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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|(Mark One)                                   |                                                                                          
|-------------------------------------------- | -----------------------------------------------------------------------------------------
|ý                                            | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|For the fiscal year ended September 30, 2002
|or                                          
|o                                            | 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)

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Anacomp, Inc.(Exact Name of Registrant as Specified in Its Charter)

|Indiana(State or Other Jurisdiction of Incorporation or Organization) |  | 35-1144230(I.R.S. Employer Identification No.)
|--------------------------------------------------------------------- |  | ----------------------------------------------

15378 Avenue of Science, San Diego, California 92128-3407
(858) 716-3400(Address, Including Zip Code, and Telephone Number, Including Area Code, of Principal Executive Office)

Securities
registered pursuant to Section 12(b) of the Act:NoneSecurities registered pursuant to Section 12(g) of the Act:

Title of each class
Class A Common Stock, $0.01 par value
Class B Common Stock $0.01 par value
Class B Common Stock Warrants

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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 ý    No o

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.  ý

Indicate
by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the
Act.) Yes o    No ý

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

The
aggregate market value of the voting stock held by non-affiliates of the registrant was approximately $62,078,940 as of March 29, 2002 (based upon the closing
price for shares of the registrant's common stock as reported by the OTC Bulletin Board for March 29, 2002, the last business day of the registrant's most recently completed second fiscal
quarter) and $12,352,580 as of December 19, 2002 (based upon the closing price for shares of the registrant's common stock as reported by the OTC Bulletin Board for December 19, 2002).
Shares of common stock held by each of the registrant's executive officers, directors and stockholders whose ownership exceeds 10% of our common stock outstanding at March 29, 2002 and
December 19, 2002, respectively, 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.

As
of December 19, 2002, the number of outstanding shares of the registrant's Class A Common Stock, $0.01 par value, was 4,032,000 and the number of outstanding shares of
the registrant's Class B Common Stock, $0.01 par value, was 4,034.

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 2002 Annual Meeting of Shareholders, currently scheduled to be held on February 25, 2003, are incorporated by reference into Part III of this report. Such
Definitive Proxy Statement (or an amendment to this report on Form 10-K containing the information to be incorporated by reference) will be filed with the Commission not later than
120 days after the conclusion of the registrant's fiscal year ended September 30, 2002.

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ANACOMP, INC.        FORM 10-K        For the Fiscal Year Ended September 30, 2002        INDEX

|         |         |                                                                                 |                                                                                                 | Page
|-------- | ------- | ------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------- | ----
|Part I   |         |                                                                                 |                                                                                                 |     
|         | Item 1  |                                                                                 | Business                                                                                        |     
|         | Item 2  |                                                                                 | Properties                                                                                      |     
|         | Item 3  |                                                                                 | Legal Proceedings                                                                               |     
|         | Item 4  |                                                                                 | Submission of Matters to a Vote of Security Holders                                             |     
|Part II  |         |                                                                                 |                                                                                                 |     
|         | Item 5  |                                                                                 | Market for Registrant's Common Equity and Related Stockholder Matters                           |     
|         | Item 6  |                                                                                 | Selected Financial Data                                                                         |     
|         | Item 7  |                                                                                 | Management's Discussion and Analysis of Financial Condition and Results of Operations           |     
|         | Item 7A |                                                                                 | Quantitative and Qualitative Disclosures About Market Risk                                      |     
|         | Item 8  |                                                                                 | Financial Statements and Supplementary Data                                                     |     
|         | Item 9  |                                                                                 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure            |     
|Part III |         |                                                                                 |                                                                                                 |     
|         | Item 10 |                                                                                 | Directors and Executive Officers of the Registrant                                              |     
|         | Item 11 |                                                                                 | Executive Compensation                                                                          |     
|         | Item 12 |                                                                                 | Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters |     
|         | Item 13 |                                                                                 | Certain Relationships and Related Transactions                                                  |     
|         | Item 14 |                                                                                 | Controls and Procedures                                                                         |     
|Part IV  |         |                                                                                 |                                                                                                 |     
|         | Item 15 |                                                                                 | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                                |     
|         |         | Signatures                                                                      |                                                                                                 | 41  
|         |         | Securities and Exchange Act Rule 13a-14 and 15d-14 Certification of CEO and CFO |                                                                                                 | 42  

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PART I

ITEM 1. BUSINESS

This Annual Report, including Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", contains "forward-looking
statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended regarding our business,
financial condition, results of operations and prospects. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates" and similar expressions or variations of such
words are intended to identify forward-looking statements, but are not the exclusive means of identifying forward-looking statements in this Annual Report. Additionally, statements concerning future
matters such as our future plans and operations, sales levels, liquidity needs, anticipated growth of the markets in which we operate, revenue trends and other statements regarding matters that are
not historical are forward-looking statements.

Although
forward-looking statements in this Annual Report on Form 10-K reflect the good faith and judgment of our management, such statements can only be based on
facts and factors of which we are currently aware. Consequently, forward-looking statements are inherently subject to risks and uncertainties. Our actual results, performance, achievements and other
items contained in the forward-looking statements may differ materially from those discussed in or anticipated by the forward-looking statements. Factors that could cause or contribute to such
differences in results and outcomes include without limitation those discussed under the heading "Risk Factors" below, as well as those discussed elsewhere in this Annual Report on
Form 10-K. We encourage you to not place undue reliance on these forward-looking statements, which speak only as of the date of this Annual Report on Form 10-K.
We undertake no obligation to revise or update any forward-looking statements in order to reflect any event or circumstance that may arise after the date of this Annual Report on
Form 10-K. We encourage you to carefully review and consider the various disclosures made in this Annual Report on Form 10-K, which attempt to address the risks
and factors that may affect our business, financial condition, results of operations and prospects. Forward-looking statements involve known and unknown risks, uncertainties and other important
factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any future results, performance or achievements expressed or implied by
forward-looking statements. Risks, uncertainties and other important factors include, among others:



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OVERVIEW

Anacomp®, Inc. (together with its consolidated subsidiaries, "Anacomp" or the "Company") is a global provider of information outsourcing,
maintenance support, and imaging and print solutions. Anacomp was incorporated in Indiana in 1968 and has active international subsidiaries in Austria, Belgium, Canada, France, Germany, Italy, the
Netherlands, Scandinavia and the United Kingdom. Anacomp's headquarters are located at 15378 Avenue of Science in San Diego, California 92128-3407, and the telephone number is
(858) 716-3400.

For
nearly 35 years, Anacomp has provided a broad range of analog and digital archive and retrieval services and systems to help companies manage and distribute their critical
business documents. We are also one of the world's leading independent, vendor neutral providers of Multi-Vendor Services (MVS). We offer expert installation and maintenance services for a broad array
of third party equipment, such as mass storage devices and high-speed output systems. In addition, we provide systems and related supplies and services to much of the installed base of COM
(Computer Output to Microfilm) imaging systems worldwide through a combination of direct sales, telemarketing and distributors. Anacomp was once the primary manufacturer for most of the base of this
installed equipment and today we provide "as new" systems to our customers in North America, Japan and Europe. We also refurbish high-speed laser printers and provide maintenance support
for a number of these devices, as well as selling associated supplies.

We
deliver our products and services to more than 7,000 businesses and organizations in 68 countries directly or through our worldwide network of dealers and distributors. We have a
large base of premier customers in the banking, insurance and brokerage sectors, including approximately one half of the Fortune 500 companies. Our information outsourcing sales efforts are focused
heavily on these three segments, each of which has substantial and diverse document management needs. We are currently expanding our range of outsource services, adding document imaging (scanning)
services, printing services and e-mail archive capabilities to meet the demanding requirements of these and other markets. By meeting our customers' full range of information outsourcing
needs in this way, we expect to provide increased value and to maximize our business with each customer.

In
previous years, our business results have been reported in two primary business units, Document Solutions and Technical Services. In fiscal year 2002, these businesses were merged
together in an effort to create synergy for our business across product lines and to reduce operating costs. We believe our
business offerings can be sold more effectively through a single dedicated sales channel and that a number of operating efficiencies will be realized by combining our sales, operating and support
organizations. The majority of our business relates to managing customer documents, supporting the devices these documents are captured or printed on, and providing supplies for the same. We believe
we can service our existing and future customers more effectively by "bundling" an expanded list of services (e.g., Web viewing, CD Services, printing, scanning and long-term archival
storage). As a result we no longer report our operating results in separate business units.

Bankruptcy Reorganization

On October 19, 2001, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, together with a prepackaged plan of
reorganization (the "Plan"), with the U.S. Bankruptcy Court for the Southern District of California. The U.S. Bankruptcy Court confirmed the Plan on December 10, 2001, and we emerged from
bankruptcy effective December 31, 2001.

The
primary benefits of our bankruptcy were the elimination of $310 million of debt, related accrued interest of $52.3 million and the related annual interest expense of
approximately $34 million.

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Additionally, our credit facility was amended such that we cured previous events of default and we continue to have the ability to borrow under the credit facility.

Under
the Plan, our publicly traded 107/8% senior subordinated notes, related accrued interest and existing Anacomp common stock were canceled, and new common stock was
issued. New Class A Common Stock was distributed to the holders of the notes, as well as reserved for issuance as incentive compensation to Anacomp personnel. New Class B Common Stock
was issued and distributed to holders of previously existing Anacomp common stock. Terms and conditions of the Class A and Class B Common Stock are identical, including voting rights,
dividends, when and if declared, and liquidation rights, subject to any preference of preferred stock as may be issued in the future. Preferred stock is authorized to be issued in one or more series
with terms to be established at the time of issuance by our Board of Directors.

In
exchange for the notes totaling $310 million and related accrued interest totaling $52.3 million, holders of the notes received 4,030,000 shares of new Class A
Common Stock. Holders of previously existing common stock received 4,034 shares of new Class B Common Stock. In addition, for each share of new Class B Common Stock issued, these
shareholders received 194.12 warrants. Each warrant is exercisable for a period of five years for the purchase of one share of the new Class B Common Stock at an exercise price of $61.54 per
share. As a result, 783,077 warrants to purchase Class B Common Stock were issued.

Holders
of Class A Common Stock own 99.9% of our equity and those holding Class B Common Stock own 0.1%.

Anacomp's
financial results for fiscal 2002 reflect the continuing overall decline in the COM business, growth in our Multi-Vendor Services and Web Presentment offerings, the effects of
our financial restructuring and associated debt elimination, and re-payment of a significant portion of the outstanding balance of our credit facility. See Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations", and the Notes to the Company's Consolidated Financial Statements for additional information with respect to our fiscal 2002 financial
performance and liquidity.

Document Management Industry

The document management industry in which Anacomp conducts business provides businesses and organizations with products and services for storing, distributing and
accessing critical documents. Today, the rapid increase in the number of documents generated in both commercial and non-commercial sectors, combined with the rapid advance of digital
technologies, is fueling growth in the industry. We estimate that the overall document management and related services market has been growing by more than 20% annually since 2000 and that the market
may reach $6.6 billion in 2003. We believe that this anticipated growth is based primarily on the following customer requirements:



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Products and Services

Anacomp provides archive and retrieval services based upon the document accessibility, security and archival requirements of our customers' businesses. Utilizing
our extensive infrastructure, a growing number of our customers transmit their documents to our data and document service centers via our secure, high-speed, data network. We offer three
primary information outsourcing services: (1) we host customer documents on a server and provide secure, high-speed access to them via standard Web browsers, (2) we convert
customer documents to industry standard formats and package them on Compact Disc-Recordable (CD-R) media with a viewer and navigational tools and (3) we index these
documents and capture them on microfiche or microfilm, a very stable, economical, long-term storage alternative.

Anacomp's
maintenance support services are offered in North America and Europe primarily through a dedicated, experienced organization of over 400 service professionals. We extend this
service to approximately 50 countries through our worldwide network of affiliated, certified service technicians. We support more than 85 hardware manufacturers, resellers and distributors.

During
fiscal year 2002, as a follow-on to our restructuring efforts, we focused on a number of items that we felt were important to reaffirm Anacomp's leadership position in
the document management and related services marketplace. The first step was to demonstrate that we had a valid business that could generate substantial cash flow and operating income from continuing
operations. We generated pre-tax income from continuing operations in the nine months ended September 30, 2002 by managing costs closely and carefully evaluating investments in our
future business. Second, we examined our existing business to determine where our focus should be in order to achieve positive results in fiscal year 2003. We reorganized our workforce by combining
the field organizations of Document Solutions and Technical Services into one organization, which created: an executive level position to oversee all sales and marketing activities; and a single
support group for our data centers, Web Presentment operations, field services operations and process quality. The net effect of these changes was to give each of our sales associates full access to
sell our entire product line, to introduce additional offerings and to nurture synergies between the product lines by bundling our services and products for sale to our customers.

Our
new business structure manages results along product lines distinguished primarily by technology usage. This will enable us to focus more clearly on stabilizing declining revenues in
mature product lines and to manage revenue generation in moderate and higher growth technology segments. Our overall revenues in fiscal year 2002 declined from $306 million to
$242 million or 21%, primarily

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as a result of a 27% decrease in COM-related businesses. Non-COM related revenues decreased by $6 million or 7% as a result of the sale of our Switzerland operations.
The Switzerland operations contributed approximately $14 million of non-COM revenue in fiscal year 2001.

CD Services.Anacomp offers industry-leading outsource services for storing, delivering and accessing documents using the
CD-R medium. This outsource service provides customers with an easy-to-use, high-capacity, portable, standardized solution for the electronic
distribution, access and storage of invoices, reports, statements, policies, trade confirmations and other important documents. Since entering the emerging field of CD-based document
management in 1995, Anacomp has become one of the world's largest providers of computer output to CD. During fiscal year 2002, we provided over 1,100 customers with CD Services, with the majority of
these customers based in North America.

Our
CD Services revenues declined by $2 million or 7% in fiscal year 2002 after being a consistently strong contributor to revenue growth in the past two years. CD revenues grew
from $26.7 million or 7% of total Company revenues in fiscal year 2000 to $30.1 million, or 10% of revenues in fiscal year 2001, representing growth of $3.4 million. We expect the
moderate decline in CD revenues in fiscal year 2002 to continue into fiscal year 2003 and beyond as CD services are becoming increasingly commodity-driven and prices are continuing to erode. We
believe we can mitigate these effects by increasing product sales by linking CD usage with our growing Web services segment. Primary competition in this market is from large document services
providers such as Lason, from hundreds of local and regional CD services providers as well as in house on-line viewing systems. These revenues are reported as CD/Digital in our financial
statements.

Web Presentment ServiceSM.Anacomp's Web Presentment Service provides what we believe is an industry-leading
capability for storing, delivering and accessing documents using the Internet. This outsource service provides 24x7 worldwide access to critical information for authorized users. Customer print data
streams are securely transmitted to an Anacomp Data Center, where the information is indexed and converted to a format suitable for viewing through industry-standard Web browsers. Critical customer
information can be stored concurrently at dual sites, facilitating disaster recovery planning. Records for all aspects of the customer storage process are maintained for the storage life of the
document, providing an auditable record of all document activity. We believe that financial market businesses, with highly regulated document retention and control requirements, will be among the
primary users of this service. Web Presentment Service is primarily sold via Anacomp's direct sales force.

Web
Presentment Service revenues increased by 41% in fiscal year 2002, growing from $11.1 million in fiscal year 2001 to $15.7 million. We expect continued growth from this
revenue stream in fiscal year 2003 based upon a number of factors, including increased customer awareness and recognition; a strong sales pipeline at the end of fiscal year 2002; increased national
concern for information security; and tighter financial reporting and record keeping requirements.    Web Presentment Service revenues are
currently generated primarily in North America. We have recently begun to focus on expanding this customer base throughout the U.K. and Italy.

Competition
is growing in the Internet-based document management services market. In the U.S., several smaller companies are offering somewhat similar services on a regional basis. Some
nationwide competitors have also emerged and are focused on vertical market sectors or specific, more narrowly focused applications such as check presentment, enrollment or e-mail support.
In particular, there is intense competition in the area of online document viewing. Nevertheless, the major competition for Anacomp's Web Presentment Service in North America is in-house
solutions (i.e., software licenses sold to corporations for running a Web service on internal computer equipment). Providers of technology for compatible in-house solutions include FileNET
Corporation, Documentum, Inc., SER, Mobius Management Systems and IBM. In the last several months, some of these in-house software solutions providers, recognizing the merits and
potential revenues of a services-based solution, have begun

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initiating competing service offerings, by partnering with existing document services providers. The current economic conditions and widely reported limitations on capital spending by companies
worldwide favors outsourcing as a more economical means of acquiring Internet-based document management solutions. In the U.K. and Italy, Anacomp competes with both global providers such as IBM and
individual document management outsource service providers within each country.

