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 DECEMBER 31, 1998

                                  or

      [   ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
            SECURITIES EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM ____________ TO____________


                    Commission File Number: 1-8328


                             Anacomp, Inc.
        (Exact name of registrant as specified in its charter)


      Indiana                                         33-1144230
(State or other jurisdiction of                    (I.R.S.Employer          
incorporation or organization)                    Identification No.)



           12365 Crosthwaite Circle, Poway, California 92064
                            (619) 679-9797
  (Address, including zip code, and telephone number, including area
                 code, of principal executive offices)



      Indicate by check mark whether the  registrant  (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities  Exchange  Act of 1934  during the  preceding  12 months (or
for such shorter  period that the  registrant was required to file such
reports),  and (2) has been  subject to such  filing  requirements  for
the past 90 days.        Yes     X     No        

      Indicate  by check  mark  whether  the  registrant  has filed all
documents  and reports  required to be filed by Section 12, 13 or 15(d)
of the Securities  Exchange Act of 1934 subsequent to the  distribution
of   securities   under  a  plan   confirmed   by  a  court.   Yes  X  
No     

      As  of  January  31,  1999,  the  number  of  outstanding  shares  of  the
registrant's common stock, $.01 par value per share, was 14,285,541.



<PAGE>


                    ANACOMP, INC. AND SUBSIDIARIES
                                 INDEX



  PART I.    FINANCIAL INFORMATION                                 Page
  Item 1.    Financial Statements:

                Condensed Consolidated Balance Sheet at
                   December 31, 1998 and September 30, 1998....     2

                Condensed Consolidated Statements of Operations
                   Three Months Ended December 31, 1998 and 1997    3

                Condensed Consolidated Statements of Cash Flows
                   Three Months Ended December 31, 1998 and 1997    4

                Condensed Consolidated Statements of                     
                   Stockholders' Equity (Deficit) Three Months    
                   Ended December 31, 1998.....................     5

                Condensed Consolidated Statements of                     
                   Comprehensive Income (Loss) Three Months       
                   Ended December 31, 1998 and 1997............     5

                Notes to Condensed Consolidated Financial                
                Statements.....................................     6

             Management's Discussion and Analysis of Financial
  Item 2.          Condition and Results of Operations.......       9


             Quantitative and Qualitative Disclosures About       
  Item 3.    Market Risk.....................................       13


  PART II.   OTHER INFORMATION                                           

  Item 1.    Legal Proceedings...............................       14

  Item 2.    Changes in Securities and Use of Proceeds.......       14

  Item 6.    Exhibits and Reports on Form 8-K................       14

  SIGNATURES..................................................      15















<PAGE>



                    PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                    ANACOMP, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>

                                                 December 31,   September 30,
(in thousands)                                       1998           1998
                                                 -------------- --------------
Assets                                           (Unaudited)
<S>                                              <C>            <C>

Current assets:
   Cash and cash equivalents                          $8,689        $17,721
   Restricted cash                                       902          4,285
   Accounts and notes receivable, net                 73,293         79,109
   Current portion of long-term receivables, net       5,516          5,641
   Inventories                                        31,372         28,618
   Prepaid expenses and other                         10,873         10,321
                                                 -------------- --------------
Total current assets                                 130,645        145,695

Property and equipment, net                           47,496         41,749
Long-term receivables, net of current portion          8,508          9,002
Excess of purchase price over net assets of                                   
   businesses acquired                                           
   and other intangibles, net                        119,340        120,814
Reorganization value in excess of identifiable                                
   assets, net                                        67,629         88,230
Other assets                                          14,963         15,663
                                                 -------------- --------------
                                                    $388,581       $421,153
</TABLE>
<TABLE>
<CAPTION>
                                                 ============== ==============
Liabilities and Stockholders' Equity (Deficit)
<S>                                               <C>            <C>
Current liabilities:
   Current portion of long-term debt                  $1,145         $1,152
   Accounts payable                                   27,405         36,464
   Accrued compensation, benefits and                                         
     withholdings                                     16,261         18,372
   Accrued income taxes                               16,291         15,197
   Accrued interest                                   12,209         18,158
   Other accrued liabilities                          38,759         40,418
                                                 -------------- --------------
Total current liabilities                            112,070        129,761
                                                 -------------- --------------

Long-term debt, net of current portion               338,744        338,884
                                                 -------------- --------------

