," "estimates" and similar expressions or variations of such words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Quarterly Report. Additionally, statements concerning future matters such as our future plans and operations, projections used for valuation purposes, sales levels, consolidation and restructuring plans, liquidity needs, expectations of business trends and product line revenue trends and other statements regarding matters that are not historical are forward-looking statements. Although forward-looking statements in this Quarterly Report reflect the good faith estimates and judgment of our management, such statements can only be based on facts and factors of which we are currently aware. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Our actual results, performance and achievements may differ materially from those discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such differences in results and outcomes include without limitation those discussed under the heading "Risk Factors" below, as well as those discussed elsewhere in this Quarterly Report and in our other periodic reports filed with the SEC. We encourage you to not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. We undertake no obligation to revise or update any forward-looking statements made in this report in order to reflect any event or circumstance that may arise after the date of this Quarterly Report. We encourage you to carefully review and consider the various disclosures made in this Quarterly Report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations and prospects. Forward-looking statements involve known and unknown risks and uncertainties. Risks, uncertainties and other important factors include, among others: o general economic and business conditions; o industry trends and growth rates; o liability resulting from theft or loss of customer data; o competition; o future technology; o costs and availability of raw materials; o currency fluctuations; o the loss of any significant customers or suppliers; o changes in business strategy or development plans; o successful development of new products and services; o anticipated financial performance and contributions of our products and services; o availability, terms and deployment of capital; o availability of qualified personnel; o changes in, or the failure or inability to comply with, government regulations; and o other factors referenced in this report and in our other public filings with the Securities and Exchange Commission, including our Form 10-K for the year ended September 30, 2003. Overview and Recent Events Anacomp is a global provider of information outsourcing services, maintenance support, and imaging and print solutions. Anacomp was incorporated in Indiana in 1968 and has active international subsidiaries in Austria, Belgium, Canada, France, Germany, Italy, the Netherlands, Scandinavia and the United Kingdom. The majority of our business relates to managing customer documents, supporting the devices these documents are captured, printed or stored on, and providing supplies and service for the same. We attempt to service our existing and future customers by "bundling" an expanded list of services (e.g. Web viewing, CD Services, printing, scanning and long-term archival storage). We are also one of the world's leading independent, vendor neutral providers of Multi-Vendor Services (MVS), where we act as a third party maintainer, providing support services such as on-site maintenance, call center/help desk service and/or depot repair services, as well as laser printer maintenance and associated hardware. We offer expert installation, maintenance and repair services for a broad array of third party equipment, such as mass storage devices and high-speed output systems. In addition, we provide systems and related supplies and services to much of the installed base of COM imaging systems worldwide through a combination of direct sales, telemarketing and distributors. Anacomp was once the primary manufacturer for most of the base of this installed COM equipment and today we provide "as new" systems to our customers in North America, Japan and Europe. We also refurbish high-speed laser printers and provide maintenance support for a number of these devices, as well as selling associated supplies. We continually monitor our legacy business volumes and intend to reduce the cost of infrastructure when and where appropriate. In the second quarter of fiscal 2004, we initiated a plan to better align our infrastructure with major market opportunities. In order to enhance our presence in these major markets, we are consolidating our smaller facilities into larger, Mega-center locations and have made related adjustments to our worldwide workforce. We plan on leveraging our current data transmission capabilities to optimize the cost of delivering legacy services. Our Mega-centers will be positioned in areas where we believe our future prospects are strongest and will enable us to service customers from other geographic markets. Creating better span of control of our resources, while aligning our sales resources around these centers is expected to help us identify additional opportunities while reducing operating costs. On May 11, 2004, we signed a letter of intent for a new 5 year, $50 million credit agreement with Wells Fargo Foothill. The new larger credit facility is expected to include greater availability and flexibility for acquisitions, stock buybacks and working capital. We expect the proposed facility will become effective approximately July 1, 2004. Management's discussion and analysis presented below provides a narrative on our financial performance and condition and is intended to provide information that will assist in understanding our condensed consolidated financial statements, the changes in certain key items in those financial statements from period to period, and the primary factors that caused those changes, including how certain accounting principles, policies and estimates affect such financial statements. The discussion and analysis that follows should be read in conjunction with the accompanying condensed consolidated financial statements and the related notes appearing elsewhere in this report, and includes the following sections: o Critical Accounting Policies and Estimates, o Results of Operation, o Liquidity and Financial Resources, and o Off-balance Sheet Arrangements, Contractual Obligations and Commercial Commitments. Critical Accounting Policies and Estimates Our discussion and analysis of financial condition and our results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to bad debts, inventories, intangible assets, income taxes, restructuring and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. A summary of our significant accounting policies and estimates can be found in our fiscal 2003 Annual Report on Form 10-K. Results of Operations Three Months Ended March 31, 2004 vs. Three Months Ended March 31, 2003 General. We reported a net loss of $2.2 million for the three months ended March 31, 2004 versus $0.3 million in net income for the three months ended March 31, 2003. Current quarter results reflect a $2.3 million restructuring charge. Both MVS and Web Presentment revenues grew substantially over the prior year period revenues. COM-based revenues, comprised of COM/Other Output Services, COM/Professional Services, and Equipment and Supplies, continued to decline in the three months ended March 31, 2004, in line with historical trends. This quarter's COM-based revenues were up $0.6 million, or 2%, compared to the first quarter of this fiscal year due to strong year-end processing. In the comparable periods in fiscal 2003 there was a 1% decline in COM-based revenues, including year-end processing. Due to the general weakening of the U.S. dollar, our total net revenues for the second quarter of fiscal 2004 were favorably impacted by foreign exchange rates as compared with the second quarter of fiscal 2003. The impact of the foreign exchange benefit in the current period was approximately 4% of total net revenues as compared with the second quarter of last year. We define our product lines as follows: MVS - Multi-Vendor Services where Anacomp acts as a third party maintainer, providing support services such as on-site maintenance, call center/help desk or depot repair, laser printer maintenance and associated hardware sales. docHarbor Web Presentment - Electronic ingestion, storage, delivery and internet browser-based access to documents. Also includes license sales and maintenance for the docHarbor software that is our Web platform in the US. CD/Digital - CD-based document management services, scanning and digital software sales. COM/Other Output Services - Our Computer Output to Microfilm and laser printer document management services. COM Professional Services - Our maintenance services for Computer Output to Microfilm and other micrographic products. Equipment/Supplies - Computer Output to Microfilm original and duplicate film, chemistry and hardware sales.