Integrated System Solutions.Anacomp previously offered Integrated System Solutions for document management exclusively in
our European markets, primarily through our Swiss subsidiary, Cominformatic AG. These services were comprised of software license sales, a limited ASP service offering and attendant professional
services based on the internally developed Swiss software platform. In addition, a professional services offering in support of a third party document management and workflow system was included. In
fiscal year 2002, we decided to exit this market and sold Cominformatic to edotech Limited, based in Gloucestershire, England effective October 1, 2002. We believe that the service-based
document management opportunities in Europe are a better match for our core capabilities and that they will offer Anacomp greater revenue and profit opportunities. Integrated System Solutions revenues
were $3.7 million and $17 million for the three months ended December 31, 2001 and twelve months ended September 30, 2001, respectively, and are included with CD/Digital
revenues in our financial statements.

Micrographic Services.Anacomp is a world leader in Micrographic (COM) Services. With time-tested technological
and operational expertise in COM, we image nearly two billion original pages to microfiche each month for thousands of customers worldwide. The majority of these customers are in North America and
represent 87% of total revenues from Micrographic Services. Overall, fiscal year 2002 Micrographic Services revenues were $92.6 million and represented 38% of total Company revenues.

Compared
with prior years, this line of business continued to decline in fiscal year 2002 largely as the result of a decreased demand for the COM storage and retrieval medium. Overall,
the Micrographic Services revenues declined $27.7 million, or 23%, in fiscal 2002, compared to fiscal year 2001, reflecting the trend in the mature micrographics market segment. The decline in
revenues in fiscal year 2001
from fiscal year 2000 was $30.6 million and represented a 20% decrease. We are attempting to minimize the impact of the declining micrographics market on our Micrographic Services business and
are currently implementing several strategies that are focused on retaining our business and relationships with our customers, while providing them effective, useful solutions.

Our
primary competitors in the COM outsourcing business in the U.S. marketplace include Lason and SourceCorp. We also compete on a regular basis with hundreds of local and regional COM
service providers. To date, competition in this arena has been primarily based on price. We believe we can sustain our market share by providing customers with bundled services that provide COM,
print, Web and CD services in a single package. We are also investigating using microfiche and microfilm for additional applications that require very long retention periods and plan to support source
document image to COM applications on a regular basis instead of just a case-by-case basis as in the past.

Multi-Vendor Services.Our Multi-Vendor Services (MVS) is one of the principal growth areas for us. By providing installation
and maintenance for products made by other OEMs, Anacomp is able to leverage our considerable field services and support expertise and infrastructure by expanding far beyond the range of our own
products. We offer Multi-Vendor Services using two approaches. First, Anacomp serves as an alternative to maintenance services provided by the OEM (Original Equipment Manufacturers). For example, we
offer users of Xerox high-speed laser printers a high-quality, economical alternative to the service offered by Xerox Corporation itself. There is a large installed base of
Xerox printers worldwide and, in most cases, Xerox has been the major source of field maintenance services for these critical printing systems. As a second approach, we contract with an OEM to provide
maintenance services, including field services as well as optionally available centralized services such as

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help desk support, logistics support and depot repair for that company's end users. This arrangement appeals to manufacturers that have geographically limited maintenance capabilities or no
capabilities of their own, or whose own service operations are more costly to provide than ours. We service many different makes and types of storage products, various routers and switches, high speed
printing devices, tape subsystems and many other systems under these arrangements.

We
are striving to grow our MVS business by adding additional OEM partners and Value Added Resellers (VARs), as well as through possible acquisitions. Revenues in 2002 from MVS were
$27 million, representing 52% of total maintenance services revenues and 11% of total Company revenues for the year. Annual MVS revenues increased $4.7 million or 21% in fiscal year
2002, after increasing $3.2 million or 17% in fiscal year 2001. MVS revenues of $27.1 million exceeded Micrographic Maintenance Services revenues of $25.4 million for the first
time in fiscal year 2002.

We
compete with a number of other providers in the MVS business, including the OEM's themselves and with other third party maintenance providers such as DecisionOne Holdings, the Eastman
Kodak Company ("Kodak") and IBM.

Micrographic Maintenance Services.Anacomp maintains virtually the entire installed base of Anacomp-manufactured COM systems
in use today, as well as COM systems manufactured by other suppliers. We also provide maintenance support for other micrographic equipment, such as retrieval devices, microfilm scanners, cameras and
duplicators. Revenues from micrographic maintenance services were $25.4 million or 11% of total Company revenues in fiscal year 2002.

We
have few competitors in our traditional micrographic maintenance services business, and the majority of the equipment we maintain is our own proprietary equipment.

Imaging and Print Systems.Anacomp has the largest installed base of COM systems in the world. Our flagship
XFP2000® imaging platform remains the premier system in the marketplace, using precise laser-optics and advanced film processing techniques to produce high-quality, original
and duplicate images of reports and other documents on microfiche or 16mm roll film. The XFP2000 is the most widely used imaging system in the world, with over 700 installations. We also use the
XFP2000 for our own Micrographic Services operations. While we no longer manufacture the XFP2000, we continue to offer "as new" XFP2000 imaging systems for sale, as well as refurbished laser printers.
Revenues from imaging and print systems and related equipment in fiscal year 2002 were approximately $4.2 million or 2% of total Company revenues in fiscal year 2002. Imaging and Print Systems
revenues are included as Equipment/Supplies in our financial statements. For fiscal year 2003 and beyond, we expect COM imaging systems sales will continue to decline.

Imaging and Print Supplies.Complementing Anacomp's imaging and print systems product offerings, we sell and distribute an
extensive assortment of supplies to help customers with their imaging needs. These supplies are sold through a centralized telesales group and various distributors worldwide.

Primary
products in our supplies business include silver halide original COM film (used to produce master images) and non-silver duplicating microfilm (used to produce copies
of master images). The majority of silver halide original COM film for use of Anacomp's XFP2000 systems is sold in a proprietary package and is currently available only from Anacomp. We obtain our
proprietary silver halide products through an exclusive multi-year supply agreement with Kodak. The supplies business also distributes non-proprietary duplicating film to our
installed base of imaging systems users. We obtain our duplicate film products through a long-term supply agreement with Intelicoat Technologies. We believe the users of our imaging
systems purchase the majority of their original and duplicate film and related chemicals from us. Revenues from supplies sales in fiscal year 2002 were $37.1 million or 15% of total Company
revenues and were reported as Equipment/Supplies in our financial statements.

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We
have no significant competitors in our proprietary XFP2000 original COM film business. In the original and duplicate COM film market for older imaging systems, we compete with Global
Information Distribution, Agfa-Gevaert AG ("Agfa") and Kodak.

Engineering, Research and Development

Anacomp's ability to meet customer needs for improved technology, and to maintain our leadership in the document management and related services industry, depends
on our ability to incorporate evolving technologies into our products and services to meet our customers' needs. Our engineering and development expenses totaled $7.6 million in fiscal year
2002, $7.2 million in fiscal year 2001 and $10.1 million in fiscal year 2000.

We
own numerous patents and licenses covering various aspects of our business lines and production processes, as well as proprietary trade secret information relating to our products and
services. While we believe that the protection provided by these patents, licenses and proprietary information is important, we also feel that the knowledge and experience of our employees, along with
their abilities to develop and market our services and products and to provide value added benefits to our customers, is equally significant.

Intellectual Property

Anacomp has three patents that are material to our COM business that prevent competitors from developing a film canister that is usable in the XFP2000 imaging
system. As a result, it is more difficult for competitors to offer COM film directly to our customers. Although the COM business is in decline, these patents serve to maintain our leadership in this
business segment. We also have one patent that is material to our information outsourcing business. This patent pertains to the compression of color and gray-scale imagery to achieve a
high compression of data with a low loss and low computational burden. The patents described above expire at various times between September 2010 and January 2016.

In
addition, we hold trade secrets relating to the compression technology used in our information outsourcing service offerings. While these trade secrets may be patentable, we have not
applied for patents for competitive reasons. Our compression technology affords us economies of storage, transmission and back-up of data. As these economies reduce our costs, they provide
a competitive advantage. We attempt to protect our trade secrets by entering into confidentiality agreements with third parties, employees and consultants. Our employees and engineering consultants
also sign agreements requiring that they assign to us their interests in patents and other intellectual property arising from their work for us. Additionally, all employees sign an agreement not to
engage in any conflicting employment or activity during their employment with us nor to disclose or misuse our confidential information. Should these agreements be breached or invalidated, however,
there may not be an adequate corrective remedy available. Consequently, we cannot assure that third parties, employees or consultants will not breach the confidentiality provisions in our contracts or
infringe or misappropriate our patents, trade secrets and other proprietary rights. The measures we are taking to protect our proprietary rights may also not be adequate.

Raw Materials and Suppliers

Polyester and silver are the principal raw materials used in the manufacture of both original and duplicate microfilm products. Costs for both polyester and
silver remained generally stable in fiscal year 2002 as a result of a relative balance between supply and demand. There can be no assurance, however, that the current conditions will continue.

Intelicoat
Technologies and Anacomp entered into a new four-year agreement in October 2001, in which Intelicoat agreed to supply Anacomp with duplicate microfilm. At
this time Intelicoat is the

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exclusive provider of duplicate microfilm to Anacomp. There is only one other international qualified supplier of duplicate film.

Anacomp's
XFP2000 system utilizes a proprietary, patented original film canister and the original film used in that canister is supplied exclusively by Kodak. We also purchase from Kodak
substantially all of our requirements for original microfilm for earlier-generation systems that we manufactured and other older systems.

Industry Segments and Foreign Operations

Anacomp's business is focused in the document management industry. Previously, our business results were reported in two primary business lines, Document
Solutions and Technical Services. We now manage our business through one operating unit. We believe this approach will create operating efficiencies in our sales and support organizations, and that it
will promote business decisions that are more synergistic across product lines. Financial information concerning our operations in different geographical areas is included in Note 20 of the
Notes to the Consolidated Financial Statements.

Employees

As of September 30, 2002, we employed approximately 1,600 people at multiple facilities and offices in North America and Europe, excluding our Switzerland
subsidiaries that are classified as discontinued operations at September 30, 2002. Some of our employees in certain European countries are represented by worker's councils. We consider our
employee relations to be good.

Executive Officers

The current executive officers of the Company, their ages (as of November 22, 2002) and their positions with the Company are listed in the following table:

|NAME              |  | AGE |  | PRINCIPAL OCCUPATION                                                  
|----------------- |  | --- |  | ----------------------------------------------------------------------
|Jeffrey R. Cramer |  | 49  |  | President and Chief Executive Officer                                 
|Linster W. Fox    |  | 53  |  | Director, Executive Vice President and Chief Financial Officer        
|Richard V. Keele  |  | 53  |  | Executive Vice President, Global Marketing and Sales                  
|Frank Roche       |  | 56  |  | Executive Vice President and General Manager International            
|Thomas L. Brown   |  | 46  |  | Senior Vice President and Treasurer                                   
|Paul J. Najar     |  | 40  |  | Executive Vice PresidentAdministration, General Counsel and Secretary
|James P. Hunt     |  | 43  |  | Senior Vice President of Materials and Repair                         

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

Jeffrey R. Cramerwas elected Chief Executive Officer on October 1, 2002 and President on March 18, 2002. Prior to that, he
was our Senior Vice President-Technical Services since August 13, 1997. Mr. Cramer joined Anacomp in July 1996 with Anacomp's acquisition of COM Products, Inc., referred to
as 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.

Linster W. Foxwas elected Executive Vice President on April 25, 2002, Director on November 2, 2001, and Senior Vice
President and Chief Financial Officer on November 15, 2000, having served as Senior Vice President and Corporate Controller since August 2, 1999, and Vice President and Controller since
July 1998. From January 1996 to June 1998, Mr. Fox served as Vice President and U.S. Controller. Previously, Mr. Fox served as Vice President and Controller of our
Poway Operations from

9

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May 1995 to December 1995. From October 1992 to May 1995, Mr. Fox was Vice President of Finance and Administration for Poway Operations. Prior to that,
Mr. Fox served as Vice President of Finance and Administration for our International Operations from October 1990 to October 1992.

Richard V. Keelewas elected Executive Vice President on April 25, 2002 and has led Anacomp's Global Marketing and Sales force
since June 2002. Mr. Keele served as Senior Vice President and Chief Technology Officer since September 2000. Mr. Keele joined Anacomp in January 1997 with the
Company's acquisition of Data/Ware Development, Inc. thereafter he served as Senior Vice President of Product Development and President of the Data/Ware Group.

Frank Rochewas elected Executive Vice PresidentInternational on July 22, 2002. Mr. Roche joined Anacomp in
November 1997 serving as Technical Services Director for the UK and then was promoted to Technical Services Director for the International Region. Prior to joining Anacomp, Mr. Roche was
Managing Director and CEO for the Fortay Group Holdings in the UK from 1991 to 1997.

Thomas L. Brownwas elected Senior Vice President and Treasurer on August 10, 2000, having served as Vice President and Treasurer
since 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 Anacomp from March 1991 until January 1995.

Paul J. Najarwas elected Executive Vice PresidentAdministration, General Counsel and Secretary on April 25, 2002
after serving as Vice President- Administration, General Counsel and Secretary since November 15, 2000. Mr. Najar had served as Associate General Counsel and Assistant Secretary since
joining Anacomp in October 1996. Prior to joining Anacomp, Mr. Najar was an attorney for the University of California, Irvine from May 1992 to October 1996.

James P. Huntwas elected to Senior Vice President of Materials and Repair on July 22, 2002 after serving as Vice President of
Resource and Materials Management since January 25, 2001. Mr. Hunt joined Anacomp in 1981, previously serving as Vice President of Materials, as well as in a variety of management roles
within the materials/manufacturing arena.

ITEM 2. PROPERTIES

Anacomp's headquarters will be in San Diego, California effective December 30, 2002. This facility will house our management, customer service, marketing,
a Document Services center, finance, accounting, legal and information technology groups. Additional space located in Vista, California houses the equipment/supplies, Multi-Vendor Services, and COM
Professional Services groups. We also lease office space for sales and service centers in a variety of locations around the world. Properties previously reported as owned are related to our Swiss
subsidiaries and have been classified accordingly in the current year as assets of discontinued operations in our Consolidated Balance Sheet. The following table indicates the square footage of our
facilities:

Operating
Facilities

Other
Facilities

TotalUnited States:Leased

690,751

30,229

720,980International:Leased

103,324

29,270

132,594Total

794,075

59,499

853,574


10

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"Other
facilities" consists of currently unused space, substantially all of which have been subleased to others. Management 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

On October 19, 2001 Anacomp filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, together with a prepackaged plan of
reorganization in the United States Bankruptcy Court for the Southern District of California. The U.S. Bankruptcy Court confirmed the plan on December 10, 2001, and we emerged from bankruptcy
effective December 31, 2001. The U.S. Bankruptcy Court issued its final decree on September 27, 2002 closing the Chapter 11 case. There are no remaining claims or unrecorded obligations
related to the bankruptcy proceedings.

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

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

During the three months ended September 30, 2002, no matters were submitted to a vote of Anacomp's security holders through the solicitation of proxies or
otherwise.

11

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PART II

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

Anacomp's Class A and Class B Common Stock are traded on the OTC Bulletin Board. Class B Common Stock is not actively traded and is quoted
only on a limited basis, and, as a result there is no established public trading market with respect to Class B Common Stock. The Class A Common Stock is traded under the symbol ANCPA.
The following table sets forth the range of high and low closing prices for our Class A Common Stock for the periods indicated, as reported by the OTC Bulletin Board (these quotations reflect
inter-dealer prices, without retail mark up, mark down, or commissions, and may not necessarily represent actual transactions):

|               |  | Fiscal Year 2002 |       | Fiscal Year 2001 |  
|-------------- |  | ---------------- | ----- | ---------------- | -
|
|First quarter  |  |                  | (a    | )                |  
|Second quarter |  | $                | 27.00 |                  | $
|Third quarter  |  |                  | 31.00 |                  |  
|Fourth quarter |  |                  | 26.75 |                  |  

---

Management
currently intends to retain any future earnings for use in the operation and development of the business and, therefore, does not expect to declare or pay any cash dividends
on our capital stock. In addition, our borrowing agreements prohibit the payment of cash dividends on our capital stock. As of December 5, 2002, there were approximately 25 holders of record of
our Class A Common Stock and approximately 70 holders of record of our Class B Common Stock.

Securities Authorized for Issuance Under Equity Compensation Plans

We currently maintain two compensation plans that provide for the issuance of our Class A Common Stock to officers and other employees, directors and
consultants. These consist of the 2001 Stock Option Plan, which has been approved by shareholders, and the 2002 Outside Director Restricted Stock Plan (the "2002 Plan"), which has not been approved by
shareholders. The following table sets

12

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forth information regarding outstanding options and shares reserved for future issuance under the foregoing plans as of September 30, 2002:

|                                                          |  | (a)     |  | (b) |       | (c)
|--------------------------------------------------------- |  | ------- |  | --- | ----- | ---
|
|Equity compensation plans approved by shareholders        |  | 210,000 |  | $   | 26.00 |    
|Equity compensation plans not approved by shareholders(1) |  | 2,000   |  |     | N/A   |    
|                                                          |  |         |  |     |       |    
|Total                                                     |  | 212,000 |  |     | N/A   |    
|                                                          |  |         |  |     |       |    

---

Material features of the 2002 Outside Director Restricted Stock Plan

As of September 30, 2002, we had reserved 5,000 shares of Class A Common Stock for issuance under the 2002 Plan. The 2002 Plan provides for the
granting of restricted shares of Class A Common Stock to outside directors, the consideration of which shall be services actually rendered to Anacomp for its benefit. Shares granted under the
2002 Plan may be made subject to vesting conditioned upon the satisfaction of service requirements, conditions, restrictions or performance criteria, as shall be
established by the board. Some of the shares that have been granted under the 2002 Plan are subject to full acceleration of vesting in the event of a change in control of Anacomp.