Stockholders' equity (deficit):
   Preferred stock                                      ----           ----
   Common stock                                          143            143
   Capital in excess of par value                    109,599        109,486
   Cumulative translation adjustment (from May                                
     31, 1996)                                           106            447
   Accumulated deficit (from May 31, 1996)          (172,081)      (157,568)
                                                 -------------- --------------
Total stockholders' equity (deficit)                 (62,233)       (47,492)
                                                 -------------- --------------
                                                    $388,581       $421,153
-------------------------------------------------============== ==============
</TABLE>


   See the notes to the condensed consolidated financial statements


<PAGE>


                    ANACOMP, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                              (Unaudited)
<TABLE>
<CAPTION>
                                                      Three Months Ended
                                                         December 31,
(in thousands, except per share amounts)              1998          1997
-------------------------------------------------  ------------  ------------
<S>                                                <C>           <C>
Revenues:
   Services provided                                  $75,485       $48,507
   Equipment and supply sales                          63,462        69,307
                                                   ------------  ------------
                                                      138,947       117,814
                                                   ------------  ------------
Operating costs and expenses:
   Costs of services provided                          45,598        27,199
   Costs of equipment and supplies sold                45,748        51,071
   Selling, general and administrative expenses        26,214        23,861
   Amortization of reorganization asset                18,890        18,745
   Amortization of intangible assets                    4,495         2,600
                                                   ------------  ------------
                                                      140,945       123,476
                                                   ------------  ------------

Loss from operations                                   (1,998)       (5,662)
                                                   ------------  ------------

Other income (expense):
   Interest income                                        388           785
   Interest expense and fee amortization               (9,961)       (7,921)
   Other                                                  229          (170)
                                                   ------------  ------------
                                                       (9,344)       (7,306)
                                                   ------------  ------------
Loss before income taxes                              (11,342)      (12,968)
Provision for income taxes                              3,171         2,400
                                                   ------------  ------------
Net loss                                             $(14,513)     $(15,368)
                                                   ============  ============


Basic net loss per share                               $(1.02)       $(1.11)
                                                   ============  ============

Shares used in computing basic net loss per                                  
   share                                               14,267        13,814
                                                   ============  ============

</TABLE>















   See the notes to the condensed consolidated financial statements


<PAGE>


                    ANACOMP, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                              (Unaudited)

<TABLE>
<CAPTION>


                                                      Three Months Ended
                                                         December 31,
                                                  ---------------------------
(in thousands)                                        1998          1997
                                                  ------------- -------------
Cash flows from operating activities:
<S>                                                 <C>           <C>      
Net loss                                            $(14,513)     $(15,368)
Adjustments to reconcile net loss to net cash                                
provided by (used in) operating activities:                                  
Depreciation and amortization                         28,800        24,993
Non-cash compensation                                    286           251
Non-cash charge in lieu of taxes                       1,711         1,460
Restricted cash requirements                           3,383         2,881
Change in assets and liabilities net of effects                              
from acquisitions:                                                           
Decrease (increase) in accounts and long-term                                
receivables                                            5,664        (2,774)
Decrease (increase) in inventories and prepaid                               
expenses                                              (2,843)          247
Increase in other assets                                (442)         (207)
Decrease in accounts payable and accrued                                     
expenses                                             (18,493)      (17,637)
Decrease in other noncurrent liabilities                  (9)         (338)
                                                  ------------- -------------
Net cash provided by (used in) operating                                     
activities                                             3,544        (6,492)
                                                  ------------- -------------
Cash flows from investing activities:
Purchases of property, plant and equipment            (9,001)       (2,331)
Payments to acquire companies and customer                                   
rights                                                (3,821)      (13,020)
                                                  ------------- -------------
Net cash used in investing activities                (12,822)      (15,351)
                                                  ------------- -------------
Cash flows from financing activities:
Proceeds from the exercise of options and                                    
warrants                                                 113           421
Principal payments on long-term debt                    (115)       (3,951)
                                                  ------------- -------------
Net cash used in financing activities                     (2)       (3,530)
                                                  ------------- -------------
Effect of exchange rate changes on cash                  248          (778)
                                                  ------------- -------------
Decrease in cash and cash equivalents                 (9,032)      (26,151)
Cash and cash equivalents at beginning of period      17,721        58,060
                                                  ------------- -------------
Cash and cash equivalents at end of period            $8,689       $31,909
                                                  ============= =============


Supplemental Information:
Cash paid for interest                               $15,403       $12,834
                                                  ============= =============
Cash paid for income taxes                              $667        $1,090
                                                  ============= =============
Assets acquired by assuming liabilities                  $--          $702
                                                  ============= =============
</TABLE>




   See the notes to the condensed consolidated financial statements


<PAGE>


                    ANACOMP, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
                           EQUITY (DEFICIT)
                              (Unaudited)