(in thousands) Three Months Ended March 31, ____________________________ Percentage Product Line 2004 2003 Change Change ____________ ____ ____ ______ ______ MVS $ 9,429 $ 8,238 $ 1,191 14% DocHarbor Web Presentment 6,135 4,713 1,422 30% CD/Digital 6,162 7,336 (1,174) (16%) COM/Other Output Services 15,400 18,777 (3,377) (18%) COM Professional Services 4,564 5,268 (704) (13%) Equipment/Supplies 7,176 8,449 (1,273) (15%) _____ _____ _______ Total $ 48,866 $ 52,781 $ (3,915) (7%) ======== ======== =========
MVS revenues increased $1.2 million, or 14%, over the prior year three month period. This increase reflects the increase in new OEM agreements and the resulting growth in our Multi-Vendor Services offerings. We have experienced several years of continuous growth in MVS revenues, and we expect continued growth in this area as we expand our service offerings to include call center/help desk and depot repair capabilities. The relative makeup of total professional services revenues (consisting of MVS and COM professional services) continues to migrate from COM to MVS. In the three months ended March 31, 2004, MVS represented 67% of total professional services, compared to 61% in the prior year three month period. docHarbor Web Presentment revenues increased $1.4 million, or 30%, over the prior year three month period. This increase reflects the addition of new customers and additional revenue from established customers as they have increased the number of their applications utilizing our Web services. A large Web Presentment customer (representing 22% of docHarbor Web Presentment revenue in the second quarter of fiscal 2004) has indicated that they will not renew their Web Presentment services agreement when it expires in September 2004. Although we will be losing this customer, we expect continued revenue growth on an annual basis in this product line resulting from increased customer awareness and recognition, increased acceptance of outsourcing non-core business processes and tighter regulations around financial reporting and record keeping. Over the long term, we believe that pricing for this product may become more competitive. CD/Digital revenues declined $1.2 million, or 16%, from the prior year three month period. The decline was due primarily to the availability of alternative Web-based or in-house solutions. COM/Other Output Services revenues declined $3.4 million, or 18%, from the prior year three month period. This decline reflects the decreased volumes processed in our data centers and continues the trend experienced in prior years. This decline also was and continues to be due primarily to the availability of alternative technologies. We expect that COM revenues will continue to decline in future periods. COM Professional Services revenues declined $0.7 million, or 13%, from the prior year three month period. This decline reflects the continued decrease in the number of COM units in operation. We expect that the number of COM units in use worldwide will continue to decline as organizations choose to outsource these document management functions to service centers, such as those operated by us, or elect to utilize other options such as CD or on-line solutions. Equipment and supplies revenues declined $1.3 million, or 15%, from the prior year three month period. This decrease was largely the result of the decline in demand for and use of COM systems. Gross Margins. Our gross margin, based on gross profits of $16.2 million for the three months ended March 31, 2004 and $17.2 million for the three months ended March 31, 2003, remained consistent at 33% of total revenues. Engineering, Research and Development. Engineering, research and development expenditures, $1.4 million for the three month period ended March 31, 2004, decreased $0.2 million, or 13%, from the prior year three month period, and remained at 3% of total revenues in both periods. This decrease in spending was mainly the result of restructuring-related actions taken in the third and fourth quarters of fiscal 2003. Engineering, research and development expenditures will increase in the next two quarters as we will be developing new features and functionalities for our docHarbor Web Presentment services. Engineering, research and development expenses will not necessarily have a direct or immediate correlation to revenues. Selling, General and Administrative. SG&A expenses decreased from $13.6 million for the three months ended March 31, 2003 to $13.5 million for the three months ended March 31, 2004. This decrease primarily reflects reduced level of expenses resulting from prior year restructuring actions partially offset by current year proxy-related expenses. During the quarter ended March 31, 2004, the Company was involved in a proxy contest involving the election of directors. The Company expended over $0.2 million for this proxy contest. The Company's proposed directors were elected as noted in Part II - Other Information, Item 4. Submission of Matters to a Vote of Security Holders. Amortization of Intangible Assets. Amortization of intangible assets was constant at $0.5 million for the three months ended March 31, 2003 and March 31, 2004. The expense in each period reflects amortization of identifiable intangible assets valued as part of Fresh Start Reporting. Restructuring Charges. Net restructuring charges of $2.3 million were recorded in the current quarter. These included $2.4 million related to the fiscal 2004 data center consolidation and reorganization of related personnel on a worldwide basis. Additional restructuring charges, totaling approximately $6.6 million, primarily facility closing related, are expected during the remainder of fiscal 2004. In addition, in the current quarter we were able to negotiate an early termination of a lease expensed in our fiscal 2003 restructuring, resulting in a $49 thousand reduction to the restructuring charge for the quarter ended March 31, 2004. Interest Expense and Fee Amortization. Interest expense decreased to $0.2 million for the three months ended March 31, 2004 from $0.6 million for the three months ended March 31, 2003. The decrease reflects the lower balance outstanding on the senior secured revolving credit facility for the three months ended March 31, 2004. Other. The expense in both periods is related primarily to currency exchange gains and losses. Provision for Income Taxes. The provision for income taxes of $0.4 million and $0.5 million for the three months ended March 31, 2004 and 2003, respectively, related primarily to earnings of foreign subsidiaries. Certain European subsidiaries generate taxable income and resultant income tax expense. Other legal entities generate operating losses on which no income tax benefit is recorded due to the uncertainty of future profits against which these benefits could be used. These events create an unbalanced situation where income tax expense is a disproportionate percentage of operating income or loss. Six Months Ended March 31, 2004 vs. Six Months Ended March 31, 2003 General. We reported a net loss of $2.3 million for the six months ended March 31, 2004 versus $8.4 million in net income for the six months ended March 31, 2003. Current year net loss included a $2.3 million restructuring charge. The prior year net income included an $8.2 million gain on the sale of our Swiss subsidiaries. Both MVS and Web Presentment revenues grew substantially over the prior year period revenues. COM-based revenues continued to decline in the six months ended March 31, 2004, in line with historical trends. Fiscal 2004 second quarter COM-based revenues were up $0.7 million, or 2%, compared to the first quarter of this year due to strong year-end processing. In the comparable periods in fiscal 2003 there was a 1% decline in COM-based revenues, including year-end processing. Due to the general weakening of the U.S. dollar, our total net revenues for the first half of fiscal 2004 were favorably impacted by foreign exchange rates as compared with the first half of fiscal 2003. The impact of the foreign exchange benefit in the current period was approximately 4% of total net revenues as compared with the first half of last year.
(in thousands) Six Months Ended March 31, __________________________ Percentage Product Line 2004 2003 Change change ____________ ____ ____ ______ ______ MVS $ 18,414 $ 16,355 $ 2,059 13% docHarbor Web Presentment 11,926 9,496 2,430 26% CD/Digital 12,289 14,665 (2,376) (16%) COM/Other Output Services 30,483 37,935 (7,452) (20%) COM Professional Services 9,246 10,806 (1,560) (14%) Equipment/Supplies 13,931 16,495 (2,564) (16%) ______ ______ _______ Total $ 96,289 $ 105,752 $ (9,463) (9%) ======== ========= =========
MVS revenues increased $2.1 million, or 13%, over the prior year six month period. This increase reflects the increase in new OEM agreements and the resulting growth in our Multi-Vendor Services offerings. We have experienced several years of continuous growth in MVS revenues, and we expect continued growth in this area as we expand our service offerings to include call center/help desk and depot repair capabilities. The relative makeup of total professional services revenues (consisting of MVS and COM professional services) continues to migrate from COM to MVS. In the six months ended March 31, 2004, MVS represented 67% of total professional services, compared to 60% in the prior year six month period. docHarbor Web Presentment revenues increased $2.4 million, or 26%, over the prior year six month period. This increase reflects the addition of new customers and additional revenue from established customers as they have increased the number of their applications utilizing our Web services. A large Web Presentment customer (representing 23% of docHarbor Web Presentment revenue in the first half of fiscal 2004) has indicated that they will not renew their Web Presentment services agreement when it expires in September 2004. Although we will be losing this customer, we expect continued revenue growth on an annual basis in this product line resulting from increased customer awareness and recognition, increased acceptance of outsourcing non-core business processes and tighter regulations around financial reporting and record keeping. Over the long term, we believe that pricing for this product may become more competitive. CD/Digital revenues declined $2.4 million, or 16%, from the prior year six month period. The decline was due primarily to the availability of alternative Web-based or in-house solutions. COM/Other Output Services revenues declined $7.5 million, or 20%, from the prior year six month period. This decline reflects the decreased volumes processed in our data centers and continues the trend experienced in prior years. This decline also was and continues to be due primarily to the availability of alternative technologies. We expect that COM revenues will continue to decline in future periods. COM Professional Services revenues declined $1.6 million, or 14%, from the prior year six month period. This decline reflects the continued decrease in the number of COM units in operation. We expect that the number of COM units in use worldwide will continue to decline as organizations choose to outsource these document management functions to service centers, such as those operated by us, or elect to utilize other options such as CD or on-line solutions. Equipment and supplies revenues