<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-K

(Mark One)
[X]  Annual Report Pursuant to Section 13 or 15 (d) of the Securities Exchange
     Act of 1934

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 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

           Securities registered pursuant to Section 12(b) of the Act:
                                      NONE
           Securities registered pursuant to Section 12(g) of the Act:

                               Title of each class
                               -------------------
                          COMMON STOCK, $.01 PAR VALUE
                              COMMON STOCK WARRANTS

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, and (2) has been subject to such filing 
requirements for the past 90 days.       Yes X No

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K, or any amendment to
this Form 10-K. [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of November 30, 1998, was approximately $131,714,358 (based upon
the closing price for shares of the registrant's Common Stock as reported by the
NASDAQ National Market for November 27, 1998, the last trading day prior to that
date). Shares of Common Stock held by each of the registrant's officers and
directors, and by a certain holder of more than 10% of the registrant's
outstanding Common Stock, have been excluded in that such persons may be deemed
to be affiliates of the registrant; however, this determination of affiliate
status is not necessarily a conclusive determination for any other purpose.

The number of shares outstanding of the registrant's Common Stock, $.01 par
value, as of November 30, 1998 was 14,263,058 shares.

<PAGE>

                      DOCUMENTS INCORPORATED BY REFERENCE

      Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A in connection
with the registrant's 1999 Annual Meeting of Shareholders are incorporated
herein by reference into Part III of this Report. Such Proxy Statement will be
filed with the Securities and Exchange Commission not later than 120 days after
the registrant's fiscal year ended September 30, 1998.

<PAGE>

                                  ANACOMP, INC.

                                    FORM 10-K

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998

                                      INDEX

<TABLE>
<CAPTION>

PART I                                                                                          Page
                                                                                              ---------
<S>                                                                                           <C>
    Item 1     Business                                                                          1
    Item 2     Properties                                                                        12
    Item 3     Legal Proceedings                                                                 12
    Item 4     Submissions of Matters to Vote of Security Holders                                12

PART II
    Item 5     Market for the Registrant's Common Stock and Related Stockholder Matters          15
    Item 6     Selected Financial Data                                                           16
    Item 7     Management's Discussion and Analysis of Financial Condition and 
               Results of Operations                                                             17
    Item 7A    Quantitative and Qualitative Disclosures About Market Risk                        24
    Item 8     Financial Statements                                                              24
    Item 9     Changes in and Disagreements with Accountants on Accounting and 
               Financial Disclosures                                                             24

PART III
    Item 10    Directors and Executive Officers of the Registrant                                25
    Item 11    Executive Compensation                                                            25
    Item 12    Security Ownership of Certain Beneficial Owners and Management                    25
    Item 13    Certain Relationships and Related Transactions                                    25

PART VI
    Item 14    Exhibits, Financial Statement Schedules and Reports on Form 8-K                   26
    Signatures                                                                                   29

</TABLE>

<PAGE>

                                     PART I

ITEM 1. BUSINESS

         Except for the historical information contained herein, the following
discussion regarding Anacomp, Inc. ("Anacomp" or the "Company") contains forward
looking statements that involve risks and uncertainties. Future results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include, but are not specifically limited to, the
ability to service debt, timely product development, fluctuations in currency
exchange rates, availability and price of polyester and other supplies, and
changes in economic conditions of various markets that the Company serves.

DOCUMENT MANAGEMENT INDUSTRY

         Anacomp is a leading provider in the document management industry,
which the Company believes to be in excess of $8 billion worldwide. The Company
provides services and products utilized in the storage and distribution of, and
access to, computer generated documents and various forms of document images.
Users of these services and products must balance the ease of accessibility to
information contained in these documents with the cost of storing and accessing
that information.

         Historically, document management (storage, distribution and access of
documents) was dominated by micrographics services and products, a segment in
which Anacomp has achieved a sustained leading market position. Recent advances
in digital technologies, which provide rapid access to electronic images of
documents, have provided customers with document management alternatives to
micrographics. Over the next several years, the Company believes that
micrographics technology will continue to retain certain cost or functional
advantages over alternative media, which should keep micrographics competitive
in a wide range of applications. Over the longer term, the Company believes that
micrographics technology will be viewed predominately as a reliable and
cost-effective method for long-term document archival.

         Companies are increasingly faced with the competing challenges of
reducing the costs, while improving the capabilities, of their information
processing and management operations. Moreover, these challenges are being faced
at a time when technology is advancing rapidly, which greatly increases the
complexity of selecting and implementing the appropriate solutions. As a result,
organizations increasingly are seeking outsourcing alternatives to reduce their
overall cost and eliminate the complexity associated with constantly changing
technology choices and implementation requirements.

         The Company's business strategy is to capitalize on these industry
trends by leveraging its market position and competitive strengths to provide
new services and products while maintaining its leading position in the
traditional segments of the market.

OVERVIEW OF THE COMPANY

         Anacomp is a leading provider of document management services and
products to over 10,000 customers in more than 65 countries. The Company offers
a broad range of document management solutions for the storage and distribution
of, and access to computer generated documents utilizing micrographic, magnetic
media and, to an increasing extent, electronic technologies.

         The Company has built a strong reputation as the world's leading
full-service provider of micrographic systems, services, and supplies.
Micrographics is the conversion of information stored in electronic form or on
paper to microfilm or microfiche. Traditionally, micrographics has provided one
of the most cost-effective means of document storage and retrieval for
information-intensive organizations such as banks, insurance companies,
brokerage firms, healthcare providers and government agencies. The Company is a
worldwide provider of Computer-Output-to-Microfilm ("COM") solutions, which
consists of the high speed conversion of computer generated documents directly
from a computer or magnetic tape to microfilm or microfiche. The Company is a
leading manufacturer of systems, as well as the leading provider of services for
customers that outsource their micrographic requirements.

<PAGE>

         Organizations are increasingly seeking outsource alternatives to meet
their information processing and management needs. In order to reduce costs and
improve capabilities, the Company believes that it is uniquely positioned to
leverage its significant base of loyal, long-term customers to take advantage of
the trends to outsourcing and the increasing use of new technologies in the
industry. Anacomp believes it can take advantage of this trend by increasing its
customer base through strategic acquisitions and by offering a broader range of
services and products utilizing new technologies to complement its traditional
micrographics business.

         In recent years, the Company increased the breadth of its services and
products by incorporating certain new technologies being utilized in the
document management industry. The Company has established itself as a leading
global provider of Compact Disc ("CD") document management outsource services
through the growth of its ALVA-TM- CD ("ALVA") services and through the
Company's acquisition in 1997 of Data/Ware Development, Inc. ("Data/Ware"), a
leading supplier of CD systems for document management applications. ALVA
services are offered from a majority of the Company's service centers throughout
the world, and this business has enjoyed significant growth over the past three
years. The Company's Data/Ware CD systems generally are sold to businesses with
high-volume CD output needs and who prefer to produce CDs internally rather than
outsource this process.

         The Company has an extensive installed base of systems located at
end-user operations, which together with the Company's strong customer
relationships, provide the Company with a high margin recurring revenue stream
from systems maintenance and related supplies. In addition, the Company is a
leading provider of half-inch computer tape (magnetic media) products for larger
computing systems, with manufacturing plants in the United States and Europe.

         Overall, the Company plans to maintain its leadership position in
traditional document management solutions while continuing to capitalize on its
expertise and customer base to add new document management products and
services. This migration toward faster growth areas of the document management
industry is being accomplished through internal product development, strategic
alliances and acquisitions of companies and technology.

BUSINESS STRATEGY

         The Company has a strategic plan entitled "Strategy 2000". Strategy
2000 sets forth the following four key strategies for the Company:

PROVIDE CUSTOMERS WITH SOLUTIONS TO THEIR DOCUMENT MANAGEMENT REQUIREMENTS

         Anacomp has a large, long-term customer base with diverse document
management requirements, and Anacomp desires to be the provider of choice for
all of these requirements. By understanding the document management requirements
of, and working closely with its customers, Anacomp gains insights into
additional services and products it can offer to its customers. The Company
intends to continue to broaden its range of services and products as it
endeavors to capture all of its customers' business for all the document
management services and products that its customers require.

INCREASE MARKET POSITION AND PROFITABILITY IN TRADITIONAL BUSINESSES

         The Company has established leading positions in certain segments of
the document management industry with its traditional businesses (micrographics
and magnetic media). Although these segments and businesses are mature, Anacomp
believes that opportunities remain to increase its market position in these
segments and increase the contribution of these businesses to the Company's net
sales and EBITDA (as defined). The Company will seek to increase its market
position through strategic acquisitions and by leveraging its customer base for
its other services and products. In addition, Anacomp continually strives to
leverage its existing infrastructure and make strategic investments to achieve
incremental operating efficiencies that would lead to increased profitability.

                                      2

<PAGE>

DEVELOP A LEADING POSITION IN ELECTRONIC DELIVERY AND ARCHIVAL SOLUTIONS

         With the rapid evolution and acceptance of the Internet worldwide, the
Company believes it is presented with an opportunity to develop a leading
position in the emerging electronic archival (long-term storage) and document
delivery (access) services and products segment. As the Internet emerges as a
widely accepted, standardized, low-cost medium for distribution of, and access
to, documents and information, Anacomp will seek to leverage its extensive
expertise and experience in document management to become a leading provider of
a new generation of solutions utilizing this medium. The Company is pursuing
these opportunities with initiatives such as its Computer Output to Internet
("COFI(TM)") services and its offerings with New Dimension Software, Inc.
("NDS") and is actively developing new offerings.

PURSUE STRATEGIC ACQUISITIONS

         The Company will continue to pursue strategic acquisitions to expand
its current capabilities and offerings. All of Anacomp's acquisitions will be
focused in one or more segments of the document management industry that will be
designed to increase its market position in current segments, add complementary
services and products to its existing businesses, or add offerings in new
businesses.

DOCUMENT MANAGEMENT SOLUTIONS INITIATIVES

         Since June 1996, Anacomp has initiated several strategic initiatives to
expand its range of services and products in the electronic document management
market. Its three main initiatives are centered on using CD technology, using
the internet or an organization's intranet system, and using mainframe and/or
high-performance, server-based software solutions.

         Management of documents on CD-R involves the transforming, indexing,
storing, distributing and providing access to documents stored on standard,
inexpensive CDs. The Company believes the CD-R segment of the market is rapidly
growing because CDs are extremely effective for the distribution of large
volumes of electronically stored documents. The Company offers electronic
delivery on CD through its ALVA outsource services and its high-volume Data/Ware
CD MVS and Data/Ware CD Client/Server production systems. Anacomp offers its
ALVA services through its network of outsource services centers in the United
States and Europe and its Data/Ware CD MVS and Data/Ware CD Client/Server
production systems through its worldwide direct and indirect sales channels. The
ALVA Services revenues have grown approximately 117% and 183% during fiscal 1998
and 1997 respectively, as compared to their prior comparable periods. However,
ALVA services revenues are still a relatively small percentage of the Company's
total revenues.

         Management of documents using the internet or an organization's
intranet involves the transforming, indexing, storing, distributing and
providing access to documents stored on Webservers and accessible using Web
browsers. The Company believes that the electronic delivery through the internet
or intranet is a rapidly growing segment for the delivery of electronic
documents to end-users. Anacomp offers such electronic delivery through its COFI
outsource services which deliver documents to the customers' desktop using low
cost, standard browser facilities. Although the COFI outsource service is a new
product for the Company and is still small in terms of revenue generation, the
Company believes that revenue from this service will grow rapidly.

         Management of documents using mainframe and/or high-performance servers
based on software solutions delivers documents to a customer's desktop or
high-speed printer. This method of delivery and archival involves the
transforming, indexing, storing, distributing, and providing access to documents
stored on large scale mainframes or server systems. Anacomp offers document
management using enterprise-wide computing systems and networks through its EOM
system, in conjunction with the Company's technology partner, NDS. The Company
introduced its EOM system as an offering in late January 1998 and is marketing
the product to its current customer base and to customers of the Company's
competitors in the micrographics segment of the market.

                                      3

<PAGE>

COMPETITIVE STRENGTHS

LONG-TERM CUSTOMER RELATIONSHIPS

         The Company has developed long-term relationships (in excess of five
years) with many of its customers. Among the Company's current long-term
customers are Aetna Inc., AT&T Corp., Automatic Data Processing, Inc.,
BankAmerica Corporation, Bank One Corp., Citicorp, Deutsche Bank AG, Electronic
Data Systems, FMR Corp., General Electric Corp., IBM, and Travelers Group Inc.
The Company believes that it has developed this long-term customer base by
consistently meeting or exceeding customer document and information management
needs and expectations. The Company manages these customer relationships through
its worldwide sales force of approximately 200 individuals and through its
extensive distributor networks.

LEADING MARKET POSITION

         The Company is a leader in certain businesses within the document
management industry including systems, maintenance and supplies, outsource
services, certain half-inch magnetic media products, and digital based document
management services and products. The Company's market position and customer
base provides the necessary platform to grow these businesses and to introduce
new and complementary document management services and products.

UNDERSTANDING OF CUSTOMERS' DOCUMENT MANAGEMENT REQUIREMENTS

         Through its long-term customer relationships, Anacomp has developed an
understanding of its customers' unique document management requirements as well
as the particular document management requirements in its customers' industries.
This understanding has enabled the Company to recognize and meet the changing
needs of its customers. In addition, the Company believes that because of this
understanding, its customers trust Anacomp to properly and securely process
their critical documents and information.

BROAD RANGE OF SERVICES AND PRODUCTS

         In the last two years, the Company has introduced new services and
products designed to further broaden its offerings across the entire spectrum of
document management. In addition to enhancing its traditional services and
products, the Company has become a leading provider of document management CD
solutions through the development of its ALVA services and through the
acquisition of Data/Ware and its CD systems business line. The Company is also
introducing complementary services related to its existing offerings, including
on-line solutions, document management consulting services, enterprise-scale
report management software products in partnership with NDS, and new magnetic
media products, services and equipment.

FIRST IMAGE ACQUISITION

         The Company believes the acquisition of First Image Management Company
("First Image") will strengthen its outsource service business, increase its
already significant customer base, and enhance revenues and profitability
through cross-selling opportunities and cost savings associated with
consolidating the businesses. The addition of the First Image business will
increase the Company's production capacity and expand the geographic coverage of
its services. The Company believes it will be able to capitalize on
cross-selling opportunities by leveraging the additional customer base with new
service and product offerings.

EXPERIENCED MANAGEMENT TEAM

         The Company's management team has an average of 17 years of experience
in the information technology, document management and related industries and is
committed to executing the Company's business strategy. The Company continues to
recruit managers and other professionals from other successful companies and to
promote from within when appropriate.

                                      4

<PAGE>

 FIRST IMAGE ACQUISITION

         On June 18, 1998, the Company completed its acquisition of First Image,
the primary component of which was Image Access Services, principally COM and CD
services (the "IAS Business"). The Company disposed of the two remaining
components of the First Image businesses, which included Document Print and
Distribution Services, primarily laser print and mail and demand publishing
services ("the DPDS Business"), and Document Acquisition Services, primarily
data entry and data capture services (the "DAS business"). The details of the
First Image acquisition and the subsequent disposals of the two business lines
discussed above is further discussed in Note 7 of the Notes to the Consolidated
Financial Statements included herein.


DESCRIPTION OF IAS BUSINESS

         The IAS Business provided a variety of document management services.
These services, which are substantially the same as Anacomp's services business,
include the transfer of computer-generated documents, such as reports,
statements and invoices to microfilm, CD, and other electronic format. See
"Offerings - Outsource Services."

         For the four months ended September 30, 1998, the revenues of the IAS
Business were approximately $37.7 million, with 74% of those revenues coming
from Outsource Services. Much of the remaining revenue came from the sale of
supplies and equipment related to the COM system market including microfilm,
microfiche readers, and chemicals. Prior to the acquisition, the IAS business
was a maintenance and supplies customer of Anacomp generating quarterly revenues
of $2.5 million.

         Prior to the acquisition, the IAS Business operated 42 production
centers geographically dispersed throughout the United States and had over 750
employees. Like Anacomp, the IAS Business has focused on maintaining strong
client relationships, and has an annual client retention rate of approximately
90%. The IAS Business also utilized innovative technology, such as on-line
ordering and status reporting in its sales and marketing efforts.

INTEGRATION OF IAS BUSINESS

         The acquisition of the IAS Business will result in significant
opportunities for operational savings and efficiencies when combined with
Anacomp's existing services and facilities. The Company and the IAS Business
operated outsource service centers in 23 of the same cities or metropolitan
areas in the United States, which affords the Company opportunities for
consolidation. The Company will consolidate 46 service centers into 23 locations
by the end of fiscal 1999. In cities with an IAS Business service center
location and without an Anacomp center, the Company will continue to operate
those centers or perform a natural consolidation into existing Anacomp centers
as trends in the market dictate. As of September 30, 1998, the Company had
completed eight location consolidations.

         The corporate operations of the IAS Business have been relocated to
Anacomp's Poway, California offices and into the existing Anacomp corporate
operations, which will allow for consolidation savings. Achievement of the
consolidation plan has required an investment in production and communications
capital equipment to increase overall capacity and has required additional
leasehold improvements to accommodate the combined operations. The investments
in capacity and leasehold improvements have been factored into the consolidation
plan.

OFFERINGS

         Anacomp operates in a single industry generally known as the document
management industry, and it offers a wide range of services and products within
this industry. These solutions can be grouped into five major business lines:
outsource services, technical services, systems, micrographics supplies, and
magnetic media.

                                      5

<PAGE>

         The table below shows Anacomp's revenues for each of these product
families for the last three fiscal years. The information is presented on a
traditional comparative basis for the year ended September 30, 1996 to
facilitate a meaningful comparison to fiscal year 1997 and 1998. Consequently,
the fiscal 1996 information presented below does not comply with accounting
requirements for companies upon emergence from bankruptcy, which calls for
separate reporting for the newly reorganized Company and the predecessor
company. (Dollars in thousands.)

<TABLE>
<CAPTION>

                                                      Year ended September 30,
                                ---------------------------------------------------------------------
                                       1998                     1997                     1996
                                --------------------     --------------------     -------------------
       <S>                      <C>              <C>     <C>              <C>     <C>             <C>
       Outsource Services...... $ 152,805         31%    $ 103,595         22%    $ 103,733        21%
       Technical Services......    72,837         15        77,123         17        82,105        17
       Systems.................    51,468         10        39,985          9        32,794         7
       Micrographics Supplies..   111,413         22       131,615         28       150,449        31
       Magnetic Media..........   104,592         21       102,823         22       112,187        23
       Other...................     5,902          1         7,369          2         4,872         1
                                ---------    -------     ---------    -------     ---------    ------
            Total.............. $ 499,017        100%    $ 462,510        100%    $ 486,140       100%
                                ---------    -------     ---------    -------     ---------    ------
                                ---------    -------     ---------    -------     ---------    ------

</TABLE>

OUTSOURCE SERVICES

         The principal outsource services delivered by Anacomp are computer
output to microfilm and computer output to CD services, which are delivered
through the Company's 78 service centers throughout the world. Outsource
services are sold by Anacomp's direct sales forces in the United States, Canada,
Brazil and Europe. The Company began offering outsource services to customers
outside the United States in January 1997 with an acquisition in Italy. Since
then, the Company has continued to increase its presence in strategic geographic
areas through the acquisition of selected service centers. The Company has
recently introduced COFI services, which deliver electronic documents to the
users desktop using the internet and/or the organizations' intranet.