<TABLE>
<CAPTION>
                                   Cap. in                                     
                                   excess of     Cum.
                           Common   par      Translation   Accum.
(in thousands)              Stock    value       adj.      Deficit    Total
                           ----------------------------------------------------
<S>                          <C>    <C>         <C>       <C>        <C>          
Balance at September 30,                                                       
1998                         $143   $109,486    $447      $(157,568)$(47,492)
Common stock issued for                                                        
the exercise of options    
and warrants                 ----        113    ----           ----      113
Cumulative translation                                                         
adjustment                   ----       ----    (341)          ----     (341)
Net loss for three months    ----       ----    ----        (14,513) (14,513)
                           ----------------------------------------------------
Balance at December 31,                                                        
1998                         $143   $109,599    $106      $(172,081)$(62,233)
                           ====================================================

</TABLE>









                    ANACOMP, INC. AND SUBSIDIARIES
          CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
                             INCOME (LOSS)
                              (Unaudited)
<TABLE>
<CAPTION>

                                            Three Months Ended
                                               December 31,
                                        ---------------------------
     (in thousands)                         1998          1997
                                        ------------- -------------
<S>                                       <C>           <C>      
     Net loss                             $(14,513)     $(15,368)

     Translation adjustment                   (341)         (607)
                                        ------------- -------------
     Comprehensive loss                   $(14,854)     $(15,975)
                                        ============= =============

</TABLE>
















   See the notes to the condensed consolidated financial statements


<PAGE>


                    ANACOMP, INC. AND SUBSIDIARIES
       NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                              (Unaudited)

Note 1.  Basis of Presentation

The  accompanying   condensed  consolidated  financial  statements  include  the
accounts of Anacomp,  Inc.  ("Anacomp" or the  "Company")  and its  wholly-owned
subsidiaries.  All significant  intercompany accounts and transactions have been
eliminated.  These  financial  statements,  except for the  balance  sheet as of
September  30, 1998,  have not been audited but, in the opinion of the Company's
management,  include  all  adjustments  (consisting  only  of  normal  recurring
accruals) necessary for a fair presentation of the Company's financial position,
results of operations and cash flows for all periods presented.  These financial
statements should be read in conjunction with the Company's financial statements
and notes  thereto  for the year  ended  September  30,  1998,  included  in the
Company's  1998 Annual Report on Form 10-K.  Interim  operating  results are not
necessarily indicative of operating results for the full year.

Note 2.  Management Estimates and Assumptions

The Company's preparation of the accompanying  condensed  consolidated financial
statements in conformity with generally accepted accounting  principles requires
its  management  to make  estimates  and  assumptions  that affect the  reported
amounts of assets and  liabilities,  the  disclosure  of  contingent  assets and
liabilities at the date of the financial statements, and the reported amounts of
revenues and expenses during the reporting period.  Estimates have been prepared
on the basis of the most current available  information and actual results could
differ from those estimates.

Note 3.  Reorganization Asset

As of May 31, 1996, the Company  adopted Fresh Start Reporting which resulted in
material  changes to the  consolidated  balance  sheet,  including  valuation of
assets,  intangible assets and liabilities at fair market value and valuation of
equity based on the appraised  reorganization value of the ongoing business. The
net  result  of  the  valuation  of  identifiable  assets,  the  recognition  of
liabilities  at fair market  value and the  valuation  of equity was the Company
recognizing an asset  "Reorganization  value in excess of  identifiable  assets"
("Reorganization  Asset")  totaling  $267.5  million  as of May  31,  1996.  The
Reorganization  Asset was $67.6  million,  net of accumulated  amortization,  at
December  31,  1998.  This  asset is  being  amortized  over a 3.5  year  period
beginning May 31, 1996 and will be fully amortized by November 30, 1999.

On a pro forma basis,  excluding the Reorganization  Asset amortization of $18.9
million and $18.7  million,  the Company  would have reported net income of $4.4
million  and $3.4  million,  basic  net  income  per  share of $.31 and $.24 and
diluted  net  income  per  share of $.29 and $.23  for the  three  months  ended
December 31, 1998 and 1997, respectively.

Note 4.  Comprehensive Income

The Company adopted Financial  Accounting Standards Board ("FASB") Statement No.
130 - Reporting  Comprehensive  Income effective October 1, 1998. This statement
requires the presentation of comprehensive  income,  as defined,  as part of the
basic financial statements.  Comprehensive income includes all changes in equity
during  a  period  except  those  resulting  from   investments  by  owners  and
distributions to owners.