declined $2.6 million, or 16%, from the prior year six month period. This decrease was largely the result of the decline in demand for and use of COM systems. Gross Margins. Our gross margin, based on gross profits of $31.3 million for the six months ended March 31, 2004 and $34.6 million for the six months ended March 31, 2003, were 32% and 33% of total revenues, respectively. Engineering, Research and Development. Engineering, research and development expenditures, $2.9 million for the six month period ended March 31, 2004, decreased $0.5 million, or 17%, from the prior year period, and remained consistent at 3% of total revenues in both periods. This decrease in spending was mainly the result of restructuring-related actions taken in the third and fourth quarters of fiscal 2003. These expenses will not necessarily have a direct or immediate correlation to revenues. We continue to build and support our outsource service solutions base and corresponding internet and digital technologies. Most of these expenditures were in support of the docHarbor Web Presentment and CD/Digital services and, to a lesser extent, COM products. Selling, General and Administrative. SG&A expenses decreased from $27.6 million for the six months ended March 31, 2003 to $26.6 million for the six months ended March 31, 2004, due primarily to benefits realized from our recent restructuring activities. During the second quarter of fiscal 2004, the company was involved in a proxy contest involving the election of directors. During fiscal 2004, the company expended $0.4 million for this proxy contest. The company's proposed directors were elected as noted in Part II - Other Information, Item 4. Submission of Matters to a Vote of Security Holders. Reversal of Environmental Liability. Based upon updated environmental analysis and continued favorable site contamination test results, we recorded a reduction to our EPA liability of $0.5 million in the quarter ended December 31, 2003,as reflected in the six month period ended March 31, 2004. Amortization of Intangible Assets. Amortization of intangible assets remained at $1.0 million for the six months ended March 31, 2003 and March 31, 2004. The expense in each period reflects amortization of identifiable intangible assets valued as part of Fresh Start Reporting. Restructuring Charges. Net restructuring charges of $2.3 million were recorded in the second quarter of fiscal year 2004. These included $2.4 million related to fiscal 2004 data center consolidation and reorganization of related personnel on a worldwide basis. Additional restructuring charges, totaling approximately $6.6 million, are expected during the remainder of fiscal 2004. In addition, in the second quarter of the current fiscal year, we were able to negotiate an early termination of a lease expensed in our fiscal 2003 restructuring, resulting in a $49 thousand reduction to the restructuring charge for the six months ended March 31, 2004. Interest Expense and Fee Amortization. Interest expense decreased to $0.3 million for the six months ended March 31, 2004 from $1.4 million for the six months ended March 31, 2003. The decrease reflects the lower balance outstanding on the senior secured revolving credit facility in the current year period. Other. The expense in both periods is related primarily to currency exchange gains and losses. Provision for Income Taxes. The provision for income taxes of $0.8 million and $1.1 million for the six months ended March 31, 2004 and 2003, respectively, related primarily to earnings of foreign subsidiaries. Certain European subsidiaries generate taxable income and resultant income tax expense. Other legal entities generate operating losses on which no income tax benefit is recorded due to the uncertainty of future profits against which these benefits could be used. These events create an unbalanced situation where income tax expense is a disproportionate percentage of operating income or loss. Liquidity and Capital Resources Our legacy business (COM) has declined in recent years and is forecasted to continue to decline as new technologies become available and are accepted in the marketplace. Our ability to generate sufficient cash to fund operations and to meet future bank requirements is dependent on successful and simultaneous management of the decline in COM as well as the expansion of alternative service offerings. Other factors, such as an uncertain economy, levels of competition in the document management industry, and technological uncertainties will impact our ability to generate cash and maintain liquidity. We believe the actions taken over the past two years, including new and enhanced product and service offerings, Company downsizing and cost control measures will allow us to maintain sufficient cash flows from operations to meet our operating, capital and debt requirements in the normal course of business for at least the next twelve months. In the six months ended March 31, 2004, we generated cash from operations of $5.2 million, consistent with $5.2 million generated in the same period of the prior fiscal year. Net cash from operations in the first half of fiscal 2004 primarily reflects our operating loss offset by non-cash charges for depreciation, amortization, and compensation in the form of stock grants for our outside directors, offset by a small overall decrease in liabilities. Net cash used in investing activities was $2.1 million for the six months ended March 31, 2004, compared to cash provided by investing activities of $11.9 million in the comparable prior year period. Expenditures in both years were primarily for purchases of equipment. In the first quarter of fiscal 2004, we invested approximately $0.7 million in our call center and central services infrastructure. In the prior year we received $13.4 million in cash proceeds from the sale of our Switzerland operations and subsidiaries. Net cash used in financing activities was $4.5 million for the six months ended March 31, 2004, compared to $18.6 million used in financing activities in the comparable prior year period. In both periods, cash was used to pay down the revolving credit facility. At March 31, 2004, the outstanding revolving credit borrowings were $1.4 million (plus outstanding standby letters of credit of $5.4 million). As of April 30, 2004, the amount payable on the outstanding revolving credit facility had been reduced to zero. Effective November 24, 2003, we entered into a two-year revolving credit agreement with Fleet National Bank and Union Bank of California. Effective March 26, 2004, we signed an amendment to the revolving credit agreement. The amendment modified certain financial covenants to accommodate our current restructuring activities and business plans, reduced the maximum commitment to $17.5 million and provides limited ability to purchase Anacomp Class B Common Stock. The amended credit agreement provides for a standby letter of credit sublimit of up to $10.0 million. Availability is limited to the lesser of (a) the maximum commitment of $17.5 million or (b) the borrowing base. The amended credit facility bears interest at a base rate equal to the higher of (a) the annual rate of interest announced from time to time by Fleet National Bank as its best rate, or (b) one-half of one percent above the Federal Funds Effective Rate, for the portion of the facility equal to the borrowing base. The borrowing base equals 80% of eligible accounts, which include U.S. and Canadian accounts receivable. The borrowing base for the new credit agreement was $11.6 million as of March 31, 2004, with borrowing base availability of $4.9 million. The amended credit facility is secured by virtually all of Anacomp's assets and 65% of the capital stock of our foreign subsidiaries. The amended credit facility contains covenants relating to limitations on the following: o additional debt; o permitted acquisitions; and o liens and dividends. The amended credit facility also is subject to a leverage ratio covenant, minimum liquidity and limits on annual capital expenditures. In addition, we are required to remit to the Bank Group the net proceeds of any significant capital asset sale. The banks must approve any buyback of our common stock. During the past year, our significant paydown of the outstanding balance on our revolving credit facility through both payments of cash generated through operations and from proceeds received on the sale of our Switzerland subsidiaries, as well as the reclassification of our credit facility from current to long-term has substantially improved our working capital position. Working capital has grown from $4.7 million at March 31, 2003 to $12.0 million at March 31, 2004. Our cash balance totaled $17.6 million at March 31, 2004 compared to $18.4 million at September 30, 2003. Approximately 54% of the March 31, 2004 cash balance is located at our foreign subsidiaries compared to approximately 65% at September 30, 2003. On May 11, 2004, we signed a letter of intent for a new 5 year, $50 million credit agreement with Wells Fargo Foothill. The new larger credit facility is expected to include greater availability and flexibility for acquisitions, stock buybacks and working capital. We expect the proposed facility will become effective approximately July 1, 2004. Off-balance Sheet Arrangements, Contractual Obligations and Commercial Commitments We provide indemnification of varying scope and size to certain customers against claims of intellectual property infringement made by third parties arising from the use of our products and services. We evaluate estimated losses for such indemnifications under SFAS No. 5, "Accounting for Contingencies," as interpreted by FIN 45. We consider such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss when evaluating our indemnification obligations. To date, aside from a patent infringement case settled in fiscal 2001, we have not encountered material costs as a result of such obligations and have not accrued any liabilities related to such indemnifications in our financial statements. In the normal course of business, we occasionally enter into arrangements with customers, suppliers or other parties that may result in material obligations or commitments from a cash flow standpoint. The following table shows our material contractual obligations and commercial commitments at March 31, 2004:
(in thousands) Amounts Due Within: ___________________ Description Total 1 year 2-3 years 4-5 years 6+ years ___________ _____ ______ _________ _________ ________ Revolving credit facility (1) $ 1,416 $ --- $ 1,416 $ --- $ --- Standby letters of credit 5,365 --- 5,365 --- --- Non-cancelable leases 50,617 10,136 16,188 12,453 11,840 Royalty payments (2) 750 600 150 --- --- ___ ___ ___ ___ ___ Total $58,148 $ 10,736 $ 23,119 $12,453 $ 11,840 ______________________________ ======= ======== ======== ======= ========