ITEM 6. SELECTED FINANCIAL DATA

The Company prior to the bankruptcy reorganization may be referred to in this Annual Report on Form 10-K as the "Predecessor Company" and the
Company after the bankruptcy reorganization may be referred to in this Annual Report on Form 10-K as the "Reorganized Company." The following Selected Financial Data of the Company
should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" set forth in Item 7 of this Annual

13

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Report on Form 10-K, and with the consolidated financial statements and the related notes thereto included elsewhere herein:

|                                                                    |  | Reorganized
Company |         | Predecessor Company |  
|------------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | -
|
|
|Revenues                                                            |  | $                   | 173,807 |                     | $
|Operating income (loss) from continuing operations                  |  |                     | 3,219   |                     |  
|(Loss) income from continuing operations before extraordinary items |  |                     | (2,312  | )                   |  
|Net (loss) income                                                   |  |                     | (2,312  | )                   |  
|Base and diluted net loss per share                                 |  |                     | (0.57   | )                   |  

|                                        |  | Reorganized Company |         | Predecessor Company |  
|--------------------------------------- |  | ------------------- | ------- | ------------------- | -
|
|
|Current assets                          |  | $                   | 71,494  |                     | $
|Current liabilities(b)                  |  |                     | 78,629  |                     |  
|Total assets                            |  |                     | 180,083 |                     |  
|Long-term debt, less current portion(b) |  |                     |        |                     |  
|Stockholders' equity (deficit)          |  |                     | 91,834  |                     |  

---

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview and Recent Events

Events Leading Up to Our Bankruptcy in 2001

Our business, revenues and operating cash flows have declined in recent years. Two primary factors led to the deterioration of our financial condition prior to
our bankruptcy in 2001: (a) an erosion of the core COM (Computer Output to Microfiche) business; and (b) heavy investment in Web-based digital technology.

We
have established ourselves as one of the world's leading providers of COM services and COM related professional services, equipment and supplies. Organizations increasingly want
instant, reliable access to information delivered via the Internet, intranet or extranets, for use with desktop browsers. This trend leads many organizations to re-evaluate their
document-management requirements, causing a shift away from microfiche and into digital technology. As a result, our COM-related revenue

14

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decreased from $369 million in fiscal year 1999, to $296 million in 2000 and $218 million in fiscal year 2001, 83%, 77% and 71%, respectively of total revenue.

In
response to this shift in technology, Anacomp made a significant commitment to develop storage and retrieval solutions through acquisitions and heavy investments in research and
development. Our engineering, research and development expenses totaled $7.2 million in fiscal year 2001, $10.1 million in fiscal year 2000 and $10 million in fiscal year 1999. In
August of 1999, we purchased Litton Adesso Software, Inc. for $17 million and incurred approximately $1.6 million of additional costs to further develop the acquired software as
the technology platform for the former docHarbor business unit, our Web-based product offering. This emerging operation reported a negative EBITDA (earnings before interest, other income,
reorganization items, restructuring charges, taxes, depreciation and amortization, asset impairment charges and extraordinary items) of $25 million in fiscal year 2000 and negative EBITDA of
$9 million in fiscal year 2001. Substantially all of the funds invested in the former docHarbor business unit were obtained by borrowing against our Prepetition Credit Agreement (senior secured
revolving credit facility).

The
combined impact of the declining COM revenues and increased costs related to docHarbor created a liquidity crisis for us, which resulted in default on our Prepetition Credit
Agreement. Beginning October 1, 2000, we did not make scheduled semi-annual $17 million interest payments to the holders of our $310 million outstanding notes
(107/8% senior subordinated notes).

Our
revenues, operating results, cash flows and liquidity were also negatively impacted by a number of other factors during fiscal year 2001, including charges for the settlement of
legal matters, professional and advisory costs related to the restructuring of our notes, and costs associated with preparations for a potential sale of all or parts of our European
document-management business, known as Document Solutions International ("DSI").

We
reported a loss of $47.5 million and positive cash flows from operations totaling $18.5 million (including non-payment of accrued interest of approximately
$34 million) during fiscal year 2001. At September 30, 2001, we had a working capital deficiency of $394.3 million (including $310 million in senior subordinated notes that
were classified as current and $51 million in related accrued interest) and a stockholders' deficit amounting to $277.9 million.

Our 2001 Bankruptcy

On October 19, 2001, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, together with a prepackaged plan of
reorganization with the U.S. Bankruptcy Court for the Southern District of California. The U.S. Bankruptcy Court confirmed the plan of reorganization on December 10, 2001, and we emerged from
bankruptcy effective December 31, 2001.

The
primary benefits resulting from our bankruptcy were the elimination of $310 million of debt, related accrued interest of $52.3 million and the related annual interest
expense of approximately $34 million. Additionally, our credit facility was amended such that we cured previous events of default and we continue to have the ability to borrow under the credit
facility. Borrowings under the facility are subject to revised terms and restrictions, and we are required to make mandatory quarterly payments that reduce the borrowing base of the credit facility.

Under
the plan of reorganization, our publicly traded 107/8% senior subordinated notes, accrued interest related to the notes, and our then existing common stock were
canceled and exchanged for shares of our new common stock. Class A Common Stock was distributed to the holders of the notes. Class B Common Stock was distributed to holders of our
previous common stock and was subject to additional dilution, as provided for in the plan of reorganization.

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Also
as a result of the confirmation of our plan of reorganization, the following occurred:



Under
bankruptcy law, an executory contract is an agreement between a debtor and third party under which, as of the date of a debtor's Chapter 11 petition, material performance on the
agreement remains due from both the debtor and non-debtor party, such that the failure of either side to perform its obligations under the agreement would excuse the other party from
further performance. The Bankruptcy Code permits a Chapter 11 debtor to assume (i.e., agree to continue to be bound both during the Chapter 11 case and following emergence) or reject (breach and no
longer be bound during the Chapter 11 case or thereafter) any executory contract. We assumed all of our executory contracts under our confirmed plan of reorganization except one, a nonresidential
lease of real property. The U.S. Bankruptcy Court issued its final decree on September 27, 2002 closing the Chapter 11 case. There are no remaining claims or unrecorded obligations related to
the bankruptcy proceedings.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and our results of operations are based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related
to bad debts, inventories, intangible assets, income taxes, restructuring and contingencies and litigation. We base our estimates on historical experience and on various other assumptions that we
believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are as follows:



Revenue Recognition.

We recognize contract revenue for the development and implementation of document services solutions under contracts over the contract period based on output
measures as defined by deliverable items identified in the contract. We make provisions for estimated losses on contracts, if any, during the period when the loss becomes probable and can be
reasonably estimated.

In
accordance with SOP 97-2, "Software Revenue Recognition," we recognize revenues from software license agreements provided that all of the following conditions are met:



16

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For
contracts with multiple obligations, we unbundle the respective components to determine revenue recognition using vendor-specific objective evidence (VSOE). In instances where VSOE
is not determinable, all of the related revenue is deferred and amortized over the contract period.

We
record revenues from sales of products and services or from leases of equipment under sales-type leases based on shipment of products (and transfer of risk of loss),
commencement of the lease, or performance of services. We recognize operating lease revenues during the applicable period of customer usage. We recognize revenue from maintenance contracts ratably
over the period of the related contract. Amounts billed in advance of our performing the related services are deferred and recognized as revenues as they are earned. Under sales-type
leases, we record as revenue the present value of all payments due under the lease, charge the cost of sales with the book value of the equipment plus installation costs, and defer and recognize
future interest income over the lease term.

Allowance for doubtful accounts, inventory valuations, litigation and environmental matters.We must
make estimates of the uncollectability of our accounts receivable. When evaluating the adequacy of the allowance for doubtful accounts, we specifically analyze accounts receivable as well as
historical bad debts, customer concentrations, customer credit-worthiness, current economic trends and changes in our customer payment terms. Our accounts receivable balance was $34 million,
net of allowance for doubtful accounts of $2.7 million, as of September 30, 2002.

We
write down our inventory for estimated obsolescence or unmarketable inventory equal to the difference between the cost of inventory and the estimated market value based upon
assumptions about future demand and market conditions. If actual market conditions are less favorable than management projects, we may need to write down additional inventory.

We
estimate ranges of liability related to pending litigation based on claims for which we can determine the probability of loss and estimate the amount and range of loss. When an
estimate of loss is deemed probable we record our best estimate of the expected loss or the minimum estimated liability related to those claims, where there is an estimable range of loss. Because of
the uncertainties related to both the outcomes and ranges of loss on currently pending litigation, we have not accrued for any litigation losses as of September 30, 2002. As additional
information becomes available, we will assess the potential liability related to our pending litigation and revise our estimates as necessary. Such revisions in our estimates of the potential
liability could materially impact our results of operations and financial position.

Xidex
Corporation, a company that we acquired in 1988, 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. At September 30, 2002, we have an estimated EPA liability for cleanup costs for the aforementioned locations and other sites totaling
$1.2 million. During fiscal year 2001,we recorded a $1.0 million reduction to our EPA liability previously estimated and accrued upon release from certain further clean-up
activity. Remedial action required by the EPA may exceed our current estimates and reserves and we may incur additional expenses related to environmental clean-up.

17

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Accounting for income taxes.As part of the process of preparing our consolidated financial
statements we are required to estimate our income taxes in each of the jurisdictions in which we operate. This process involves us estimating our actual current tax liability together with assessing
temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities, which are included within our
Consolidated Balance Sheet. We must then assess the likelihood that our deferred tax assets will be recovered from future taxable income and to the extent we believe that recovery is not likely, we
must establish a valuation allowance. To the
extent we establish a valuation allowance or increase this allowance in a period, we must include an expense within the tax provision in the statement of operations.

Significant
management judgment is required in determining our provision for income taxes, our deferred tax assets and liabilities and any valuation allowance recorded against our net
deferred tax assets. The net deferred tax asset as of September 30, 2002 was zero, net of a valuation allowance of approximately $43.3 million, due to uncertainties related to our
ability to utilize our net deferred tax assets before they expire. The valuation allowance is based on our estimates of taxable income by jurisdiction in which we operate and the period over which our
deferred tax assets will be recoverable. In the event that actual results differ from these estimates or we adjust these estimates in future periods we could materially impact our financial position
and results of operations.

The
tax benefits of pre-reorganization net deferred tax assets will be reported first as a reduction of the reorganization asset and then as a reduction to
non-current intangible assets arising from the reorganization, and finally as a credit to stockholders' equity. These tax benefits will not reduce future income tax expense for financial
reporting purposes.

Valuation of long-lived, intangible and reorganization assets.We assess the impairment
of identifiable intangibles, long-lived assets and reorganization value in excess of identifiable assets annually or whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. Factors we consider important which could trigger an impairment review include the following:



When
we determine that the carrying value of intangibles, long-lived assets and reorganization value in excess of identifiable net assets may not be recoverable based upon
the existence of one or more of the above indicators of impairment, we measure any impairment based on a projected discounted cash flow method using a discount rate determined by our management to be
commensurate with the risk inherent in our current business model. Net intangible assets, long-lived assets, and reorganization value in excess of identifiable assets amounted to
$108.6 million as of September 30, 2002.

Our
enterprise value of $150 million before consideration of debt after reorganization at December 31, 2001 was determined based on the consideration of many factors and
various valuation methods, including:



18

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The
cash flows valuation utilized five-year projections assuming a weighted average cost of capital rate of approximately 13.5%. A terminal value was determined using a
multiple of our estimated fifth year earnings before interest, other income, reorganization items, asset impairment and restructuring charges, taxes, depreciation and amortization, and extraordinary
items (EBITDA), together with the net present value of the five-year projected cash flows. The excess of the reorganization value over the fair value of identifiable net assets of
$73.2 million is reported as "Reorganization value in excess of identifiable net assets" and will not be subject to future amortization (similar to goodwill) in accordance with Statement of
Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" as issued by the Financial Accounting Standards Board ("FASB"). The asset is subject to reduction for
current income tax expense that utilizes pre-reorganization generated deferred tax assets. benefits of pre-reorganization net deferred tax assets. The utilization of these
deferred tax assets are reflected as a reduction of the "Re-organization value in excess of identifiable net assets" value.

For
enterprise valuation purposes, we estimated our revenues and cash flows through fiscal year 2006. We projected continued declines in COM and COM-related revenues at a
rate of approximately 20% annually and growth in digital and Multi-Vendor Services and product offerings. Our projections also assumed the following:



The
assigned fair values of the Reorganized Company and its assets and liabilities represent significant estimates that we made based on facts and circumstances currently available.
Valuation methodologies employed in estimating fair values also require the input of highly subjective assumptions and predictions of future events and operations. Actual future events and results
could differ substantially from management's current estimates and assumptions. Unfavorable changes compared to our projections used for Fresh Start Reporting purposes (which were based on our best
estimates and information available at that time) could result in future impairments of our reorganization asset and identifiable intangible assets, which could be material.

Results of Operations

The following results of operations information includes our historical information from prior to December 31, 2001, the effective date we emerged from
bankruptcy and is identified as results of operations of Predecessor Company. The results of operations for the nine months ended September 30, 2002 represents the Reorganized Company after
adopting Fresh Start Reporting. Due to our reorganization and the implementation of Fresh Start Reporting, the financial information for the Reorganized Company is not comparable to the Predecessor
Company. In addition, in the fourth quarter of fiscal year 2002 we committed to a plan to sell our Switzerland operations and in the third quarter we sold two smaller operating units. The operating
results for these units have been classified as income from discontinued operations for the nine-month period ended September 30, 2002. For all other periods presented these units
were not material to our consolidated results and are therefore not reported as discontinued operations. To facilitate a meaningful comparison of Anacomp's year-to-date
operating performance in fiscal years 2002 and 2001, the following discussion of results of operations on a consolidated basis is presented on a traditional comparative basis for all periods. However,
the pro forma results of operations presented below for the twelve-month period ended September 30, 2002 combines the nine-month period ended September 30, 2002 on a
Reorganized Company basis with the three-month period ended December 31, 2001 on a Predecessor Company basis. These periods and

19

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bases of accounting are not comparable and we have presented them separately in the accompanying Condensed Consolidated Statements of Operations.

|                                                                                                                                    |  | Fiscal Year Ended September 30, |        
|----------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | -------
|
|
|Revenues:                                                                                                                           |  |                                 |        
|Services                                                                                                                            |  | $                               | 195,837
|Equipment and supply sales                                                                                                          |  |                                 | 45,994 
|                                                                                                                                    |  |                                 |        
|                                                                                                                                    |  |                                 | 241,831
|                                                                                                                                    |  |                                 |        
|Cost of revenues:                                                                                                                   |  |                                 |        
|Services                                                                                                                            |  |                                 | 131,729
|Equipment and supply sales                                                                                                          |  |                                 | 32,868 
|                                                                                                                                    |  |                                 |        
|                                                                                                                                    |  |                                 | 164,597
|                                                                                                                                    |  |                                 |        
|Gross profit                                                                                                                        |  |                                 | 77,234 
|Costs and expenses:                                                                                                                 |  |                                 |        
|Engineering, research and development                                                                                               |  |                                 | 6,985  
|Selling, general and administrative                                                                                                 |  |                                 | 59,265 
|Amortization of reorganization asset                                                                                                |  |                                 |       
|Amortization of intangible assets                                                                                                   |  |                                 | 4,383  
|Restructuring charges (credits)                                                                                                     |  |                                 | 1,049  
|Asset impairment charges                                                                                                            |  |                                 |       
|                                                                                                                                    |  |                                 |        
|Operating income (loss) from continuing operations                                                                                  |  |                                 | 5,552  
|                                                                                                                                    |  |                                 |        
|Other income (expense):                                                                                                             |  |                                 |        
|Interest income                                                                                                                     |  |                                 | 508    
|Interest expense and fee amortization                                                                                               |  |                                 | (6,183 
|Other                                                                                                                               |  |                                 | 75     
|                                                                                                                                    |  |                                 |        
|                                                                                                                                    |  |                                 | (5,600 
|                                                                                                                                    |  |                                 |        
|Income (loss) from continuing operations before reorganization items, income taxes and extraordinary gain on extinguishment of debt |  |                                 | (48    
|Reorganization items                                                                                                                |  |                                 | 13,328 
|                                                                                                                                    |  |                                 |        
|Income (loss) from continuing operations before income taxes and extraordinary gain on extinguishment of debt                       |  |                                 | 13,280 
|Provision for income taxes                                                                                                          |  |                                 | 4,474  
|                                                                                                                                    |  |                                 |        
|Income (loss) from continuing operations before extraordinary gain on extinguishment of debt                                        |  |                                 | 8,806  
|Income from discontinued operations, net of taxes                                                                                   |  |                                 | 913    
|Loss on sale of discontinued operations, net of taxes                                                                               |  |                                 |       
|                                                                                                                                    |  |                                 |        
|Income (loss) before extraordinary gain on extinguishment of debt                                                                   |  |                                 | 9,719  
|Extraordinary gain on extinguishment of debt, net of taxes                                                                          |  |                                 | 265,329
|                                                                                                                                    |  |                                 |        
|Net income (loss)                                                                                                                   |  | $                               | 275,048
|                                                                                                                                    |  |                                 |        

20

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Our
revenues, operating results, cash flows and liquidity in fiscal year 2002 continue to be negatively impacted by an overall decline in our COM business. For the twelve months ended
September 30, 2002, we reported net income totaling $275 million. This was primarily due to reorganization items of $13.3 million and the cancellation of debt and resulting
extraordinary gain of $265.3 million. Positive cash flows provided by continuing operations were $18.8 million for the twelve months ended September 30, 2002. At
September 30, 2002, we had negative working capital of $7.1 million, and stockholders' equity of $96.7 million. The negative working capital is primarily due to the current period
classification of our revolving credit facility balance, due June 30, 2003, as current. Excluding this balance, our working capital at September 30, 2002 was positive
$22.8 million. Upon receipt of at least $4 million in net proceeds from the Switzerland sale, expected in early 2003, the maturity date of the credit facility will be extended from
June 30, 2003 to December 31, 2003.