Note 5.  First Image Acquisition

Effective   June  1,  1998,   the  Company   completed  its   acquisition   (the
"Acquisition")  of assets  constituting  substantially  all of the  business and
operations  (the "First Image  Businesses")  of First Image  Management  Company
("First Image"), a division of First Financial Management  Corporation ("FFMC"),
a wholly owned  subsidiary of First Data Corporation  ("FDC").  The Company also
assumed  substantially  all of  the  ongoing  liabilities  of  the  First  Image
Businesses.  The purchase price paid by the Company to FFMC was $150.0  million,
although a  post-closing  adjustment  resulted in FFMC  returning to the Company
$4.4 million to reflect a shortfall in the  agreed-upon  working capital for the
First Image Businesses. The Acquisition was accounted for as a purchase, and the
excess  of the  purchase  price  over the  estimated  fair  value of net  assets
acquired ("goodwill") approximated $100.0 million, which is being amortized over
a 15-year period on a straight-line basis.

The First  Image  Businesses  included  (i)  image  access  services,  primarily
Computer Output to Microfilm  ("COM") and Compact Disc ("CD") services (the "IAS
Business"),  (ii) document print and  distribution  services such as laser print
and mail and demand publishing services (the "DPDS Business") and (iii) document
acquisition  services  such as health care and  insurance  claims entry and data
capture  services (the "DAS  Business").  The Company sold the DPDS Business and
the DAS Business  during the  three-month  period ended  September 30, 1998. The
Company  retained and continues to operate the IAS Business  whose  revenues and
earnings  are  included in the  Company's  results of  operations  for the three
months ended December 31, 1998.

Note 6.  Inventories
<TABLE>
<CAPTION>
                                                     Three Months Ended
                                                        December 31,
                                                  -------------------------
                                                      1998        1997
                                                  -------------------------
<S>                                                  <C>          <C>    
  Finished goods                                     $18,374      $14,946

  Work in process                                      3,212        3,583

  Raw materials and supplies                           9,786       10,089
                                                  -------------------------
                                                     $31,372      $28,618
                                                  =========================
</TABLE>

Note 7.  Income Taxes

The Company's  amortization  of the  Reorganization  Asset is not deductible for
income tax  purposes.  Accordingly,  the Company  incurs income tax expense even
though it reports a pre-tax loss due to such amortization.

For the three  months ended  December  31, 1998 and 1997,  income tax expense is
reported for the Company based upon the estimated  effective tax rates.  For the
three months ended  December 31, 1998 and 1997,  the effective tax rate utilized
was 42% of pretax income before  amortization of the  Reorganization  Asset. For
the three  months ended  December 31, 1998 and 1997,  the limited tax benefit of
the U.S.  Federal  net  operating  loss  carryforwards  ("NOL")  of the  Company
resulted in a reduction of $1.7 million and $1.5 million,  respectively,  in the
Company's Reorganization Asset and did not reduce income tax expense.

Note 8.  Loss Per Share:

Basic earnings per share is computed  based upon the weighted  average number of
shares of the  Company's  common stock  outstanding  during the period.  Diluted
earnings per share is computed based upon the weighted  average number of shares
of common stock  outstanding  and dilutive common stock  equivalents  during the
period.  Common stock  equivalents  include  options granted under the Company's
stock option  plans using the  treasury  stock method and shares of common stock
expected to be issued under the Company's  employee stock purchase plan.  Common
stock  equivalents were not used to calculate diluted earnings per share because
of their anti-dilutive effect. There are no reconciling items in calculating the
numerator  for  basic and  diluted  earnings  per  share for any of the  periods
presented.



Note 9.  Acquisitions

During the three  months  ended  December  31,  1998,  the Company  acquired the
customer  bases  and  other   specified   assets  of  four   businesses.   Total
consideration  paid at closing was $3.6  million,  of which  approximately  $1.2
million was assigned to excess of purchase  price over the net assets  acquired.
The provisions of one of the  acquisition  agreements  includes  contingent cash
payments  of up to  $536,000,  based upon the  transfer of  additional  customer
contracts through March 31, 2000.

















<PAGE>


ITEM 2.  Management's  Discussion  and Analysis of Financial  Condition
and Results of Operations

Certain  statements in this  "Management's  Discussion and Analysis of Financial
Condition and Results of  Operations"  constitute  "forward-looking  statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking  statements  involve known and unknown risks,  uncertainties and
other  important  factors that could cause the actual  results,  performance  or
achievements of the Company,  or industry results, to differ materially from any
future  results,  performance  or  achievements  expressed  or  implied  by such
forward-looking  statements.  Such  risks,  uncertainties  and  other  important
factors  include,  among  others:  general  economic  and  business  conditions;
industry  trends;  industry  capacity;  competition;  raw  materials  costs  and
availability;  currency  fluctuations;  the loss of any significant customers or
suppliers;  changes in business  strategy or  development  plans;  availability,
terms and deployment of capital;  availability of qualified  personnel;  changes
in, or the failure or inability to comply with, government regulation; and other
factors referenced in this report. These  forward-looking  statements speak only
as of the date of this report.