(1) This item is reflected as a long-term liability in our March 31, 2004 balance sheet. (2) This item is included with other accrued liabilities in our March 31, 2004 balance sheet. RISK FACTORS You should carefully consider the following risk factors and all of the other information included in this Form 10-Q in evaluating our business and our prospects. Investing in our Class A or Class B Common Stock (collectively, "Common Stock") involves a high degree of risk. Additional risks and uncertainties may also materially adversely affect our business and financial condition in the future. Any of the following risks could materially adversely affect our business, operating results or financial condition and could result in a complete loss of your investment. The development of alternate technologies in the document management industry is decreasing the need for our micrographics services and products. The document management industry is changing rapidly. The recent trend of technological advances and attendant price declines in digital systems and products is expected to continue. As a result, in certain instances, potential micrographics customers have deferred, and may continue to defer, investments in micrographics systems (including our XFP2000 COM system) and the utilization of micrographics service centers while evaluating the abilities of other technologies. In addition, the continuing development of local area computer networks and similar systems based on digital technologies has resulted and will continue to result in many of our customers changing their use of micrographics from document storage, distribution and access to primarily archival use. We believe that this is at least part of the reason for the declines in recent years in both sales and prices of our duplicate film, readers and reader/printers. Our service centers also are producing fewer duplicate microfiche per original for customers, reflecting the shift towards using micrographics primarily for long term archival storage. Revenues for our micrographics services and products, including COM service revenues, COM system revenues, maintenance service revenues and micrographics supplies revenues, have been adversely affected for each of the past five fiscal years and will likely in the future be substantially adversely affected by, among other things, the increasing use of digital technology. COM revenues from services, system and supplies sales declined 23% in 2003 from fiscal year 2002 revenues. Overall, COM revenues represented 60% of our revenues for the twelve-month period ended September 30, 2003, 66% of our fiscal 2002 revenues, 71% of fiscal 2001 revenues, 77% of fiscal 2000 revenues, 83% of fiscal 1999 revenues, and 91% of fiscal 1998 revenues. Additionally, the rapidly changing document management industry has resulted in price competition in certain of our businesses, particularly COM services. We have been, and we expect to continue to be, impacted adversely by the decline in the demand for COM services, the declining market for COM systems and the attendant reduction in supplies revenues. We expect that our revenues for maintenance of COM systems will continue to decline as a result of decreasing use and fewer sales of COM systems. Additionally, the growth of alternate technologies has created consolidation in the micrographics segment of the document management industry. To the extent consolidation in the micrographics segment has the effect of causing major providers of micrographics services and products to cease providing such services and products, the negative trends in the segment, such as competition from alternate technologies described above, may accelerate. If we do not adapt to the rapid changes in the document management industry, our business will suffer and your investment will be adversely affected. Our revenues could continue to decrease over the next few years, which could inhibit us from achieving or sustaining profitability or even prevent us from continuing to operate. Our accumulated deficit through December 31, 2001 was eliminated as a result of Fresh Start Reporting. However, we have not recorded sustained profitable operating results for quite some time. To achieve sustained future profitability we will need to generate and sustain planned revenues and maintain reasonable cost and expense levels. We do not know when or if we will become profitable on a sustained basis. If we fail to achieve consistent profitability and generate sufficient cash flows, we will face liquidity and bank covenant issues and our credit facility could become immediately due and payable on demand. Even though we generated operating income from continuing operations before taxes in the years ended September 30, 2003 and 2002, we may not be able to sustain or increase profitability on a quarterly or an annual basis. Any failure on our part to achieve or sustain profitability could cause our stock price to decline. The loss or theft of customer data could cause us to be liable for significant damages or cause harm to our reputation. The laws concerning the privacy of consumer data have changed and companies are being held more accountable for any loss, theft or misuse of such information. Although our data centers, and the carriers that we use to ship data, have taken many security measures, it is possible that customer data could be stolen, lost or misused. Additionally, we use electronic transmission lines and computer systems which could be hacked into by third parties. Any failure by Anacomp or its carriers to protect data could cause us to be liable to our customers for significant losses and could significantly harm our reputation in the marketplace. The development of alternative technologies in the document management industry is decreasing the need for our CD Services. The document management industry is continuing to change. The technological advances and price declines in digital systems and products are expected to continue. As a result, some of our CD services customers are choosing in-house digital solutions and products or other service providers instead of our CD service offerings. We believe that this is part of the reason for the recent declines in our CD service revenues. Revenues from our CD services declined 6% in fiscal 2002 and 20% in fiscal 2003 compared to the prior fiscal years. Revenues for CD services have been adversely affected for the last two years and will likely in the future be substantially adversely affected by, among other things, the increasing use of other digital technologies. Additionally, the rapidly changing document management industry has resulted in price competition in the CD services business. We expect that our revenues for CD services will continue to decline because of the availability of other technologies and the effect of price competition. If we do not adapt to the rapid changes in the document management industry, our business will suffer and your investment will be adversely affected. If we are unable to decrease our costs to match the decline in our revenues, we may not be able to achieve or sustain profitability. The decline in the demand for COM services, systems and maintenance and the attendant reduction in supplies revenues have adversely affected our business. Over the past several years, COM revenues from services, system and supplies sales have been steadily decreasing as a percentage of our revenues and declined 23% in fiscal 2003 from fiscal year 2002 revenues. We expect that our revenues for maintenance of COM systems will continue to decline as a result of decreasing use and fewer sales of COM systems. We have taken steps (such as facilities consolidation and personnel reductions) to reduce our cost structure and offset the decrease in COM revenues. We intend to take additional measures as necessary to continue to reduce our cost structure. If these measures are unsuccessful, we will not realize profits from our COM business and your investment may be adversely affected. A significant portion of our docHarbor Web Presentment product line revenues is derived from a limited number of customers. This trend will continue until we can diversify our customer base to reduce our reliance on these largest customers. Revenues from our docHarbor Web Presentment product line have grown by 20% or more each year for the last four years. In general these limited number of customers have increased their usage of docHarbor Web Presentment services. The loss, however, of any individual customer could cause the rate of growth of docHarbor Web Presentment revenues to decrease significantly from historical trends and could cause a decline in revenues from this product line. Intense competition in the document management industry could prevent us from increasing or sustaining our revenues and prevent us from achieving or sustaining profitability. The document management industry is becoming increasingly competitive, especially in the market for Internet-based document management services. We face, and will continue to face, competition from other document-management outsource service providers as well as from document management software providers who offer in-house solutions. Some of our competitors are leading original equipment manufacturers with established client relationships in our target markets. Some of our competitors are significantly larger than we are and have greater financial resources, greater name recognition and longer operating histories than we have. Our competitors may be able to respond more quickly or adjust prices more effectively to take advantage of new opportunities or customer requirements. Increased competition could result in pricing pressures, reduced sales, reduced margins or failure to achieve or maintain widespread market acceptance, any of which could prevent us from increasing or sustaining our revenues and achieving or sustaining profitability. We face business, political and economic risks because a significant portion of our sales is to customers outside of the United States. Revenues from operations outside the United States accounted for 31% of our total revenues for the fiscal year ended September 30, 2003 and 28% of our total revenues in fiscal 2002. Our success continues to depend upon our international operations and we expect that a significant portion of our total future revenues will be generated from international sales. Our international business involves a number of risks, including: o our ability to adapt our products to foreign design methods and practices; o cultural differences in the conduct of business; o difficulty in attracting and retaining qualified personnel; o longer payment cycles for and greater difficulty collecting accounts receivable; o unexpected changes in regulatory requirements, royalties and withholding taxes that restrict the repatriation of earnings; o tariffs and other trade barriers; o the burden of complying with a wide variety of foreign laws; o political, economic or military conditions associated with current worldwide conflicts and events; o the exchange markets and our ability to generate, preserve and repatriate proceeds and dividends to the parent company in the United States; and o to the extent that profit is generated or losses are incurred in foreign countries, our effective income tax rate may be significantly affected. We recently effectuated a financial restructuring pursuant to a prepackaged Chapter 11 plan of reorganization, we have a history of net losses and we may face liquidity issues in the future. On October 19, 2001 we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code and a prepackaged plan of reorganization. The Bankruptcy Court confirmed the plan of reorganization on December 10, 2001 and we emerged from our bankruptcy proceedings effective December 31, 2001. However, our completion of bankruptcy proceedings does not assure our continued success. For