Effective
December 31, 2001, we amended our senior secured revolving credit facility including these terms:



In
accordance with the new agreement, the $53.1 million direct borrowing sublimit was reduced to $44.8 million as of September 30, 2002 as a result of scheduled
principal repayments, issuance of a new letter of credit, and the sale of assets. The credit commitment will be further reduced by future periodic scheduled amounts and by 85% of the net proceeds from
the sale of the Switzerland subsidiaries. The facility is available for new borrowings when borrowings are below the direct borrowing sublimit.

Effective
December 19, 2002, we signed an amendment to the revolving credit agreement. The amendment modifies certain financial covenants to accommodate the sale of our
Switzerland operations and current business plans. Other changes to the agreement included a permanent reduction to the credit facility commitment of $10.0 million, a decrease in future
quarterly commitment reductions, and provisions for acquisitions and/or divestitures under specified conditions.

In
May 2001, we announced our intention to sell all or parts of our European document-management business, Document Solutions International ("DSI"). Approximately
$3.9 million was spent for restructuring, consulting and severance expenses in fiscal year 2001 in preparation for a potential sale of DSI. In the third quarter of fiscal year 2002, we sold
portions of DSI generating proceeds of approximately $0.3 million. In the fourth quarter of fiscal year 2002, we committed to a plan to sell our Switzerland operations. On October 18,
2002, we completed a sale of all of our Switzerland subsidiaries and operations at a sales price of CHF 26.7 million (Swiss francs). Revenues from the Swiss operations were $6.9 million,
$21.9 million and $30.4 million, or 10.1%, 7.2% and 7.9% of total Anacomp revenues for the three months ended December 31, 2001 and fiscal years 2001 and 2000, respectively. No
additional sales of all or portions of DSI are planned at this time.

The
sales price for the Switzerland operations is payable as follows: CHF 4.6 million was received at closing; CHF 18.2 million upon completion of the Cominformatic share
exchange, no later than six months from the closing date; CHF 1.1 million on or before April 18, 2003; and CHF 2.8 million within the next 18 months upon expiration of
certain indemnification claim periods. Effectively all of the net proceeds will be used to reduce the balance outstanding under the credit facility, under the terms of the senior secured revolving
credit facility.

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Fiscal Year Ended September 30, 2002 vs. Fiscal Year Ended September 30, 2001

General.We reported net income of $275 million in fiscal year 2002, primarily as a result of the extraordinary gain
recognized as a result of our Chapter 11 reorganization effective December 31, 2001, compared to a net loss of $47.5 million in fiscal year 2001. COM based revenues continued to decline
in line with historical trends, however, both MVS and Web presentment revenues grew at a double-digit rate over the prior year revenue. In addition, our cash flow from continuing operations for the
twelve months ended September 30, 2002 was $18.8 million, which in addition to our September 30, 2001 cash on hand, enabled us to reduce our outstanding credit facility balance by
$25 million during the fiscal year.

Revenues.Our revenues totaled $241.8 million in fiscal year 2002, a decrease of 21%, or $64.5 million, from
$306.3 million in fiscal year 2001.

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We defined our product lines as follows:

MVSMulti-Vendor
Services where Anacomp acts as a third party maintainer, provides support services such as help desk or depot repair, laser printer maintenance and
associated hardware sales.

WebTransmitted
ingestion, storage, delivery and internet browser-based access to documents. Also includes license sales and maintenance for the Adesso software that is our
Web platform in the US.

CD/DigitalCD
based document management services, scanning, professional services and digital software sales.

COM/
Other Output ServicesOur Computer Output Microfilm and laser printer document management services.

COM
Professional ServicesOur maintenance services for Computer Output Microfilm and other micrographic products.

Equipment/SuppliesComputer
Output Microfilm original and duplicate film, chemistry and hardware sales.

|Product Line              |  | FY 2002 |         | FY 2001 |   | Change  |  | Percentage change |        
|------------------------- |  | ------- | ------- | ------- | - | ------- |  | ----------------- | -------
|MVS                       |  | $       | 27,069  |         | $ | 22,383  |  | $                 | 4,686  
|Web presentment           |  |         | 15,716  |         |   | 11,129  |  |                   | 4,587  
|CD/Digital                |  |         | 39,639  |         |   | 54,662  |  |                   | (15,023
|COM/Other Output Services |  |         | 92,615  |         |   | 120,344 |  |                   | (27,729
|COM Professional Services |  |         | 25,402  |         |   | 34,523  |  |                   | (9,121 
|Equipment/Supplies        |  |         | 41,390  |         |   | 63,307  |  |                   | (21,917
|                          |  |         |         |         |   |         |  |                   |        
|Total                     |  | $       | 241,831 |         | $ | 306,348 |  | $                 | (64,517
|                          |  |         |         |         |   |         |  |                   |        

The
$4.7 million, or 20.9%, increase in MVS revenues over prior year revenue reflects the increase in new OEM agreements and the resulting continued growth in our Multi-Vendor
Services (services provided for, and sales of, products manufactured by other companies) offerings. In fiscal year 2002, MVS revenues exceeded COM Professional Services revenues for the first time.
The expansion of MVS continues to be a focus for us.

Web
presentment revenues increased $4.6 million, or 41.2% over prior year revenue. This reflects the addition of new customers and additional revenue from established customers as
they have increased the number of applications utilizing our Web services. We expect continued revenue growth in this product line.

CD/Digital
revenue declined $15 million, or 27.5%, from prior year revenue. This decrease was primarily the result of the treatment of the Switzerland operations as discontinued
for the nine-months ended September 30, 2002. Switzerland CD/Digital revenue totaled $17.7 million and $5.9 million in the year ended September 30, 2001 and
three-months ended December 31, 2001 respectively. The remainder of the decline is the result of lower per unit pricing as the CD service has become less specialized and more of a commodity and
as customers have opted for in-house on-line solutions. Total CD images processed in our data centers in 2002 increased approximately 10% over 2001.

COM/Other
Output Services revenue declined $27.7 million, or 23%, from the prior year. This decline reflects the decreased volumes processed in our data centers and continues the
trend experienced in prior years. We expect the COM revenues will continue to decline in future fiscal years.

COM
Professional Services revenues declined $9.1 million, or 26.4%, from the prior year. This decline reflects the continued decrease in the number of COM units in operation
worldwide. We expect that the number of COM units in use worldwide will continue to decline as organizations choose to

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outsource the functions to service centers, such as those operated by us, or elect to utilize other options such as CD or on-line software systems.

Equipment
and supplies revenue declined $21.9 million, or 34.6%, over the prior year. This decrease was largely the result of the decline in demand and use of COM units.

Gross Margins.Our gross margin as a percentage of revenues declined slightly from 32.5% ($99.6 million) for fiscal
year 2001 to 31.9% ($77.2 million) for fiscal year 2002. We were able to maintain the gross margin percentage of revenues in spite of the revenue declines through cost savings resulting from
our recent and prior restructuring activities, which included the consolidation and downsizing of facilities and reductions in our work force.

Engineering, Research and Development.Engineering, research and development expenditures decreased $0.2 million, or
3.1%, over the prior year. These costs represented 2.9% and 2.4% of total revenues for fiscal years 2002 and 2001, respectively. These expenses will not necessarily have a direct or immediate
correlation to revenues. We continue to build and support our outsource service solutions base and corresponding internet and digital technologies.

Selling, General and Administrative.SG&A expenses deceased from $83.5 million for the year ended September 30,
2001 to $59.3 million for the year ended September 30, 2002. The $24.2 million, or 29.0%, decrease was primarily the result of fiscal year 2001 charges of $5.4 million for
the settlement of a litigation matter, $5.1 million in legal, professional and financial advisory costs related to the restructuring of the Company's Notes and $3.9 million in legal,
professional, and severance costs associated with preparations for a sale of DSI. The remainder of the reduction in SG&A costs were primarily attributable to the benefits of the integration of the
former docHarbor business unit into the Document Solutions business unit, begun in May 2001. Additional annualized savings of approximately $3.5 million are expected as a result of the
2002 reorganization of our operations from two business units into one entity.

Amortization of Intangible Assets.Amortization of intangible assets decreased 62.6%, from $11.7 million for the year
ended September 30, 2001, to $4.4 million for the year ended September 30, 2002. Fiscal year 2001 amortization expense represented the amortization of goodwill related to
acquisitions in prior years. All goodwill assets from the Predecessor Company were eliminated in conjunction with Fresh Start Reporting. Fiscal year 2002 amortization expense reflects the amortization
of identifiable intangible assets valued as part of Fresh Start Reporting.

Restructuring Charges (credits).In the third quarter of fiscal year 2002, we recorded a restructuring charge of
$2.1 million related to the reorganization of our operations from two business units to one entity. The reorganization of the workforce consisted of combining the field organizations of
Document Solutions and Technical Services into one organization, the establishment of an executive level position to oversee all sales and marketing activities and a single support group for our data
centers, Web Presentment operations, field services operations and process quality. The restructuring charges included $1.6 million in employee severance and termination related costs for
approximately 100 employees, all of whom left the Company by September 30, 2002. The restructuring charges also include approximately $0.4 million for the closure of a data center for
which the lease expires in July 2004. As a result of the restructuring we anticipate annual savings of approximately $7.1 million, or approximately $0.6 million monthly. We
achieved a phase-in of cost savings in the fourth quarter of fiscal year 2002.

In
the first quarter of fiscal year 2002, we reversed $1 million of business restructuring reserves primarily related to favorable circumstances related to the shutdown of our
Japanese subsidiary. Our closure costs to vacate our facility in Japan, cost to fulfill our contract obligations and severance and related professional costs up to that time were less than anticipated
at the time the accrual was recorded.

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In
the third quarter of fiscal year 2001, we reversed $1.2 million of business restructuring reserves consisting of $0.9 million and $0.3 million from our 2000 and
1998 restructuring plans, respectively. Our 2000 restructuring plan reversals included $0.4 million in facility closing costs and $0.5 million of professional and other costs, consisting
primarily of the following items.

In
fiscal year 2000, we accrued lease termination and exit costs for ten facilities throughout the world. In England and Scotland, we were reimbursed for originally accrued exit costs
for this leased space that were reflected as a restructuring credit in the third quarter of 2001 upon receipt of such reimbursement.

Our
2000 restructuring plan also called for one of our business units to exit a United Kingdom facility, which we deemed to be inadequate for its operating needs. Because of our
deteriorating financial condition, our need to conserve European cash and our inability to transfer working capital from the United States to Europe under the terms of our Bank Group forbearance
agreement, both of which were subsequent to initiating our 2000 restructuring plan, we opted to continue operating from this facility although the facility was not ideally suited to our needs. This
revision to our plan resulted in a benefit to our original estimate of our restructuring costs and was recorded during the third quarter of 2001.

In
fiscal year 2000 we planned to occupy substantially less space in our California headquarters facility and estimated that a portion of the building space would not be sublet,
resulting in estimated lease losses. We were able to renegotiate the lease prior to issuing our third quarter 2001 financial statements, with our new lease obligation consisting only of occupied
space. Accordingly, we reported the favorable outcome in the third quarter of 2001.

Our
2000 restructuring plan estimated professional fees of approximately $1.4 million due to complex and varying legal requirements for personnel terminations and plant closures
at our multiple global facilities. We estimated these fees based on our prior experience in exiting facilities and the comparatively expensive cost, from a United States company perspective, of
terminating international personnel. As a result of our actual cost experience rates through June 30, 2001, we revised our original estimate resulting in a credit to the restructuring accrual
of approximately $0.5 million.

Our
1998 restructuring plan had estimated employee separation costs based upon notifications of classes of employees. Actual employee separation costs completed in the third quarter of
fiscal year 2001 were lower than estimated, as those personnel actually terminated had less experience and thus received less severance than originally estimated by class.

Reorganization Items.Reorganization items represent expenses and adjustments resulting from our reorganization and consist
of professional fees incurred subsequent to our Chapter 11 filing totaling $1 million, fair value adjustments made to assets and liabilities totaling $16.9 million and other asset
write-offs and settlements totaling $2.6 million (primarily related to our extinguished debt) in Fresh Start Reporting.

Extraordinary Gain on Extinguishment of Debt.Extraordinary gain on extinguishment of debt, net of taxes, totaled
$265.3 million for the three-month period ended December 31, 2001 as compared to none
in the comparable prior year period and resulted from our bankruptcy proceedings and emergence from Chapter 11 proceedings on December 31, 2001.

Interest Expense and Fee Amortization.Interest expense decreased to $6.2 million for the year ended
September 30, 2002 from $43.9 million for the year ended September 30, 2001. Current year expense included interest (approximately $1.7 million) on our senior subordinated
notes only up to October 19, 2001, the date we filed Chapter 11 bankruptcy. Prior year expense included a full twelve months of interest (approximately $34 million) on the notes. The
remainder of expense from both periods is related primarily to interest on the senior secured revolving credit facility. We expect interest

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expense to be less in 2003 as a result of an expected reduction in the credit facility outstanding reflecting the proceeds from the sale of our Switzerland operations.

Provision for Income Taxes.In the current year, tax expense totaling $4.5 million consists of $1.7 million
related to earnings of foreign subsidiaries and $2.8 million related to domestic operations. The provision for income taxes of $3.2 million for the year ended September 30, 2001
related primarily to earnings of foreign subsidiaries. The significant fiscal year 2002 provision compared to income before income taxes results from taxes related to foreign operations and to
cancellation of life insurance policies for which cash surrender value increases had not been tax effected in prior years.

Discontinued Operations.During the fourth quarter of fiscal year 2002, we adopted a plan to divest our Switzerland
businesses and on October 18, 2002 we completed a sale. The Switzerland operations were not material to our consolidated result prior to December 31, 2001. As a result the statements of
operations for the fiscal years ended September 30, 2000 and 2001 and for the three months ended December 31, 2001 do not segregate the Switzerland operations as discontinued.

Fiscal Year Ended September 30, 2001 vs. Fiscal Year Ended September 30, 2000

General.We reported a net loss of $47.5 million in fiscal year 2001, compared with a net loss of
$111.4 million in fiscal year 2000.

Revenues.Our revenues totaled $306.3 million in fiscal year 2001, a decrease of 20%, or $76.8 million, from
$383.2 million in fiscal year 2000.

|Product Line              |  | FY 2001 |         | FY 2000 |   | Change  |  | Percentage change |        
|------------------------- |  | ------- | ------- | ------- | - | ------- |  | ----------------- | -------
|MVS                       |  | $       | 22,383  |         | $ | 19,164  |  | $                 | 3,219  
|Web presentment           |  |         | 11,129  |         |   | 6,318   |  |                   | 4,811  
|CD/Digital                |  |         | 54,662  |         |   | 61,436  |  |                   | (6,774 
|COM/Other Output Services |  |         | 120,344 |         |   | 150,927 |  |                   | (30,583
|COM Professional Services |  |         | 34,523  |         |   | 44,827  |  |                   | (10,304
|Equipment/Supplies        |  |         | 63,307  |         |   | 100,525 |  |                   | (37,218
|                          |  |         |         |         |   |         |  |                   |        
|Total                     |  | $       | 306,348 |         | $ | 383,197 |  | $                 | (76,849
|                          |  |         |         |         |   |         |  |                   |        

The
$3.2 million, or 16.8%, increase in MVS revenues over prior year revenue reflects the increase in new OEM agreements and the resulting continued growth in our Multi-Vendor
Services (services provided for, and sales of, products manufactured by other companies) offerings.