         The Company has a large customer base which has proved to be loyal to
the Company in the past. The Company's outsource service customers include
banks, insurance companies, brokerage firms, healthcare providers, and
government agencies. No one customer accounted for more than 5% of the Company's
outsource services revenues in fiscal 1998. The typical service contract is
exclusive, lasts one year or more with a one-year, automatic renewal period and
provides for usage-based monthly fees, which are subject to increase on 30 days'
notice. The Company believes approximately 75% of the Company's Outsource
Services customers are under contract and estimates approximately 90% of such
contracts are renewed annually.

         COM SERVICES. COM services, the delivery of microfilm-based outsourcing
services, represents the largest component of Anacomp's outsource services. On a
daily basis, Anacomp's service centers receive thousands of electronic
transmissions and magnetic tapes from customers. This information (both text and
graphics) is converted to microfiche, which is a four by six inch film medium
capable of storing up to 1,000 pages of computer generated documents. Turnaround
for a typical outsource job ranges from two hours to 36 hours, depending on
specific circumstances and requirements, and the centers generally operate 24
hours a day every day of the year. The Company believes it is the only national
provider of COM services and competes with regional and local providers.

         ALVA CD SERVICES. Although still a relatively small percentage of the
Company's revenues, Anacomp has quickly become a significant provider of CD
outsource services since entering this emerging market in fiscal 1995.
Competition in this segment is highly fragmented, and Anacomp believes it is the
largest U.S. provider of CD outsource services.

         Anacomp's ALVA services provide customers with an easy, high-capacity
document storage, distribution and access solution for applications requiring
frequent and high-speed document access. End user documents, such as invoices
and statements, are indexed and stored on recordable compact discs (known as
CD-R discs). In addition to indexed information within documents, ALVA includes
sophisticated Windows-based software for accessing and viewing the documents and
information. ALVA production systems are available at the majority of the
Company's service centers in the United States and at selected locations
internationally.

                                      6
<PAGE>

         The Company believes that its ALVA solution has significant advantages
over competing products, primarily due to the Company's network of service
centers, its extensive knowledge of applications and indexing expertise, and
ALVA's flexible and easy-to-use human interface.

         COFI INTERNET SERVICES. Anacomp provides COFI services from several of
its service centers in the United States, providing for the immediate access to
computer-generated documents using a standard internet browser (such as Netscape
or Microsoft Explorer) for its COFI services customers. The indexed, viewable
documents are stored on an Anacomp Web Server or on the customer's internal Web
Server, providing internal or external customers with immediate access to
information contained in these documents from their electronic desktop using
standard internet browser technology.

TECHNICAL SERVICES (FIELD MAINTENANCE)

         Anacomp's technical services, which are traditional field maintenance
services, are sold by Anacomp's direct sales forces worldwide.

         The Company provides round-the-clock maintenance and support services
through more than 500 highly trained service employees in the United States,
Brazil, Canada, and Europe which serve approximately half of the nearly 3,500
COM Systems believed to be in use worldwide. Its technical services reach is
further expanded by its distributors in those regions where Anacomp does not
maintain a direct, operational presence. In the United States, over 300 field
service engineers and managers provide geographic coverage throughout ten
regions. Internationally, maintenance services are provided either by Anacomp
employees operating in the Company's foreign subsidiaries or by authorized
distributors.

         The Company believes that it maintains virtually all of the installed
base of Anacomp-manufactured COM systems, as well as a large percentage of those
built by other manufacturers. In addition, the Company provides maintenance
services for micrographics-related devices and, increasingly, equipment outside
of the micrographics segment (such as high-speed laser printers, tape subsystems
and optical and CD systems). Since many customers tend to use the maintenance
services of the supplier that installed the system, maintenance revenues
traditionally have been a function of new system sales and the size of the
installed base. Anacomp believes that it is the leading provider of COM system
maintenance in the United States and Europe.

         As the micrographics business matures, the Company's strategy is to
leverage its maintenance infrastructure by expanding the services it provides to
include equipment beyond the micrographics segment. Recent additions to the
Company's maintenance base include computer tape subsystems and automated tape
libraries, tape cleaning and conversion equipment, and optical and CD storage
systems. The Company added maintenance of high-speed laser printers to its
offering with the acquisition of two small laser printer maintenance providers
in December 1997 and May 1998. Subsequent to year end, the Company further
strengthened its high speed laser printer maintenance offering through an
acquisition in the United Kingdom.

SYSTEMS

         The principal systems delivered by Anacomp are COM systems, CD systems,
Enterprise Report Management Systems, and document imaging systems. The Company
sells these products through its direct sales forces in the United States,
Brazil, Canada, and Europe and through distributors in Latin America, and parts
of Europe and Asia. No single customer accounted for more than 5% of the
Company's system sales in fiscal 1998.

         COM SYSTEMS. Anacomp is the world's leading manufacturer and
distributor of COM systems, offering a complete line of processors, duplicators,
sorters, and related software. Anacomp's installed base of systems and related
sales of field maintenance services and supplies to its installed base provide
the Company with what management believes to be a recurring revenue stream that
constitutes a significant portion of its annual revenues.

         The Company's XFP 2000 is the most advanced COM system on the market
and has enabled the Company to capture what it believes to be a significant
number of all new systems sold or leased. The Company sold or leased 140 XFP
2000 systems in fiscal 1998 compared to 135 systems in fiscal 1997.

         Principal customers for the Company's systems include
document-intensive organizations such as banks, insurance companies, brokerage
firms, healthcare providers, and all levels of government agencies, as well as

                                      7
<PAGE>

non-Anacomp outsource service providers. While the majority of systems are sold
outright, customers are increasingly selecting leasing plans and monthly usage
options.

         The Company's primary competitors in the sale of COM systems are
Agfa-Gevaert AG ("Agfa") and Micrographic Technology Corporation. Competition is
based principally on product features, as well as on such factors as product
quality, service, and price. The Company believes the worldwide installed base
of systems is approximately 3,500 units, which offers a continuing replacement
market opportunity for the Company's XFP 2000.

         CD SYSTEMS. Anacomp became a leading provider of document output to CD
systems for mainframe and client/server computer environments through its
acquisition in fiscal 1997 of Data/Ware. The Company's flagship Data/Ware
products, the Data/Ware CD MVS and the Data/Ware CD Client/Server, provide
companies with internal solutions for the highly automated output of documents
to CDs.

         The Company's CD systems are sold by its direct sales force worldwide
and also by distributors in Latin America and Asia. Because of the similarity
between the Company's CD and COM systems relating to target markets,
applications, and sales cycle, the Company believes it can leverage its
extensive micrographics knowledge and customer relationships to grow sales of CD
systems. In addition, the Company has begun maintenance services for its
Data/Ware CD systems, creating a recurring revenue stream for installed units.

         The Company's primary competitors in the sale of high-volume CD output
systems are Young Minds, Inc., Rimage Corporation, and, to a lesser extent, IBM.
These products primarily compete in mid-volume applications. In the high-volume
CD system market, the Company believes that it has the leading market position.
The Company also has a significant installed base of well known clients with
document output to CD systems.

         ENTERPRISE REPORT MANAGEMENT (ERM) AND DOCUMENT IMAGING SYSTEMS.
Anacomp is working actively to bring to market a wide range of electronic
document management system solutions. The Company provides on-line report
distribution, archive and document imaging solutions through its October 1997
acquisition of Com-Informatic, the leading micrographics services provider in
Switzerland and also a developer of advanced ERM and document imaging solutions
for the European market, which is marketed under the name "Image Star".

         The Company also markets an ERM offering for document management that
it obtains from NDS under the brand name Enterprise Output Management ("EOM").
Launched by the Company in late January 1998, EOM provides document management
solutions for mainframe/host and client/server computing environments that allow
organizations with significant document storage, distribution and access
requirements to expedite access regardless of the document's location.

         Although there are numerous competitors providing a variety of
electronic document management solutions, the Company believes it can be among
the first to offer a complete range of solutions, both analog and digital, that
address all of a customer's document management needs.

MICROGRAPHICS SUPPLIES

         Anacomp sells the most comprehensive line of micrographics supplies in
the world, including original silver halide film, duplicate film, chemicals for
microfilm processing, paper and toners for reader/printers, micrographics lamps
and bulbs and other consumables. These products are sold through Anacomp's
direct sales forces and through distributor channels.

         The Company supplies wet and dry original silver halide film used in
its XFP series of systems and wet and dry original silver halide film for its
X-series, an earlier generation of Anacomp systems. All original microfilm for
the Company's COM systems is manufactured for the Company by Eastman Kodak
Company ("Kodak") under an exclusive supply agreement. The microfilm products
for the XFP 2000 are manufactured for the Company by Kodak in what the Company
considers to be a proprietary package. The Company also believes it can maintain
its market position in XFP 2000 film sales going forward because of the
complexity of the manufacturing process and the Company's patents on its
proprietary canister.

         Anacomp is the world's largest distributor and seller of duplicate
microfilm, which is used to create one or more additional copies of original
microfiche and microfilm masters. All duplicate microfilm is manufactured for
the

                                       8
<PAGE>

Company by SKC America, Inc. under an exclusive supply agreement. See "Raw
Materials and Suppliers" below. Anacomp's primary competitor in the duplicate
microfilm market is Rexham Graphics Ltd.
("Rexham").

         The Company also sells original non-proprietary microfilm for Anacomp's
older COM systems and for other manufacturers' systems. Film sold for Anacomp's
systems represents the vast majority of original microfilm sales. The Company
competes in sales of non-proprietary original microfilm with other
manufacturers, including Agfa, Fuji Photo Film U.S.A., Inc. ("Fuji"), and Kodak.
For non-OEM sales of the XFP 2000, the Company is the exclusive supplier of
original microfilm because of the proprietary nature of the canister in which
the film is placed. Anacomp believes that it sells its consumable supplies
directly to more than 90% of its worldwide installed base.

         In foreign locations, the Company offers supplies through wholly owned
operating subsidiaries and, in countries in which the Company does not have a
subsidiary, through a network of dealers and distributors. In Europe, the
Company's primary competitors for micrographics supplies are Agfa, A. Messerli
AG, and Rexham. Its primary competitors in Asia are Kodak and Fuji.

MAGNETIC MEDIA

         Anacomp manufactures, sells, and distributes a broad range of magnetic
media products such as open reel tape, 3480/3490E tape cartridges, CompacTape,
voice logging, instrumentation tape and transfer (magnetic stripe) tape. In
addition, the Company distributes and sells 3590E tape cartridges, DLT tape
cartridges, and quarter-inch, 4mm and 8mm back-up tape cartridges.

         The Company is the world's largest manufacturer of chromium dioxide
half-inch tape products (open reel tape, 3480, 3490E, and TK 50/52), widely used
by organizations for the near-line and off-line storage of business data. These
products are manufactured at the Company's facilities in Graham, Texas and
Brynmawr, Wales. The Company has entered into partnerships to enable it to
participate in the next generation of magnetic media products, particularly
half-inch metal particle tape (3590 cartridges), and it plans to make modest
investments in this area. The Company also plans to expand the magnetic media
-related services it offers to its customers; such services include label
initialization, library planning, media cleaning and conversion, and disaster
recovery.

         Anacomp primarily sells its magnetic media products through a worldwide
distributor and dealer network and, to a lesser extent, through the Company's
direct sales force. The Company markets these products under the "Memorex,"
"Dysan," "Graham," and "StorageMaster" brand names, and it also is a leading OEM
for many of the magnetic media products it manufactures.

         The Company has a leading manufacturing and market position for the
products it makes. The Company has no significant competitors with respect to
the manufacture of open reel tape, and its worldwide manufacturing and market
position for 3480 and 3490E cartridges are estimated at 38% and 35%,
respectively. The Company's major competitors for half-inch tape cartridges are
Imation Enterprises Corporation (formerly 3M) and Emtech Magnetics GmbH
(formerly BASF Magnetics GmbH).

         The Company has recently introduced magnetic media services and related
equipment for certification, reproduction and cleaning.

OTHER-CONSULTING SERVICES

         Recently, Anacomp has identified professional services and consulting
services as important growth areas. As a result, the Company acquired WorkSmart,
Inc., a small professional consulting services business in January 1998. The
Company's business strategy calls for professional services to be offered as an
adjunct to Company-provided services and products and for consulting services to
be a stand-alone business offering customers a sophisticated level of guidance
regarding document management strategies and solutions.

ENGINEERING, RESEARCH, AND DEVELOPMENT

         Anacomp's engineering costs, including research and development, were
$9.2 million in fiscal 1998, compared to $7.7 million in fiscal 1997 and $4.5
million in fiscal 1996. The Company expects its current research and development
efforts to increase as it introduces new document management solutions.


                                       9
<PAGE>

         Development in fiscal 1998 included continued improvement of the speed
and the functionality of the XFP2000, as well as enhancements to the ALVA CD
outsource services offering. In addition, significant investment was made in the
development of the COFI offering including requirements to meet emerging market
trends in this fast-moving area. Due to continued market development and the
need to replace older generation hardware components, the Data/Ware CD System
was reengineered and enhanced once again, extending its market-leading position.
The Company also continues to invest in the automation of its service center
operations and to provide advanced electronic data transmission capabilities for
these centers. Finally, the Company maintained active development programs to
evaluate, test, and implement Year 2000 compliance for its offerings.

         The Company also owns various patents and licenses covering aspects of
its business lines and its production processes, as well as proprietary trade
secret information relating to its services and products. While the Company
believes that the protection provided by these patents, licenses and proprietary
information is important, the Company believes that equally significant is the
knowledge and experience of its employees, and their abilities to develop and
market the Company's services and products and to provide value-added benefits
to customers.

RAW MATERIALS AND SUPPLIERS

         Polyester is the principal raw material used in the manufacture of both
microfilm and magnetic media products. Costs for polyester remained generally
stable in fiscal 1998, as a result of a relative balance between supply and
demand. There can be no assurance, however, that the current trend will
continue.

         SKC America, Inc. and SKC Limited (collectively, "SKC") is Anacomp's
sole supplier of duplicate microfilm, under a ten-year supply agreement entered
into in 1993. SKC also provides Anacomp with polyester for a large percentage of
its magnetic media products. In connection with the supply agreement, SKC also
provided Anacomp with a $25 million trade credit facility, which was reduced to
$15 million in fiscal 1997, and further reduced to $5 million in the first half
of fiscal 1998. In addition, under an amendment to the supply agreement executed
in 1996, Anacomp agreed to certain price increases, retroactive to 1994, and
agreed to make deferred payments to SKC related to the retroactive price
increases. The Company has recognized the liability and is committed to pay $0.8
million, $0.8 million, and $1 million in 1999, 2000, and 2001, respectively.

         Pursuant to the SKC agreement, the Company is required to purchase a
substantial portion of its polyester requirements from SKC for its magnetic
media products. While the Company could purchase certain of these magnetics
polyester products from vendors other than SKC, SKC is currently the sole
available source for polyester used by the Company to manufacture many magnetic
products.

         Anacomp's XFP 2000 system utilizes a proprietary, patented original
film canister, and the original film used in that canister is supplied
exclusively by Kodak. Anacomp also purchases from Kodak substantially all of its
requirements for original microfilm for earlier-generation systems manufactured
by Anacomp and others, although the Company has from time to time purchased
original microfilm utilized in those older systems from other suppliers.

INDUSTRY SEGMENTS AND FOREIGN OPERATIONS

         As discussed in Note 1 to the Consolidated Financial Statements,
Anacomp's business operates as a single unit providing equipment, supplies, and
services for document management, including storage, processing, and retrieval.
Financial information concerning the Company's operations in different
geographical areas is included in Note 19 of the Notes to the Consolidated
Financial Statements.


                                       10
<PAGE>

BANKRUPTCY REORGANIZATION

         On January 5, 1996, the Company filed a petition for reorganization
under Chapter 11 of the Bankruptcy Code with the U.S. Bankruptcy Court for the
District of Delaware. On March 28, 1996, the Company submitted a Plan of
Reorganization and a Disclosure Statement to the Bankruptcy Court. The
Disclosure Statement was approved by the Bankruptcy Court on such date and was
transmitted to the creditors and preferred stockholders of the Company for
solicitation of ballots for acceptance or rejection of the Plan of
Reorganization. Ballots were cast by May 8, 1996. The Plan of Reorganization, as
amended, was confirmed by the Bankruptcy Court on May 20, 1996, and, on June 4,
1996, the Company emerged from bankruptcy under its Plan of Reorganization.

ASSOCIATES

         As of September 30, 1998, Anacomp employed approximately 3,400 people
at multiple facilities and offices in the United States, Canada, Brazil, Japan,
and Europe.


                                       11
<PAGE>

ITEM 2.  PROPERTIES

         The Company's headquarters are located in Poway, California. This
facility houses the Company's management, systems manufacturing, software
development, engineering, customer service, marketing, technical service
operations, finance, accounting and MIS groups. The Company also leases standard
office space for its sales and service centers in a variety of locations around
the world. Anacomp's magnetics manufacturing facilities are located in Graham,
Texas and Brynmawr, Wales. All of Anacomp's manufacturing facilities have
received international recognition for quality standards and have earned
International Standards Organization ("ISO") 9002 certification.

         The following table indicates the square footage of Anacomp's
facilities:

<TABLE>
<CAPTION>

                                       OPERATING          OTHER
                                      FACILITIES        FACILITIES          TOTAL
                                      ----------        ----------          -----
         <S>                          <C>               <C>                <C>
         United States:
             Leased.................   1,441,466         132,714           1,574,180
             Owned..................     147,420          15,630             163,050
                                       ---------         -------           ---------
                                       1,588,886         148,344           1,737,230
                                       ---------         -------           ---------
         International:
             Leased.................     140,990          19,092             160,082
             Owned..................     167,478             ---             167,478
                                       ---------         -------           ---------
                                         308,468          19,092             327,560
                                       ---------         -------           ---------
               Total................   1,897,354         167,436           2,064,790
                                       ---------         -------           ---------
                                       ---------         -------           ---------
</TABLE>


         Other Facilities consist primarily of leased space of abandoned
facilities. Approximately 151,806 square feet of the Other Facilities have been
sublet to others. The Company considers its facilities adequate for its present
needs and does not believe that it would experience any difficulty in replacing
any of its present facilities if any of its current agreements were terminated.

ITEM 3.  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 statements 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 Eastman Kodak Company ("Kodak"). The
complaint seeks injunctive relief and unspecified damages, including attorney's
fees, for 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.
Discovery in this matter continues, with any trial to occur probably not before
the middle of calendar year 1999. Although there can be no assurance as to the
eventual outcome of this matter, the Company believes that it has numerous
meritorious defenses which it intends to pursue vigorously.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No matters were submitted during the three months ended September 30,
1998, to a vote of Anacomp's security holders through the solicitation of
proxies or otherwise.