Pro Forma Statements of Operations

      As of May 31,  1996,  the  Company  adopted  Fresh Start  Reporting  which
resulted in material changes to the  consolidated  balance sheet. The net result
of the valuation of identifiable  assets, the recognition of liabilities at fair
market value and the  valuation of equity was the Company  recognizing  an asset
"Reorganization value in excess of identifiable assets" ("Reorganization Asset")
totaling $267.5 million as of May 31, 1996. This asset is being amortized over a
3.5 year period  beginning May 31, 1996 and will be fully  amortized by November
30, 1999.

      To  facilitate  a  better   understanding   of  the  Company's   operating
performance  after  the  Reorganization  Asset is  fully  amortized,  pro  forma
condensed  consolidated  statements  of  operations  for the three  months ended
December 31, 1998 and 1997 have been presented  below.  The only difference from
the  Company's  reported  results  is a pro  forma  adjustment  to  exclude  the
amortization of the  Reorganization  Asset of $18.9 million and $18.7 million in
1998 and 1997, respectively.

 PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
<TABLE>
<CAPTION>

                                       Three Months Ended December 31,
(in thousands, except per share                                           
amounts)                                   1998               1997
                                     -------------------------------------
<S>                                    <C>       <C>     <C>       <C>   
Revenues                               $138,947  100.0%  $117,814  100.0%
                                     ------------      ------------

Cost of sales                            91,346  65.7%     78,270   66.4%
Selling, general and administrative                                       
   expenses                              26,214  18.9%     23,861   20.3%
Amortization of intangible assets         4,495   3.2%      2,600    2.2%
                                     ------------      ------------
Total operating costs and expenses      122,055  87.8%    104,731   88.9%
                                     ------------      ------------

Income from operations                   16,892  12.2%     13,083   11.1%
Interest expense and other               (9,344)  6.7%     (7,306)   6.2%
                                     ------------      ------------
Income before income taxes                7,548   5.5%      5,777    4.9%
Provision for income taxes                3,171   2.3%      2,400    2.0%
                                     ------------      ------------
Net income                               $4,377   3.2%     $3,377    2.9%
                                     ============      ============

Basic net income per share                 $.31              $.24
                                     ============      ============
Diluted net income per share               $.29              $.23
                                     ============      ============
Shares used in computing basic net                                        
   income per share                    14,267            13,814           
                                     ============      ============
Shares used in computing diluted                                          
   net income per share                15,216            14,760           
                                     ============      ============
</TABLE>

<PAGE>

Results of Operations

General

      Anacomp  reported a net loss of $14.5  million for the three  months ended
December 31, 1998,  compared to a net loss of $15.4 million for the three months
ended  December 31, 1997. The net losses include  non-cash  amortization  of the
Company's  Reorganization Asset of $18.9 and $18.7 million for the periods ended
December 31, 1998 and 1997, respectively.

      Earnings  before   interest,   other  income,   taxes,   depreciation  and
amortization  ("EBITDA") was $26.8  million,  or 19.3% of revenues for the three
months ended  December 31, 1998.  This compares to EBITDA of $19.1  million,  or
16.2% of revenues for the three months ended December 31, 1997.

Three  Months Ended  December 31, 1998 vs. Three Months Ended  December
31, 1997

      Revenues.  The Company's  revenues increased 17.9% from $117.8 million for
the three months ended December 31, 1997, to $138.9 million for the three months
ended December 31, 1998.  The Company  experienced  increased  revenues of $27.0
million in its Outsource  Services business line, while  experiencing  decreased
revenues of $3.7 million in its Micrographic Supplies product line.

      The $27.0 million increase in Outsource Service revenues was primarily due
to the June 1,  1998  acquisition  of First  Image  Management  Company  ("First
Image") and the inclusion of its  operating  results for the three months ending
December 31, 1998.  Digital service revenues also increased  significantly  with
quarterly revenues now exceeding $7 million.

      The $3.7  million  decrease in  Micrographics  Supplies  revenues  was the
result of the Company's discontinuance of the sale of duplicate microfilm to the
reseller  market,  as well as  declining  sales of original  COM  microfilm  and
duplicate microfilm, which is consistent with long-term trends.