Web
presentment revenues increased $4.8 million, or 76.1% over prior year revenue. This reflects the growing customer base for these services.

CD/Digital
revenue declined $6.8 million, or 11.0%, from prior year revenue. This decrease was primarily in our Switzerland Integrated System Solutions product line.

COM/Other
Output Services revenue declined $30.6 million, or 20.3%, from the prior year. This decline reflects the decreased volumes processed in our data centers and continues
the trend experienced in prior years.

COM
Professional Services revenues declined $10.3 million, or 23.0%, from the prior year. This decline reflects the continued decrease in the number of COM units in operation
worldwide.

Equipment
and Supplies revenue declined $37.2 million, or 37.0%, over the prior year. This decrease was largely the result of the decline in demand and use of COM units.

Gross Margin.Our gross margin decreased 15% during the fiscal year 2001, from $116.9 million (30% of revenues) in
fiscal year 2000 to $99.6 million (33% of revenues) in fiscal year 2001. The

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decrease in gross margin dollars was primarily the result of the $76.8 million decrease in revenue from fiscal year 2000. Fiscal year 2001 gross margin as a percentage of revenue was greater
than the fiscal year 2000 primarily as a result of the $9 million inventory charge in fiscal year 2000.

Engineering, Research and Development.Engineering, research and development expense decreased from $10.1 million in
fiscal year 2000 to $7.2 million in fiscal year 2001. This decrease was primarily the result of lower expenses related to the discontinuance of manufacturing operations effective
October 1, 2000 and the resulting decrease in support engineering expenses.

Selling, General and Administrative Expenses.Selling, general and administrative expenses or SG&A expenses, decreased from
$100.0 million for the year ended September 30, 2000, to $83.5 million for the year ended September 30, 2001. The $16.5 million decrease was primarily the result of
continuing cost reduction efforts. SG&A expenses during fiscal year 2000 included severance and other costs related to changes in senior management. SG&A expenses for the current year reflect our cost
reduction efforts as well as the benefit of a reduction to our environmental liability reserves of $1.0 million, as a result of receipt of a Rescission of Site Cleanup Requirements. The effect
of the Rescission Order is to release Anacomp from future liability at the named site. We continue to have certain minimum testing obligations at these sites for which accrued liabilities were
previously recorded. These benefits were offset by the $5.4 million charge for the settlement of a litigation matter, $5.1 million in legal,
professional and financial advisory costs related to the proposed restructuring of our Notes and $3.9 million in legal, professional and severance costs associated with preparations for a sale
of DSI.

Amortization of Reorganization Asset.Amortization of reorganization asset in fiscal year 2001 decreased to zero from
$12 million (3.1% of revenues) in fiscal year 2000. Fiscal year 2000 amortization of reorganization asset expense of $12 million completed the amortization of the asset related to our
1996 reorganization.

Amortization of Intangible Assets.Amortization of intangible assets decreased 39%, from $19.3 million for the year
ended September 30, 2000, to $11.7 million for the year ended September 30, 2001. This decrease was primarily the result of the decreased level of goodwill due to the fiscal year
2000 goodwill impairment charge of $21.4 million and completion of amortization for certain acquisitions.

Restructuring Charges and Credits.In fiscal year 2000, we recorded restructuring charges of $14.6 million related to
the reorganization of our workforce in the United States and Europe along our then four lines of business, a reorganization of parts of the corporate staff, and the phase out of manufacturing
operations. The reorganization of the workforce and corporate staff consisted of management reassessing job responsibilities and personnel requirements in each of our continuing and
on-strategy business units and corporate staff. Such assessment resulted in substantial permanent personnel reductions and involuntary terminations throughout the organization, primarily
in our European operations and our corporate and manufacturing staff. The restructuring charges included $10.3 million in employee severance and termination-related costs. Employee severance
and termination-related costs were for approximately 300 employees, all of whom have left Anacomp, although some severance payments were paid throughout calendar year 2001. The restructuring charges
also include $1.9 million of other fees related to professional services associated with negotiations to terminate facility leases and other costs associated with implementation of the business
unit structure and the reorganization of the four business units into separate entities, $1.4 million for contractual obligations and $1.0 million for facility-related costs. Other fees
were paid by December 31, 2001. As a result of the restructuring, we anticipated cost savings in excess of $1.0 million per month, primarily related to reductions in future payroll and
related employer costs and lease rental costs resulting from vacated facilities. We anticipated the phase-in of cost savings to begin in the third quarter of fiscal year 2000. We have
substantially achieved these cost savings as planned.

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In
the third quarter of fiscal year 2001, we reversed $1.2 million of business restructuring reserves consisting of $0.9 million and $0.3 million from our 2000 and
1998 restructuring plans, respectively. Our 2000 restructuring plan reversals included $0.4 million in facility closing costs and $0.5 million of professional and other costs, consisting
primarily of the following items.

In
fiscal year 2000 we accrued lease termination and exit costs for ten facilities throughout the world. In England and Scotland we were reimbursed for originally accrued exit costs for
this leased space that
were reflected as a restructuring credit in the third quarter of 2001 upon receipt of such reimbursement.

Our
2000 restructuring plan also called for one of our business units to exit a United Kingdom facility, which we deemed to be inadequate for its operating needs. Because of our
deteriorating financial condition, our need to conserve European cash and our inability to transfer working capital from the United States to Europe under the terms of our Bank Group forbearance
agreement, both of which were subsequent to initiating our 2000 restructuring plan, we opted to continue operating from this facility although the facility was not ideally suited to our needs. This
revision to our plan resulted in a benefit to our original estimate of our restructuring costs and was recorded during the third quarter of 2001.

In
fiscal year 2000 we planned to occupy substantially less space in our California headquarters facility and estimated that a portion of the building space would not be sublet,
resulting in estimated lease losses. We were able to renegotiate the lease prior to issuing our third quarter 2001 financial statements, with our new lease obligation consisting only of occupied
space. Accordingly, we reported the favorable outcome in the third quarter of 2001.

Our
2000 restructuring plan estimated professional fees of approximately $1.4 million due to complex and varying legal requirements for personnel terminations and plant closures
at our multiple global facilities. We estimated these fees based on our prior experience in exiting facilities and the comparatively expensive cost, from a United States company's perspective, of
terminating international personnel. As a result of our actual cost experience rates through June 30, 2001, we revised our original estimate resulting in a credit to the restructuring accrual
of approximately $0.5 million.

Our
1998 restructuring plan had estimated employee separation costs based upon notifications of classes of employees. Actual employee separation costs completed in the third quarter of
fiscal year 2001 were lower than estimated, as those personnel actually terminated had less experience and thus received less severance than originally estimated by class.

Asset Impairment Charges.During the third quarter of fiscal year 2000, we wrote off a note receivable with a carrying value
of $2.7 million generated from the sale of our Magnetics division in fiscal year 1999 based on the declining operating results and liquidity of the acquirer. Also in the third quarter of 2000,
due to our overall liquidity position, we abandoned a new software product as well as our Image Mouse product. As a result, we wrote off approximately $1.6 million of capitalized software
development costs and approximately $0.7 million of specialized manufacturing assets, respectively. Further, we recorded impairments of manufacturing equipment and leasehold improvements
totaling approximately $2.0 million as a result of the discontinuation of manufacturing operations effective October 1, 2000 pertaining to the former DatagraphiX (hardware systems and
supplies) segment and downsizing of facilities.

Interest Expense and Fee Amortization.Interest expense increased 7%, from $41.0 million in fiscal year 2000 to
$43.9 million in fiscal year 2001. This was the result of a higher level of borrowings on the revolving credit facility for the first six months of fiscal year 2001 compared to the first six
months of fiscal year 2000.

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Provision for Income Taxes.The provisions for income taxes of $3.2 million for the year ended September 30,
2001 and $1.6 million for the year ended September 30, 2000 related primarily to earnings and dividends of certain foreign subsidiaries.

Loss on Sale of Discontinued Operations.During the second quarter of fiscal year1999, we adopted a plan to divest our
Magnetics business. For financial reporting purposes, the divestiture was effective at the end of the second quarter of fiscal year 1999, and we recognized a gain on the sale of the business during
the third quarter of fiscal year 1999. However, as a result of changes in our business strategy and the related effect on certain Magnetics Division obligations, we revised certain estimates of costs
to be incurred in connection with this disposition, resulting in a charge of $1.6 million being recorded in the third quarter of fiscal year 2000.

Liquidity and Capital Resources

Our legacy business (COM) has declined in recent years and is forecast to continue to decline as new technologies become available and are accepted in the
marketplace. Our ability to generate sufficient cash to fund operations and to meet future bank requirements is dependent on successful and simultaneous management of the decline in COM as well as the
expansion of alternative service offerings. Other factors, such as an uncertain economy, levels of competition in the document management industry, and technological uncertainties will impact our
ability to generate cash and maintain liquidity. Although no assurances can be given, management believes that the actions taken over the past two years, including new and enhanced product and service
offerings, company downsizing, cost control measures and the debt restructuring from our bankruptcy have positioned us for a return to profitability and maintenance of sufficient cash flows from
operations to meet our operating, capital and debt requirements in the normal course of business for at least the next twelve months.

Concurrent
with the emergence from bankruptcy on December 31, 2001, Anacomp and Fleet National Bank, as agent, and its syndicate of lenders (collectively, "the Bank Group")
entered into an Amended and Restated Revolving Credit Agreement. The amended facility included a $58.9 million credit commitment, with a $53.1 million sublimit for direct borrowing and a
$5.8 million letter of credit sublimit. In accordance with the new agreement, the $53.1 million direct borrowing sublimit was reduced to $44.8 million as of September 30,
2002 as a result of scheduled principal repayments, issuance of a new letter of credit, and the sale of assets. The credit commitment will be further reduced by future periodic scheduled amounts and
by 85% of the net proceeds from the sale of the Switzerland
subsidiaries. The facility is available for new borrowings when borrowings are below the direct borrowing sublimit.

At
September 30, 2002, our outstanding revolving credit borrowings were $30.0 million (plus outstanding standby letters of credit of $6.3 million). During the
nine-month period ended September 30, 2002, we made cash payments totaling $23.1 million, which is $16.1 million greater than our scheduled repayments, resulting in
$14.8 million of borrowing capacity, including the effect of other commitment reductions.

The
maturity date of the amended facility is June 30, 2003, with an extension to December 31, 2003 upon the receipt of at least $4 million net proceeds from the sale
of the Switzerland subsidiaries. The receipt of the required proceeds is expected to occur in early 2003. Upon receipt of the net proceeds, we will be required to permanently reduce the borrowing
sublimit of the credit facility commitment by 85% of the net sale proceeds. Substantially all of the net proceeds will be used to reduce the outstanding revolving credit borrowings. The credit
facility commitment was permanently reduced by $0.8 million upon the initial receipt of proceeds from the sale of the Switzerland subsidiaries in October 2002.

The
amended facility bears interest at a base rate equal to the higher of a) the annual rate of interest announced from time to time by Fleet National Bank as its best rate, or
b) one-half of one

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percent above the Federal Funds Effective Rate, for the portion of the facility equal to a Formula Borrowing Base ("FBB"). The FBB equals 80% of eligible accounts, which include U.S. and Canadian
accounts receivable. The rate of interest is three percentage points higher than the base rate for the facility balance outstanding in excess of the FBB. Interest is due and payable monthly in
arrears. The interest rate was 4.75% for the FBB portion and 7.75% for the excess portion at September 30, 2002. At September 30, 2002, the FBB was $15.3 million and the excess of
borrowings over the FBB was $14.7 million.

The
credit facility is secured by virtually all Anacomp assets and 65% of the capital stock of our foreign subsidiaries. The facility contains covenants relating to limitations on the
following:



The
credit facility also is subject to minimum EBITDA, interest coverage and leverage ratio covenants. In addition, we are required to remit to the Bank Group the net proceeds of any
capital asset sale.

Effective
December 19, 2002, we signed an amendment to the revolving credit agreement. The amendment modifies certain financial covenants to accommodate the sale of our
Switzerland operations and current business plans. Other changes to the agreement included a permanent reduction to the credit facility commitment of $10.0 million, a decrease in future
quarterly commitment reductions, and provisions for acquisitions and/or divestitures under specified conditions.

Under
the current facility as amended, the facility commitment and the direct borrowings sublimit will be permanently reduced in the future as follows:



As
of December 20, 2002, the outstanding revolving credit borrowings were $24.2 million and borrowing capacity was $9.8 million.

Our
credit facility currently matures on June 30, 2003. It will automatically extend to December 31, 2003, upon payment to the bank of the Switzerland subsidiary sale
proceeds that we expect to receive in early 2003. No later than December 31, 2003, we will be required to either repay any remaining principal or refinance the credit facility. We believe we
will be able to refinance the facility prior to that date, although, there can be no assurances that such financing will be available on terms acceptable to us, if at all.

We
had negative working capital of $7.1 million at September 30, 2002, compared to negative working capital of $394.3 million at September 30, 2001. The
negative working capital at September 30, 2002 results from the current period classification of our $30.0 million revolving credit facility, due June 30, 2003, from
long-term to current. The working capital deficiency at September 30, 2001 was primarily due
to $310 million in notes, $51 million of related accrued interest, and $55.1 million of borrowings under the senior secured revolving credit facility. Excluding the credit
facility balance, our working capital at September 30, 2002 was a positive $22.9 million.

To
facilitate comparison of cash flow activity, cash flows for the twelve months ended September 30, 2002 discussed below represents the combination of the three-month period
ended December 31, 2001 (Predecessor Company) and the nine-month period ended September 30, 2002

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(Reorganized Company) presented in the accompanying Condensed Consolidated Statements of Cash Flows.

Net
cash provided by continuing operations was $18.8 million for the twelve months ended September 30, 2002, compared to $18.5 million in the comparable prior year
period.

Net
cash used in investing activities was $3.9 million in the current twelve-month period, compared to cash used in investing activities of $6.4 million in the comparable
prior year period. Expenditures in both years were primarily for purchases of equipment.

Net
cash used in financing activities was $25.1 million during the current twelve-month period, compared to $1.8 million used in financing activities in the prior period.
In both periods, cash was used to pay down the revolving credit facility, and the prior year amount also includes $0.8 million received on liquidation of a currency swap contract.

Our
cash balance totaled $15.6 million at September 30, 2002 compared to $24.3 million at September 30, 2001. Approximately 49% of the September 30,
2002 cash balance is located at our foreign subsidiaries compared to approximately 50% at September 30, 2001. Our use of excess cash as additional payments against our credit facility resulted
in the decrease of domestic cash on hand.

RISK FACTORS

You should carefully consider the following risk factors and all of the other information included in this Form 10-K in
evaluating our business and our prospects. Investing in our Class A or Class B Common Stock (collectively, "Common Stock") involves a high degree of risk. Additional risks and
uncertainties may also materially adversely affect our business and financial condition in the future. Any of the following risks could materially adversely affect our business, operating results or
financial condition and could result in a complete loss of your investment.

We recently effectuated a financial restructuring pursuant to a prepackaged Chapter 11 plan of reorganization, we have a history of net losses and we may face
liquidity issues in the future.

On
October 19, 2001 we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code and a prepackaged plan of reorganization. The Bankruptcy Court
confirmed the plan of reorganization on December 10, 2001 and we emerged from our bankruptcy proceedings effective December 31, 2001. However, our completion of bankruptcy proceedings
does not assure our continued success. For example, the bankruptcy proceedings described above are our second bankruptcy: we previously filed a plan of reorganization in January 1996 and
emerged from those proceedings in June 1996. If our financial performance does not exceed our recent historical results, the price of our Common Stock could decline and your investment could be
materially adversely affected. As part of our plan of reorganization, our lenders modified the terms of our senior credit facility which encumbers substantially all of our assets. This facility also
includes mandatory periodic paydowns and covenant restrictions concerning the commitment limits of this facility including levels of collateral, financial covenants, and limitations on capital
expenditures. Our credit facility is scheduled to mature on June 30, 2003, or under certain circumstances on December 31, 2003, at which time we will be required to renew, refinance, or
modify the credit facility with our lenders or locate alternative financing. These restrictions and provisions could have an adverse impact on our future liquidity and ability to implement our
business plan.

Our revenues could continue to decrease over the next few years, which could inhibit us from achieving or sustaining profitability or even prevent us from
continuing to operate.

Our
accumulated deficit through December 31, 2001 has been eliminated as a result of Fresh Start Reporting. However, we have not recorded sustained profitable operating results
for quite some time. To achieve sustained future profitability we will need to generate and sustain planned revenues while satisfying our payment obligations under the terms of our senior secured
revolving credit facility

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(including mandatory paydowns) and maintaining reasonable cost and expense levels. We do not know when or if we will become profitable on a sustained basis. If we fail to achieve consistent
profitability and generate sufficient cash flows, we will face liquidity and bank covenant issues and our senior secured debt could become immediately due and payable on demand. Even though we
generated operating income from continuing operations in the nine months ended September 30, 2002, we may not be able to sustain or increase profitability on a quarterly or an annual basis. Any
failure on our part to achieve or sustain profitability could cause our stock price to decline.