                                       12
<PAGE>

                     EXECUTIVE OFFICERS OF THE REGISTRANT

         The current executive officers of the Company, their ages (as of
December 15, 1998) and their positions with the Company are listed in the
following table:

<TABLE>
<CAPTION>

NAME                       AGE     POSITION
------------------------- -------  -------------------------------------------------------------------
<S>                        <C>     <C>
Ralph W. Koehrer            53     President, Chief Executive Officer and Director
Frederick F. Geyer          49     Executive Vice President
Donald W. Thurman           52     Executive Vice President
Donald L. Viles             52     Executive Vice President and Chief Financial Officer
Peter Williams              46     Executive Vice President
William C. Ater             58     Senior Vice President, Chief Administrative Officer and Secretary
Jeffrey R. Cramer           45     Senior Vice President
William E. Farrant          44     Senior Vice President
George C. Gaskin            39     Senior Vice President, General Counsel and Assistant Secretary
Hasso Jenss                 55     Senior Vice President
Richard V. Keele            49     Senior Vice President
Thomas J. Magazzine         53     Senior Vice President
Stephen C. Manske           53     Senior Vice President
Kevin M. O'Neill            44     Senior Vice President
Gary M. Roth                56     Senior Vice President
Emery E. Skarupa            46     Senior Vice President
Thomas L. Brown             42     Vice President and Treasurer

</TABLE>


         The business experience of each executive officer for the past five
years is described below. Each executive officer is elected for a term of one
year and holds office until his successor is chosen and qualified or until his
earlier death, resignation or removal.

         RALPH W. KOEHRER was elected Chief Executive Officer and Director
(effective May 1, 1997) on April 29, 1997 and President (effective January 6,
1997) on December 10, 1996. Prior to joining the Company, Mr. Koehrer was with
Automatic Data Processing, Inc. ("ADP") for eleven years, most recently as
Corporate Vice President of ADP and as President of ADP's Information and
Processing Services division.

         FREDERICK F. GEYER joined Anacomp in January 1998 as Executive Vice
President. Before joining Anacomp, Dr. Geyer was with Texas Instruments, Inc.,
where Dr. Geyer served as Senior Vice President for digital imaging from August
1996 to December 1997. Prior to that, Dr. Geyer worked for Eastman Kodak Company
where, during his tenure, his responsibilities included hardware/software design
and development, marketing and sales for digital imaging products, and the
start-up of an optical storage business.

         DONALD W. THURMAN was elected Executive Vice President on November 16,
1998, having served as Senior Vice President and General Manager - Outsourcing
Services Business since May 4, 1998. From November 1997 to May 1998, Mr. Thurman
served as Senior Vice President and General Manager - North America East. Mr.
Thurman served as Senior Vice President - U.S. East from August 1997 to November
1997, and as Region Vice President - U.S. Group from October 1996 to August
1997. From November 1993 to October 1995, Mr. Thurman was Senior Vice President
of Marketing and Business Development for First Image. Mr. Thurman served as
General Manager of The Software Factory from January to November 1993 and
previously served as Senior Vice President of the Company from January 1990 to
January 1993.

         DONALD L. VILES was elected Executive Vice President and Chief
Financial Officer effective March 1, 1996. From October 1985 to March 1996, he
served as Vice President and Controller.

         PETER WILLIAMS was elected Executive Vice President on November 16,
1998, having served as Senior Vice President and General Manager - International
Business since November 1997. From October 1995 to November 1997, Mr. Williams
served as President - Magnetics Group. Previously, Mr. Williams served as
General Manager 


                                       13
<PAGE>

- Magnetics European Group from 1993 to September 1995. Prior to
that, Mr. Williams served from 1990 to 1993 as Vice President, Wales Operations
- Magnetics.

         WILLIAM C. ATER was elected Senior Vice President on August 13, 1997
and Chief Administrative Officer in February 1988. He has served as Secretary
since March 1985.

         JEFFERY R. CRAMER was elected Senior Vice President - Technical
Services on August 13, 1997. Mr. Cramer joined Anacomp in July 1996 with the
Company's acquisition of COM Products, Inc. ("CPI"), and served as Senior Vice
President-Business Development from February to August 1997. Mr. Cramer had
served as President of CPI since March 1987.

         WILLIAM E. FARRANT was elected Senior Vice President - Support Services
on November 16, 1998 and had served as Senior Vice President - Service Center
Support since February 1998. Mr. Farrant had previously served as Vice President
- U.S. Group Operations from October 1994 to January 1998. Prior to that, Mr.
Farrant was Director - Product Management from December 1992 to October 1994.

         GEORGE C. GASKIN was elected Senior Vice President, General Counsel and
Assistant Secretary on November 17, 1997 and had served as Vice President -
Legal and Assistant Secretary since June 1996. From July 1990 to June 1996, Mr.
Gaskin served as Corporate Counsel and Assistant Secretary.

         HASSO JENSS was elected Senior Vice President and General Manager - COM
Systems and Supplies on February 9, 1998 and had served as Senior Vice President
and General Manager - Europe since August 1997. From October 1995 to August
1997, Mr. Jenss served as President - European Group. Mr. Jenss served as Vice
President - European Micrographics from November 1993 to September 1995. Prior
to that, Mr. Jenss served from October 1989 to October 1993 as Managing Director
of Anacomp's German subsidiary.

         RICHARD V. KEELE was elected Senior Vice President - Product
Development on May 4, 1998 and had served as Senior Vice President and General
Manager - CDS Cluster since August 1997. Mr. Keele joined Anacomp in January
1997 with the Company's acquisition of Data/Ware, and was elected President -
Data/Ware Group in February 1997. Mr. Keele had previously served as President
of Data/Ware for more than five years.

         THOMAS J. MAGAZZINE was elected Senior Vice President and General
Manager - Consulting Services on May 4, 1998 having joined Anacomp with its
acquisition of WorkSmart in January 1998. Prior to joining Anacomp, Mr.
Magazzine had been President and Chief Executive Officer of WorkSmart since
1996. Before launching WorkSmart, Mr. Magazzine founded GTE Vantage Solutions in
1990, a company which implemented information technologies for process-level
reengineering.

         STEPHEN C. MANSKE was elected Senior Vice President - Digital Services
on November 16, 1998, and has served as Senior Vice President since May 1998.
From November 1997 to May 1998, Mr. Manske served as Senior Vice President -
COFI Cluster. Mr. Manske had previously served as Senior Vice President -
Business Development from June 1996 to August 1997. Prior to that, Mr. Manske
was Vice President - Emerging Technologies from August 1993 to June 1996, and
Director - Advanced Technologies Development from July 1989 to August 1993.

         KEVIN M. O'NEILL was elected Senior Vice President - Corporate
Development and Marketing on November 16, 1998, and has served as Senior Vice
President - Strategy, Business and Product Development since May 1998. From
August 1997 to May 1998, Mr. O'Neill served as Senior Vice President - Business
Development and Strategy, after serving as Senior Vice President - Global
Marketing since June 1996. Mr. O'Neill had served as Vice President Global
Marketing from 1995 until June 1996. From 1994 to 1995, Mr. O'Neill served as
Vice President of Marketing, Strategic Resellers Group. Mr. O'Neill had
previously served as Senior Director, Marketing and Product Development for
Fujitsu - ICL Systems, Inc.

         GARY M. ROTH was elected Senior Vice President and General Manager -
Magnetics Solutions on November 17, 1997 after serving as President -
International Group since October 1995. Previously, Mr. Roth served as Vice
President - Americas/Asia Division from November 1992 to September 1995. From
October 1991 to October 1992, 


                                       14
<PAGE>

he served as Manager - LAAP/Canada Operations. From October 1988 to October 
1991, Mr. Roth served as Vice-President - Data Systems Division.

         EMERY SKARUPA was elected Senior Vice President - Manufacturing and
Materials on August 13, 1997. Mr. Skarupa joined the Company in November 1993 as
Director of Purchasing and was promoted to Vice President of Materials in May of
1996. Prior to joining Anacomp, Mr. Skarupa served as Director of Materials for
Abex Aerospace, a division of Abex Corp., since January 1991.

         THOMAS L. BROWN was elected Vice President and Treasurer on May 19,
1996. From January 1995 to April 1996, Mr. Brown served as Corporate Controller
of Hurco Companies, Inc. Mr. Brown had previously served as Assistant Vice
President - Financial Reporting and Analysis for the Company from March 1991.



                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                 STOCKHOLDER MATTERS

The Company's Common Stock is traded on the NASDAQ National Market ("NASDAQ")
under the symbol "ANCO." The following table sets forth the range of high and
low closing prices for the Company's Common Stock for the periods indicated, as
reported by NASDAQ:

<TABLE>
<CAPTION>
                                  Fiscal Year 1998              Fiscal Year 1997
                             -------------------------      ------------------------
                                High           Low             High          Low
                             ----------     ----------      ----------    ----------
        <S>                    <C>            <C>             <C>           <C>
        First Quarter          $16.25         $12.38          $ 9.50        $ 7.75
        Second Quarter          17.75          14.63           12.38          8.25
        Third Quarter           24.38          14.81           14.00         10.25
        Fourth Quarter          23.38          12.00           16.13         11.25

</TABLE>

The Company currently intends to retain all future earnings, if any, for the use
in the operation and development of its business and, therefore, does not expect
to declare or pay any cash dividends on the Company's capital stock. In
addition, the Company's borrowing agreements prohibit the payment of cash
dividends on the Company's capital stock. As of November 30, 1998, there were
approximately 106 holders of record of the Company's Common Stock. The number of
beneficial shareholders of record as of that date was approximately 1600.


                                       15
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA

The following Selected Financial Data of the Company should be read in
conjunction with Item 1, "Business," set forth in Part I above and with the
Company's Notes to the Consolidated Financial Statements (In thousands, except
per share data):

<TABLE>
<CAPTION>

                                                            Reorganized Company                         Predecessor Company
                                                  ---------------------------------------    --------------------------------------
                                                                                 Four         Eight       
                                                                                months        months
                                                Year ended      Year ended       Ended         Ended      Year ended     Year ended
                                                  9/30/98        9/30/97        9/30/96       5/31/96       9/30/95       9/30/94  
                                                ----------      ----------     ----------    ----------   ----------     ----------
<S>                                             <C>             <C>            <C>           <C>          <C>            <C>       
Revenues ....................................... $ 499,017      $ 462,510      $ 151,542     $ 334,598     $ 591,189      $ 592,599
Income from operations before amortization of                                                                                      
  reorganization asset and                                                                                                         
restructuring charges ..........................    56,761         67,265         19,899        41,605        41,395         79,577
Income (loss) from operations ..................   (27,359)        (8,515)        (5,764)       41,605      (128,189)        79,577
Income (loss) before reorganization items,                                                                                         
  income taxes, extraordinary items,                                                                                               
  and cumulative effect of accounting                                                                                              
  change .......................................   (60,135)       (41,350)       (17,609)       23,389      (203,326)        15,355
Income (loss) before, extraordinary items,                                                                                         
  and cumulative effect of accounting                                                                                              
  change .......................................   (66,635)       (56,850)       (22,009)      112,528      (238,326)         6,955
Net income (loss) ..............................   (67,749)(a)    (67,811)(a)    (22,009)(a)   164,970(b)   (238,326)(d)     14,955
                                                                                                                                   
Basic loss per share ........................... $   (4.85)     $   (5.05)     $   (2.19)          (c)           (c)           (c)

</TABLE>

<TABLE>
<CAPTION>
                                                                           As of September 30,
                                             --------------------------------------------------------------------------------------
                                                         Reorganized Company                            Predecessor Company
                                             ------------------------------------------------   -----------------------------------
                                                1998             1997              1996                1995                1994
                                             -----------     -----------        -----------         -----------         -----------
<S>                                           <C>             <C>                <C>                 <C>                 <C>
Current assets ............................   $ 145,695       $ 159,882          $ 147,530           $ 175,193           $ 214,129
Current liabilities .......................     129,142         128,084            152,996             578,857             208,313
Working Capital ...........................      16,553          31,798             (5,466)           (403,664)              5,816
Total assets ..............................     421,153         391,951            435,421             421,029             658,639
Long-term debt, less current portion ......     338,884         247,889            217,044                 ---             366,625
Stockholders' equity (deficit) ............     (47,492)         14,520             58,569            (188,243)             49,756

</TABLE>


(a)      The net loss for the fiscal years ended September 30, 1998 and1997 and
         the four months ended September 30, 1996, includes $75.6, $75.8 and
         $25.7 million of Reorganization Asset amortization, respectively.

(b)      The net income for the eight months ended May 31, 1996, includes $92.8
         million of Reorganization items and an extraordinary item of $52.4
         million as more fully discussed in Note 3 to the accompanying
         consolidated financial statements.

(c)      Due to the implementation of Fresh Start Reporting, per share data for
         the Predecessor Company has been excluded as they are not comparable.

(d)      The net loss for the year ended September 30, 1995, includes a $136.9
         million charge related to the write-off of goodwill.


                                       16
<PAGE>

ITEM 7.  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;
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.


RESULTS OF OPERATIONS

         On June 18, 1998, the Company completed its acquisition of assets
constituting substantially all of the business and operations of First Image
Management Company("First Image"). For reporting purposes, the acquisition date
was set as June 1, 1998. The First Image acquisition resulted in incremental
revenues and EBITDA (defined on page 19) of $37.7 million and $9.7 million,
respectively, for the period June 1, 1998 to September 30, 1998, and are
included in the Company's results of operations for the fiscal year ended
September 30, 1998. See Note 7 to the accompanying Consolidated Financial
Statements for additional information related to this acquisition.

         On May 20, 1996, the Company's Reorganization Plan was confirmed by the
United States Bankruptcy Court and on June 4, 1996, the Company emerged from
bankruptcy reorganization. The Plan of Reorganization resulted in a reduction of
approximately $174 million in principal and accrued interest on the Company's
debt obligations and in liquidation amount and accrued dividends on its
preferred stock. As a result of the Reorganization, the recording of the
restructuring transaction and the implementation of Fresh Start Reporting, the
Company's results of operations after May 31, 1996 (the cutoff date used for
financial reporting purposes) are not comparable to results reported in prior
periods. See Note 3 to the accompanying consolidated financial statements for
information on the consummation of the Plan of Reorganization and implementation
of Fresh Start Reporting.

         To facilitate a meaningful comparison of the Company's quarterly and
year-to-date operating performance in fiscal years 1998, 1997 and 1996, the
following discussion of consolidated results of operations is presented on a
traditional comparative basis for all periods. Consequently, the information
presented below for fiscal 1996 does not comply with accounting requirements for
companies upon emergence from bankruptcy, which requirements call for separate
reporting for the newly reorganized company and the predecessor company.


                                       17
<PAGE>

CONSOLIDATED RESULTS OF OPERATIONS
ANACOMP, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>

                                                                                           Year Ended September 30,
                                                                          -----------------------------------------------------
(dollars in thousands)                                                       1998                    1997             1996 (a)
                                                                          ---------                ---------          ---------
<S>                                                                       <C>                      <C>                <C>
Revenues:
    Services provided ...........................................         $ 227,851                $ 186,590          $ 189,257
    Equipment and supply sales ..................................           271,166                  275,920            296,883
                                                                          ---------                ---------          ---------
                                                                            499,017                  462,510            486,140
                                                                          ---------                ---------          ---------
Operating costs and expenses:
    Costs of services provided ..................................           134,000                   97,932            104,499
    Costs of equipment and supplies sold ........................           198,627                  206,582            226,623
    Selling, general and administrative expenses ................            97,335                   87,355             87,217
    Amortization of reorganization asset ........................            75,626                   75,780             25,663
    Amortization of intangible assets ...........................            12,294                    3,376              6,297
    Restructuring charges .......................................             8,494                     ----               ----
                                                                          ---------                ---------          ---------
                                                                            526,376                  471,025            450,299
                                                                          ---------                ---------          ---------
Income (loss)  from operations ..................................           (27,359)                  (8,515)            35,841
                                                                          ---------                ---------          ---------

Other income (expense):
    Interest income .............................................             2,339                    4,346              2,573
    Interest expense and fee amortization .......................           (34,598)                 (35,896)           (39,629)
    Other .......................................................              (517)                  (1,285)             6,995
                                                                          ---------                ---------          ---------
                                                                            (32,776)                 (32,835)           (30,061)
                                                                          ---------                ---------          ---------

Income (loss) before reorganization items, income taxes and
  extraordinary items ...........................................           (60,135)                 (41,350)             5,780
Reorganization items ............................................              ----                     ----             92,839
                                                                          ---------                ---------          ---------
Income (loss) before income taxes and extraordinary items .......           (60,135)                 (41,350)            98,619
Provision for income taxes ......................................             6,500                   15,500              8,100
                                                                          ---------                ---------          ---------
Income (loss) before extraordinary items ........................           (66,635)                 (56,850)            90,519
Extraordinary items .............................................            (1,114)                 (10,961)            52,442
                                                                          ---------                ---------          ---------
Net income (loss) ...............................................           (67,749)                 (67,811)           142,961
Preferred stock dividends and discount accretion ................              ----                     ----                540
                                                                          ---------                ---------          ---------
Net income (loss) available to common stockholders ..............         $ (67,749)               $ (67,811)         $ 142,421
                                                                          ---------                ---------          ---------
                                                                          ---------                ---------          ---------

Supplemental:
EBITDA (b) ......................................................         $  84,843                $  83,662          $  84,175
                                                                          ---------                ---------          ---------
                                                                          ---------                ---------          ---------

</TABLE>

(a)      This column reflects the combination of historical results for the
         eight months ended May 31, 1996, for the Predecessor Company and for
         the four months ended September 30, 1996, for the Reorganized Company.

(b)      See the definition of EBITDA on Page 19.

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GENERAL

         Anacomp reported a net loss of $67.7 million for the year ended
September 30, 1998 as compared to a net loss of $67.8 million and net income of
$143.0 million for the years ended September 30, 1997 and 1996, respectively.
The fiscal 1998 net loss includes non-cash amortization of the Company's
reorganization asset of $75.6 million and an extraordinary loss of $1.1 million
net of income taxes, on the extinguishment of debt comprised of unamortized debt
issue costs on the Company's senior secured loan. Included in the fiscal 1997
net loss is non-cash amortization of the Company's reorganization asset of $75.8
million and an extraordinary loss of $11.0 million net of income taxes on the
extinguishment of debt comprised of a 3% call premium and unamortized discount
on the Company's existing 13% subordinated notes. Net income for fiscal 1996
includes $25.7 million in non-cash amortization of the Company's reorganization
asset, a gain of $92.8 million for reorganization items and an extraordinary
gain resulting from the discharge of indebtedness of $52.4 million.

         Pursuant to a 1990 OEM agreement Eastman Kodak Company ("Kodak") was
obligated to purchase an additional 151 XFP 2000 systems by October 1997 or pay
a cash penalty to the Company. The Company and Kodak negotiated an amendment to
the OEM agreement, whereby the Company accepted a $3.6 million cash payment from
Kodak, which is included in the results for fiscal 1997, a commitment to
purchase an additional 28 XFP 2000 systems and a one-time purchase of spare
parts. Kodak purchased 16 XFP 2000 systems in fiscal 1997 and 12 in fiscal 1998
thereby fulfilling their obligation under the amended agreement.

         Earnings before interest, other income, reorganization items, special
and restructuring charges, taxes, depreciation and amortization and
extraordinary items ("EBITDA") was $84.8 million, or 17.0% of revenues for the
year ended September 30, 1998. This compares to EBITDA of $83.7 million, or
18.1% of revenues, and $84.2 million, or 17.3% of revenues for the years ended
September 30, 1997 and 1996, respectively. Excluding the Kodak payment of $3.6
million described above, EBITDA for fiscal 1997 was $80.1 million or 17.3% of
revenues.

FISCAL YEAR ENDED SEPTEMBER 30, 1998 VS. FISCAL YEAR ENDED SEPTEMBER 30, 1997

         REVENUES. The Company's revenues increased 7.9% from $462.5 million in
fiscal 1997 to $499.0 million in fiscal 1998. The Company experienced increased
revenues of $49.2 million and $11.5 million in its Outsource Services and Output
Systems business lines, respectively, while experiencing decreasing revenues of
$20.2 million in its Micrographic Supplies product lines.