example, the bankruptcy proceedings described above are our second bankruptcy: we previously filed a plan of reorganization in January 1996 and emerged from those proceedings in June 1996. If our financial performance does not exceed our recent historical results, the price of our Common Stock could decline and your investment could be materially adversely affected. Our current credit facility includes covenant restrictions concerning a leverage ratio, liquidity, and capital expenditures. Fluctuation in our quarterly financial results may cause instability in our stock price. Our COM business continues to decline; however, the rate at which this decline will impact our operations is difficult to predict. Additionally, while we attempt to base our operating expenses on anticipated revenue levels, a substantial percentage of our expenses are fixed in the short term. As a result, any delay in generating or recognizing revenues could cause our operating results to be below expectations. Moreover, the operating expenses from our growth initiatives may exceed our estimates. Any or all of these factors could affect our financial results and cause the price of our Common Stock to decline. If our future results do not meet or exceed the projections and assumptions we made for Fresh Start Reporting purposes, we may have to write down the values of some of our assets. On December 31, 2001, as a result of our emergence from bankruptcy, we adopted Fresh Start Reporting. This resulted in material changes to our financial statements including the recording of an asset for "Reorganization value in excess of identifiable net assets." We determined the value of our business and accordingly, our reorganization asset by making certain projections and assumptions based on historical results as well as our best estimates of expected future market conditions. Unfavorable changes compared to our projections used for Fresh Start Reporting purposes could result in future impairments of our reorganization asset and our identifiable intangible assets. If these assets were to be impaired, the value of your investment could decline. If we are unable to make technological advancements and upgrades to our current product and services offerings, we will lose market share. In order to maintain and grow market share, we continually invest in offering new customer solutions and in upgrading our storage and delivery systems and infrastructure. We cannot ensure that we will be able to continue to develop innovations in our software to stay abreast of client needs. We also cannot ensure that we will be able to maintain or upgrade our infrastructure to take advantage of new technology. Our future plans for growth and a return to sustained profitability would be detrimentally affected if we are unable to develop new and innovative customer solutions or if we are unable to sustain our infrastructure. Litigation or third party claims of intellectual property infringement could require us to spend substantial time and money and adversely affect our ability to develop and commercialize products. Third parties may accuse us of employing their proprietary technology without authorization. In addition, third parties may obtain patents that relate to our technologies and claim that our use of such technologies infringes these patents. Regardless of their merit, such claims could require us to incur substantial costs, including the diversion of management and technical personnel, in defending ourselves against any such claims or enforcing our patents. In the event that a successful claim of infringement is brought against us, we may be required to pay damages and obtain one or more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, or at all. Defense of any lawsuit or failure to obtain any of these licenses could adversely affect our ability to develop and commercialize products and our operating results. The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to expand our operations. We are highly dependent on the principal members of our management team and the technical expertise of our personnel. The success of our business is based on our technical expertise and proven ability to provide fast, expert, on-site service and support around the clock. This service is provided in North America and Europe by approximately 425 Anacomp service professionals, the loss of whose services might adversely impact the achievement of our business objectives. Moreover, our business operations will require additional expertise in specific industries and areas applicable to products identified and developed through our technologies. These activities will require the addition of new personnel, including management and technical personnel as well as the development of additional expertise by existing employees. Competition for experienced technicians may limit our ability to attract or retain such technicians. If we are unable to attract such personnel or to develop this expertise, we may not be able to sustain or expand our operations in a timely manner or at all. We use hazardous chemicals in our business and any claims relating to improper handling, storage or disposal of these materials could be time consuming and costly. Our operations involve the use and sale of hazardous chemicals. Although we believe that our safety procedures for handling and disposing comply with the applicable standards, we cannot eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling and disposal of hazardous materials. In the event of an accident, we may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our liability may exceed our insurance coverage and our total assets. Disclosure of trade secrets could aid our competitors. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, our employees and consultants. However, these agreements can be breached and, if they are, there may not be an adequate remedy available to us. If our trade secrets become known we may lose our competitive position. If we are unable to adequately protect our intellectual property, third parties may be able to use our technology, which could adversely affect our ability to compete in the market. Our success will depend in part on our ability to obtain protection for our intellectual property. We will be able to protect our intellectual property rights from unauthorized use by third parties only to the extent that our software is copyrightable and business methods are patentable under applicable intellectual property laws or are effectively maintained as trade secrets. The laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies have encountered significant problems in protecting and defending such rights in foreign jurisdictions. Furthermore, others may independently develop similar or alternative technologies or design around our intellectual property protections. In addition, our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets. Difficulties we may encounter managing our growth product lines may divert resources and limit our ability to successfully expand our operations and implement our business plan. We anticipate that our MVS and docHarbor Web Presentment product lines will continue to grow. Our growth in the future anticipates potential acquisitions that may place a strain on our administrative personnel and operational infrastructure should such acquisitions occur. We cannot assure you that we will be able to identify acquisition candidates, be able to consummate acquisitions on terms acceptable to us, if at all or to integrate any acquisitions into our other operations. Additionally, we cannot assure you that we will have funds available for making acquisitions. Effectively managing growth will also require us to improve our operational, financial and management controls, reporting systems and procedures. We may not be able to successfully implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls. We rely on a few suppliers to provide us COM products that, while in decline, are essential to our operations. Supplies and system sales represented approximately 15% of our total revenues for fiscal 2003. The primary products in the supplies business are silver halide original COM film and non-silver duplicating microfilm. We obtain all of our silver halide products through an exclusive multi-year supply agreement with a single provider and our duplicate film products from one other provider. Any disruption in the supply relationship between Anacomp and such suppliers could result in delays or reductions in product shipment or increases in product costs that adversely affect our operating results in any given period. In the event of any such disruption, we cannot assure you that we could develop alternative sources of raw materials and supplies at acceptable prices and within reasonable times. Additionally, as the demand for COM services declines, the demand for COM supplies falls as well. If the decline in COM supplies is greater than planned, our profitability and liquidity would decline as well. Our stock price may be volatile, and you may not be able to resell your shares at or above the price you paid, or at all. Since the effective date of our bankruptcy restructuring, our Common Stock has had limited trading activity on the OTC Bulletin Board. We cannot predict the extent to which investor interest in our stock will lead to the development of a more active trading market, how liquid that market might become or whether it will be sustained. The trading price of our Common Stock could be subject to wide fluctuations due to the factors discussed in this risk factors section and elsewhere in this report. In addition, the stock markets in general have experienced extreme price and volume fluctuations. These broad market and industry factors may decrease the market price of our Common Stock, regardless of our actual operating performance. Our net deferred tax asset may have no future value should we experience an Ownership Change as defined by the Internal Revenue Code. We maintain a deferred tax asset for tax goodwill in excess of book reorganization asset, certain temporary differences, net operating losses and other tax basis carryforwards. We have also established a valuation allowance in order to fully offset this net deferred tax asset. We have been advised that in the event of an Ownership Change (as defined by Section 382 of the Internal Revenue Code), our net deferred tax asset may have limited value and may be unavailable for us to utilize for our benefit in future periods. Any of these factors could significantly harm our future international sales and, consequently, our revenues and results of operations and business and financial condition. Item 3. Quantitative and Qualitative Disclosures About Market Risk Revenues generated outside of the United States, as a percentage of total revenues, were 34% and 30% for the six-month periods ended March 31, 2004 and 2003, respectively. Fluctuations in foreign exchange rates could impact operating results through translation of our subsidiaries' financial statements. Recent global economic events have caused exchange rates in general to rise over the past several months, making foreign currencies more valuable in terms of the U.S. dollar. For example, the Euro has risen over 5% compared to the U.S. dollar during the six months ended March 31, 2004. Exchange rate changes of this magnitude can have a