The development of alternate technologies in the document management industry is decreasing the need for our micrographics services and
products.

The
document management industry is rapidly changing. The recent trend of technological advances and attendant price declines in digital systems and products is expected to continue. As
a result, in
certain instances, potential micrographics customers have deferred, and may continue to defer, investments in micrographics systems (including our XFP 2000 COM system) and the utilization of
micrographics service centers while evaluating the abilities of other technologies. Additionally, the continuing development of local area computer networks and similar systems based on digital
technologies has resulted and will continue to result in many of our customers changing their use of micrographics from document storage, distribution and access to primarily archival use. We believe
that this is at least part of the reason for the declines in recent years in both sales and prices of our duplicate film, readers and reader/printers. Our service centers also are producing fewer
duplicate microfiche per original for customers, reflecting the shift towards using micrographics primarily for long term archival storage. Revenues for our micrographics services and products,
including COM service revenues, COM system revenues, maintenance service revenues and micrographics supplies revenues, have been adversely affected for each of the past five fiscal years and will
likely in the future be substantially adversely affected by, among other things, the increasing use of digital technology. COM revenues from services, system and supplies sales declined 27% in 2002
from fiscal year 2001 revenues. Overall, COM revenues represented 66% of our revenues for the twelve-month period ended September 30, 2002, 71% of our fiscal year 2001 revenues, 77% of 2000
revenues, 83% of 1999 revenues, 91% of 1998 revenues and 95% of 1997 revenues. Additionally, the rapidly changing document management industry has resulted in price competition in certain of our
businesses, particularly COM services. We have been and we expect to continue to be impacted adversely by the decline in the demand for COM services, the declining market for COM systems and the
attendant reduction in supplies revenues. We expect that our revenues for maintenance of COM systems will continue to decline as a result of decreasing use and fewer sales of COM systems.
Additionally, the growth of alternate technologies has created consolidation in the micrographics segment of the document management industry. To the extent consolidation in the micrographics segment
has the effect of causing major providers of micrographics services and products to cease providing such services and products, the negative trends in the segment, such as competition from alternate
technologies described above, may accelerate. If we do not adapt to the rapid changes in the document management industry, our business will suffer and your investment will be adversely affected.

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Intense competition in the document management industry could prevent us from increasing or sustaining our revenues and prevent us from achieving or sustaining
profitability.

The
document management industry is becoming increasingly competitive, especially in the market for Internet-based document management services. We face, and will continue to face,
competition from other document-management outsource-service providers as well as from document-management software providers who offer in-house solutions. Some of our competitors are
leading original equipment manufacturers with established client-relationships in our target markets. Some of our competitors are significantly larger than we are and have greater financial resources,
greater name recognition and longer operating histories than we have. Our competitors may be able to respond more quickly or adjust prices more effectively to take advantage of new opportunities or
customer requirements. Increased competition could result in pricing pressures, reduced sales, reduced margins or failure to achieve or maintain widespread market acceptance, any of which could
prevent us from increasing or sustaining our revenues and achieving or sustaining profitability.

Fluctuation in our quarterly financial results may cause instability in our stock price.

Our
COM business has experienced and continues to experience trending decline; however, the rate at which this decline will impact our operations is difficult to predict. Additionally,
we attempt to base our operating expenses on anticipated revenue levels, and a substantial percentage of our expenses are fixed in the short term. As a result, any delay in generating or recognizing
revenues could cause our operating results to be below expectations. Moreover, the operating expenses from our growth initiatives may exceed our estimates. Any or all of these factors could cause the
price of our common stock to decline.

If we are unable to decrease our costs to match the decline in our revenues, we may not be able to achieve or sustain profitability.

The
decline in the demand for COM services, systems and maintenance and the attendant reduction in supplies revenues have adversely affected our business. Over the past several years,
COM revenues from services, system and supplies sales have been steadily decreasing as a percentage of our revenues and declined 27% in 2002 from fiscal year 2001 revenues. We expect that our revenues
for maintenance of COM systems will continue to decline as a result of decreasing use and fewer sales of COM systems. We have taken steps such as facilities consolidation and personnel reductions to
reduce our cost
structure and offset the decrease in COM revenues. We intend to take additional measures as necessary to continue to reduce our cost structure. If these measures are unsuccessful, we will not realize
profits from our COM business and your investment may be adversely affected.

If our future results do not meet or exceed the projections and assumptions we made for Fresh Start Reporting purposes, we may have to write down the values of
some of our assets.

On
December 31, 2001, as a result of our emergence from bankruptcy, we adopted Fresh Start Reporting. This resulted in material changes to our financial statements including the
recording of an asset for "reorganization value in excess of identifiable net assets." We determined the value of our business and accordingly, our reorganization asset by making certain projections
and assumptions based on historical results as well as our best estimates of expected future market conditions. Unfavorable changes compared to our projections used for Fresh Start Reporting purposes
could result in future impairments of our reorganization asset and our identifiable intangible assets. If these assets were to be impaired, the value of your investment could decline.

If we are unable to make technological advancements and upgrades to our current product and services offerings, we will lose market share.

In
order to maintain and grow market share, we continually invest in offering new customer solutions and in upgrading our storage and delivery systems and infrastructure. We cannot
assure you

33

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that we will be able to continue to develop innovations in our software to stay abreast of client needs. We also cannot assure you that we will be able to maintain or upgrade our infrastructure to
take advantage of new technology. Our future plans for growth and a return to profitability would be detrimentally affected if we are unable to develop new and innovative customer solutions or if we
are unable to sustain our infrastructure.

Litigation or third party claims of intellectual property infringement could require us to spend substantial time and money and adversely affect our ability to
develop and commercialize products.

Third
parties may accuse us of employing their proprietary technology without authorization. In addition, third parties may obtain patents that relate to our technologies and claim that
our use of such technologies infringes these patents. Regardless of their merit, such claims could require us to incur substantial costs, including the diversion of management and technical personnel,
in defending ourselves against any such claims or enforcing our patents. In the event that a successful claim of infringement is brought against us, we may be required to pay damages and obtain one or
more licenses from third parties. We may not be able to obtain these licenses at a reasonable cost, or at all. Defense of any lawsuit or failure to obtain any of these licenses could adversely affect
our ability to develop and commercialize products and our operating results.

The loss of key personnel or the inability to attract and retain additional personnel could impair our ability to expand our operations.

We
are highly dependent on the principal members of our management team and the technical expertise of our personnel, especially in our Technical Services business unit. The success of
this business is based on our technical expertise and proven ability to provide fast, expert, on-site service and support around the clock. This service is provided in North America and
Europe by approximately 400 Anacomp service professionals, the loss of whose services might adversely impact the achievement of our business objectives. Moreover, our business operations will require
additional expertise in specific industries and areas applicable to products identified and developed through our technologies. These activities will require the addition of new personnel, including
management and technical personnel as well as the development of additional expertise by existing employees. Competition for experienced technicians may limit our ability to attract or retain such
technicians. If we are unable to attract such personnel or to develop this expertise, we may not be able to sustain or expand our operations in a timely manner or at all.

We face business, political and economic risks because a significant portion of our sales is to customers outside of the United States.

Revenues
from operations outside the United States accounted for 28% of our total revenue for the twelve-month period ended September 30, 2002 and 30% of our total revenue in
fiscal year 2001. Although we previously announced our intent to sell all or parts of our European document management business, our success continues to depend upon our international operations, and
we expect that a significant portion of our total future revenues will be generated from international sales. Our international business involves a number of risks, including:



34

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We use hazardous chemicals in our business and any claims relating to improper handling, storage or disposal of these materials could be time consuming and
costly.

Our
operations involve the use and sale of hazardous chemicals. Although we believe that our safety procedures for handling and disposing comply with the applicable standards, we cannot
eliminate the risk of accidental contamination or discharge and any resultant injury from these materials. Federal, state and local laws and regulations govern the use, manufacture, storage, handling
and disposal of hazardous materials. In the event of an accident, we may be sued for any injury or contamination that results from our use or the use by third parties of these materials, and our
liability may exceed our insurance coverage and our total assets.

Disclosure of trade secrets could aid our competitors.

We
attempt to protect our trade secrets by entering into confidentiality agreements with third parties, our employees and consultants. However, these agreements can be breached and, if
they are, there may not be an adequate remedy available to us. If our trade secrets become known we may lose our competitive position.

If we are unable to adequately protect our intellectual property, third parties may be able to use our technology, which could adversely affect our ability to
compete in the market.

Our
success will depend in part on our ability to obtain protection for our intellectual property. We will be able to protect our intellectual property rights from unauthorized use by
third parties only to the extent that our software is copyrightable and business methods are patentable under applicable intellectual property laws or are effectively maintained as trade secrets. The
laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States and many companies have encountered significant problems in protecting
and defending such rights in foreign jurisdictions. Furthermore, others may independently develop similar or alternative technologies or design around our intellectual property protections. In
addition, our competitors may independently develop substantially equivalent proprietary information or may otherwise gain access to our trade secrets.

Difficulties we may encounter managing our growth product lines may divert resources and limit our ability to successfully expand our operations and implement our
business plan.

We
anticipate that our MVS and Web presentment product lines will be able to grow as a result of our reorganization. Our growth in the future anticipates potential acquisitions that may
place a strain on our administrative personnel and operational infrastructure should such acquisitions occur. We cannot assure you that we will be able to identify acquisition candidates, or be able
to consummate acquisitions on terms acceptable to us, if at all. Additionally, we cannot assure you that we will have funds available for making acquisitions. Effectively managing growth will also
require us to improve our operational, financial and management controls, reporting systems and procedures. We may not be able to successfully implement improvements to our management information and
control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.

35

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We rely on a few suppliers to provide us COM products that while in decline, are essential to our operations.

Supplies
and system sales represented approximately 17% of our total revenue, for fiscal year 2002. The primary products in the supplies business of our Technical Services Business Unit
are silver halide original COM film and non-silver duplicating microfilm. We obtain all of our silver halide products through an exclusive multi-year supply agreement with a
single provider and our duplicate film products from two other providers. Any disruption in the supply relationship between Anacomp and such suppliers could result in delays or reductions in product
shipment or increases in product costs that adversely affect our operating results in any given period. In the event of any such disruption, we cannot assure you that we could develop alternative
sources of raw materials and supplies at acceptable prices and within reasonable times. Additionally, as the demand for COM services declines, the demand for COM supplies falls as well. If the decline
in COM supplies is greater than planned, our profitability and liquidity would decline as well.

Our stock price may be volatile, and you may not be able to resell your shares at or above the price you paid, or at all.

Since
the effective date of our bankruptcy restructuring, our common stock has had limited trading activity on the OTC Bulletin Board. We cannot predict the extent to which investor
interest in our stock will lead to the development of a more active trading market, how liquid that market might become or whether it will be sustained. The trading price of our common stock could be
subject to wide fluctuations due to the factors discussed in this risk factors section and elsewhere in this report. In addition, the stock markets in general have experienced extreme price and volume
fluctuations. These broad market and industry factors may decrease the market price of our common stock, regardless of our actual operating performance.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

Revenues generated outside the United States, as a percentage of total revenues, were 28% in fiscal year 2002, 30% in fiscal year 2001 and 30% in fiscal year
2000. Fluctuations in foreign exchange rates could impact operating results through translation of the Company's subsidiaries' financial statements.

The
Company is exposed to the risk of future currency exchange rate fluctuations, which is accounted for as an adjustment to stockholders' equity. Therefore, changes from reporting
period to reporting period in the exchange rates between various foreign currencies and the U.S. Dollar have had and will continue to have an impact on the accumulated other comprehensive loss
component of stockholders' equity reported by the Company, and such effect may be material in any individual reporting period.

The
Company's bank revolving credit facility is affected by the general level of U.S. interest rates. The Company had $30 million outstanding under its bank line of credit on
September 30, 2002. If interest rates were to increase 2%, the Company's annual interest expense would increase approximately $0.6 million based on the $30 million outstanding
balance.

Foreign
Exchange Options

We
completed a sale of our Switzerland subsidiaries and operations on October 18, 2002 to edotech Ltd. (a UK company) at a sales price of CHF 26.7 million (Swiss
francs) or approximately $17.9 million (U.S. dollars). CHF 4.6 million of the sales price was paid at closing. However, the remaining sales price was deferred and is payable as follows:
CHF 18.2 million upon completion of the Cominformatic share exchange, no later than six months from the closing date; CHF 1.1 million on or before April 18, 2003; and CHF
2.8 million within the next 18 months upon expiration of certain indemnification claim periods.

36

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Effectively
all of the net proceeds (i.e. sales price less sale costs) will be used to reduce the revolving balance outstanding and 85% of such proceeds will permanently reduce the total
borrowing commitment under the terms of the senior secured revolving credit facility. The Bank Group approval of the Switzerland sale transaction was conditioned upon protecting the value of the
future cash proceeds because of foreign exchange risk.

On
October 15, 2002, we entered into three forward contracts to hedge the expected cash receipts from the sale. The contract protects Anacomp against an exchange rate above
1.5425. The first forward contract was written in the amount of CHF 18.2 million and expires on January 29, 2003. We receive full exchange benefits for a lower rate unless the rate falls
to 1.4100 at any time prior to the expiration date. If that occurs, the forward option becomes fixed at 1.5425. The minimum U.S. dollar proceeds received would be $11.8 million.

The
second forward contract was written in the amount of CHF 2.1 million and expires on April 15, 2003. We receive full exchange benefits for a lower rate on CHF
1.0 million of the contract and the remaining CHF 1.1 million will be converted at 1.5425. The minimum U.S. dollar proceeds received would be $1.4 million if the buyer releases
all funds.

The
third forward contract was written in the amount of CHF 1.8 million and expires on April 15, 2004. We receive full exchange benefits for a lower rate on 50% of the
contract and the remaining 50% will be converted at 1.5425. The minimum U.S. dollar proceeds received would be $1.2 million if the buyer releases all funds.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial statements and supplementary financial information appear on pages A-1 to A-36 of this Annual Report on
Form 10-K.

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

None.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The information required by this item is incorporated by reference to the Definitive Proxy Statement under the headings "Election of Directors" and
"Section 16(a) Beneficial Ownership Reporting Compliance" from its Definitive Proxy Statement to be delivered to the shareholders of the Company in connection with the 2002 Annual Meeting of
Shareholders to be held February 25, 2003. Information regarding executive officers is set forth in Item 1 of Part I of this Report under the caption "Executive Officers."

ITEM 11. EXECUTIVE COMPENSATION

The information required by this item is incorporated by reference to the Definitive Proxy Statement under the heading "Executive Compensation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item is incorporated by reference to the Definitive Proxy Statement under the heading "Security Ownership of Management and Other
Beneficial Owners."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item is incorporated by reference to the Definitive Proxy Statement under the heading "Certain Relationships and Related
Transactions."

ITEM 14. CONTROLS AND PROCEDURES

(a)  Under
the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation
of our disclosure controls and procedures, as such term is defined under Rule 13a-14(c) promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
within 90 days of the filing date of this report. Based on their evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and
procedures are effective.

(b)  There
have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in our internal controls or in other
factors that could significantly affect these controls subsequent to the date of the evaluation referenced in paragraph (a) above.

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PART IV

ITEM 15.    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, 2002 and 2001.

Consolidated
Statements of OperationsYears Ended September 30, 2002, 2001 and 2000.

Consolidated
Statements of Stockholders' Equity (Deficit)Years Ended September 30, 2002, 2001 and 2000.

Consolidated
Statements of Cash FlowsYears Ended September 30, 2002, 2001 and 2000.

Notes
to the Consolidated Financial Statements.