         The $49.2 million increase in Outsource Service revenues was primarily
due to the acquisition of First Image and the inclusion of its operating results
for the four months ending September 30, 1998 ($37.7 million). Additionally,
excluding the results of the First Image, COM service volumes increased by
approximately 23% while average selling prices decreased by approximately 12%.
Certain data center acquisitions in Europe and several large customer gains
contributed to both the increase in volumes and the decrease in average selling
prices.

         The $11.5 million increase in Output Systems revenues was primarily due
to a $6.8 million increase in COM systems sales which was the result of both an
increase in the number of units sold as well as the pricing of new and used
systems. The Company sold or leased 140 XFP 2000 units in fiscal 1998 compared
to 135 in fiscal 1997. Digital systems revenues increased by $4.7 million which
was primarily the result of the Com-Informatic acquisition that was consummated
in October 1997.

         The $20.2 million decrease in Micrographics Supplies revenues was the
result of the Company's discontinuance of the sale of duplicate film to the
reseller market, as well as declining sales of original COM film and duplicate
film, which is consistent with long-term trends.

         GROSS MARGIN. The Company's gross margins increased 7.4% from $154.4
million (33.6% of revenues) in fiscal 1997 to $166.4 million (33.3% of revenues)
in fiscal 1998 (excluding the Kodak payment in fiscal 1997). Gross margins as a
percentage of revenues remained relatively flat on a consolidated basis although
there were fluctuations within certain business lines. Gross margins generated
by Outsource Services decreased as a percent of revenue by 3.4% which was
primarily the result of decreases in COM services average selling prices. The
decrease in average selling prices was in part due to the large customer gains
which received favorable pricing due to their large volumes and acquisitions
which increased sales volume at lower average 

                                      19

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selling prices. Gross margins generated by COM systems sales as a percent of 
revenue increased by approximately 5.3% which was primarily due to product 
mix and the result of manufacturing efficiencies realized during fiscal 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased 11.4% from $87.4 million (18.9% of
revenues) in fiscal 1997 to $97.3 million (19.5% of revenues) in fiscal 1998.
This increase is primarily due to the increased expenses associated with the
First Image and Com-Informatic acquisitions. Additionally, the Company increased
its sales efforts, sales support and product development for the digital systems
products. The Company experienced lower SG&A expenses as a percentage of
revenues (18.1% of revenues) during the fourth quarter of fiscal 1998. This
decrease in SG&A was the result of additional revenues from First Image along
with the benefit from sales force reductions which occurred in the third
quarter.

         AMORTIZATION OF INTANGIBLE ASSETS . Amortization of intangible assets
increased 264.0% from $3.4 million (1.0% of revenues) in fiscal 1997 to $12.3
million (2.5% of revenues) in fiscal 1998. This increase is primarily due to the
amortization of goodwill associated with the First Image acquisition.

         RESTRUCTURING CHARGES. Restructuring charges totaled $8.5 million (1.7%
of revenues) in fiscal 1998. These charges resulted from the Company's
acquisition of First Image as the Company plans to close down Anacomp sites with
multiple market presence in certain cities and convert First Image customers to
Anacomp equipment. These restructuring activities are expected to be completed
during fiscal year 1999. The restructuring charges consist of personnel related
costs of $2.7 million, facility closedown costs of $4.8 million, and other costs
of $1.0 million. The Company incurred $1.1 million of personnel costs primarily
related to severance expenditures and $0.4 million of other administrative costs
during the year ended September 30, 1998.

         INTEREST EXPENSE. Interest expense decreased 6.9% from $35.9 million in
fiscal 1997 to $34.6 million in fiscal 1998. This decrease was the result of the
Company refinancing substantially all of its debt obligations at lower interest
rates during fiscal 1998 and 1997 which was partially offset by additional
borrowings used to finance the acquisition of First Image. The Company is
currently anticipating that interest expense will increase to levels similar to
that which was experienced in the fourth quarter of fiscal 1998. Interest
expense increased $2.3 million from $7.9 million in the fourth quarter of fiscal
1997 to $10.2 million in the fourth quarter of fiscal 1998.

         PROVISION FOR INCOME TAXES. The provision for income taxes in fiscal
1998 includes $5.0 million on earnings of Anacomp's foreign subsidiaries and
$0.8 million of domestic taxes after considering the impact of the extraordinary
loss. Of the $0.8 million domestic tax provision, approximately $0.4 million is
currently payable. The Company's effective tax rate decreased by approximately
3% from 45% of taxable income in fiscal 1997 to 42% of taxable income in 1998.
This decrease was primarily due to a substantial portion of the taxable income
being generated in countries with lower income tax rates relative to the prior
period. See Note 17 to the accompanying Consolidated Financial Statements for
further discussion.

FISCAL YEAR ENDED SEPTEMBER 30, 1997 VS. FISCAL YEAR ENDED SEPTEMBER 30, 1996

         REVENUES. The Company's revenues decreased 4.9% from $486.1 million in
fiscal 1996 to $462.5 million in fiscal 1997. The Company experienced decreased
revenues of $18.8 million and $9.4 million in its Micrographic Supplies and
Magnetic Media business lines, respectively, which was offset by increased
revenues of $7.2 million in its Output Systems product lines.

         The $18.8 million decrease in Micrographic Supplies revenues includes a
decrease of $8.3 million related to the discontinuance and downsizing of
selected product lines initiated in fiscal 1996. The remaining decrease was
consistent with the projected market trends for reader and reader/printers,
original COM film, duplicate film and other accessories.

         The Magnetic Media revenues decreased by $9.4 million due to expected
declining sales in several major product categories including 3480 tape
cartridges ($5.9 million), open reel tape ($7.7 million) and TK 50/52 tape ($2.0
million). These decreases were partially offset by new contributions of $5.8
million from metal particle tape products.

                                      20

<PAGE>

         The $7.2 million increase in Output Systems revenues is primarily
attributable to digital systems sales. Digital systems sales increased by $9.3
million which was primarily the result of the revenue contribution from the
DataWare acquisition that was consummated in January 1997. Prior to that
acquisition, there were no digital system sales. These sales were offset by a
$2.1 million decrease in COM systems revenues. This reduction resulted from an
increase in 1997 in the number of COM system units shipped under operating lease
arrangements, and a decrease in the number of systems shipped under straight
sales arrangements along with a change in the mix and pricing of new and used
systems

         GROSS MARGIN. The Company's gross margins increased by less than 2% as
a percentage of revenues from $155.0 million (31.9% of revenues) in fiscal 1996
to $154.4 million (33.6% of revenues) in fiscal 1997 (the fiscal 1997 margin
excludes the Kodak payment). Gross margins remained relatively flat on a
consolidated basis although there were fluctuations within certain business
lines. Gross margins generated by Outsource Services decreased as a percent of
revenue by approximately 3% which was primarily the result of a decrease in COM
services average selling prices. Data center acquisitions and several large
customer gains resulted in increased volumes with a corresponding decrease in
average selling prices. Gross margins generated by Technical Services as a
percent of revenue increased by approximately 7% which was primarily due to cost
reduction efforts in maintenance services initiated by new management. Output
Systems gross margins as a percentage of revenues increased by approximately 12%
due to a change in product mix with a greater portion of sales represented by
refurbished systems which have higher margins.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. SG&A expenses increased
less than 1% from $87.2 million (17.9% of revenues) in fiscal 1996 to $87.4
million (18.9% of revenues) in fiscal 1997. This increase was primarily the
result of transition costs associated with the Company's fiscal 1997 acquisition
activity.

         INTEREST EXPENSE. Interest expense decreased 7.8% from $39.6 million in
fiscal 1996 to $35.9 million in fiscal 1997. This decrease was primarily due to
the Company's refinancing efforts in fiscal 1997 and its improved debt structure
as a result of the Company's reorganization in fiscal 1996.

         PROVISION FOR INCOME TAXES. The provision for income taxes in fiscal
1997 includes $5.4 million on earnings from Anacomp's foreign subsidiaries and
$4.2 million of domestic taxes after considering the impact of the extraordinary
loss. Of the $4.2 million domestic tax provision, approximately $0.7 million is
currently payable. See Note 17 to the accompanying Consolidated Financial
Statements for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

         During the period ended September 30, 1998, Anacomp issued $135 million
of 10 7/8% Senior Subordinated Notes which proceeds were used to fund the First
Image acquisition. As of September 30, 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.

         Anacomp's working capital at September 30, 1998, excluding the current
portion of long-term debt, was $17.7 million, compared to $41.4 million at
September 30, 1997. Net cash provided by operating activities decreased to $24.6
million for the fiscal year ended September 30, 1998, compared to $57.8 million
in the comparable prior period. Fiscal 1997 benefited from $12 million in
non-cash interest expense and significant reductions in long-term lease
receivables and inventory. Fiscal 1998 did not include the same benefits and, in
addition, current liabilities were significantly reduced during the year.

         Net cash used in investing activities was $143.4 million in the current
period, compared to $32.8 million in the comparable prior period. This change
was primarily the result of the First Image acquisition in the current period.

         Net cash provided by financing activities increased to $79.6 million
for the fiscal year ended September 30, 1998, compared to a net use of $5.1
million in the comparable prior period. This change was primarily the result of
the Company's issuance of $135 million of 10 7/8% Senior Subordinated notes
during the current period which was offset by the pay off of senior indebtedness
outstanding at the end of fiscal 1997.

                                      21

<PAGE>

         The Company's cash balance (including restricted cash) as of September
30, 1998 was $22.0 million, compared to $65.5 million at September 30, 1997. The
Company also has available an $80 million revolving credit facility. There were
no amounts outstanding under the revolving credit facility as of September 30,
1998.

         The Company has significant debt service obligations. The ability of
the Company to meet its debt service and other obligations will depend upon its
future performance and is subject to financial, economic and other factors, some
of which are beyond its control. However, the Company believes that cash on hand
and cash generated from operations 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.

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. The Company is
currently in the remediation phase of its electronic data transmission project.
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 on
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
which 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.

                                      22

<PAGE>

         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 which
Anacomp acquires, such as First Image, are subject to the same assessment,
remediation, testing and implementation phases as those described above.

     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.

ACCOUNTING PRONOUNCEMENTS

         In June 1997, the FASB issued two additional pronouncements related to
reporting comprehensive income and disclosure of segment information. These two
pronouncements are effective for fiscal years beginning after December 15, 1997.
The Company has not yet determined the additional disclosures specified by these
pronouncements on the consolidated financial statements for the year ended
September 30, 1998, which will be reported during fiscal 1999.

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EURO CURRENCY

         Many of the countries in which the Company sells its products and
services are Member States of the Economic and Monetary Union ("EMU"). Beginning
January 1, 1999, Member States of the EMU may begin trading in either their
local currencies or the euro, the official currency of EMU participating Member
States. Parties are free to choose the unit they prefer in contractual
relationships during the transitional period, beginning January 1999 and ending
June 2002. The Company's computer system contains the functionality to process
transactions in either a country's local currency or the euro. The Company does
not currently anticipate any material adverse effects on its operations related
to the EMU's conversion to the euro. However, there can be no assurance that the
conversion of EMU Member States to euro will not have a material adverse effect
on the Company and its operations.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The Company does not have any significant financial instruments other
than fixed rate debt. The Company's bank line of credit is affected by the
general level of U.S. interest rates and/or Libor. However, the Company had no
amounts outstanding under its bank line of credit on September 30, 1998.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial statements and supplementary financial information appear on
pages A-1 to A-27 of this Annual Report on Form 10-K.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
         ACCOUNTING AND FINANCIAL DISCLOSURE

         There are no changes in or disagreements with accountants on accounting
and financial disclosures.

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                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Company hereby incorporates by reference the information contained
under the headings "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" from its definitive Proxy Statement
(hereinafter, the "Proxy Statement") to be delivered to the shareholders of the
Company in connection with the 1999 Annual Meeting of Shareholders to be held
February 8, 1999. Certain information relating to executive officers of the
Company appears on pages 13 through 15 hereof.

ITEM 11.  EXECUTIVE COMPENSATION

         The Company hereby incorporates by reference into this Item the
information contained under the heading "Executive Compensation" in the Proxy
Statement.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT

         The Company hereby incorporates by reference into this Item the
information contained under the heading "Security Ownership of Management and
Other Beneficial Owners" in the Proxy Statement.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Hasso Jenss, a Senior Vice President of the Company, borrowed $115,600
from the Company on August 12, 1998 in connection with his relocation from
Germany to the Poway, California area and his purchase of a residence. The
indebtedness was evidenced by a promissory note dated that same date which bears
interest at 7.5% per annum with a stated maturity date of November 30, 1998
(subject to extension). On December 16, 1998, Mr. Jenss repaid to the Company
the entire principal amount of the promissory note (which was then cancelled),
and he repaid all accrued interest on December 18, 1998.

                                      25

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                                     PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                   FORM 8-K

(a)  1.   The following financial statements and other information appear
          in Appendix A to this Annual Report on Form 10-K and are filed as
          a part hereof:


         Report of Independent Public Accountants.
         Consolidated Balance Sheets - September 30, 1998 and 1997.
         Consolidated Statements of Operations - Years Ended September 30,
             1998 and 1997, the Four Months Ended September 30, 1996, and the
             Eight Months Ended May 31, 1996. 
         Consolidated Statements of Cash Flows - Years Ended September 30, 1998
             and 1997, the Four Months Ended September 30, 1996 and the Eight 
             Months Ended May 31, 1996.
         Consolidated Statements of Stockholders' Equity (Deficit) - Years Ended
             September 30, 1998 and 1997, the Four Months Ended September 30,
             1996 and the Eight Months Ended May 31, 1996.
         Notes to the Consolidated Financial Statements.

    2.   Financial Statement Schedules are not filed with this Annual Report on
         Form 10-K because the Schedules are either inapplicable or the required
         information is presented in the financial statements listed immediately
         above or in the notes thereto.

(b)      Reports on Form 8-K:

         During the quarter ended September 30, 1998, and prior to filing this
         Annual Report on Form 10-K, Anacomp filed one report on Form 8-K, dated
         August 12, 1998 (the "Form 8-K Amendment"). The Form 8-K Amendment was
         filed to amend the June 18, 1998 Form 8-K that the Company had
         previously filed reporting that the Company had entered into an Asset
         Purchase Agreement with First Financial Management Company and First
         Data Corporation to acquire First Image. The Form 8-K Amendment was
         filed to include the audited financial statements of First Image for
         the three years ended December 31, 1997.

(c)      The following exhibits are filed with this Annual Report on Form 10-K
         or incorporated herein by reference to the listed document previously
         filed with the Securities and Exchange Commission (the "SEC").
         Previously unfiled documents are noted with an asterisk (*):

2.1      Third Amended Joint Plan of Reorganization of the Company and certain
         of its subsidiaries. (1)

2.2      Asset Purchase Agreement, dated as of May 5, 1998, among the Company,
         First Financial Management Corporation and First Data Corporation. (2)

2.3      Amendment No. 1, dated as of June 18, 1998, to Asset Purchase
         Agreement, dated as of May 5, 1998, among the Company, First Financial
         Management Corporation and First Data Corporation. (3)

3.1      Amended and Restated Articles of Incorporation of the Company. (4)

3.2      Amended and Restated Bylaws of the Company. (4)

4.1      Form of Common Stock Certificate.  (4)

4.2      Warrant Agreement, dated as of June 4, 1996, between the Company and
         ChaseMellon Shareholder Services, L.L.C. (2)

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<PAGE>

4.3      Form of Warrant Certificate. (4)

4.4      Indenture, dated as of March 24, 1997, between the Company and IBJ
         Schroder Bank & Trust Company, as trustee, relating to the Company's
         10-7/8% Senior Subordinated Notes due 2004, Series B. (5)

4.5      First Supplemental Indenture, date as of June 12, 1998, to the
         Indenture, dated as of March 24, 1997, between the Company, as issuer,
         and IBJ Schroder Bank & Trust Company, as trustee relating to the
         10-7/8% Senior Subordinated Notes due 2004, Series A and the 10-7/8%
         Senior Subordinated Notes due 2004, Series B (containing, as exhibits,
         specimens of such Series A Notes and Series B Notes ). (2)

4.6      Indenture, dated as of June 18, 1998, between the Company and IBJ
         Schroder Bank & Trust Company, as trustee, relating to the Company's
         10-7/8% Series C Senior Subordinated Notes due 2004 and 10 7/8% Series
         D Senior Subordinated Notes due 2004. (2)

4.7      Purchase Agreement, dated June 12, 1998, between the Company and
         NatWest Capital Markets Limited, relating to the Company's 10-7/8%
         Series Senior C Subordinated Notes due 2004. (2)

4.8      Exchange and Registration Rights Agreement, dated June 18, 1998,
         between the Company and NatWest Capital Markets Limited, relating to
         the Company's 10-7/8% Series C Senior Subordinated Notes due 2004 and
         10-7/8% Series D Senior Subordinated Notes due 2004. (2)

4.9      Form Letter of Transmittal, relating to the Company's 10-7/8% Series C
         Senior Subordinated Notes due 2004 and Series D Senior Subordinated
         Notes due 2004. (3)

10.1     Employment Agreement, effective October 1, 1997, between the Company
         and Ralph W. Koehrer. (6)

10.2     Employment Agreement, effective January 5, 1998, between the Company
         and Frederick F. Geyer. (3)

10.3     Employment Agreement, effective October 1, 1992, between the Company
         and William C. Ater. (8)

10.4     Employment Agreement, effective October 1, 1994, between the Company
         and Dr. Peter Williams.*

10.5     Revolving Credit Agreement, dated as of June 15, 1998, among Anacomp,
         Inc., the various lending institutions named therein and BankBoston,
         N.A. as agent. (2)

10.6     Common Stock Registration Rights Agreement, dated as of June 4, 1996,
         by and among the Company and the Holders of Registrable Shares. (4)

10.7     Amended and Restated Master Supply Agreement, dated October 8, 1993, by
         and among the Company, SKC America, Inc. and SKC Limited. (7)

10.8     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. (9)

21.1     Subsidiaries. *

23.1     Consent of Arthur Andersen LLP. *

27.1     Financial data schedule (required for electronic filing only). *

---------------------



(1)      Incorporated by reference to the Company's Form 8-A filed with the SEC
         on May 15, 1996 (File No. 0-7641).

(2)      Incorporated by reference to the Company's Form 8-K filed with the SEC
         on June 24, 1998 (File No. 1-8328).

                                      27

<PAGE>

(3)      Incorporated by reference to the Company's Form S-4 Registration
         Statement filed with SEC on August 17, 1998 (File No. 333-61675).

(4)      Incorporated by reference to the Company's Form 8-K filed with the SEC
         on June 19, 1996 (File No. 1-8328).

(5)      Incorporated by reference to the Company's Form S-4 Registration
         Statement filed with the SEC on April 16, 1997 (File No. 333-25281).

(6)      Incorporated by reference to the Company's Form 10-Q for the quarterly
         period ended December 31, 1997.

(7)      Incorporated by reference to the Company's Form 10-K for the year ended
         September 30, 1993.

(8)      Incorporated by reference to the Company's Form 10-K for the year ended
         September 30, 1996.

(9)      Incorporated by reference to the Company's Pre-Effective Amendment No.
         1 to Form S-1 Registration Statement filed with the SEC on September
         19, 1996 (File No. 333-9395).

                                      28

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.
                                  By:  /s/ Ralph W. Koehrer
                                  --------------------------------------------
                                  Ralph W. Koehrer
                                  President, Chief Executive
                                  Officer and Director

Dated:  December 22, 1998

Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacities and on the dates indicated.