material effect on our financial statement results, particularly with regard to the accumulated other comprehensive income or loss account in the equity section of the balance sheet. Our revolving credit facility bears interest at variable rates and is therefore affected by the general level of U.S. interest rates. We had $1.4 million outstanding under our facility on March 31, 2004. If interest rates were to increase 2%, annual interest expense would increase approximately $28 thousand based on the $1.4 million outstanding balance. Foreign Exchange Options On October 15, 2002, we entered into a Swiss Franc (CHF) forward contract to protect the value of the expected cash receipts from the sale of our Switzerland operations. The contract protects Anacomp against an exchange rate above 1.5425. The forward contract was written in the amount of CHF 1.8 million and expired on April 15, 2004. As a result we received approximately $1.0 million in April 2004. The Other category of our Condensed Consolidated Statement of Operations for the six months ended March 31, 2004 includes the recognition of $19 thousand of exchange gain from currency fluctuations related to the Swiss receivable, the forward contract and sale costs. We are exposed to various foreign currency exchange rate risks that arise in the normal course of business. Our functional currency is the U.S. dollar. We have international operations resulting in receipts and payments in currencies that differ from the functional currency of Anacomp. In connection with the sale of our Switzerland subsidiaries, we entered into a forward contract to hedge the related receivables. The forward contract entered into was for the sole purpose of hedging existing currency exposure, not for speculation or trading purposes. We used a forward contract only to hedge balance sheet exposure. The contract is in Swiss Francs, and matured in April 2004. When hedging balance sheet exposure, all gains and losses on forward contracts are recognized as other income and expense in the same period as the gains and losses on remeasurement of the foreign currency denominated assets. We entered into this foreign exchange forward contract within a few days of the sale, and therefore the difference between the change in the fair value of the asset and the change in value in the contract that must be recognized in the financial statements is immaterial. Item 4. Controls and Procedures (a) Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this quarterly report. (b) There was no change in our internal control over financial reporting identified in connection with the evaluation conducted in subparagraph (a) above that occurred during our fiscal quarter ended March 31, 2004 and which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Since there were no significant deficiencies or material weaknesses in our internal control over financial reporting, no corrective actions were taken. PART II - OTHER INFORMATION Item 1. Legal Proceedings Anacomp and its subsidiaries are potential or named defendants in several lawsuits and claims arising in the ordinary course of business. While the outcome of claims, lawsuits or other proceedings brought against us cannot be predicted with certainty, management expects that any liability, to the extent not provided for through insurance or otherwise, will not have a material adverse effect on our financial condition or results of operations. Item 2. Changes in Securities and Use of Proceeds There were no repurchases of Common Stock made by the Company during the three months ended March 31, 2004. Item 4. Submission of Matters to a Vote of Security Holders On February 26, 2004, Anacomp held its annual meeting of shareholders. The following directors were elected, with the following votes cast for, against and abstaining:
For Against/Withheld ___ ________________ Edward P. Smoot 3,672,089 2,254 Jeffrey R. Cramer 3,672,089 2,254 Gary J. Fernandes 3,672,089 2,254 Mark K. Holdsworth 2,365,651 1,308,692 Fred G. Jager 2,365,651 1,308,692 James F. McGovern 3,672,089 2,254 Michael E. Tennenbaum 3,672,089 2,254
The second proposal was the approval of an amendment to the articles of incorporation to delete an inapplicable provision. This proposal received the following votes: For Against Abstain 3,668,349 2,278 1,810 The foregoing proposal was approved. The third proposal was to approve the adoption of the 2004 outside director compensation plan. This proposal received the following votes: For Against Abstain 3,561,735 108,902 1,800 The foregoing proposal was approved. The fourth proposal was to approve the adoption of the employee stock bonus plan. This proposal received the following votes: For Against Abstain 3,668,345 2,292 1,800 The foregoing proposal was approved. The fifth proposal was to ratify the appointment of Ernst & Young LLP as the independent auditors for fiscal 2004. This proposal received the following votes: For Against Abstain 3,670,282 2,251 1,800 The foregoing proposal was approved. The sixth proposal was to ratify adjournment of the meeting, if necessary, to solicit additional proxies. This proposal received the following votes: For Against Abstain 2,586,135 711,788 376,410 The foregoing proposal was approved. Item 6. Exhibits and Reports on Form 8-K (exhibits incorporated by reference) (a) Exhibits: For a list of exhibits filed with this quarterly report, refer to the Index of Exhibits below. (b) During the period covered by this report, we filed the following reports on Form 8-K: (1) On January 12, 2004, we filed a Form 8-K with respect to (i) a press release dated January 6, 2004 regarding results of operations for the fiscal year ended September 30, 2003, and for the fourth quarter of fiscal 2003, and (ii) a transcript for the investor call held on January 9, 2004. (2) On January 21, 2004, we filed a Form 8-K regarding an amendment to Section 1.2 of the Company Bylaws to permit one or more shareholders beneficially owning at least 15% of outstanding shares to call a special meeting of the shareholders. (3) On February 24, 2004, we filed a Form 8-K with respect to a press release dated February 19, 2004 announcing financial results for the quarter ended December 31, 2003. (4) On March 18, 2004, we filed a Form 8-K regarding the announcement of the election of Michael E. Tennenbaum to the position of Chairman of the Board. 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/ Linster W. Fox ______________________________ Linster W. Fox Executive Vice President and Chief Financial Officer Date: May 14, 2004 INDEX TO EXHIBITS The following exhibits are filed with this Quarterly Report on Form 10-Q or incorporated herein by reference to the listed documents previously filed with the Securities and Exchange Commission (the "SEC").
- ---------- ---------------------------------------------------------------------------------------------------- 2.1 Plan of Reorganization dated August 29, 2001. (1) - ---------- ---------------------------------------------------------------------------------------------------- 3.1 Amended and Restated Articles of Incorporation of the Company as of December 31, 2001. (2) - ---------- ---------------------------------------------------------------------------------------------------- 3.2 Amended and Restated Bylaws of the Company as of January 13, 2004. (16) - ---------- ---------------------------------------------------------------------------------------------------- 4.1 Shareholders Rights Plan. (4) - ---------- ---------------------------------------------------------------------------------------------------- 4.2 Amendments to the Shareholders Rights Plan. (5) - ---------- ---------------------------------------------------------------------------------------------------- 4.3 Warrant Agreement by and between the Company and Mellon Investor Services LLC dated December 31, 2002. (2) - ---------- ---------------------------------------------------------------------------------------------------- 10.1 Retirement/Part-Time Employment Agreement dated October 27, 1999, between the Company and William C. Ater. (6)(8) - ---------- ---------------------------------------------------------------------------------------------------- 10.2 Employment Agreement, effective August 21, 2000, between the Company and Jeffrey R. Cramer. (7) (8) - ---------- ---------------------------------------------------------------------------------------------------- 10.3 Revolving Credit Agreement, dated as of June 15, 1998, among Anacomp, Inc., the various lending institutions named therein and BankBoston, N.A. as agent. (9) - ---------- ---------------------------------------------------------------------------------------------------- 10.4 Forbearance and Standstill Agreement, dated as of November 15, 2000, among Anacomp, Inc., the various banks named therein, and Fleet National Bank as agent for the banks. (6) - ---------- ---------------------------------------------------------------------------------------------------- 10.5 Amendment to the Forbearance and Standstill Agreement, dated as of December 15, 2000, between Anacomp, Inc. and Fleet National Bank. (6) - ---------- ---------------------------------------------------------------------------------------------------- 10.6 Amended and Restated Master Supply Agreement, dated October 8, 1993, by and among the Company, SKC America, Inc. and SKC Limited. (10) - ---------- ---------------------------------------------------------------------------------------------------- 10.7 First Cumulative Amendment to the Amended and Restated Master Supply Agreement, dated May 17, 1996, by and among the Company, SKC America, Inc. and SKC Limited. (11) - ---------- ---------------------------------------------------------------------------------------------------- 10.8 Second Amended and Restated Master Supply Agreement, dated as of July 1, 1997, by and among the Company, SKC America, Inc. and SKC Limited. (12) - ---------- ---------------------------------------------------------------------------------------------------- 10.9 Second Amendment to Amended and Restated Revolving Credit Agreement and Restructure of Obligations dated as of December 19, 2002, by and among the Company, the various banks named therein, and Fleet National Bank as agent for the banks. (5) - ---------- ---------------------------------------------------------------------------------------------------- 10.10 Lease Agreement by and between the Company and Kilroy Realty, LP., a Delaware limited partnership dated June 14, 2002. (13) - ---------- ---------------------------------------------------------------------------------------------------- 10.11 Consulting Agreement by and between the Company and Steven G. Singer dated May 7, 2002. (13) - ---------- ---------------------------------------------------------------------------------------------------- 10.12 Employment Agreement and Amended Employment Agreement between the Company and Edward P. Smoot dated November 12, 2002 and April 28, 2003, respectively. - ---------- ---------------------------------------------------------------------------------------------------- 10.13 Revolving Credit Agreement, dated as of November 21, 2003, by and among, Anacomp, Inc., Fleet National Bank and Union Bank of California. (14) - ---------- ---------------------------------------------------------------------------------------------------- 10.14 First Amendment to Second Amended and Restated Revolving Credit Agreement, dated as of March 26, 2004, by and among, Anacomp, Inc., Fleet National Bank and Union Bank of California.* - ---------- ---------------------------------------------------------------------------------------------------- 31.1 Rule 13a - 14(a)/15(d) - 14(a) Certification of Chief Executive Officer.* - ---------- ---------------------------------------------------------------------------------------------------- 31.2 Rule 13a - 14(a)/15(d) - 14(a) Certification of Chief Financial Officer.* - ---------- ---------------------------------------------------------------------------------------------------- 32.1 Section 1350 Certification of Chief Executive Officer.* - ---------- ---------------------------------------------------------------------------------------------------- 32.2 Section 1350 Certification of Chief Financial Officer.* - ---------- ----------------------------------------------------------------------------------------------------