      Gross  Margins.  The Company's  gross margins  increased  20.4% from $39.5
million  (33.6% of revenues)  for the three months ended  December 31, 1997,  to
$47.6 million  (34.3% of revenues) for the three months ended December 31, 1998.
Gross margins,  as a percentage of revenue,  remained  relatively  consistent in
total.  Services margins,  as a percentage of revenue,  decreased 4.3 percentage
points from 1997 to 1998  principally  because of decreases  in average  selling
prices  for  Outsource   Service   business  and  of  costs   incurred  for  the
consolidation of First Image data centers.  Equipment and supplies margins, as a
percentage  of  revenue,  increased  1.6  percentage  points  from  1997 to 1998
primarily  due to product mix in the  Micrographic  Supplies and Magnetic  Media
businesses.

      Selling,  general  and  administrative  expenses.   Selling,  general  and
administrative  ("SG&A")  expenses  increased  9.9% from $23.9 million (20.3% of
revenues) for the three months ended  December 31, 1997 to $26.2 million  (18.9%
of  revenues)  for the three months ended  December 31, 1998.  This  increase is
primarily  due to  the  increased  expenses  associated  with  the  First  Image
acquisition.

      Amortization  of intangible  assets.  Amortization  of  intangible  assets
increased  72.9% from $2.6 million (2.2% of revenues) for the three months ended
December 31, 1997, to $4.5 million (3.2% of revenues) for the three months ended
December  31,  1998.  This  increase is  primarily  due to the  amortization  of
goodwill associated with the First Image acquisition.

      Interest  Expense.  Interest expense increased 25.8% from $7.9 million for
the three months ended  December 31, 1997 to $10.0  million for the three months
ended December 31, 1998.  This increase was the result of additional  borrowings
used to finance the acquisition of First Image.

      Provision for Income  Taxes.  The provision for income taxes for the three
months  ended  December  31,  1998  includes  $1.5  million on  earnings  of the
Company's  domestic  operations  and $1.7 million on earnings from the Company's
foreign  subsidiaries.  The  Company's  effective  tax rate  remained  at 42% of
taxable  income  for both  periods  presented.  See  Note 7 to the  accompanying
Condensed Consolidated Financial Statements for further discussion.
<PAGE>

Liquidity and Capital Resources

      Anacomp's  working  capital at December  31, 1998,  excluding  the current
portion  of  long-term  debt was $19.7  million,  compared  to $17.1  million at
September 30, 1998.  Net cash provided by operating  activities was $3.5 million
for the three months ended December 31, 1998,  compared to a use of $6.5 million
in the comparable prior period. The current period benefited from an increase in
depreciation and amortization of approximately $3.8 million, which was primarily
the result of  increased  goodwill and  depreciable  assets from the First Image
acquisition.  The current period also benefited from a $5.7 million reduction in
accounts and long-term receivables,  which was offset by a $2.8 million increase
in inventories and prepaid expenses.

      Net cash used in  investing  activities  was $12.8  million in the current
period,  compared to $15.3 million in the comparable prior period. This decrease
was the result of the decline in capital used to acquire  companies and customer
rights  which was  offset by an  increase  in  capital  expenditures  which were
primarily used to integrate the First Image businesses.

      Net cash used in financing activities decreased approximately $3.5 million
during the three months ended  December 31, 1998 with respect to the same period
in the prior year.  This decrease was  principally the result of $4.0 million in
payments on the Company's senior debt obligations  during the three months ended
December  31,  1997.  No  payments  were  made  on  the  Company's  senior  debt
obligations for the three months ended December 31, 1998.

      The Company's cash balance (including  restricted cash) as of December 31,
1998 was $9.6  million,  compared to $22.0  million at September  30, 1998.  The
Company also has available an $80 million revolving credit facility.  There were
no amounts  outstanding  under the revolving  credit facility as of December 31,
1998.

      The Company has significant debt service  obligations.  As of December 31,
1998,  the  Company  had $335  million  of  10-7/8%  Senior  Subordinated  Notes
outstanding.  Interest on these notes is payable semi-annually and the notes are
due in April 2004. The ability of the Company to meet its debt service and other
obligations will depend upon its future performance and is subject to financial,
economic and other factors,  some of which are beyond its control.  However, the
Company  believes that cash on hand and cash generated from  operations and cash
available  under the  revolving  credit  facility will be sufficient to fund its
debt  service   requirements,   acquisition   strategies  and  working   capital
requirements in the foreseeable future.