Dated:  December 22, 1998         By:  /s/ Ralph W. Koehrer
                                  --------------------------------------------
                                  Ralph W. Koehrer
                                  President, Chief Executive
                                  Officer and Director

Dated:  December 22, 1998         By: /s/ Donald L. Viles
                                  --------------------------------------------
                                  Donald L. Viles,  Executive Vice
                                  President and Chief Financial Officer

Dated:  December 22, 1998         By: /s/ Richard D. Jackson
                                  --------------------------------------------
                                  Richard D. Jackson,
                                  Co-Chairman of the Board

Dated:  December 22, 1998         By:  /s/ Lewis Solomon
                                  --------------------------------------------
                                  Lewis Solomon,
                                  Co-Chairman of the Board

Dated:  December 22, 1998         By: /s/ Talton R. Embry
                                  --------------------------------------------
                                  Talton R. Embry, Director

Dated:  December 22, 1998         By: /s/ Darius W.  Gaskins, Jr.
                                  --------------------------------------------
                                  Darius W. Gaskins, Jr., Director

Dated:  December 22, 1998         By: /s/ Jay P. Gilbertson
                                  --------------------------------------------
                                  Jay P. Gilbertson, Director

Dated:  December 22, 1998         By:  /s/ George A. Poole, Jr.
                                  --------------------------------------------
                                  George A. Poole, Jr., Director

                                      29

<PAGE>

                                   APPENDIX A

ANNUAL REPORT ON FORM 10-K
ANACOMP, INC.

<TABLE>
<CAPTION>

                                                                                                       PAGE
                                                                                                       ----
<S>                                                                                                   <C>
Report of Independent Public Accountants..............................................................A - 2

Consolidated Balance Sheets -- September 30, 1998 and 1997............................................A - 3

Consolidated Statements of Operations - Years Ended September 30, 1998 and 1997,
  Four Months Ended September 30, 1996, Eight Months Ended May 31, 1996...............................A - 4

Consolidated Statements of Cash Flows -- Years Ended September 30, 1998 and 1997, Four
  Months Ended September 30, 1996, Eight Months Ended May 31, 1996....................................A - 5

Consolidated Statements of Stockholders' Equity (deficit) -- Years Ended September 30, 1998
  and 1997, Four Months Ended September 30, 1996 and Eight Months Ended May 31, 1996, ................A - 7

Notes to the Consolidated Financial Statements........................................................A - 8

</TABLE>


                                   A-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Anacomp, Inc.:

         We have audited the accompanying consolidated balance sheets of
Anacomp, Inc. (an Indiana corporation) and subsidiaries as of September 30, 1998
and 1997, and the related consolidated statements of operations, stockholders'
equity (deficit), and cash flows for the years ended September 30, 1998 and
1997, the four months ended September 30, 1996 and the eight months ended May
31, 1996. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

         We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

         As more fully described in Note 2 to the consolidated financial
statements, effective June 4, 1996, the Company emerged from protection under
Chapter 11 of the U.S. Bankruptcy Code pursuant to a Reorganization Plan which
was confirmed by the Bankruptcy Court on May 20, 1996. In accordance with AICPA
Statement of Position 90-7, the Company adopted "Fresh Start Reporting" whereby
its assets, liabilities and new capital structure were adjusted to reflect
estimated fair values as of May 31, 1996. As a result, the consolidated
financial statements for the periods subsequent to May 31, 1996 reflect the
Successor Company's new basis of accounting and are not comparable to the
Predecessor Company's pre-reorganization consolidated financial statements.

         In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Anacomp,
Inc. and subsidiaries as of September 30, 1998 and 1997, and the results of
their operations and their cash flows for the years ended September 30, 1998 and
1997, the four months ended September 30, 1996, and the eight months ended May
31, 1996 in conformity with generally accepted accounting principles.


                                                      Arthur Andersen LLP


Indianapolis, Indiana,
November 20, 1998.

                                      A-2

<PAGE>

             CONSOLIDATED BALANCE SHEETS
             Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>

                                                                                               September 30,
                                                                                    ----------------------------------
                                                                                        1998                 1997
(dollars in thousands, except per share amounts)                                    ---------                ---------
<S>                                                                                 <C>                      <C>

ASSETS
Current assets:
    Cash and cash equivalents ...................................................   $  17,721                $  58,060
    Restricted cash .............................................................       4,285                    7,433
    Accounts and notes receivable, net ..........................................      79,109                   58,628
    Current portion of long-term receivables, net ...............................       5,641                    3,647
    Inventories .................................................................      28,618                   25,261
    Prepaid expenses and other ..................................................      10,321                    6,853
                                                                                    ---------                ---------
Total current assets ............................................................     145,695                  159,882

Property and equipment, net .....................................................      41,749                   29,063
Long-term receivables, net of current portion ...................................       9,002                    6,587
Excess of purchase price over net assets of businesses acquired
    and other intangibles, net ..................................................     120,814                   17,800
Reorganization value in excess of identifiable assets, net ......................      88,230                  163,856
Other assets ....................................................................      15,663                   14,763
                                                                                    ---------                ---------
                                                                                    $ 421,153                $ 391,951
                                                                                    ---------                ---------
                                                                                    ---------                ---------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
    Current portion of long-term debt ...........................................   $   1,152                $   9,595
    Accounts payable ............................................................      36,464                   39,270
    Accrued compensation, benefits and withholdings .............................      18,372                   16,481
    Accrued income taxes ........................................................      15,197                   13,471
    Accrued interest ............................................................      18,158                   14,738
    Other accrued liabilities ...................................................      39,799                   34,529
                                                                                    ---------                ---------
Total current liabilities .......................................................     129,142                  128,084
                                                                                    ---------                ---------
                                                                                    ---------                ---------

Non current liabilities:
    Long-term debt, net of current portion ......................................     338,884                  247,889
    Other noncurrent liabilities ................................................         619                    1,458
                                                                                    ---------                ---------
Total noncurrent liabilities ....................................................     339,503                  249,347
                                                                                    ---------                ---------

Commitments and contingencies (See Note 18) Stockholders' equity
(deficit):
    Preferred stock, 1,000,000 shares authorized, none issued ...................         ---                      ---
    Common Stock, $.01 par value; 20,000,000 shares authorized;
       14,263,569 and 13,789,764 issued and outstanding, respectively                     143                      138
    Capital in excess of par value ..............................................     109,486                  105,329
    Cumulative translation adjustment (from May 31, 1996) .......................         447                   (1,128)
    Accumulated deficit (from May 31, 1996) .....................................    (157,568)                 (89,819)
                                                                                    ---------                ---------
Total stockholders' equity (deficit) ............................................     (47,492)                  14,520
                                                                                    ---------                ---------
                                                                                    $ 421,153                $ 391,951
                                                                                    ---------                ---------
                                                                                    ---------                ---------

</TABLE>

               See notes to the consolidated financial statements.

                                      A-3

<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>

                                                                                                                 Predecessor
                                                                              Reorganized Company                  Company
                                                                          -----------------------------------------------------
                                                                                                         Four       Eight
                                                                           Year Ended    Year Ended   Months Ended Months Ended
                                                                          September 30, September 30, September 30, May 31,
(in thousands, except per share amounts)                                      1998         1997          1996        1996
                                                                          -----------------------------------------------------
<S>                                                                       <C>          <C>          <C>          <C>
Revenues:
    Services provided ..................................................   $ 227,851   $ 186,590    $  59,055    $ 130,202
    Equipment and supply sales .........................................     271,166     275,920       92,487      204,396
                                                                           ---------   ---------    ---------    ---------
                                                                             499,017     462,510      151,542      334,598
                                                                           ---------   ---------    ---------    ---------
Operating costs and expenses:
    Costs of services provided .........................................     134,000      97,932       31,858       72,641
    Costs of equipment and supplies sold ...............................     198,627     206,582       70,097      156,526
    Selling, general and administrative expenses .......................      97,335      87,355       29,482       57,735
    Amortization of reorganization asset ...............................      75,626      75,780       25,663          ---
    Amortization of intangible assets ..................................      12,294       3,376          206        6,091
    Restructuring charges ..............................................       8,494         ---          ---          ---
                                                                           ---------   ---------    ---------    ---------
                                                                             526,376     471,025      157,306      292,993
                                                                           ---------   ---------    ---------    ---------

Income (loss) from operations ..........................................     (27,359)     (8,515)      (5,764)      41,605
                                                                           ---------   ---------    ---------    ---------

Other income (expense):
    Interest income ....................................................       2,339       4,346          997        1,576
    Interest expense and fee amortization ..............................     (34,598)    (35,896)     (12,869)     (26,760)
    Other ..............................................................        (517)     (1,285)          27        6,968
                                                                           ---------   ---------    ---------    ---------
                                                                             (32,776)    (32,835)     (11,845)     (18,216)
                                                                           ---------   ---------    ---------    ---------
Income (loss) before reorganization items, income taxes and
  extraordinary items ..................................................     (60,135)    (41,350)     (17,609)      23,389
Reorganization items ...................................................         ---         ---          ---       92,839
                                                                           ---------   ---------    ---------    ---------
Income (loss) before income taxes and extraordinary items ..............     (60,135)    (41,350)     (17,609)     116,228
Provision for income taxes .............................................       6,500      15,500        4,400        3,700
                                                                           ---------   ---------    ---------    ---------
Income (loss) before extraordinary items ...............................     (66,635)    (56,850)     (22,009)     112,528
Extraordinary items:
    Gain on discharge of indebtedness, net of  income taxes ............         ---         ---          ---       52,442
    Loss on extinguishment of debt, net of income tax benefits .........      (1,114)    (10,961)         ---          ---
                                                                           ---------   ---------    ---------    ---------
Net income (loss) ......................................................     (67,749)    (67,811)     (22,009)     164,970
Preferred stock dividends and discount accretion .......................         ---         ---          ---          540
Net income (loss) available to common stockholders .....................   $ (67,749)  $ (67,811)   $ (22,009)   $ 164,430
                                                                           ---------   ---------    ---------    ---------
                                                                           ---------   ---------    ---------    ---------

Basic net loss per share before extraordinary items ....................   $   (4.77)  $   (4.23)   $   (2.19)
Extraordinary loss on extinguishment of debt ...........................       (0.08)      (0.82)         ---
                                                                           ---------   ---------    ---------
Basic net loss per share ...............................................   $   (4.85)  $   (5.05)   $   (2.19)
                                                                           ---------   ---------    ---------
                                                                           ---------   ---------    ---------

Shares used in computing basic net loss per share ......................      13,963      13,432       10,034
                                                                           ---------   ---------    ---------
                                                                           ---------   ---------    ---------

</TABLE>

                                      A-4

              See notes to the consolidated financial statements.
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                                                                       Predecessor
                                                                                       Reorganized Company              Company
                                                                               ---------------------------------------------------
                                                                                                              Four       Eight
                                                                                Year Ended    Year Ended  Months Ended Months Ended
                                                                               September 30, September 30,September 30,  May 31,
(dollars in thousands)                                                              1998         1997         1996        1996
                                                                               ---------------------------------------------------
<S>                                                                            <C>           <C>          <C>          <C>
Cash flows from operating activities:
    Net income (loss) ........................................................... $ (67,749)  $ (67,811)    $(22,009)   $ 164,970
    Adjustments to reconcile net income (loss) to net
        cash provided by operating activities:
      Extraordinary items .......................................................     1,114      10,961          ---      (52,442)
      Non-cash reorganization items .............................................       ---         ---          ---     (107,352)
      Depreciation and amortization .............................................   104,516      93,552       30,635       18,788
      Non-cash compensation .....................................................     1,004       1,012          975          ---
      Provision (benefit) for losses on accounts receivable .....................       277        (341)         482          110
      Non-cash charge in lieu of taxes ..........................................       ---         700        1,300          ---
      Gain on sale of ICS Division ..............................................       ---         ---          ---       (6,202)
      Other .....................................................................       ---       6,278         (175)         997
  Restricted cash requirements ..................................................     3,147       2,164       (2,755)      (6,842)
  Change in assets and liabilities net of effects from acquisitions:
        Decrease in accounts and long-term receivables ..........................     1,368       6,687        5,637       24,624
        Decrease (increase) in inventories and prepaid expenses .................      (269)      7,118       10,416       11,174
        Decrease (increase) in other assets .....................................    (1,948)       (953)           1        1,094
        Increase (decrease) in accounts payable and accrued expenses ............   (15,839)      4,970      (17,283)      (5,077)
        Increase (decrease) in other noncurrent liabilities .....................      (982)     (6,495)       4,671       (5,899)
                                                                                  ---------   ---------     --------    ---------
         Net cash provided by operating activities ..............................    24,639      57,842       11,895       37,943
                                                                                  ---------   ---------     --------    ---------
Cash flows from investing activities:
    Proceeds from sale of ICS Division ..........................................       ---         ---          ---       13,554
    Purchases of property, plant and equipment ..................................   (12,469)    (10,399)      (2,224)      (3,599)
    Payments to acquire companies and customer rights, net of the
      proceeds from the sale of DAS and DPDS business lines in 1998 .............  (130,936)    (22,443)      (3,844)         ---
                                                                                  ---------   ---------     --------    ---------
         Net cash provided by (used in) investing activities ....................  (143,405)    (32,842)      (6,068)       9,955
                                                                                  ---------   ---------     --------    ---------
Cash flows from financing activities:
    Proceeds from issuance of common stock, options and warrants ................     3,015         412         (139)         ---
    Proceeds from revolving line of credit and long-term borrowings .............   214,286     253,853          ---        2,656
    Proceeds from exercise of common stock rights ...............................       ---      24,548          ---          ---
    Principal payments on long-term debt ........................................  (132,197)   (271,288)     (22,646)     (15,332)
    Payments related to the issuance and extinguishment of debt .................    (5,541)    (12,647)         ---          ---
                                                                                  ---------   ---------     --------    ---------
         Net cash provided by (used in) financing activities ....................    79,563      (5,122)     (22,785)     (12,676)
                                                                                  ---------   ---------     --------    ---------
Effect of exchange rate changes on cash .........................................    (1,136)        (16)        (172)         691
                                                                                  ---------   ---------     --------    ---------
Increase (decrease) in cash and cash equivalents ................................   (40,339)     19,862      (17,130)      35,913
Cash and cash equivalents at beginning of period ................................    58,060      38,198       55,328       19,415
                                                                                  ---------   ---------     --------    ---------
Cash and cash equivalents at end of period ...................................... $  17,721   $  58,060     $ 38,198    $  55,328
                                                                                  ---------   ---------     --------    ---------
                                                                                  ---------   ---------     --------    ---------

</TABLE>

               See notes to the consolidated financial statements

                                      A-5

<PAGE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

<TABLE>
<CAPTION>

                                                                                          Predecessor
                                                     Reorganized Company                     Company
                                       ---------------------------------------------------------------
                                                                              Four           Eight
                                        Year Ended       Year Ended       Months Ended    Months Ended
                                       September 30,    September 30,     September 30,      May 31,
(dollars in thousands)                     1998             1997             1996             1996
                                       ---------------------------------------------------------------
<S>                                    <C>              <C>               <C>             <C>
Cash paid during the period for:
    Interest .........................    $27,277          $15,016          $5,581          $11,613
    Income taxes .....................    $ 5,150          $ 6,612          $2,942          $ 3,045

</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

See Note 3 for discussion of non-cash activity related to Fresh Start Reporting
and the Reorganization.

<TABLE>
<CAPTION>

                                                                                                        Predecessor
                                                                       Reorganized Company                Company
                                                          ----------------------------------------------------------
                                                                                               Four        Eight
                                                           Year Ended      Year Ended     Months Ended  Months Ended
                                                          September 30,    September 30,   September 30,   May 31,
(dollars in thousands)                                        1998             1997           1996          1996
                                                          ----------------------------------------------------------
<S>                                                       <C>              <C>            <C>           <C>
    Notes payable issued ...............................       ---              ---          $ 500           ---
    Assets acquired by assuming liabilities ............   $11,955          $ 1,553            ---           ---
    Interest on subordinated notes satisfied with
        additional notes ...............................       ---          $11,960            ---           ---

</TABLE>

              See notes to the consolidated financial statements.

                                      A-6

<PAGE>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>

                                                                      Capital in Cumulative
                                                            Common    excess of  translation Accumulated
(Dollars in thousands)                                       Stock    par value   adjustment   Deficit      Total
--------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>       <C>        <C>         <C>          <C>
BALANCE AT SEPTEMBER 30, 1995 - PREDECESSOR COMPANY...        $462     $182,725     $ 1,329   $(372,759)  $(188,243)
Preferred stock conversion............................          11        7,893        ----        ----       7,904
Preferred stock dividends.............................        ----         ----        ----        (516)       (516)
Accretion of redeemable preferred stock discount......        ----         ----        ----         (24)        (24)
Translation adjustment for eight months...............        ----         ----      (1,560)       ----      (1,560)
NBS stock issuance....................................          11          (11)       ----        ----        ----
Reorganization........................................        (484)    (190,607)        231     208,329      17,469
New stock issuance....................................         100       79,666        ----        ----      79,766
Net income for eight months...........................        ----         ----        ----     164,970     164,970
                                                            ------     --------     -------    --------   ---------
BALANCE AT  MAY 31, 1996 - REORGANIZED COMPANY........         100       79,666        ----        ----      79,766
Common Stock issued for restricted stock award........           1          791        ----        ----         792
Fees associated with rights offering..................        ----         (139)       ----        ----        (139)
Translation adjustment for four months................        ----         ----         159        ----         159
Net loss for four months..............................        ----         ----        ----     (22,009)    (22,009)
                                                            ------     --------     -------    --------   ---------
BALANCE AT SEPTEMBER 30, 1996 - REORGANIZED COMPANY...         101       80,318         159     (22,009)     58,569
Common Stock issued for exercise of rights............          36       24,511        ----        ----      24,547
Common Stock issued for exercise of stock options.....           1          500        ----        ----         501
Translation adjustment for twelve months .............        ----         ----      (1,287)       ----      (1,287)
Other.................................................        ----         ----        ----           1           1
Net loss for twelve months............................        ----         ----        ----     (67,811)    (67,811)
                                                            ------     --------     -------    --------   ---------
BALANCE AT SEPTEMBER 30, 1997 - REORGANIZED COMPANY...         138      105,329      (1,128)    (89,819)     14,520
Common Stock issued for exercise of stock options and            4        2,668        ----        ----       2,672
warrants..............................................
Common Stock issued for employee stock purchases......           1          905        ----        ----         906
Common Stock issued as incentive compensation.........        ----          584        ----        ----         584
Translation adjustment for twelve months .............        ----         ----       1,575                   1,575
Net loss for twelve months............................        ----         ----        ----     (67,749)    (67,749)
                                                            ------     --------     -------    --------   ---------
BALANCE AT SEPTEMBER 30, 1998 - REORGANIZED COMPANY...        $143     $109,486        $447  $ (157,568)   $(47,492)
                                                            ------     --------     -------    --------   ---------
                                                            ------     --------     -------    --------   ---------

</TABLE>

              See notes to the consolidated financial statements.

                                      A-7

<PAGE>

NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
Anacomp, Inc. and Subsidiaries

NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CONSOLIDATION

The 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.