________________________________ * Filed herewith. (1) Incorporated by reference to the Company's Current Reports on Form 8-K (File No. 1-08328) filed on September 20, 2001 and October 29, 2001. (2) Incorporated by reference to the exhibits to the Registration Statement on Form 8-A (File No. 1-08328) filed by the Company on January 9, 2002. (3) Incorporated by reference to the Company's Quarterly Report on Form 10-Q/A (File No. 1-08328) for the quarterly period ended June 30, 2002. (4) Incorporated by reference to an exhibit to the Company's Current Report on Form 8-K (File No. 1-08328) filed on September 21, 2002. (5) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08328) for the fiscal year ended September 30, 2002. (6) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08328) for the fiscal year ended September 30, 2000. (7) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08328) for the fiscal year ended September 30, 2001. (8) Management contract or compensation plan. (9) Incorporated by reference to the Company's Current Report on Form 8-K (File No. 1-08328) filed with the SEC on June 24, 1998 (File No. 1-08328). (10) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08328) for the fiscal year ended September 30, 1993. (11) Incorporated by reference to the Company's Pre-Effective Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-9395) filed with the SEC on September 19, 1996. (12) Incorporated by reference to the Company's Annual Report on Form 10-K (File No. 1-08328) for the fiscal year ended September 30, 1999. (13) Incorporated by reference to the Company's Quarterly Report on Form 10-Q (File No. 1-08328) for the quarterly period ended June 30, 2002. (14) Incorporated by reference to the Company's Current Report on Form 8-K (File No. 1-08328) filed on November 25, 2003. (15) Incorporated by reference to an exhibit to the Company's Current Report on Form 8-K (File No. 1-08328) filed with the SEC on May 29, 2002. (16) Incorporated by reference to Exhibit 3.2.1 to the Company's Quarterly Report on Form 10-Q (File No. 1-08328) filed with the SEC on February 17, 2004. EX-10 2 ex10_14q204.txt 1ST AMND TO 2ND AMND & RESTATED REVOLV CRED AGMT Exhibit 10.14 FIRST AMENDMENT TO SECOND AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT First Amendment dated as of March 26, 2004 to Second Amended and Restated Revolving Credit Agreement (the "First Amendment"), by and among ANACOMP, INC., an Indiana corporation (the "Borrower"), FLEET NATIONAL BANK and the other lending institutions listed on Annex A to the Credit Agreement (as hereinafter defined) (the "Banks"), amending certain provisions of the Second Amended and Restated Revolving Credit Agreement dated as of November 21, 2003 (as amended and in effect from time to time, the "Credit Agreement") by and among the Borrower, the Banks and Fleet National Bank as agent for the Banks (the "Agent"). Terms not otherwise defined herein which are defined in the Credit Agreement shall have the same respective meanings herein as therein. WHEREAS, the Borrower and the Banks have agreed to modify certain terms and conditions of the Credit Agreement as specifically set forth in this First Amendment; NOW, THEREFORE, in consideration of the premises and the mutual agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: ss.1.Amendment to Section 1.1 of the Credit Agreement. Section 1.1 of the Credit Agreement is hereby amended as follows: (a) The definition of "Borrowing Base Availability" is hereby amended by deleting the words "exceeds the Total Borrowing Base Outstandings" which appear in such definition and substituting in place thereof the words "exceeds the Total Outstandings". (b) The definition of "Consolidated EBITDA" is hereby amended by deleting such definition in its entirety and restating it as follows: Consolidated EBITDA. With respect to the Borrower and its Subsidiaries for any fiscal period, an amount equal to Consolidated Net Income for such period, plus to the extent deducted in the calculation of Consolidated Net Income and without duplication, (a) depreciation and amortization for such period, (b) other noncash charges for such period which are reasonably acceptable to the Agent, (c) the noncash compensation expense of the Borrower for such period relating to the Borrower issuing shares of its Capital Stock to employees in connection with an employee compensation plan, (d) solely for purposes of calculating compliance with the financial covenant set forth in ss.10.1 hereof and solely with respect to the period of March 1, 2004 through and including December 31, 2004, the restructuring charges taken during the applicable period in connection with the closing of certain of the Borrower's data centers, in an aggregate amount not to exceed $8,000,000, (e) income tax expense for such period, and (f) Consolidated Total Interest Expense paid or accrued during such period, and minus, to the extent added in computing Consolidated Net Income and without duplication, all noncash gains (including income tax benefits) for such period, all as determined in accordance with Generally Accepted Accounting Principles. For the avoidance of doubt, the restructuring charge described in subparagraph (d) of this definition shall only be added back to the calculation of the EBITDA for the sole purpose of calculating compliance with the financial covenant contained in ss.10.1 hereof, and shall not be included in any other computation of EBITDA hereunder. (c) The definition of "Revolving Credit Loans" is hereby amended by deleting the words "(including, without limitation, all or any portion of a Revolving Credit Loan which constitutes an Overadvance Amount)" from such definition. (d) Section 1.1 of the Credit Agreement is further amended by deleting the definitions of "Consolidated EBT", "Consolidated Operating Cash Flow", "Individual Overadvance Amount", "Overadvance Amount" and "Total Borrowing Base Outstandings" in their entirety. ss.2.Amendment to Section 2 of the Credit Agreement. Section 2 of the Credit Agreement is hereby amended as follows: (a) Section 2.1 of the Credit Agreement is hereby amended by deleting the comma and the words "provided, further, notwithstanding the foregoing proviso, to the extent the Borrower is requesting a Revolving Credit Loan to fund all or a portion of a Permitted Acquisition, then the sum of the outstanding amount of the Revolving Credit Loans (after giving effect to all amounts requested) plus the Maximum Drawing Amount and all Unpaid Reimbursement Obligations shall not at any time exceed the lesser of (i) the Total Commitment at such time and (ii) the Borrowing Base at such time plus the Overadvance Amount at such time" which appear at the end of the first sentence of ss.2.1. (b) Section 2.5(a) of the Credit Agreement is hereby amended by deleting the words "and, in addition, to the extent any Overadvance Amount is outstanding, that portion of the Revolving Credit Loans which are Base Rate Loans and which constitute an Overadvance Amount shall bear interest for the period commencing on the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate of one and one half percent (1 1/2%) per annum above the Base Rate" which appear in ss.2.5(a). (c) Section 2.5(b) of the Credit Agreement is hereby amended by deleting the words " and, in addition, to the extent any Overadvance Amount is outstanding, that portion of the Revolving Credit Loans which are LIBOR Rate Loans and which constitute an Overadvance Amount shall bear interest for the period commencing on the Drawdown Date thereof and ending on the last day of the Interest Period with respect thereto at the rate of three and one half percent (3 1/2%) per annum above the LIBOR Rate determined for such Interest Period" which appear in ss.2.5(b). (d) Section 2.6 of the Credit Agreement is hereby amended by deleting the comma and the words "if any and, which portion of the Revolving Credit Loan being requested constitutes an Individual Overadvance Amount (if any). To the extent the Borrower fails to identify whether all or any portion of the requested Revolving Credit Loan is to be an Individual Overadvance Amount, such requested Revolving Credit Loan shall not be considered an Individual Overadvance Amount." which appear in ss.2.6. ss.3.Amendment to Section 3 of the Credit Agreement. Section 3 of the Credit Agreement is hereby amended as follows: (a) Section 3.1 of the Credit Agreement is hereby amended by deleting the second sentence of ss.3.1 in its entirety. (b) Section 3.2.1 of the Credit Agreement is hereby amended by deleting the words "(or, to the extent the Borrower had previously utilized any portion of the Overadvance Amount, then the Borrowing Base at such time plus the Overadvance Amount outstanding at such time)" which appear in the first sentence of ss.3.2.1. (c) Section 3.2.3 of the Credit Agreement is hereby amended by deleting the words "(with the Overadvance Amount being reduced first, and after the Overadvance Amount has been reduced to $0, to the other Revolving Credit Loans)" which appear in ss.3.2.3. ss.4.Amendment to Section 4 of the Credit Agreement. Section 4.1.1 of the Credit Agreement is hereby amended by deleting the words "(or, to the extent the Borrower had previously utilized any portion of the Overadvance Amount, then the Borrowing Base at such time plus the Overadvance Amount outstanding at such time)" which appear at the end of the text of ss.4.1.1. ss.5.Amendment to Section 8 of the Credit Agreement. Section 8.9.2 of the Credit Agreement is hereby amended by deleting ss.8.9.2 in its entirety and restating it as follows: 8.9.2. Collateral Reports. No more frequently than once during each calendar quarter, commencing with the calendar quarter ending March 31, 2004, or more frequently as determined by the Agent if an Event of Default shall have occurred and be continuing, upon the request of the Agent, the Borrower will obtain and deliver to the Agent, or, if the Agent so elects, will cooperate with the Agent in the Agent's obtaining, a report of an independent collateral auditor satisfactory to the Agent (which may be affiliated with one of the Banks) with respect to the Accounts included in the Borrowing Base, which report shall indicate whether or not the information set forth in the Borrowing Base Report most recently delivered is accurate and complete in all material respects based upon a review by such