<PAGE>



Year 2000

      Anacomp  has  undertaken  a  comprehensive  "year  2000"  program  for the
products that it sells or  distributes in the  marketplace.  Under this program,
the Company has assessed all of its critical  software and hardware  products to
determine what remediation,  if any, is necessary for the proper  functioning of
these  systems in the year 2000 and  beyond.  The  Company  has worked  with its
outside  vendors to ensure that they will  continue to support the products that
the vendors  supply to Anacomp  for resale,  including  the  performance  by the
vendors of any required  year 2000  remediation.  Anacomp has also  analyzed and
updated for year 2000  purposes  certain  software and hardware  systems that it
uses internally.  The Company continues to consider year 2000 issues for all new
products  and services as well as those in  development  or included in business
acquisitions.

      State of Readiness.  Anacomp's  overall state of readiness can be assessed
by describing its specific readiness in four key areas,  namely its products and
services,  its  vendors' and  suppliers'  products  and  services,  its internal
systems, and its products in development.

      Anacomp has completed the  assessment,  remediation  and year 2000 testing
phases  of  nearly  all  supported   products  and  services,   including  those
responsible  for  generating  the  material  portion  of its  revenues.  Anacomp
summarizes the status of each  completed  product or service in a written report
to the Company's  year 2000 steering  committee,  for archiving in the Company's
year 2000 database.  These  processes have been reviewed and approved by a third
party consultant retained for this purpose.

      The  implementation  phase of the Company's year 2000 project depends upon
the response of the Company's  customers  who may require  upgrades or migration
paths.  Anacomp is in the process of communicating with identified customers and
has no reason to believe that all  customers  who require  upgrades or migration
will not receive them. To this end, Anacomp has offered financial  incentives to
encourage early responses and avoid peak demand loads, although no assurance can
be made that the  demand  will be spread  sufficiently  to  eliminate  delays in
implementation.  Anacomp has also launched its "Analog as a Fail Safe"  campaign
to educate  customers  about the value of COM and microfilm as a way to minimize
the risk of the year 2000.  Although customers may divert expenditures away from
these  products  and  services  in order to fund  other  year 2000  remediation,
Anacomp  encourages  customers  to consider  these  products  and  services as a
cost-effective  backup to digital  storage  because  retrieval of data stored on
microfilm does not require digital technology.

      The  Company has  requested  that  approximately  1,000 of its vendors and
suppliers  answer a year 2000 readiness  questionnaire  and has sent a follow-up
letter and  questionnaire to each of approximately 200 key vendors and suppliers
who did not reply to the first  mailing.  Anacomp is in the process of reviewing
the responses for their likely impact on the Company. For those Anacomp products
that  incorporate the products of a third party supplier,  Anacomp requests that
its suppliers  disclose test procedures and results.  Anacomp has also requested
that its vendors in the human resources area, such as its retirement, health and
insurance providers,  respond in writing as to their readiness, but there can be
no assurance  that such vendors  will either  respond or achieve  readiness in a
timely fashion.

      Anacomp has identified all internal software and hardware products used in
its  corporate  headquarters  in  Poway,  California,  including  those  used to
assimilate and report financial  information and to handle billing,  collections
and electronic commerce.  In those instances where remediation or renovation was
required,  Anacomp has either completed or has nearly completed such remediation
or renovation. Anacomp is in the process of completing the documentation of such
efforts for its year 2000 archives.

      The Company continues to develop new products and services and acquire new
businesses.  Anacomp  develops  and tests each new product,  sometimes  with the
assistance of an outside  consultant,  for year 2000 readiness.  Businesses that
Anacomp  acquires,  such as First  Image,  are  subject to the same  assessment,
remediation, testing and implementation phases as those described above.

<PAGE>


      Costs. Anacomp estimates that total expenditures on its year 2000 project,
including costs of outside  parties such as consultants and attorneys,  costs of
hardware  and software  remediation,  internal  labor,  travel and out of pocket
expenses to be  approximately  $0.3, $2.3, and $1.2 million in fiscal year 1997,
1998,  and  1999,  respectively.   These  figures  include  estimates  from  the
engineering,  manufacturing, legal and information technology departments of the
Company.

      Risks.  There can be no  assurance  that the  Company  and its vendors and
suppliers will be able to identify all year 2000 issues before problems manifest
themselves or to complete all  remediation in the required time frame.  Further,
it is possible  that the future level of expenses in the  Company's  remediation
efforts could rise significantly.