Due to the Reorganization and implementation of Fresh Start Reporting, the
consolidated financial statements for the Reorganized Company (period starting
May 31, 1996) are not comparable to those of the Predecessor Company. For
financial reporting purposes, the effective date of the emergence from
bankruptcy is considered to be the close of business on May 31, 1996. A black
line has been drawn on the accompanying consolidated financial statements to
distinguish between the Reorganized Company and the Predecessor Company.

FOREIGN CURRENCY TRANSLATION

Substantially all assets and liabilities of Anacomp's international operations
are translated at the year-end exchange rates; income and expenses are
translated at the average exchange rates prevailing during the year. Translation
adjustments are accumulated in a separate section of stockholders' equity.
Foreign currency transaction gains and losses are included in the Consolidated
Statement of Operations.

SEGMENT REPORTING

Anacomp operates in a single business segment providing equipment, supplies and
services for document management, including storage, processing and retrieval.

MANAGEMENT ESTIMATES AND ASSUMPTIONS

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and 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.

REVENUE RECOGNITION

Revenues from sales of products and services or from lease of equipment under
sales-type leases are recorded based on shipment of products or performance of
services. Under sales-type leases, the present value of all payments due under
the lease contracts is recorded as revenue, cost of sales is charged with the
book value of the equipment plus installation costs, and future interest income
is deferred and recognized over the lease term. Operating lease revenues are
recognized during the applicable period of customer usage. Revenues from
maintenance contracts are deferred and recognized in earnings on a pro rata
basis over the period of the agreements.

INVENTORIES

Inventories are stated at the lower of cost or market, with cost being
determined by methods approximating the first-in, first-out basis.

                                      A-8

<PAGE>

RESTRICTED CASH

Restricted cash represents cash reserved as collateral for letters of credit 
issued by the Company or cash held in escrow primarily to secure certain 
contingent obligations of the Company. The contingent obligations are 
primarily related to environmental liabilities and certain insurance policies.

PROPERTY AND EQUIPMENT

Property and equipment is recorded at cost and depreciated or amortized using 
the straight-line method over estimated useful lives. Buildings are 
depreciated over ten to forty years. Leasehold improvements are amortized 
over the shorter of their estimated useful life or the remaining term of the 
related lease. Tooling costs are amortized over the total estimated units of 
production, not to exceed three years. Other property and equipment have 
useful lives ranging from two to twelve years. The Company incurred $9.0, 
$10.6, and $10.7 million in maintenance and repair costs during the years 
ended September 30, 1998, 1997, and 1996, respectively. In accordance with 
Fresh Start Reporting, property and equipment were reflected at fair market 
values as of May 31, 1996 (See Note 3).

DEBT ISSUANCE COSTS

The Company capitalizes all costs related to its issuance of debt and 
amortizes those costs using the effective interest method over the life of 
the related debt instruments. Unamortized Debt issuance costs were $8.6 
million at September 30, 1998 and are included in "Other assets" in the 
accompanying Consolidated Balance Sheets. During the years ended September 
30, 1998 and 1997 and the eight months ended May 31, 1996, the Company 
amortized $1.6, $0.9 and $1.0 million, respectively, of debt issuance costs 
which are included in "Interest expense and fee amortization" in the 
accompanying Consolidated Statements of Operations.

The Company refinanced certain long-term obligations in June 1998 which 
resulted in the write-off of $1.9 million of unamortized debt issue costs 
which is recorded as an extraordinary item, net of income tax, for the year 
ended September 30, 1998.

The Company refinanced certain long-term obligations in March 1997 which 
resulted in the write-off of $16.9 million of unamortized debt issue costs 
which is recorded as an extraordinary item, net of income tax, for the year 
ended September 30, 1997.

The Company wrote off deferred debt issuance costs of $11.1 million upon the 
date of the bankruptcy filing. These costs are included in "Reorganization 
Items" in the accompanying Consolidated Statements of Operations for the 
eight months ended May 31, 1996.

GOODWILL

Excess of purchase price over net assets of businesses acquired ("goodwill") 
is amortized on the straight-line method over the estimated periods of future 
demand for the related products acquired. Goodwill at September 30, 1998 is 
being amortized over periods of three to fifteen years. Effective with Fresh 
Start Reporting, the Company now measures impairment based on estimated 
future cash flows of the related products.

REORGANIZATION VALUE IN EXCESS OF AMOUNTS ALLOCATED TO IDENTIFIABLE ASSETS

As more fully discussed in Note 3, the Company has "reorganization value in 
excess of amounts allocated to identifiable assets" of $88.2 million net of 
accumulated amortization of $177.0 million at September 30, 1998. This asset 
is being amortized over a 3.5 year period beginning May 31, 1996. The 
carrying value of the Reorganization Asset will be periodically reviewed if 
the facts and circumstances suggest that it may be impaired. The Company will 
measure the impairment based upon future cash flows of the Company over the 
remaining amortization period.

RESEARCH AND DEVELOPMENT

The engineering costs associated specifically with research and development
programs are expensed as incurred, and amounted to $3.9 and $4.8 million for the
years ended September 30, 1998 and 1997, respectively. These 


                                      A-9

<PAGE>

costs totaled $1.3 million for the four months ended September 30, 1996 and 
$2.4 million for the eight months ended May 31, 1996. The Company supports 
several engineering processes, including basic technological research, 
product development and sustaining engineering support for existing customer 
installations.

SOFTWARE COSTS

Software product costs incurred from the time technological feasibility is 
reached until the product is available for general release to customers are 
capitalized and reported at the lower of cost or net realizable value. Such 
costs are amortized over the greater of the estimated units of sale or under 
the straight-line method not to exceed five years. Unamortized deferred 
software costs remaining as of September 30, 1998 total $0.6 million.

ACCRUED LEASE RESERVES

Other noncurrent liabilities include reserves established for unfavorable 
facility and equipment lease commitments, vacant facilities and related 
future lease costs. Total obligations recorded for these unfavorable lease 
commitments and future lease and related costs at their estimated amounts 
were $1.3 and $6.2 million at September 30, 1998 and 1997, respectively. The 
current portion of these obligations was $0.8 and $4.9 million as of 
September 30, 1998 and 1997, respectively.

INCOME TAXES

Current income tax expense is the amount of income taxes expected to be 
payable for the current year. A deferred tax asset and/or liability is 
computed for both the expected future impact of temporary differences between 
the financial statement and tax bases of assets and liabilities and for the 
expected future tax benefit to be derived from tax loss and tax credit carry 
forwards. Valuation allowances are established when necessary to reduce 
deferred tax assets to the amount expected to be "more likely than not" 
realized in future tax returns.

CASH AND CASH EQUIVALENTS

Anacomp considers all highly liquid investments purchased with an original 
maturity of three months or less to be cash equivalents. These temporary 
investments, primarily repurchase agreements and other overnight investments, 
are recorded at cost, which approximates market.

EARNINGS (LOSS) PER SHARE

Basic earnings per share is computed based upon the weighted average number 
of common shares outstanding during the period. Diluted earnings per share is 
based upon the weighted average number of common shares 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 common shares 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.

The weighted average number of common shares outstanding and net income 
(loss) per common share for periods prior to May 31, 1996 have not been 
presented because, due to the Reorganization and implementation of Fresh 
Start Reporting, they are not comparable to subsequent periods.

NOTE  2.
FINANCIAL REORGANIZATION:

On May 20, 1996 (the "Confirmation Date"), the U.S. Bankruptcy Court 
confirmed the Company's Third Amended Joint Plan of Reorganization (the 
"Reorganization"), and on June 4, 1996, the Company emerged from bankruptcy. 
Pursuant to the Reorganization, on such date certain indebtedness of the 
Company was canceled in exchange for cash, new indebtedness, and /or new 
equity interests, certain indebtedness was reinstated, certain other 
prepetition claims were discharged, certain claims were settled, executory 
contracts and unexpired leases were assumed or rejected, and the members of a 
new Board of Directors of the Company were designated. The Company 
simultaneously distributed to creditors approximately $22 million in cash, 
$112.2 million principal amount of its 11-5/8% Senior Secured Notes due 1999 
(the "Senior Secured Notes") and $160 million principal 


                                      A-10

<PAGE>

amount of its 13% Senior Subordinated Notes due 2002 (the "Senior 
Subordinated Notes"), equity securities consisting of 10 million shares of 
new Common Stock and 362,694 warrants, each of which is convertible into 
1.0566 shares of new Common Stock during the five year period ending June 3, 
2001 at an exercise price of $11.57 per share.

The process began January 5, 1996, when Anacomp filed a Prenegotiated Plan of 
Reorganization with the U.S. Bankruptcy Court in Delaware under Chapter 11 of 
the U.S. Bankruptcy Code. The Company was in default under substantially all 
of its debt agreements as a result of its failure to make $89.7 million of 
principal payments scheduled for April 26, 1995 and October 26, 1995 on the 
senior secured credit facilities (including $60 million relating to the 
revolving loan agreement which expired on October 26, 1995), $11.4 million of 
principal and interest payments on the 9% Convertible Subordinated Debentures 
which were due January 15, 1996, $34.1 million of interest payments scheduled 
for May 1, 1995 and November 1, 1995 on its Senior Subordinated Notes, and 
$3.2 million of interest payments scheduled for July 15, 1995 and January 15, 
1996 on the 13.875% Convertible Subordinated Debentures, as well as certain 
financial covenant violations, and the cross-default provisions of the other 
debt agreements.

NOTE  3.
FRESH START REPORTING AND BANKRUPTCY REORGANIZATION:

As noted above, upon emerging from bankruptcy, the Company's Revolving Loan, 
Multi-Currency Revolving Loan, Term Loans, Series B Senior Notes, 15% Senior 
Subordinated Notes, 13.875% Convertible Subordinated Debentures and 9% 
Convertible Subordinated Debentures were canceled. In addition, the Company's 
8.25% Cumulative Convertible Redeemable Exchangeable Preferred Stock, Common 
Stock, Warrants and Stock Options were canceled. In connection therewith, the 
Company issued new debt and equity securities as mentioned above.

As of May 31, 1996, the Company adopted Fresh Start Reporting in accordance 
with the American Institute of Certified Public Accountant's Statement of 
Position 90-7 "Financial Reporting by Entities in Reorganization under the 
Bankruptcy Code" ("SOP 90-7"). Fresh Start Reporting resulted in material 
changes to the Consolidated Balance Sheet, including valuation of assets, 
intangible assets (including goodwill) and liabilities at fair market value 
and valuation of equity based on the appraised reorganization value of the 
ongoing business. The net result of the valuation of identifiable assets, the 
recognition of liabilities at fair market value and the valuation of equity 
was the Reorganized Company recognizing an asset "Reorganization Value in 
excess of identifiable assets" totaling $267.5 million as of May 31, 1996.

As a result of the Bankruptcy Reorganization, the Predecessor Company recorded
an extraordinary gain resulting from the discharge of indebtedness of $52.4
million calculated as follows:

<TABLE>
<CAPTION>
         (dollars in thousands)                                             May 31, 1996
         ----------------------------------------------------------------  -------------
         <S>                                                               <C>
         Historical carrying value of old debt securities ...............  $     379,256
         Historical carrying value of related accrued interest...........         48,500
         Unamortized portion of old deferred financing costs.............           (600)
         Market value of consideration exchanged for the old debt:
                 Plan securities (face value $279,692)...................       (265,948)
                 New Common Stock (10.0 million new shares issued).......        (79,766)
                                                                           -------------
                                                                                  81,442
                    Tax provision........................................        (29,000)
                                                                           -------------
                    Extraordinary gain ..................................  $      52,442
                                                                           -------------
                                                                           -------------
</TABLE>


                                      A-11

<PAGE>


In accordance with SOP 90-7, expenses of the Predecessor Company resulting from
the Chapter 11 Reorganization are reported separately as reorganization items in
the accompanying Consolidated Statements of Operations, and are summarized
below:

<TABLE>
<CAPTION>
                                                                           Eight Months
                                                                               Ended
         (dollars in thousands)                                            May 31, 1996
         ----------------------------------------------------------------  ------------
         <S>                                                               <C>
         Write-off of deferred debt issue costs and discounts............  $    (17,551)
         Adjustment of assets and liabilities to fair market value.......       124,903
         Legal and professional fees associated with bankruptcy..........       (14,944)
         Interest earned on accumulated cash.............................           431
                                                                           ------------
                                                                           $     92,839
                                                                           ------------
</TABLE>

The following Pro Forma Condensed Financial Information for the twelve months
ended September 30, 1996, have been prepared giving effect to the sale of the
Image Conversion Services ("ICS") Division and the adjustments related to the
consummation of the Reorganization for interest expense and intangible asset
amortization. The Condensed Financial Information was prepared as if the Pro
Forma adjustments had occurred on October 1, 1995. This information does not
purport to be indicative of the results which would have been obtained had such
transactions in fact been completed as of the date hereof and for the periods
presented or that may be obtained in the future.


ANACOMP, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED FINANCIAL INFORMATION

<TABLE>
<CAPTION>
                                                                             Pro Forma
                                                                             Year Ended
         (dollars in thousands)                                            September 30,
                                                                                1996
         ---------------------------------------------------------------   ------------
         <S>                                                               <C>
         Total Revenues.................................................   $    484,637
         Operating costs and expenses...................................        493,291
         Loss before interest, other income, reorganization items,
           Income taxes and extraordinary credit........................         (8,654)
         Interest expense and fee amortization..........................        (41,327)
         Net loss available to Common Stockholders......................        (53,713)
</TABLE>

NOTE 4.
SALE OF ICS DIVISION:

Effective November 1, 1995, Anacomp sold its ICS Division for approximately 
$13.5 million, which resulted in a net gain to the Company of $6.2 million 
that is reflected in "other income (expense)" in the accompanying 
Consolidated Statement of Operations. The proceeds from this sale were used 
to reduce the principal balance on certain senior debt. The ICS Division 
performed source document microfilm services at several facilities around the 
country generating approximately $20 million of revenues per year.


                                      A-12

<PAGE>

NOTE 5.
FAIR VALUES OF FINANCIAL INSTRUMENTS:

Statement of Financial Accounting Standards No. 107, Disclosures About Fair
Value of Financial Instruments, requires disclosure of fair value information
for certain financial instruments. The carrying amounts for trade receivables
and payables are considered to be their fair values. The carrying amounts and
fair values of the Company's other financial instruments at September 30, 1998,
and 1997, are as follows:

<TABLE>
<CAPTION>
                                                             September 30, 1998          September 30, 1997
                                                          -----------------------     -----------------------
                                                          Carrying                    Carrying
(dollars in thousands)                                     Amount      Fair Value      Amount      Fair Value
                                                          --------     ----------     ---------    ----------
<S>                                                       <C>          <C>            <C>          <C>
Long-Term Debt:
     Multicurrency Revolving Loan....................           ---           ---        $2,439    $    2,439
     Senior Secured Term Loan........................           ---           ---        55,000        55,000
     10 7/8% Senior Subordinated Notes Series B......     $ 196,989    $  200,000       196,611       210,160
     10 7/8% Senior Subordinated Notes Series D......       140,192       135,000           ---           ---
</TABLE>

The September 30, 1998 and 1997 estimated fair value of Long-Term Debt was based
on quoted market values.

NOTE 6.
ACQUISITIONS:

During the three years ended September 30, 1998, Anacomp made the 
acquisitions set forth below, each of which has been accounted for as a 
purchase. The consolidated financial statements include the operating results 
of each business from the date of acquisition. Pro forma results of 
operations have not been presented because the effects of these acquisitions, 
excluding First Image, were not significant.

FISCAL 1998

During fiscal 1998, excluding the First Image acquisition discussed 
separately in Note 7, Anacomp acquired either the customer bases and other 
assets or the stock of nine businesses. Total consideration paid at the 
closing was $17.9 million of which approximately $12.5 million was assigned 
to excess of purchase price over net assets acquired. The aggregate purchase 
prices consisted of $17.0 million cash at closing, $0.9 million in assumed 
liabilities and contingent cash payments of up to $10.9 million based upon 
future operating results over the next ten years from the acquisition date.

FISCAL 1997

During fiscal 1997, Anacomp acquired either the customer bases and other 
assets or the stock of nine businesses. Total consideration was $25.5 
million, of which approximately $18.3 million was assigned to excess of 
purchase price over net assets acquired. The aggregate purchase prices 
consisted of $22.4 million cash, $1.6 million in assumed liabilities and 
contingent cash and/or stock payments of up to $10.0 million based upon 
future operating results over the next two to five years from the acquisition 
date.

FISCAL 1996

During fiscal 1996, Anacomp acquired certain assets of one business. Total 
consideration was $4.3 million, of which approximately $2.4 million was 
assigned to excess of purchase price over net assets acquired. The purchase 
price consisted of $3.8 million in cash and a one-year note payable of $0.5 
million which accrued interest at prime.


                                      A-13

<PAGE>

NOTE 7.
FIRST IMAGE ACQUISITION:

On June 18, 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 at the closing of the 
Acquisition was $150.0 million, although a post-closing adjustment has 
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") 
approximates $100.0 million, which is being amortized over a 15-year period 
on a straight-line basis. For reporting purposes, the Acquisition date was 
set as June 1, 1998 because the significant contingencies associated with the 
definitive agreement between the Company, FFMC and FDC were all cleared and 
the Company received the economic benefits and assumed the economic risks 
associated with the operations of the First Image Businesses beginning 
June 1, 1998.

The First Image Businesses include (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 has retained and 
continues to operate the IAS Business whose revenues and earnings before 
interest, other expense, taxes, restructuring charges, depreciation and 
amortization ("EBITDA") of $37.7 million and $9.7 million, respectively, for 
the period June 1, 1998 to September 30, 1998 are included in the Company's 
results of operations for the fiscal year ended September 30, 1998.

The Company closed the sale of the DAS Business to ACS Shared Services, Inc., 
a wholly owned subsidiary of Affiliated Computer Services, Inc., effective 
July 1, 1998. The Company also closed the sale of the DPDS Business to 
Southern Micrographix Company LLC (now known as AccuDocs LLC) effective 
August 1, 1998. The Company generated $45.0 million in cash from the sale of 
both Businesses and liquidation of related working capital. Combined, the two 
Businesses accounted for 44% of First Image's revenues for the year ended 
December 31, 1997. The Company has excluded the results of operations for the 
DAS and DPDS Businesses from the Company's results of operations for the year 
ended September 30, 1998.

The unaudited pro forma consolidated operating data of the Company for the 
year ended September 30, 1998 and 1997 are presented below. The unaudited pro 
forma consolidated operating data for the year ended September 30, 1998 
includes the Company's operations for the year ended September 30, 1998 and 
First Image's operations for the eight months ended May 31, 1998. The 
unaudited pro forma consolidated operating data for the year ended September 
30, 1997 includes the Company's operations for the year ended September 30, 
1997 and First Image's operations for the year ended December 31, 1997.

The unaudited pro forma consolidated operating data have been prepared giving 
effect to the IAS businesses acquisition, the disposition of the DAS and DPDS 
Businesses and the use of the proceeds thereof, the new Senior Secured 
Revolving Credit Facility and Senior Subordinated Notes (as each such term is 
described in Note 12 below), and the fiscal year 1997 refinancings as if they 
had all occurred at the beginning of the applicable results of operations 
period.

The unaudited pro forma consolidated operating data is not necessarily 
indicative of the results that would have been obtained had such transactions 
in fact been completed at the beginning of the periods presented nor is such 
information indicative of future results.