(b)  Reports
on Form 8-K:



(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.   |  | Plan of Reorganization dated August 29, 2001.(1)                                                                                                                             
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1  |  | Amended and Restated Articles of Incorporation of the Company as of December 31, 2001.(2)                                                                                    
|3.2  |  | Amended and Restated Bylaws of the Company as of April 25, 2002.(3)                                                                                                          
|4.1  |  | Shareholders Rights Plan.(4)                                                                                                                                                 
|4.2  |  | Amendment to the Shareholders Rights Plan dated December 17, 2002.                                                                                                           
|4.3  |  | Warrant Agreement by and between the Company and Mellon Investor Services LLC dated December 31, 2001.(2)                                                                    
|10.1 |  | Retirement / Part-Time Employment Agreement dated October 27, 1999, between the Company and William C. Ater.(5)(7)                                                           
|10.2 |  | Employment Agreement, effective August 21, 2000, between the Company and Jeffrey R. Cramer.(6)(7)                                                                            
|10.3 |  | Revolving Credit Agreement, dated as of June 15, 1998, among Anacomp, Inc., the various lending institutions named therein and BankBoston, N.A. as agent.(8)                 
|10.4 |  | Forbearance and Standstill Agreement, dated as of November 15, 2000, among Anacomp, Inc., the various banks named therein, and Fleet National Bank as agent for the banks.(5)
|10.5 |  | Amendment to the Forbearance and Standstill Agreement, dated as of December 15, 2000, between Anacomp, Inc. and Fleet National Bank.(5)                                      
|     |  |                                                                                                                                                                              

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|10.6  |  | Amended and Restated Master Supply Agreement, dated October 8, 1993, by and among the Company, SKC America, Inc. and SKC Limited.(9)                                                                                                                     
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7  |  | First Cumulative Amendment to the Amended and Restated Master Supply Agreement, dated May 17, 1996, by and among the Company, SKC America, Inc. and SKC Limited.(10)                                                                                     
|10.8  |  | Second Amended and Restated Master Supply Agreement, dated as of July 1, 1997, by and among the Company, SKC America, Inc. and SKC Limited.(11)                                                                                                          
|10.9  |  | Second Amendment to Amended and Restated Revolving Credit Agreement and Restructure of Obligations dated as of December 19, 2002, by and among the Company, the various banks named therein, and Fleet National Bank as agent for the
banks.             
|10.10 |  | Lease agreement by and between the Company and Kilroy Realty, LLP., a Delaware limited partnership dated June 14, 2002.(12)                                                                                                                              
|10.11 |  | Consulting Agreement by and between the Company and Steven G. Singer dated May 7, 2002.(12)                                                                                                                                                              
|16.   |  | Letter by Arthur Anderson to the SEC dated May 28, 2002 regarding change in certifying accountant.(10)                                                                                                                                                   
|21.1  |  | Subsidiaries.                                                                                                                                                                                                                                            
|23.1  |  | Consent of Ernst and Young LLP.                                                                                                                                                                                                                          
|23.2  |  | Solely due to the closure of Arthur Andersen LLP's San Diego, California office, after reasonable efforts, the Registrant was unable to obtain the written consent of Arthur Andersen LLP to incorporate by reference its report dated November 21,
2001.
|99.1  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Executive Officer.                                                                                                      
|99.2  |  | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for Chief Financial Officer.                                                                                                      

---

40

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1. 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/JEFFREY R. CRAMERJeffrey R. Cramer President and Chief Executive Officer
|Dated: December 23, 2002 |  |                                                                                

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 and in the capacities and on
the dates indicated.

|Dated: December 23, 2002 |  | By: /s/EDWARD P. SMOOTEdward P. Smoot Chairman of the
Board                                       
|------------------------ |  | --------------------------------------------------------------------------------------------------
|Dated: December 23, 2002 |  | By: /s/LINSTER W. FOXLinster W. Fox Director, Executive Vice President and Chief Financial
Officer
|Dated: December 23, 2002 |  | By: /s/RALPH B. BUNJE, JR.Ralph B. Bunje, Jr.,Director                                            
|Dated: December 23, 2002 |  | By: /s/CHARLES M. TAYLORCharles M. Taylor,Director                                                

41

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I, Jeffrey R. Cramer, certify that:

1.    I
have reviewed this annual report on Form 10-K of Anacomp, Inc.;

2.    Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The
registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.    The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.    The
registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:
December 23, 2002

| |  | /s/JEFFREY R. CRAMERJeffrey R. Cramer Chief Executive
Officer
| |  | -------------------------------------------------------------

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I, Linster W. Fox, certify that:

1.    I
have reviewed this annual report on Form 10-K of Anacomp, Inc.;

2.    Based
on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made,
in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3.    Based
on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial
condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4.    The
registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act
Rules 13a-14 and 15d-14) for the registrant and have:



5.    The
registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's
board of directors (or persons performing the equivalent functions):



6.    The
registrant's other certifying officers and I have indicated in this annual report whether there were significant changes in internal controls or in other factors that
could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date:
December 20, 2002

| |  | /s/LINSTER W. FOXLinster W. Fox Chief Financial Officer
| |  | -------------------------------------------------------

43

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APPENDIX A

Annual Report on Form 10-K
Anacomp, Inc.

|                                                                                                                                                                                  |  | Page
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|Report of Ernst & Young LLP, Independent Auditor                                                                                                                                  |  | A-2 
|Report of Independent Public Accountants                                                                                                                                          |  | A-3 
|Consolidated Balance SheetsSeptember 30, 2002 and 2001                                                                                                                           |  | A-4 
|Consolidated Statements of OperationsNine Months Ended September 30, 2002, Three Months Ended December 31, 2001, and Years Ended September 30, 2001 and 2000                     |  | A-5 
|Consolidated Statements of Stockholders' Equity (Deficit)Nine Months Ended September 30, 2002, Three Months Ended December 31, 2001, and Years Ended September 30, 2001 and 2000 |  | A-6 
|Consolidated Statements of Cash FlowsNine Months Ended September 30, 2002, Three Months Ended December 31, 2001, and Years Ended September 30, 2001 and 2000                     |  | A-7 
|Notes to the Consolidated Financial Statements                                                                                                                                    |  | A-9 

A-1

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REPORT OF ERNST&YOUNG LLP, INDEPENDENT AUDITOR

To
the Stockholders and the
Board of Directors of Anacomp, Inc.:

We
have audited the accompanying consolidated balance sheet of Anacomp, Inc. and subsidiaries as of September 30, 2002, and the related consolidated statements of
operations, stockholders' equity/(deficit), and cash flows for the nine months ended September 30, 2002 (Reorganized Company) and the three months ended December 31, 2001 (Predecessor
Company). These consolidated financial statements are the responsibility of Anacomp, Inc.'s management. Our responsibility is to express an opinion on these consolidated financial statements
based on our audits. The consolidated financial statements of Anacomp, Inc. for the fiscal years ended September 30, 2001 and 2000, were audited by other auditors who have ceased
operations. Those auditors opinion on those statements contained an explanatory paragraph relating to the Company's ability to continue as a going concern in their report dated November 21,
2001.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. 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.

In
our opinion, the 2002 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Anacomp, Inc. and
subsidiaries as of September 30, 2002, and the consolidated results of their operations and their cash flows for the nine months ended September 30, 2002 (Reorganized Company) and the
three months ended December 31, 2001 (Predecessor Company) in conformity with accounting principles generally accepted in the United States.

As
discussed above, the financial statements of Anacomp, Inc. as of September 30, 2001 and 2000, and for the years then ended were audited by other auditors who have ceased
operations. As described in Note 2 these financial statements have been revised to include the transitional disclosures required by Statement of Financial Accounting Standards (Statement)
No. 142,Goodwill and Other Intangible Assets,which was adopted by the Company as of January 1, 2002. Our audit procedures with respect
to the disclosures in Note 2 with respect to 2001 and 2000 included (a) agreeing the previously reported net income(loss) to the previously issued financial statements and the
adjustments to reported net income(loss) representing amortization expense (including any related tax effects) recognized in those periods related to goodwill, intangible assets that are no longer
being amortized, to the Company's underlying records obtained from management, and (b) testing the mathematical accuracy of the reconciliation of adjusted net income(loss) to reported net
income(loss). In our opinion, the disclosures for 2001 and 2000 in Note 2 are appropriate. However, we were not engaged to audit, review, or apply any procedures to the 2001 and 2000 financial
statements of the Predecessor Company other than with respect to such disclosures and, accordingly, we do not express an opinion or any other form of assurance on the Predecessor Company's 2001 and
2000 financial statements taken as a whole.

| |  |  |  | /s/ ERNST&YOUNG LLP |  | 
| |  |  |  | ------------------- |  | 

San
Diego, CA
December 12, 2002,
except for note 4 as to which the
date is
December 19, 2002

A-2

---



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, 2001 and 2000, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for each of the three years in the period ended September 30, 2001. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits 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.

In
our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Anacomp, Inc. and subsidiaries as of
September 30, 2001 and 2000, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2001 in conformity with accounting
principles generally accepted in the United States.

The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the
Company has defaulted on its debt obligations, has substantial operating and liquidity issues, and has filed for voluntary bankruptcy protection and reorganization under Chapter 11 of the United
States Bankruptcy Code, which raises substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1.
The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a
going concern.

/s/
ARTHUR ANDERSEN LLP
San Diego, California
November 21, 2001

NOTE:
THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSENLLP ("ANDERSEN") IN CONNECTION WITH ANACOMP, INC.'S FORM 10-K FILING FORTHE FISCAL YEAR ENDED
SEPTEMBER 30, 2001. THE INCLUSION OF THIS PREVIOUSLY ISSUEDANDERSEN REPORT IS PURSUANT TO THE "TEMPORARY FINAL RULE AND FINAL RULEREQUIREMENTS FOR ARTHUR ANDERSEN LLP AUDITING CLIENTS," ISSUED
BY THE U.S. SECURITIES AND EXCHANGE COMMISSION IN MARCH 2002. NOTE THAT THIS PREVIOUSLY ISSUED ANDERSEN REPORT INCLUDES REFERENCES TO CERTAIN FISCAL YEARS, WHICH ARE NOT REQUIRED TO BE
PRESENTED IN THE ACCOMPANYING CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED SEPTEMBER 30, 2001 AND 2000. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP
IN CONNECTION WITH THIS FILING ON FORM 10-K. SEE EXHIBIT 23.02 FOR FURTHER DISCUSSION.

A-3

---



CONSOLIDATED BALANCE SHEETSAnacomp, Inc. and Subsidiaries

|                                                          |                                                                                                     | Reorganized
Company |         | Predecessor
Company |  
|--------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ------------------- | ------- | ------------------- | -
|
|
|Assets                                                    |                                                                                                     |                     |         |                     |  
|Current assets:                                           |                                                                                                     |                     |         |                     |  
|                                                          | Cash and cash equivalents                                                                           |                     | $       | 15,561              |  
|                                                          | Accounts receivable, net                                                                            |                     |         | 33,990              |  
|                                                          | Current portion of long term receivables, net                                                       |                     |         | 1,305               |  
|                                                          | Inventories                                                                                         |                     |         | 3,474               |  
|                                                          | Prepaid expenses and other                                                                          |                     |         | 5,137               |  
|                                                          | Assets of discontinued operations                                                                   |                     |         | 12,027              |  
|                                                          |                                                                                                     |                     |         |                     |  
|Total current assets                                      |                                                                                                     |                     | 71,494  |                     |  
|Property and equipment, net                               |                                                                                                     |                     | 21,448  |                     |  
|Long term receivables, net of current portion             |                                                                                                     |                     | 1,188   |                     |  
|Reorganization value in excess of identifiable net assets |                                                                                                     |                     | 73,227  |                     |  
|Goodwill                                                  |                                                                                                     |                     |        |                     |  
|Intangible assets, net                                    |                                                                                                     |                     | 10,813  |                     |  
|Other assets                                              |                                                                                                     |                     | 1,913   |                     |  
|                                                          |                                                                                                     |                     |         |                     |  
|                                                          |                                                                                                     | $                   | 180,083 |                     | $
|                                                          |                                                                                                     |                     |         |                     |  
|Liabilities and Stockholders' Equity (Deficit)            |                                                                                                     |                     |         |                     |  
|Current liabilities:                                      |                                                                                                     |                     |         |                     |  
|                                                          | Current portion of senior secured revolving credit facility                                         |                     | $       | 29,975              |  
|                                                          | 107/8% senior subordinated notes payable                                                            |                     |         |                    |  
|                                                          | Accounts payable                                                                                    |                     |         | 9,797               |  
|                                                          | Accrued compensation, benefits and withholdings                                                     |                     |         | 16,294              |  
|                                                          | Accrued income taxes                                                                                |                     |         | 1,900               |  
|                                                          | Accrued interest                                                                                    |                     |         |                    |  
|                                                          | Other accrued liabilities                                                                           |                     |         | 16,422              |  
|                                                          | Liabilities of discontinued operations                                                              |                     |         | 4,241               |  
|                                                          |                                                                                                     |                     |         |                     |  
|Total current liabilities                                 |                                                                                                     |                     | 78,629  |                     |  
|                                                          |                                                                                                     |                     |         |                     |  
|Long-term liabilities:                                    |                                                                                                     |                     |         |                     |  
|                                                          | Unfunded accumulated benefit obligation                                                             |                     |         | 6,233               |  
|                                                          | Other long-term liabilities                                                                         |                     |         | 3,387               |  
|                                                          |                                                                                                     |                     |         |                     |  
|Total long-term liabilities                               |                                                                                                     |                     | 9,620   |                     |  
|                                                          |                                                                                                     |                     |         |                     |  
|Commitments and contingencies                             |                                                                                                     |                     |         |                     |  
|Stockholders' equity (deficit):                           |                                                                                                     |                     |         |                     |  
|                                                          | Preferred stock, 1,000,000 shares authorized, none issued                                           |                     |         |                    |  
|                                                          | Common stock, $.01 par value; 40,787,711 shares authorized; 4,036,034 shares issued and outstanding |                     |         | 40                  |  
|                                                          | Additional paid-in capital                                                                          |                     |         | 96,942              |  
|                                                          | Accumulated other comprehensive loss                                                                |                     |         | (2,836              | )
|                                                          | Accumulated deficit                                                                                 |                     |         | (2,312              | )
|                                                          |                                                                                                     |                     |         |                     |  
|Total stockholders' equity (deficit)                      |                                                                                                     |                     | 91,834  |                     |  
|                                                          |                                                                                                     |                     |         |                     |  
|                                                          |                                                                                                     | $                   | 180,083 |                     | $
|                                                          |                                                                                                     |                     |         |                     |  

See
the notes to the consolidated financial statements.

A-4

---



CONSOLIDATED STATEMENTS OF OPERATIONSAnacomp, Inc. and Subsidiaries

|                                                                                                                                    |                                                                        | Reorganized
Company(a) |         | Predecessor Company(a) |  
|----------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------- | ---------------------- | ------- | ---------------------- | -
|
|
|Revenues:                                                                                                                           |                                                                        |                        |         |                        |  
|                                                                                                                                    | Services                                                               |                        | $       | 140,739                |  
|                                                                                                                                    | Equipment and supply sales                                             |                        |         | 33,068                 |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|                                                                                                                                    |                                                                        |                        | 173,807 |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Cost of revenues:                                                                                                                   |                                                                        |                        |         |                        |  
|                                                                                                                                    | Services                                                               |                        |         | 95,099                 |  
|                                                                                                                                    | Equipment and supply sales                                             |                        |         | 22,994                 |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|                                                                                                                                    |                                                                        |                        | 118,093 |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Gross profit                                                                                                                        |                                                                        |                        | 55,714  |                        |  
|Costs and expenses:                                                                                                                 |                                                                        |                        |         |                        |  
|                                                                                                                                    | Engineering, research and development                                  |                        |         | 5,305                  |  
|                                                                                                                                    | Selling, general and administrative                                    |                        |         | 43,622                 |  
|                                                                                                                                    | Amortization of reorganization asset                                   |                        |         |                       |  
|                                                                                                                                    | Amortization of intangible assets, including goodwill                  |                        |         | 1,487                  |  
|                                                                                                                                    | Restructuring charges (credits)                                        |                        |         | 2,081                  |  
|                                                                                                                                    | Asset impairment charges                                               |                        |         |                       |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Operating income (loss) from continuing operations                                                                                  |                                                                        |                        | 3,219   |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Other income (expense):                                                                                                             |                                                                        |                        |         |                        |  
|                                                                                                                                    | Interest income                                                        |                        |         | 353                    |  
|                                                                                                                                    | Interest expense and fee amortization                                  |                        |         | (3,069                 | )
|                                                                                                                                    | Other                                                                  |                        |         | 296                    |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|                                                                                                                                    |                                                                        |                        | (2,420  | )                      |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Income (loss) from continuing operations before reorganization items, income taxes and extraordinary gain on extinguishment of debt |                                                                        |                        | 799     |                        |  
|Reorganization items                                                                                                                |                                                                        |                        |        |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Income (loss) from continuing operations before income taxes and extraordinary gain on extinguishment of debt                       |                                                                        |                        | 799     |                        |  
|Provision for income taxes                                                                                                          |                                                                        |                        | 4,024   |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|(Loss) income from continuing operations before extraordinary gain on extinguishment of debt                                        |                                                                        |                        | (3,225  | )                      |  
|Loss on sale of discontinued operations, net of taxes                                                                               |                                                                        |                        |        |                        |  
|Income from discontinued operations, net of taxes                                                                                   |                                                                        |                        | 913     |                        |  
|(Loss) income before extraordinary gain on extinguishment of debt                                                                   |                                                                        |                        | (2,312  | )                      |  
|Extraordinary gain on extinguishment of debt, net of taxes                                                                          |                                                                        |                        |        |                        |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Net (loss) income                                                                                                                   |                                                                        | $                      | (2,312  | )                      | $
|                                                                                                                                    |                                                                        |                        |         |                        |  
|Basic and diluted per share data:                                                                                                   |                                                                        |                        |         |                        |  
|                                                                                                                                    | Basic and diluted net loss from continuing operations                  |                        | $       | (0.80                  | )
|                                                                                                                                    | Basic and diluted net income from discontinued operations              |                        |         | 0.23                   |  
|                                                                                                                                    |                                                                        |                        |         |                        |  
|                                                                                                                                    | Basic and diluted net loss                                             |                        | $       | (0.57                  | )
|                                                                                                                                    |                                                                        |                        |         |                        |  
|                                                                                                                                    | Shares used in computing basic and diluted net (loss) income per share |                        |         | 4,036                  |  
|                                                                                                                                    |                                                                        |                        |         |                        |  

---

See
the notes to the consolidated financial statements.