      The Company  relies upon the  continuous  provision of services from third
parties such as electrical and telecommunication utilities around the world, and
the Company plans to enhance its electronic data transmission capabilities.  Any
sustained  disruption  of  service  or  capability  could  adversely  impact the
Company's  ability to operate its business.  Finally,  there can be no assurance
that,  if left  unremedied,  the products or services  that the Company sells or
distributes would remain competitive in the marketplace or the products that the
Company uses internally would not have a material effect upon the ability of the
Company to report its financial results.

      Contingency  Plans. In those  instances where the Company  determines that
year 2000  problems  with its  operational  facilities  may not be identified or
remediated in time, the Company believes that its business will still be able to
function without substantial interruption. For example, COM services provided in
a data center which  experiences a loss of power due to a third party  utility's
failure to identify or remediate an isolated  year 2000 problem could be shifted
to another data center without substantial interruption. In addition, electronic
transmission  of data  could be  replaced  with  manual  delivery  of data  upon
completion of certain  modifications.  In those instances where an installed COM
customer  experiences a year 2000 problem while operating its own COM equipment,
Anacomp  could offer its COM services to the customer at one of its data centers
upon  completion  of  certain  modifications.  This  seamless  nature of many of
Anacomp's products and services forms the basis of Anacomp's ongoing contingency
planning.


ITEM 3.  Quantitative and Qualitative Disclosures About Market Risks

      The Company does not have any significant financial instruments other than
fixed rate debt.  The  Company's  revolving  credit  facility is affected by the
general level of U.S. interest rates and/or the LIBOR rate. However, the Company
had no amounts  outstanding under this revolving credit facility on December 31,
1998.



<PAGE>


                      PART II - OTHER INFORMATION

Item 1.       Legal Proceedings

      The Company and its  subsidiaries  are  potential or named  defendants  in
several  lawsuits and claims arising in the ordinary  course of business.  While
the outcome of such claims,  lawsuits or other  proceedings  against the Company
cannot be predicted with certainty,  management expects that such liability,  to
the extent not provided  for through  insurance  or  otherwise,  will not have a
material adverse effect on the financial  conditions or results of operations of
the Company.

      On August 29, 1997, Access Solutions  International,  Inc. ("ASI") filed a
complaint for patent infringement in the U.S. District Court,  District of Rhode
Island, against Data/Ware Development,  Inc. ("Data/Ware"),  of which Anacomp is
the successor by merger, and The Eastman Kodak Company ("Kodak").  The complaint
seeks injunctive relief and unspecified damages,  including attorney's fees, for
the alleged  infringement  by Data/Ware and Kodak of ASI's United States Letters
Patent No. 4,775,969 for "Optical Disk Storage Format,  Method and Apparatus for
Emulating a Magnetic  Tape Drive" and No.  5,034,914  for "Optical  Disk Storage
Method and  Apparatus  with  Buffered  Interface."  The  Company has assumed the
defense  of this  matter on behalf of both  Data/Ware  and Kodak,  although  the
Company  has  also  requested   indemnification   from  the  principal   selling
shareholder of Data/Ware.  Discovery in this matter continues, with any trial to
occur probably not before the third calendar quarter of 1999. Although there can
be no assurance as to the eventual outcome of this matter,  the Company believes
that it has numerous meritorious defenses that it intends to pursue vigorously.

Item 2.  Changes in Securities and Use of Proceeds

(c)   Unregistered Securities

      Pursuant to the 1996 Non-employee  Director Stock Option Plan (Amended and
Restated  as of December 1,  1997),  non-employee  directors  of the Company may
elect to receive their annual  retainer in the form of options to acquire common
stock of the Company. Pursuant to such elections,  during the three-month period
ending  December  31, 1998,  an aggregate of 1,875  options was granted to three
directors in lieu of aggregate cash compensation of $9,375. The issuance of such
options was effected in reliance upon the private placement  exemption set forth
in Section 4 (2) of the Securities Act of 1933, as amended,  on the basis of the
directors'  familiarity  with  the  business  and  affairs  of the  Company.  No
underwriting fees or discounts were applicable to the transactions.  The options
are first exercisable six months after the date of grant and remain  exercisable
through the tenth anniversary of the grant date, at an exercise price of $11.375
per share.

Item 6.  Exhibits and Reports on Form 8-K

(a)   Exhibit 27.1  -  Financial Data Schedule

(b)    The  Company  filed no  reports  on Form 8-K  during  the  quarter  ended
       December 31, 1998.




<PAGE>


                              SIGNATURES



Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned, thereunto duly authorized.


                                                ANACOMP, INC.



                                                /s/ Donald L. Viles
                                                Donald L. Viles
                                                Executive Vice
                                          President and
                                                  Chief Financial
                                          Officer
Date: February 10, 1999