<TABLE>
<CAPTION>
                                               Year ended September 30,
                                            -----------------------------
(dollars in thousands)                         1998                1997
-----------------------------------------   ----------        -----------
<S>                                         <C>               <C>
Total revenues ..........................   $ 570,872         $   571,453
Net loss before extraordinary item ......     (60,106)            (46,000)
</TABLE>


                                      A-14

<PAGE>

NOTE 8.
RESTRUCTURING RESERVES:

In connection with the acquisition of First Image, the Company recorded 
certain reserves associated with the restructuring of the Company's existing 
business and the acquired business. The reserves associated with costs to be 
incurred related to restructuring the Company's existing business are charged 
to expense while the reserves associated with restructuring costs to be 
incurred related to the acquired business are recorded as a purchase 
accounting adjustment and does not effect the operating results of the 
Company.

Included in the Company's operating results for the year ended September 30, 
1998 are restructuring charges of $8.5 million. These charges result from the 
Company's acquisition of the First Image Businesses as the Company plans to 
close down Anacomp sites with multiple market presence in certain cities and 
convert First Image customers to Anacomp equipment. These restructuring 
activities are expected to be completed during fiscal year 1999. The 
restructuring charges consist of personnel related costs of $2.7 million, 
facility closedown costs of $4.8 million, and other costs of $1.0 million. 
The Company incurred $1.1 million of personnel costs primarily related to 
severance expenditures and $0.4 million of other administrative costs during 
the year ended September 30, 1998.

The Company recorded $11.7 million in reserves related to the restructuring 
of the First Image Businesses as the Company planned to integrate the First 
Image corporate functions into Anacomp's and also planned to close down 
certain First Image sites where the Company will have a multiple market 
presence. These restructuring activities are expected to be completed during 
fiscal year 1999. The restructuring charges consist of personnel related 
costs of $4.5 million, facility closedown costs of $3.6 million, and other 
costs of $3.6 million. The Company incurred $0.1 million of personnel costs 
primarily related to severance expenditures, $0.2 million in facility costs, 
and $1.7 million of other administrative costs during the year ended 
September 30, 1998.

NOTE 9.
SKC AGREEMENT:

Anacomp has entered into a supply agreement (the "Supply Agreement") with SKC 
America, Inc., a New Jersey corporation ("SKCA"), and SKC Limited ("SKCL"), 
an affiliated corporation of SKCA organized pursuant to the laws of the 
Republic of Korea. SKCA and SKCL are collectively referred to as "SKC". The 
Supply Agreement expires in December 2003. Pursuant to the Supply Agreement, 
Anacomp purchases substantially all of its requirements for coated duplicate 
microfilm from SKC. Pursuant to the Supply Agreement, SKC also provides the 
Company with a substantial portion of its polyester requirements for its 
magnetic media products.

In connection with the Supply Agreement, SKC also provided the Company with a 
$25.0 million trade credit facility which was reduced to $15.0 million in 
fiscal 1997 and further reduced to $5.0 million in fiscal 1998 (secured by up 
to $5.0 million of products sold to the Company by SKC), all of which is 
outstanding at September 30, 1998. The trade credit arrangement bears 
interest at 1.75% over the prime rate of The First National Bank of Boston 
(10.0% as of September 30, 1998).

In connection with an amendment to the Supply Agreement as of the effective 
date under the Plan of Reorganization, the Company agreed to certain price 
increases, retroactive to 1994, and agreed to make the following deferred 
payments related to the retroactive price increases to SKC (which were 
accrued in "Other accrued liabilities" in the accompanying Consolidated 
Balance Sheets): The Company is committed to pay $0.8 million, $0.8 million, 
and $1.0 million in 1999, 2000, and 2001, respectively which is accrued in 
"Other accrued liabilities" in the accompanying Consolidated Balance Sheets.


                                      A-15

<PAGE>

NOTE 10.
COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:

<TABLE>
<CAPTION>
                                                                                           September 30,
                                                                                     ---------------------------
        (dollars in thousands)                                                          1998              1997
                                                                                     ---------          --------
        Accounts and Notes Receivable:
        ---------------------------------------------------------------------
        <S>                                                                          <C>                <C>
        Trade receivables, net of allowance for doubtful accounts
          of $5,299 and $5,501, respectively.................................        $  76,511          $ 53,901
        Other................................................................            2,598             4,727
                                                                                     ---------          --------
                                                                                     $  79,109          $ 58,628
                                                                                     ---------          --------
                                                                                     ---------          --------
        Inventories:
        ---------------------------------------------------------------------
        Finished goods.......................................................        $  14,946          $ 14,887
        Work in process......................................................            3,583             3,299
        Raw materials and supplies...........................................           10,089             7,075
                                                                                     ---------          --------
                                                                                     $  28,618          $ 25,261
                                                                                     ---------          --------
                                                                                     ---------          --------
        Property and equipment:
        ---------------------------------------------------------------------
        Land and buildings...................................................        $   6,377          $  3,286
        Office Furniture.....................................................            6,674             2,765
        Manufacturing equipment and tooling..................................            5,431             4,442
        Field support spare parts............................................            5,077             5,875
        Leasehold improvements...............................................            3,225               645
        Equipment leased to others...........................................            2,552             2,185
        Processing equipment.................................................           32,483            17,122
                                                                                     ---------          --------
                                                                                        61,819            36,320
        Less accumulated depreciation and amortization.......................          (20,070)           (7,257)
                                                                                     ---------          --------
                                                                                     $  41,749          $ 29,063
                                                                                     ---------          --------
                                                                                     ---------          --------

        Excess of Purchase Price Over Net Assets of Businesses Acquired:
        ---------------------------------------------------------------------
        Goodwill.............................................................        $ 134,862          $ 20,673
        Less accumulated amortization........................................          (14,048)           (2,873)
                                                                                     ---------          --------
                                                                                     $ 120,814          $ 17,800
                                                                                     ---------          --------
                                                                                     ---------          --------

        Other Accrued Liabilities:
        ---------------------------------------------------------------------
        Restructuring reserves (see Note 8)..................................        $  16,786          $   ---
        Unfavorable lease commitment related to sale/leaseback transactions..              811             3,755
        EPA reserve..........................................................            3,331             6,779
        Other................................................................           18,871            23,995
                                                                                     ---------          --------
                                                                                     $  39,799          $ 34,529
                                                                                     ---------          --------
                                                                                     ---------          --------
</TABLE>


                                      A-16

<PAGE>


NOTE 11.
LONG-TERM RECEIVABLES:

<TABLE>
<CAPTION>
                                                                                September 30,
        (dollars in thousands)                                              ---------------------
        Long-term receivables:                                                1998          1997
        --------------------------------------------------------------      -------       -------
        <S>                                                                 <C>           <C>
        Lease contracts receivable....................................      $13,219       $ 8,785
        Other.........................................................        1,424         1,449
                                                                            -------       -------
                                                                             14,643        10,234
        Less current portion..........................................       (5,641)       (3,647)
                                                                            -------       -------
                                                                            $ 9,002       $ 6,587
                                                                            -------       -------
                                                                            -------       -------

</TABLE>

Lease contracts receivable result from customer leases of products under
agreements which qualify as sales-type leases. Annual future lease payments to
be received under sales-type leases are as follows:

<TABLE>
<CAPTION>
                                                                              Year Ended
                            (Dollars in thousands)                           September 30,
                            ------------------------------------------       -------------
                            <S>                                              <C>
                            1999......................................           $6,702
                            2000......................................            4,602
                            2001......................................            2,485
                            2002......................................              816
                            2003......................................              551
                                                                             -------------
                                                                                 15,156
                            Less deferred interest....................           (1,937)
                                                                             -------------
                                                                                $13,219
                                                                             -------------
                                                                             -------------
</TABLE>

NOTE 12.
LONG-TERM DEBT:
Long-term debt is comprised of the following:

<TABLE>
<CAPTION>
                                                                               September 30,
                                                                           ----------------------
        (dollars in thousands)                                               1998          1997
        --------------------------------------------------------------     --------      --------
        <S>                                                                <C>           <C>
        Senior Secured Revolving Credit Facility......................     $    ---      $    ---
        Multicurrency Revolving Loan..................................          ---         2,439
        Senior Secured Term Loan......................................          ---        55,000
        10 7/8% Senior Subordinated Notes Series B, net of
          unamortized discount of $3.0 and $3.4 million...............      196,989       196,611
        10 7/8% Senior Subordinated Notes Series D, including
          unamortized premium of $5.2 million.........................      140,192           ---
        Other.........................................................        2,855         3,434
                                                                           --------      --------
                                                                            340,036       257,484
        Less current portion..........................................       (1,152)       (9,595)
                                                                           --------      --------
                                                                           $338,884      $247,889
                                                                           --------      --------
                                                                           --------      --------
</TABLE>

SENIOR SECURED REVOLVING CREDIT FACILITY

On June 15, 1998, the Company entered into a new $80 million Senior Secured
Revolving Credit Facility (the "New Facility") with a syndicate of banks and
BankBoston, N.A. ("BankBoston") as agent. Proceeds of the New Facility were used
to repay the outstanding balance of the existing $80 million Senior Secured Term
Loan and Multi-currency Revolving Loan (the "Old Facility"). The balance of the
Old Facility at June 15, 1998, was $53.6 million.


                                      A-17

<PAGE>

The Company used cash generated from the sale of the DAS Business and DPDS 
Business combined with cash generated from the Company's operations to repay 
the outstanding balance under the New Facility. As of September 30, 1998, 
there were no amounts outstanding under the New Facility. The New Facility is 
available for loans denominated in U.S. dollars and certain foreign 
currencies. In addition, up to $15 million of the New Facility is available 
for letters of credit. Letters of credit outstanding against the New Facility 
totaled $3.4 million at September 30, 1998. The New Facility terminates on 
June 15, 2003.

The Company may elect to have loans under the New Facility bear interest at 
(a) the Base Rate (as defined below) plus 0-3/4% or (b) the Eurocurrency Rate 
(as defined below) plus 1-2%. Interest is payable quarterly under the Base 
Rate loans and payable either quarterly or at the end of the interest period 
if less than three months under the Eurocurrency Rate loans. The "Base Rate" 
for any day means the higher of (i) the corporate base rate of interest 
announced by BankBoston and (ii) the federal funds rate published by the 
Federal Reserve Bank of New York on the next business day plus 1/2%. The 
"Eurocurrency Rate" means the Eurodollar Rate or the International 
Eurocurrency Rate as defined and offered by BankBoston.

The New Facility is secured by virtually all of the Company's assets and 65% 
of the capital stock of the Company's foreign subsidiaries. Among other 
restrictions, the New Facility contains certain covenants with respect to the 
Company relating to limitations on additional debt, limitations on mergers 
and acquisitions, limitations on liens, minimum EBITDA, interest coverage and 
leverage ratios.

10 7/8% SENIOR SUBORDINATED NOTES

On June 18, 1998, the Company issued $135 million of additional 10 7/8% 
Senior Subordinated Notes (the "Series C Notes"). The Series C Notes were 
sold at 104% of the face amount to yield proceeds of $140.4 million which 
resulted in a $5.4 million premium to be offset against interest expense over 
the life of the Series C Notes. The proceeds from the Series C Notes, along 
with available cash, were used to finance the Acquisition (see Note 7). In 
August 1998, the Company filed an Exchange Offer Registration Statement with 
the SEC to exchange the Series C Notes for new Series D Notes registered 
under the Securities Act.

The 10 7/8% Series B and Series D Senior Subordinated notes ("the Notes") are 
not redeemable at the option of the Company prior to April 1, 2000. On or 
after such date and until April 1, 2003, the Notes will be redeemable at the 
option of the Company in whole or in part at prices ranging from 108.156% to 
102.710% plus accrued and unpaid interest. On or after April 1, 2003, the 
Notes may be redeemable at 100% plus accrued and unpaid interest. Prior to 
April 1, 2000, the Company may, at its option, use the net cash proceeds of 
one or more Public Equity Offerings (as defined), to redeem up to 35% of the 
aggregate principal amount at a redemption price equal to 110.875% plus 
unpaid interest to the date of redemption, provided that at least $87.75 
million of the aggregate principal amount of Notes originally issued remains 
outstanding after such redemption. Also, upon a Change of Control (as 
defined), the Company is required to make an offer to purchase the Notes then 
outstanding at a purchase price equal to 101% plus accrued and unpaid 
interest. Interest on the Notes is payable semi-annually. The Notes have no 
sinking fund requirements and are due in full on April 1, 2004.

The Notes are general unsecured obligations of the Company and expressly 
subordinated in right of payment to all existing and future Senior 
Indebtedness (as defined) of the Company. The Notes will rank pari passu with 
any future Senior Subordinated Indebtedness (as defined) and senior to all 
Subordinated Indebtedness (as defined) of the Company.

The indenture relating to the Notes contains covenants with respect to the 
Company related to limitations of indebtedness of the Company and restricted 
subsidiaries, limitations on restricted payments, limitations on 
distributions from restricted subsidiaries, limitations on sale of assets and 
restricted subsidiary stock, limitations on liens, a prohibition on layering, 
limitations on transactions with affiliates, limitations on issuance and sale 
of capital stock of restricted subsidiaries, limitations of sale/leaseback 
transactions and limitations on mergers, consolidations or sales of 
substantially all of the Company's assets.

NOTE 13.
RIGHTS OFFERING:

On October 30, 1996, the Company completed a rights offering to its existing 
shareholders that resulted in the issuance of 3.6 million shares of Common 
Stock. For each share of Anacomp Common Stock held as of the close of 
business on September 18, 1996, the Company distributed 0.36 rights to 
purchase an additional share of Common 

                                      A-18

<PAGE>

Stock at a subscription price of $6.875 per share. The Company used the 
proceeds of the rights offering, approximately $25 million, for the 
acquisition of businesses, assets and technologies.

NOTE 14.
CAPITAL STOCK:

PREFERRED STOCK

The Board of Directors of the Company has the ability, at its discretion, to
create one or more series of Preferred Stock and shall determine the
preferences, limitations, and relative voting and other rights of one or more
series of Preferred stock.

WARRANTS

In connection with the Reorganization discussed in Note 2, Anacomp issued
362,694 new warrants to certain creditors and previous common and preferred
stockholders. Each new warrant was convertible into one share of new Common
Stock at an exercise price of $12.23 per share. In connection with the rights
offering discussed in Note 13, each new warrant is now convertible into 1.0566
shares of new Common Stock at an exercise price of $11.57 per share. The new
warrants expire on June 3, 2001. At September 30, 1998, 362,015 warrants were
outstanding.

NOTE 15.
STOCK PLANS:

On July 22, 1996, the Company's Board of Directors approved the 1996 Restructure
Recognition Incentive Plan. Under this plan, effective August 22, 1996, the
Company awarded to employees 947,500 stock options to acquire new Common Stock
and 99,050 shares of restricted new Common Stock.

With regard to the stock options, the options were granted at an exercise price
of $4.63 per share of new Common Stock which will result in approximately $3.2
million of compensation expense over the vesting period of the options based on
the market value of the stock at August 22, 1996. 75% of the options vest
ratably during the period from June 30, 1997 to June 30, 1999. 25% of the
options vest on September 30, 1999, provided certain performance goals have been
met; otherwise the options vest on June 30, 2003. The Company recognized $1.0,
$1.0, and $0.2 million of compensation expense related to the options issued and
the restricted stock award during the fiscal years ended September 30, 1998 and
1997 and for the four months ended September 30, 1996, respectively. The options
expire 10 years after the date of the grant.

With regard to the restricted shares of new Common Stock, the shares vested
immediately and thus the Company recognized approximately $0.8 million of
compensation expense immediately upon granting the award based on the market
value of the Company's stock on August 22, 1996. The shares were restricted from
sale or transfer by the recipient employees until after September 30, 1997.
Effective December 6, 1996, 34,650 shares of restricted stock were returned by
employees to the Company.

In April of 1998 the Company awarded 35,000 shares of restricted common stock
that were valued at $0.5 million. The Compensation expense related to this award
is being amortized to expense over the vesting period. Amortization expense
related to this award was $0.3 million for the year ended September 30, 1998.

                                    A-19
<PAGE>

On February 3, 1997 the Company's shareholders approved the 1996 Long-Term 
Incentive Plan, which provides for the future issuance of various forms of 
stock related awards including options, stock appreciation rights and 
restricted shares. The Company has reserved 1,400,000 shares of new Common 
Stock for issuance under this plan. Awards, including the nature of the 
awards and related exercise prices, are to be determined at the discretion of 
the Compensation Committee of the Board of Directors in accordance with the 
plan provisions.

Transactions under the Company's stock option plans are summarized as follows:

<TABLE>
<CAPTION>
                                                                                        Weighted Ave.
                                                                              Shares    Exercise Price
                                                                         -----------    --------------
             <S>                                                         <C>            <C>
             OUTSTANDING AT JUNE 1, 1996............................            ----            ----  
             Granted................................................         947,500         $  4.63
             OUTSTANDING AT SEPTEMBER 30, 1996......................         947,500            4.63
             Granted................................................         939,205           10.64
             Canceled...............................................        (135,650)           4.86
             Exercised..............................................         (80,000)           5.15
                                                                         -----------
             OUTSTANDING AT SEPTEMBER 30, 1997......................       1,671,055            7.96
             Granted................................................         979,375           14.31
             Canceled...............................................        (335,336)           9.41
             Exercised..............................................        (309,388)           6.17
                                                                         -----------
             OUTSTANDING AS OF SEPTEMBER 30, 1998                          2,005,706           11.36
                                                                         -----------
</TABLE>

The following table summarizes all options outstanding and exercisable by price
range as of September 30, 1998:

<TABLE>
<CAPTION>
                                                                                        Weighted Ave.
                                       Weighted          Weighted                       Exercise Price
  Number of    Range of Exercise       Average           Average          Options      Of Exercisable
   Options      Price Per Share     Exercise Price    Remaining Life     Exercisable       Options
  ---------    -----------------    --------------    --------------     -----------   ---------------
<S>            <C>                  <C>               <C>                <C>           <C>
  610,155       $ 4.63 - $ 8.50         $ 5.32          7.98 Years         230,155         $ 5.05
  913,576       $10.63 - $13.75         $12.72          8.88 Years         188,183         $12.35
  481,975       $14.63 - $22.81         $15.07          9.53 Years           6,709         $14.96
---------
2,005,706
---------

</TABLE>

On February 3, 1997, the Company's shareholders approved the Anacomp, Inc. 1997
Qualified Employee Stock Purchase Plan (the "Stock Purchase Plan"). The Stock
Purchase Plan allows qualified employees to purchase shares of the Company's
Common Stock at the lower of 85% of the fair market value at the date of
purchase or 85% of the fair market value on the first day of each quarterly
offering period. A maximum of 500,000 shares of Common Stock is available for
purchase under the Stock Purchase Plan. As of September 30, 1998, 124,052 shares
were issued under the plan.

The Company has reserved approximately 2.9 million shares of Anacomp new Common
Stock for the exercise of stock options, exercise of warrants, employee stock
purchases and other corporate purposes.

NOTE 16.
PROFORMA EARNINGS PER SHARE - SFAS 123:

The Company accounts for its Stock Option Plans in accordance with APB Opinion
No. 25 ("APB 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. During 1995, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
Accounting for Stock Based Compensations (SFAS 123), which considers the stock
options as compensation expense to the Company, based on their fair value at the
date of grant. Under this standard, the Company has the option of accounting for
employee stock option plans as it 

                                     A-20
<PAGE>

currently does or under the new method. The Company uses the APB 25 method 
for accounting, but has adopted the disclosure requirements of SFAS 123.