auditors of the Accounts (including verification with respect to the amount, aging, identity and credit of the respective Account Debtors and the billing practices of the Borrower or its applicable Subsidiary). All such collateral value reports shall be conducted and made at the expense of the Borrower. ss.6.Amendment to Section 9 of the Credit Agreement. Section 9 of the Credit Agreement is hereby amended as follows: (a) Section 9.1(c) of the Credit Agreement is hereby amended by deleting the amount "$5,000,000" which appears in ss.9.1(c) and substituting in place thereof the amount "$2,500,000". (b) Section 9.1(i) of the Credit Agreement is hereby amended by deleting the amount "$5,000,000" which appears in ss.9.1(i) and substituting in place thereof the amount "$2,500,000". (c) Section 9.4 of the Credit Agreement is hereby amended by deleting ss.9.4 of the Credit Agreement in its entirety and restating it as follows: 9.4. Restricted Payments. The Borrower will not make any Restricted Payments; provided, however, (a) any Subsidiary shall be permitted to make a Restricted Payment to the Borrower or any Guarantor; and (b) so long as no Default or Event of Default has occurred and is continuing, (i) the Borrower shall be permitted to repurchase shares of its Series B common stock from the holders thereof for fair market value so long as the aggregate consideration paid by the Borrower for all such repurchases does not exceed $120,000 in the aggregate and all such repurchases are consummated by not later than December 31, 2004; and (ii) in addition to the repurchase permitted by ss.9.4(b)(i) hereof, the Borrower may also request that the Banks consent to the Borrower repurchasing a portion of its issued and outstanding Capital Stock (with the Borrower agreeing to provide the Agent and the Banks a written request detailing the number of shares to be repurchased, the date of such repurchase, the aggregate amount of consideration to be paid by the Borrower in connection with such repurchase and whether the Borrower intends to retire any Capital Stock so repurchased), and the Agent hereby agrees to promptly notify the Borrower whether such consent has been granted by the Majority Banks, provided nothing contained in this ss.9.4(b)(ii) shall obligate any Bank to consent to such request. (d) Section 9.5.1(ix) of the Credit Agreement is hereby amended by (i) deleting the amount "$5,000,000" which appears in ss.9.5.1(ix) and substituting in place thereof the amount "$2,500,000"; and (ii) deleting the amount "$10,000,000" which appears in ss.9.5.1(ix) and substituting in place thereof the amount "$5,000,000". ss.7.Amendment to Section 10 of the Credit Agreement. Section 10 of the Credit Agreement is hereby amended as follows: (a) Section 10.1 of the Credit Agreement is hereby amended by deleting ss.10.1 in its entirety and restating it as follows: 10.1. Mimimum EBITDA. The Borrower will not permit Consolidated EBITDA at the end of any fiscal quarter set forth in the table below to be less than the amount set forth opposite such period in such table:
----------------------------------------- -------------------------------------------- Fiscal Quarter Ending Minimum Consolidated EBITDA ----------------------------------------- -------------------------------------------- March 31, 2004 $3,500,000 ----------------------------------------- -------------------------------------------- June 30, 2004 $3,200,000 ----------------------------------------- -------------------------------------------- September 30, 2004 $4,500,000 ----------------------------------------- -------------------------------------------- December 31, 2004 and each $3,000,000 fiscal quarter ending thereafter ----------------------------------------- --------------------------------------------
(b) Section 10.2 of the Credit Agreement is hereby amended by deleting the amount "$7,500,000" which appears in ss.10.2 and substituting in place thereof the amount "$6,500,000". (c) Section 10.3 of the Credit Agreement is hereby amended by deleting ss.10.3 in its entirety and restating it as follows: 10.3. Restructuring Charge. The Borrower will not permit the restructuring charge taken during the period of March 1, 2004 through and including December 31, 2004 in connection with the closing of certain of its data centers to exceed $8,000,000 in the aggregate, and such charge shall be taken only during the period of March 1, 2004 through and including December 31, 2004 (but not at any time thereafter). ss.8.Amendment to Section 12. Section 12 of the Credit Agreement is hereby amended as follows: (a) The first sentence of Section 12 is hereby amended by inserting immediately after the words "to make any Revolving Credit Loan" a comma and the words "and to continue and/or convert any Revolving Credit Loan in accordance with ss.2.7 hereof". (b) Section 12.1 of the Credit Agreement is hereby amended by inserting immediately after the words "as of the time of the making of such Revolving Credit Loan" which appear in the first sentence thereof a comma and the words ", the continuation and/or conversion of any Revolving Credit Loan in accordance with ss.2.7 hereof". ss.9.Amendment to Annex A. Annex A of the Credit Agreement is hereby amended by deleting Annex A in its entirety and replacing it with the Annex A attached hereto. ss.10. Conditions to Effectiveness. This First Amendment shall not become effective until the Agent receives the following: (a) a counterpart of this First Amendment, executed by the Borrower and the Banks; (b) payment in cash of an amendment fee of $15,000 for each Bank; and (c) payment in cash of an administrative fee of $10,000 for the Agent's own account. ss.11. Representations and Warranties. The Borrower hereby represents that, on and as of the date hereof, each of the representations and warranties made by it in ss.7 of the Credit Agreement remain true as of the date hereof (except to the extent of changes resulting from transactions contemplated or permitted by the Credit Agreement and the other Loan Documents and changes occurring in the ordinary course of business that singly or in the aggregate are not materially adverse, and to the extent that such representations and warranties relate expressly to an earlier date), provided, that all references therein to the Credit Agreement shall refer to such Credit Agreement as amended hereby. In addition, the Borrower hereby represents and warrants that the execution and delivery by the Borrower of this First Amendment and the performance by the Borrower of all of its agreements and obligations under the Credit Agreement as amended hereby are within the corporate authority of each of the Borrower and has been duly authorized by all necessary corporate action on the part of the Borrower. ss.12. Ratification, Etc. Except as expressly amended hereby, the Credit Agreement and all documents, instruments and agreements related thereto, including, but not limited to the Security Documents, are hereby ratified and confirmed in all respects and shall continue in full force and effect. The Credit Agreement and this First Amendment shall be read and construed as a single agreement. All references in the Credit Agreement or any related agreement or instrument to the Credit Agreement shall hereafter refer to the Credit Agreement as amended hereby. ss.13. No Waiver. Nothing contained herein shall constitute a waiver of, impair or otherwise affect any Obligations, any other obligation of the Borrower or any rights of the Agent or the Banks consequent thereon. ss.14. Counterparts. This First Amendment may be executed in one or more counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument. ss.15. Governing Law. THIS FIRST AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS (WITHOUT REFERENCE TO CONFLICT OF LAWS). IN WITNESS WHEREOF, the parties hereto have executed this First Amendment as a document under seal as of the date first above written. ANACOMP, INC. By:/s/Linster W. Fox --------------------------------------- Title: EVP / CFO FLEET NATIONAL BANK By:/s/Greg Roux --------------------------------------- Title: Managing Director UNION BANK OF CALIFORNIA, N.A. By:/s/Douglas S. Lambell --------------------------------------- Title: Vice President/SCM Annex A Banks/Commitments
- --------------------------------------------------------- ------------------------- ------------------------- Commitment Banks Commitment Percentage - --------------------------------------------------------- ------------------------- ------------------------- Fleet National Bank $10,000,000.00 57.142857% 100 Federal Street Technology & Communications Boston, Massachusetts 02110 Attention: Gregory Roux, Managing Director Telephone: 650-470-4180 - --------------------------------------------------------- ------------------------- ------------------------- - --------------------------------------------------------- ------------------------- ------------------------- Union Bank of California, N.A. $7,500,000.00 42.857143% 530 B Street, 4th Floor San Diego, California 92101 Attention: Douglas S. Lambell, Vice President Telephone: 619-230-3029 - --------------------------------------------------------- ------------------------- ------------------------- - --------------------------------------------------------- ------------------------- ------------------------- Totals $17,500,000.00 100% - --------------------------------------------------------- ------------------------- -------------------------
EX-32 3 ex32_1q204.txt CEO CERTIFICATION Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Anacomp, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jeffrey R. Cramer, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), that, to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 13, 2004 /s/Jeffrey R. Cramer -------------------------- Jeffrey R. Cramer Chief Executive Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Anacomp, Inc. and will be retained by Anacomp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-32 4 ex32_2q204.txt CFO CERTIFICATION Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Anacomp, Inc. (the "Company") on Form 10-Q for the quarter ended March 31, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Linster W. Fox, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 ("Section 906"), that, to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or Section 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Dated: May 13, 2004 /s/Linster W. Fox ------------------------ Linster W. Fox Chief Financial Officer A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to Anacomp, Inc. and will be retained by Anacomp, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. EX-31 5 ex31_1q204.txt CEO CERTIFICATION Exhibit 31.1 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Jeffrey R. Cramer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anacomp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2004 /s/Jeffrey R. Cramer ______________________________ Jeffrey R. Cramer Chief Executive Officer EX-31 6 ex31_2q204.txt CFO CERTIFICATION Exhibit 31.2 CERTIFICATION PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Linster W. Fox, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Anacomp, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13, 2004 /s/Linster W. Fox ____________________________ Linster W. Fox Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----