Had compensation costs for these plans been determined based on their fair value
on their grant date, the Company's net loss would have been as follows:

<TABLE>
<CAPTION>
                                                                                           Four Months
                                                        Year Ended        Year Ended          Ended
                                                       September 30,     September 30,    September 30,
     (dollar in thousands, except per share data)          1998              1997             1996
                                                       -------------     -------------    -------------
     <S>                                               <C>               <C>              <C> 
     Net loss as reported..........................         $(67,749)        $(67,811)        $(22,009)
     Pro forma net loss............................          (70,309)         (69,940)         (22,096)
     Pro forma loss per share......................         $  (5.04)        $  (5.21)        $  (2.20)
</TABLE>

The fair value of each option grant is estimated on the date of grant using the
Black Scholes option pricing model. The weighted average fair value of options
granted during 1998, 1997 and 1996, as well as the weighted average assumptions
used to determine the fair values are summarized below:

<TABLE>
<CAPTION>
                                                               1998           1997            1996
                                                           ----------      ----------      ----------
       <S>                                                 <C>             <C>             <C>
       Fair Value of Options Granted...................      $  7.30        $   6.73         $  6.05
       Risk-Free Interest Rate.........................         5.69%           6.22%           6.57%
       Expected Dividend Yield.........................            0%              0%              0%
       Expected Volatility.............................           46%             40%             40%
       Expected Life...................................       5 Years        10 Years        10 Years
</TABLE>

NOTE 17.
INCOME TAXES:

The components of income (loss) before income taxes and extraordinary items
were:

<TABLE>
<CAPTION>
                                                                                    Predecessor
                                                                                      Company
                                ----------------------------------------------------------------
                                                                    Four Months     Eight Months
                                  Year Ended      Year Ended          Ended           Ended
                                September 30,    September 30,    September 30,      May 31,
(dollars in  thousands)              1998            1997              1996            1996
------------------------------- -------------    ------------     -------------     ------------
<S>                             <C>              <C>              <C>               <C>
United States..................   $(74,549)      $(53,968)         $(21,602)         $112,100
Foreign........................     14,414         12,618             3,993             4,128
                                -------------    ------------     -------------     ------------
                                  $(60,135)      $(41,350)         $(17,609)         $116,228
                                -------------    ------------     -------------     ------------
                                -------------    ------------     -------------     ------------
</TABLE>

                                     A-21
<PAGE>

The components of the consolidated tax provision after utilization of net
operating loss carryforwards and the adjustment of tax reserves are summarized
below:

<TABLE>
<CAPTION>
                                                                                       Predecessor
                                                                                         Company
                                   ------------------------------------------------------------------
                                                                      Four Months     Eight Months
                                     Year Ended       Year Ended         Ended            Ended
                                   September 30,    September 30,    September 30,       May 31,
(dollars in thousands)                  1998             1997             1996            1996
---------------------------------  --------------- ----------------- --------------- ----------------
<S>                                <C>              <C>              <C>             <C>
Current:
    Federal.........................         ---          $  300         $  600             ---
    Foreign.........................      $5,000           5,400          2,400        $  3,700
    State...........................         400             400            100             ---
                                          ------          ------         ------        --------
                                           5,400           6,100          3,100           3,700
Tax reserve adjustment..............         400           2,800           ----             ---
Non-cash charge in lieu of taxes....         ---             700          1,300          29,000
                                          ------          
                                          $5,800          $9,600         $4,400        $ 32,700
                                          ------          ------         ------        --------
                                          ------          ------         ------        --------
</TABLE>

The income tax provision is included in the Consolidated Statements of
Operations as follows:

<TABLE>
<CAPTION>
                                                                                             Predecessor
                                                                                               Company
                                          ------------------------------------------------------------------
                                                                               Four Months      Eight Months
                                            Year Ended        Year Ended          Ended            Ended
                                           September 30,    September 30,     September 30,       May 31,
(dollars in thousands)                         1998              1997             1996              1996
----------------------------------------  --------------- ----------------- --------------- ----------------
<S>                                       <C>             <C>               <C>             <C>
Provision for income taxes
  before extraordinary items ............     $ 6,500         $ 15,500         $ 4,400          $ 3,700
Extraordinary gain on discharge
  of indebtedness .......................         ---              ---             ---           29,000
Extraordinary loss extinguishment
  of indebtedness .......................        (700)          (5,900)            ---              ---
                                              -------         --------         -------          -------
                                              $ 5,800         $  9,600         $ 4,400          $32,700
                                              -------         --------         -------          -------
                                              -------         --------         -------          -------
</TABLE>

For the reorganized company, the non-cash charge in lieu of taxes represents the
utilization of pre-organization tax benefits which are reflected as reductions
in the reorganization asset. For the predecessor company, the non-cash charge in
lieu of taxes represents the utilization of pre-acquisition tax benefits which
are reflected as reductions to goodwill.


                                    A-22
<PAGE>


The following is a reconciliation of income taxes calculated at the United
States federal statutory rate to the provision for income taxes:

<TABLE>
<CAPTION>
                                                                                            Four Months       Eight Months
                                                           Year Ended        Year Ended         Ended             Ended
                                                          September 30,     September 30,    September 30,        May 31,
(dollars in thousands)                                        1998             1997              1996             1996
--------------------------------------------------------  -------------     -------------   --------------    ------------
<S>                                                       <C>               <C>             <C>               <C> 
Provision (benefit) for income taxes at U.S.
  statutory rate.........................................   $(21,047)         $(14,203)         $(6,200)         $ 40,700
Non taxable reorganization                                                                                               
income...................................................        ---              ----             ----           (43,700)
Nondeductible amortization and write-off of
  Intangible assets......................................     27,038            24,359            8,300             2,500
State and foreign income taxes...........................        309             2,677            1,200             2,300
Tax reserve adjustment...................................        400             2,800             ----              ----
Tax effect of pre-reorganization loss not
  Available due to ownership change .....................       ----              ----             ----             2,100
Alternative minimum tax..................................       ----               400            1,000              ----
Other....................................................       (200)             (533)             100              (200)
                                                            --------          --------          -------          --------
                                                            $  6,500          $ 15,500          $ 4,400          $  3,700
                                                            --------          --------          -------          --------
                                                            --------          --------          -------          --------
</TABLE>

The components of deferred tax assets and liabilities are as follows:

<TABLE>
<CAPTION>

(dollars in thousands)                                                          September 30,
                                                                     ---------------------------
Net Deferred Tax Asset:                                                  1998            1997
-------------------------------------------------------------------  ------------     ----------
<S>                                                                  <C>              <C>
Tax effects of future temporary differences related to:
    Inventory reserves ............................................  $  5,000           $  9,300
    Reserves ......................................................     6,500              4,700
    Depreciation and amortization .................................     3,500              1,900
    Other .........................................................     2,300              3,900
                                                                     --------           --------
Net tax effects of future differences .............................    17,300             19,800
                                                                     --------           --------
Tax effects of carryforward benefits:
    Federal net operating loss carryforwards ......................    62,000             59,900
    Federal general business tax credits ..........................     1,100              3,200
    Foreign tax credits ...........................................     3,000              3,000
                                                                     --------           --------
Tax effects of carryforwards ......................................    66,100             66,100
                                                                     --------           --------
Tax effects of future taxable differences and carryforwards .......    83,400             85,900
Less deferred tax asset valuation allowance .......................   (83,400)           (85,900)
                                                                     --------           --------
Net deferred tax asset ............................................  $  ---             $  ---
                                                                     --------           --------
</TABLE>

At September 30, 1998, the Company has NOLs of approximately $155.1 million
available to offset future U.S. taxable income. This amount will increase to
$198.3 million as certain temporary differences reverse in future periods. Usage
of these NOLs by the Company is limited to approximately $4 million annually.
However, the Company may authorize the use of other tax planning techniques to
utilize a portion of the remaining NOLs before they expire. In any event, the
Company expects that substantial amounts of the NOLs will expire unused.

The Company has tax credit carryforwards of approximately $4.1 million. These
tax credits are principally foreign tax credit carryforwards resulting from the
repatriation of a portion of the Company's foreign subsidiaries' accumulated
earnings and profits included in U.S. taxable income in 1996. The Company
expects that these credits will expire unused.

The tax benefits of pre-reorganization net deferred tax assets will be reported
first as a reduction of "Reorganization value in excess of identifiable assets"
and then as a credit to equity. Effective with the beginning of the year ended
September 30, 1998, the Company intends to permanently reinvest the earnings of
its foreign subsidiaries, exclusive of those foreign subsidiaries in Brazil,
Canada and Japan. For those foreign 

                                     A-23
<PAGE>

subsidiaries in Brazil, Canada, and Japan, the Company will continue to remit 
and record applicable U.S. income and withholding tax expense on their 
earnings. As of September 30, 1998, the Company has approximately $13.0 
million in undistributed earnings from those foreign subsidiaries that the 
Company intends to permanently reinvest. These tax benefits will not reduce 
income tax expense for financial reporting purposes.

NOTE 18.
COMMITMENTS AND CONTINGENCIES:

Anacomp has commitments under long-term operating leases, principally for
building space and data service center equipment. Lease terms generally cover
periods from five to twelve years. The following summarizes the future minimum
lease payments under all noncancelable operating lease obligations, including
the unfavorable lease commitments and vacant facilities discussed in Note 1,
which extend beyond one year:

<TABLE>
<CAPTION>
                                                                 Year Ended
                                                                September 30,
                                                              ----------------
          (dollars in thousands)
          <S>                                                   <C>
          1999............................................           $15,742
          2000............................................            10,949
          2001............................................             7,232
          2002............................................             6,959
          2003............................................             3,810
          Thereafter......................................            15,470
                                                                     -------
                                                                     $60,162
                                                                     -------
</TABLE>

The total of future minimum rentals to be received under noncancelable subleases
related to the above leases is $2.5 million. The Company's rent and lease
expense was $18.4 million, $16.6 million, and $19.9 million for the years ended
September 30, 1998, 1997, and 1996, respectively.

Xidex Corporation, a predecessor company of Anacomp, was designated by the
United States Environmental Protection Agency ("EPA") as a potentially
responsible party for investigatory and cleanup costs incurred by state and
federal authorities involving locations included on a list of EPA's priority
sites for investigation and remedial action under the federal Comprehensive
Environmental Response, Compensation, and Liability Act. The EPA reserve,
disclosed in Note 10, relates to its estimated liability for cleanup costs for
the aforementioned locations and other sites. No material losses are expected in
excess of the liability recorded.

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 Eastman Kodak Company ("Kodak"). The complaint
seeks injunctive relief and unspecified damages, including attorney's fees, for
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. Discovery in this
matter continues, with any trial to occur after the middle of calendar year
1999. Although there can be no assurance as to the eventual outcome of this
matter, the Company believes that it has numerous meritorious defenses which it
intends to pursue vigorously.

Anacomp also is involved in various claims and lawsuits incidental to its
business and management believes that the outcome of any of those matters will
not have a material adverse effect on its consolidated financial position or
results of operations.

NOTE 19.
INTERNATIONAL OPERATIONS:

Anacomp's international operations are conducted principally through
subsidiaries, a substantial portion of whose operations are located in Western
Europe. Total International sales includes sales by subsidiaries and through

                                    A-24
<PAGE>

distributors. Information as to U.S. and international operations for the years
ended September 30, 1998 and 1997, the four months ended September 30, 1996 and
the eight months ended May 31, 1996 is as follows (dollars in thousands):


YEAR ENDED SEPTEMBER 30, 1998 - REORGANIZED COMPANY

<TABLE>
<CAPTION>
                                                               U.S.          International          Elimination       Consolidated
                                                           ---------         -------------          -----------       ------------
     <S>                                                   <C>               <C>                    <C>               <C>
     Customer sales ...................................    $ 330,122           $ 168,895            $    ---           $ 499,017
     Inter-geographic .................................       21,493                 ---             (21,493)                ---
                                                           ---------           ---------             -------           ---------
     Total sales ......................................      351,615             168,895             (21,493)            499,017
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Operating income (loss) ..........................      (45,796)             18,437                 ---             (27,359)
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Identifiable assets ..............................    $ 360,983           $  60,170            $    ---           $ 421,153
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
</TABLE>

YEAR ENDED SEPTEMBER 30, 1997 - REORGANIZED COMPANY

<TABLE>
<CAPTION>
                                                               U.S.          International          Elimination       Consolidated
                                                           ---------         -------------          -----------       ------------
     <S>                                                   <C>               <C>                    <C>               <C>
     Customer sales ...................................    $ 300,149           $ 162,361            $    ---           $ 462,510
     Inter-geographic .................................       20,366                ----             (20,366)               ----
                                                           ---------           ---------             -------           ---------
     Total sales ......................................      320,515             162,361             (20,366)            462,510
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Operating income (loss) ..........................      (29,169)             20,654                 ---              (8,515)
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Identifiable assets ..............................    $ 346,487           $  45,464            $    ---           $ 391,951
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
</TABLE>

FOUR MONTHS ENDED SEPTEMBER 30, 1996 - REORGANIZED COMPANY

<TABLE>
<CAPTION>
                                                               U.S.          International          Elimination       Consolidated
                                                           ---------         -------------          -----------       ------------
     <S>                                                   <C>               <C>                    <C>               <C>
     Customer sales ...................................    $ 102,733           $  48,809            $    ---           $ 151,542
     Inter-geographic .................................        4,449                 ---              (4,449)               ----
                                                           ---------           ---------             -------           ---------
     Total sales ......................................      107,182              48,809              (4,449)            151,542
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Operating income(loss) ...........................      (12,401)              6,637                 ---              (5,764)
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Identifiable assets ..............................    $ 390,088           $  45,333            $    ---           $ 435,421
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
</TABLE>

                                     A-25
<PAGE>

EIGHT MONTHS ENDED MAY 31, 1996 - PREDECESSOR COMPANY

<TABLE>
<CAPTION>
                                                               U.S.          International          Elimination       Consolidated
                                                           ---------         -------------          -----------       ------------
     <S>                                                   <C>               <C>                    <C>               <C>
     Customer sales ...................................    $ 227,742           $ 106,856            $    ---           $ 334,598
     Inter-geographic .................................       12,592                ----             (12,592)                ---
                                                           ---------           ---------             -------           ---------
     Total sales ......................................      240,334             106,856             (12,592)            334,598
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
     Operating income (loss) ..........................    $  34,990           $   6,615            $    ---           $  41,605
                                                           ---------           ---------             -------           ---------
                                                           ---------           ---------             -------           ---------
</TABLE>

NOTE 20.
QUARTERLY FINANCIAL DATA (UNAUDITED):

<TABLE>
<CAPTION>
                                                             First       Second        Third         Fourth
      (dollars in thousands, except per share amounts)      Quarter      Quarter       Quarter       Quarter
                                                           ---------    ---------     ---------     ---------
     <S>                                                   <C>          <C>           <C>           <C>
     FISCAL 1998
     Revenues .........................................    $ 117,814    $ 117,593     $ 121,021     $ 142,589
     Gross margin .....................................       39,085       39,329        40,175        47,801
     Loss before extraordinary loss ...................      (15,368)     (15,855)      (21,749)      (13,663)
     Extraordinary loss on extinguishment of debt .....          ---          ---        (1,857)          743
                                                           ---------    ---------     ---------     ---------
     Net loss .........................................    $ (15,368)   $ (15,855)    $ (23,606)    $ (12,920)
                                                           ---------    ---------     ---------     ---------
                                                           ---------    ---------     ---------     ---------
     Loss before extraordinary item ...................    $   (1.11)   $   (1.14)    $   (1.55)    $   (0.96)
     Extraordinary loss on extinguishment of debt .....          ---          ---         (0.13)         0.05
                                                           ---------    ---------     ---------     ---------
     Basic net loss per share .........................    $   (1.11)   $   (1.14)    $   (1.68)    $   (0.91)
                                                           ---------    ---------     ---------     ---------
                                                           ---------    ---------     ---------     ---------
</TABLE>

<TABLE>
<CAPTION>
                                                             First       Second        Third         Fourth
                                                            Quarter      Quarter       Quarter       Quarter
                                                           ---------    ---------     ---------     ---------
     <S>                                                   <C>          <C>           <C>           <C>
     FISCAL 1997
     Revenues .........................................    $ 116,453    $ 114,520     $ 114,041     $ 117,496
     Gross margin .....................................       41,414       38,801        37,782        39,999
     Loss before extraordinary loss ...................      (12,914)     (14,566)      (14,856)      (14,514)
     Extraordinary loss on extinguishment of debt .....          ---      (12,536)          875           700
                                                           ---------    ---------     ---------     ---------
     Net loss .........................................    $ (12,914)   $ (27,102)    $ (13,981)    $ (13,814)
                                                           ---------    ---------     ---------     ---------
                                                           ---------    ---------     ---------     ---------
     Loss per share before extraordinary item .........    $   (1.01)   $   (1.06)    $   (1.08)    $   (1.05)
     Extraordinary loss on extinguishment of debt .....          ---        (0.92)         0.06          0.05
                                                           ---------    ---------     ---------     ---------
     Basic net loss per share .........................    $   (1.01)   $   (1.98)    $   (1.02)    $   (1.00)
                                                           ---------    ---------     ---------     ---------
                                                           ---------    ---------     ---------     ---------
</TABLE>

                                    A-26
<PAGE>

NOTE 21.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES:

The following is a summary of activity in the Company's valuation and qualifying
accounts and reserves for the years ended September 30, 1998 and 1997 and for
the periods ended September 30, 1996 and May 31, 1996:

<TABLE>
<CAPTION>
                                                     Balance at    Charged to                                 Balance at
                                                     beginning     costs and                                   end of
                                                     of period      expenses     Deductions      Other         period
                                                     ----------    -----------   ----------      -----       -----------
     (dollars in thousands, except per share amounts)
     <S>                                             <C>           <C>           <C>             <C>         <C>
     REORGANIZED COMPANY:

     YEAR ENDED SEPTEMBER 30, 1998
     Allowance for doubtful accounts................    $ 5,501         277           479           ---       $ 5,299
                                                        -------       -----         -----        ------       -------
                                                        -------       -----         -----        ------       -------
     Restructuring reserves (a).....................    $   ---       8,494         3,422        11,714       $16,786
                                                        -------       -----         -----        ------       -------
                                                        -------       -----         -----        ------       -------
     YEAR ENDED SEPTEMBER 30, 1997
     Allowance for doubtful accounts................    $ 6,768        (341)          926           ---       $ 5,501
                                                        -------       -----         -----        ------       -------
                                                        -------       -----         -----        ------       -------
     FOUR MONTHS ENDED SEPTEMBER 30, 1996
     Allowance for doubtful accounts................    $ 7,464         388         1,084           ---       $ 6,768
                                                        -------       -----         -----        ------       -------
                                                        -------       -----         -----        ------       -------
     PREDECESSOR COMPANY:

     EIGHT MONTHS ENDED MAY 31, 1996
     Allowance for doubtful accounts................    $ 7,367         253           156           ---       $ 7,464
                                                        -------       -----         -----        ------       -------
                                                        -------       -----         -----        ------       -------
</TABLE>

         (a)      Other additions include restructuring liabilities recorded in
                  connection with the First Image acquisition. See Note 8.

                                    A-27
<PAGE>

EXHIBIT INDEX

EXHIBIT NUMBER

(10) MATERIAL CONTRACTS.

(21) SUBSIDIARIES OF THE REGISTRANT.

(23) CONSENT OF ARTHUR ANDERSEN, LLP.

(27) FINANCIAL DATA SCHEDULE (REQUIRED FOR ELECTRONIC FILING ONLY).



                                    A-28