A-5

---



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

|                                                                                         |  | Common Stock |   |   |      | Accumulated
Other
Comprehensive
Income (Loss) |   |          |   |   |       
|---------------------------------------------------------------------------------------- |  | ------------ | - | - | ---- | --------------------------------------------- | - | -------- | - | - | ------
|
|
|
|SEPTEMBER 30, 1999PREDECESSOR COMPANY                                                   |  | 14,384,089   |   | $ | 149  |                                               | $ | 108,997  |   | $ | (1,222
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Net loss                                                                                 |  |             |   |   |     |                                               |   |         |   |   |      
|Translation adjustment                                                                   |  |             |   |   |     |                                               |   |         |   |   | (8,136
|Realized gain on currency swap contracts                                                 |  |             |   |   |     |                                               |   |         |   |   | 3,424 
|Unrealized gain on currency swap contract                                                |  |             |   |   |     |                                               |   |         |   |   | 532   
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Comprehensive loss                                                                       |  |              |   |   |      |                                               |   |          |   |   |       
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Common stock issued for exercise of stock options, warrants, and restricted stock grants |  | 198,479      |   |   |     |                                               |   | 3,350    |   |   |      
|Common stock issued for employee stock purchases                                         |  | 38,568       |   |   |     |                                               |   | 510      |   |   |      
|Common stock purchased and retired                                                       |  | (93,200      | ) |   | (3   | )                                             |   | (1,628   | ) |   |      
|Common stock issued for acquisitions                                                     |  | 38,262       |   |   |     |                                               |   | 95       |   |   |      
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|SEPTEMBER 30, 2000PREDECESSOR COMPANY                                                   |  | 14,566,198   |   |   | 146  |                                               |   | 111,324  |   |   | (5,402
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Net loss                                                                                 |  |             |   |   |     |                                               |   |         |   |   |      
|Translation adjustment                                                                   |  |             |   |   |     |                                               |   |         |   |   | (273  
|Realized gain on currency swap contracts                                                 |  |             |   |   |     |                                               |   |         |   |   | 763   
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Comprehensive loss                                                                       |  |              |   |   |      |                                               |   |          |   |   |       
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|SEPTEMBER 30, 2001PREDECESSOR COMPANY                                                   |  | 14,566,198   |   |   | 146  |                                               |   | 111,324  |   |   | (4,912
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Net income for three months                                                              |  |             |   |   |     |                                               |   |         |   |   |      
|Translation adjustment for three months                                                  |  |             |   |   |     |                                               |   |         |   |   | 639   
|Unfunded accumulated benefit obligation                                                  |  |             |   |   |     |                                               |   |         |   |   |       
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Comprehensive income for three months                                                    |  |              |   |   |      |                                               |   |          |   |   |       
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Reorganization items                                                                     |  | (14,566,198  | ) |   | (146 | )                                             |   | (111,324 | ) |   | 4,273 
|New stock issuance                                                                       |  | 4,034,034    |   |   | 40   |                                               |   | 96,885   |   |   |      
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|DECEMBER 31, 2001REORGANIZED COMPANY                                                    |  | 4,034,034    |   |   | 40   |                                               |   | 96,885   |   |   |      
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Net loss for nine months                                                                 |  |             |   |   |     |                                               |   |         |   |   |      
|Translation adjustment for nine months                                                   |  |             |   |   |     |                                               |   |         |   |   | 1,996 
|Unfunded accumulated benefit obligation                                                  |  |             |   |   |     |                                               |   |         |   |   | (4,832
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|Comprehensive income for nine months                                                     |  |             |   |   |     |                                               |   |         |   |   |      
|Common stock issued for director stock grants                                            |  | 2,000        |   |   |     |                                               |   | 57       |   |   |      
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       
|SEPTEMBER 30, 2002REORGANIZED COMPANY                                                   |  | 4,036,034    |   | $ | 40   |                                               | $ | 96,942   |   | $ | (2,836
|                                                                                         |  |              |   |   |      |                                               |   |          |   |   |       

See the notes to the consolidated financial statements.

A-6

---



CONSOLIDATED STATEMENTS OF CASH FLOWSAnacomp, Inc. and Subsidiaries

|                                                   |                                                                                                    | Reorganized
Company                                                              |                                                                  | Predecessor Company |       
|-------------------------------------------------- | -------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------- | ---------------------------------------------------------------- | ------------------- | ------
|
|
|Cash flows from operating activities:              |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   | Net income (loss)                                                                                  |                                                                                  | $                                                                | (2,312              | )     
|                                                   | Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities: |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    | Extraordinary gain on extinguishments of debt                                    |                                                                  |                     |      
|                                                   |                                                                                                    | Adjustment of assets and liabilities to fair value                               |                                                                  |                     |      
|                                                   |                                                                                                    | Write off of deferred debt issuance costs and unamortized premiums and discounts |                                                                  |                     |      
|                                                   |                                                                                                    | Asset impairment charges                                                         |                                                                  |                     |      
|                                                   |                                                                                                    | Loss on sale of discontinued operations                                          |                                                                  |                     |      
|                                                   |                                                                                                    | Income from discontinued operations                                              |                                                                  |                     | (913  
|                                                   |                                                                                                    | Depreciation and amortization                                                    |                                                                  |                     | 12,999
|                                                   |                                                                                                    | Amortization of debt fees, premiums and discounts                                |                                                                  |                     | 516   
|                                                   |                                                                                                    | Non-cash tax expense on life insurance                                           |                                                                  |                     | 1,994 
|                                                   |                                                                                                    | Non-cash legal settlement charge                                                 |                                                                  |                     |      
|                                                   |                                                                                                    | Non-cash compensation                                                            |                                                                  |                     |      
|                                                   |                                                                                                    | Other non-cash charges                                                           |                                                                  |                     | 358   
|                                                   | Change in assets and liabilities:                                                                  |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    | Accounts and other receivables                                                   |                                                                  |                     | (280  
|                                                   |                                                                                                    | Inventories                                                                      |                                                                  |                     | (148  
|                                                   |                                                                                                    | Prepaid expenses and other assets                                                |                                                                  |                     | (590  
|                                                   |                                                                                                    | Accounts payable, accrued expenses and other liabilities                         |                                                                  |                     | 2,173 
|                                                   |                                                                                                    | Accrued interest                                                                 |                                                                  |                     | (13   
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    |                                                                                  | Net cash provided by (used in) continuing operations             |                     |       
|                                                   |                                                                                                    |                                                                                  | Net operating cash provided by (used in) discontinued operations |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    |                                                                                  | Net cash provided by (used in) operating activities              |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|Cash flows from investing activities:              |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   | Purchases of property and equipment for continuing operations                                      |                                                                                  |                                                                  | (2,727              | )     
|                                                   | Purchases of property and equipment for discontinued operations                                    |                                                                                  |                                                                  | (48                 | )     
|                                                   | Proceeds from sale of discontinued operations and other assets                                     |                                                                                  |                                                                  |                    |       
|                                                   | Payments to acquire companies and customer rights                                                  |                                                                                  |                                                                  |                    |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    |                                                                                  | Net cash used in investing activities                            |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|Cash flows from financing activities:              |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   | Proceeds from issuance of common stock                                                             |                                                                                  |                                                                  |                    |       
|                                                   | Proceeds from liquidation of currency swap contracts                                               |                                                                                  |                                                                  |                    |       
|                                                   | (Payment on) proceeds from revolving line of credit                                                |                                                                                  |                                                                  | (23,100             | )     
|                                                   | Repurchases of common stock                                                                        |                                                                                  |                                                                  |                    |       
|                                                   | Principal payments on long-term debt                                                               |                                                                                  |                                                                  |                    |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|                                                   |                                                                                                    |                                                                                  | Net cash (used in) provided by financing activities              |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|Effect of exchange rate changes on cash            |                                                                                                    |                                                                                  | 725                                                              |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|(Decrease) increase in cash and cash equivalents   |                                                                                                    |                                                                                  | (8,569                                                           | )                   |       
|Less increase in cash from discontinued operations |                                                                                                    |                                                                                  | (2,749                                                           | )                   |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|Cash and cash equivalents at beginning of period   |                                                                                                    |                                                                                  | 26,879                                                           |                     |       
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       
|Cash and cash equivalents at end of period         |                                                                                                    | $                                                                                | 15,561                                                           |                     | $     
|                                                   |                                                                                                    |                                                                                  |                                                                  |                     |       

See the notes to the consolidated financial statements.

A-7

---

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

|                             |              | Reorganized
Company |   | Predecessor Company
|---------------------------- | ------------ | ------------------- | - | -------------------
|
|
|Cash paid during period for: |              |                     |   |                    
|                             | Interest     |                     | $ | 2,175              
|                             | Income taxes |                     | $ | 2,208              

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

| |                                           | Reorganized
Company |   | Predecessor Company
| | ----------------------------------------- | ------------------- | - | -------------------
|
|
| | Stock issued for acquisitions             |                     | $ |                   
| | Unrealized gain on currency swap contract |                     | $ |                   

See
the notes to the consolidated financial statements.

A-8

---



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSAnacomp, Inc. and Subsidiaries

NOTE 1.
COMPANY OPERATIONS AND BASIS OF PRESENTATION:

Anacomp®, Inc. provides comprehensive information outsourcing, maintenance support, and imaging and print solutions for businesses and
organizations around the globe. We primarily serve customers in the financial services and insurance sectors and in the case of MVS the technology sector.



On October 19, 2001, we filed a voluntary petition for reorganization under Chapter 11 of the U.S. Bankruptcy Code, together with a prepackaged plan of
reorganization (the "Plan"), with the U.S. Bankruptcy Court for the Southern District of California. The U.S. Bankruptcy Court confirmed the Plan on December 10, 2001, and we emerged from
bankruptcy effective December 31, 2001.

The
primary benefits of our bankruptcy were the elimination of $310 million of debt, related accrued interest of $52.3 million and the related annual interest expense of
approximately $34 million. Additionally, our credit facility was amended such that we cured previous events of default and we continue to have the ability to borrow under the credit facility.
Borrowings under the facility are subject to revised terms and restrictions, and we are required to make mandatory quarterly payments that reduce the borrowing base of the credit facility (see
Note 4).

Under
the Plan, our publicly traded 107/8% senior subordinated notes, related accrued interest and existing Anacomp common stock (14,566,198 shares) were canceled, and new
common stock was issued. New Class A Common Stock was distributed to the holders of the notes, as well as reserved for issuance
as incentive compensation to Anacomp personnel. New Class B Common Stock was issued and distributed to holders of previously existing Anacomp common stock.

Pursuant
to the reorganization, we are authorized to issue 40,000,000 shares of Class A Common Stock, 787,711 shares of Class B Common Stock and 1,000,000 shares of
preferred stock. Terms and conditions of the Class A and Class B Common Stock are identical, including voting rights, dividends, when and if declared, and liquidation rights, subject to
any preference of preferred stock as may be issued in the future. Class B Common Stock is also subject to potential further dilution if additional shares of Class B Common Stock are
required to be issued in satisfaction of claims pursuant to the reorganization. Preferred stock is authorized to be issued in one or more series with terms to be established at the time of issuance by
our Board of Directors.

In
exchange for the notes totaling $310 million and related accrued interest totaling $52.3 million, holders of the notes received 4,030,000 shares of new Class A
Common Stock.

For
each share of common stock outstanding immediately prior to the emergence from bankruptcy, common shareholders received .0002769 shares of new Class B Common Stock. As a
result, 4,034 shares of new Class B Common Stock were issued. In addition, for each share of new Class B Common Stock issued, these shareholders received 194.12 warrants. Each warrant is
exercisable for a period of five years for the purchase of one share of the new Class B Common Stock at an exercise price of $61.54 per share. As a result, 783,077 warrants to purchase
Class B Common Stock were issued.

Holders
of Class A Common Stock own 99.9% of our equity and those holding Class B Common Stock own 0.1%.

Also,
as a result of the Chapter 11 reorganization, the following occurred:



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Under
bankruptcy law, an executory contract is an agreement between a debtor and third party under which, as of the date of a debtor's Chapter 11 petition, material performance on the
agreement remains due from both the debtor and non-debtor party, such that the failure of either side to perform its obligations under the agreement would excuse the other party from
further performance. The Bankruptcy Code permits a Chapter 11 debtor to assume (i.e. agree to continue to be bound both during the Chapter 11 case and following emergence) or reject (breach and no
longer be bound during the Chapter 11 case or thereafter) any executory contract. We assumed all of our executory contracts under our confirmed plan of reorganization except one, which was a
nonresidential lease of real property.

The
U.S. Bankruptcy Court issued its final decree on September 27, 2002 closing the Chapter 11 case. There are no remaining claims or unrecorded obligations related to the
bankruptcy proceedings.



At December 31, 2001, as a result of our emergence from bankruptcy, we adopted Fresh Start Reporting in accordance with AICPA Statement of Position
90-7, "Financial Reporting by Entities in Reorganization under the Bankruptcy Code." Fresh Start Reporting resulted in material changes to the Consolidated Balance Sheet as of
December 31, 2001, including adjustment of assets and liabilities to estimated fair values, the valuation of equity based on the reorganization value of the ongoing business, and the recording
of an asset for reorganization value in excess of the fair value of the separately identifiable assets and liabilities (similar to goodwill).

The
accompanying financial statements include historical information from prior to December 31, 2001, the effective date we emerged from bankruptcy, and are identified as
financial statements of the Predecessor Company. The Consolidated Balance Sheet, Statements of Operations and the Statement of Cash Flows as of and for the nine-month period ended
September 30, 2002, represent the Reorganized Company after adopting Fresh Start Reporting and also reflect our Switzerland subsidiaries as discontinued operations. Due to our reorganization,
the implementation of Fresh Start Reporting (see Note 3), and our presentation of discontinued operations for the nine-month period ended September 30, 2002, the financial
statements for the Reorganized Company are not comparable to those of the Predecessor Company. We did not reflect the discontinued operations presentation
relating to the sale of Switzerland in the financial statements of the Predecessor Company due to the immateriality of such results in those periods.

The
accompanying consolidated financial statements include the accounts of Anacomp and our wholly-owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated in consolidation. The financial statements, in the opinion of management, include all adjustments (consisting of normal recurring accruals and the Fresh Start adjustments described in
Note 3) necessary for a fair presentation of our financial position, results of operations and cash flows for all periods presented.

Preparation
of the accompanying consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of
revenues and

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expenses during the periods presented. Estimates have been prepared on the basis of the most current available information and actual results could differ from those estimates.

NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Consolidation

The consolidated financial statements include the accounts of Anacomp and its wholly owned subsidiaries. All significant intercompany accounts and transactions
have been eliminated.

Cash and Cash Equivalents

Cash equivalents primarily represent highly liquid investments, with original maturities of 90 days or less, in money market funds that are convertible to
a known amount of cash and carry an insignificant interest rate risk. The Company has periodically maintained balances in various operating accounts in excess of federally insured limits.

Concentration of Credit Risk

The Company sells its products to customers primarily in the United States, Canada, Europe and Asia. The Company maintains a reserve for potential credit losses
and historically such losses have been within management's estimates.

Inventories

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

Property and Equipment

Property and equipment, which includes leasehold improvements, is recorded at cost and depreciated or amortized using the straight-line method over
estimated useful lives. Leasehold improvements are amortized over the shorter of their estimated useful life or the remaining term of the related lease. Processing equipment and other property and
equipment have useful lives ranging from two to twelve years. Repair and maintenance costs are expensed as incurred.

Software Costs

In accordance with Statement of Financial Accounting Standards ("SFAS") No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or
Otherwise Marketed," software production 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 estimated net realizable value. As of September 30, 2002 and 2001, no capitalized software costs remain on the Balance Sheet.

Income Taxes

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 carryforwards. Valuation allowances are established to reduce deferred tax assets to the amount expected to be realized in future tax returns.

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Foreign Currency Translation

Substantially all assets and liabilities of Anacomp's international operations are translated at year-end exchange rates; revenues and expenses are
translated at the average exchange rates prevailing during the year. Foreign currency transaction gains and losses are charged to operations as incurred. A foreign currency transaction gain of
$0.3 million was recorded for the nine months ended September 30, 2002, and a foreign currency transaction loss of $0.2 million was recorded for the three months ended
December 31, 2001.Foreign currency transaction losses for the years ended September 30, 2001 and 2000 totaled $0.1 million, and $0.8 million, respectively. Foreign currency
transaction gains and losses are included as a component of "Other income (expense)" in the accompanying Consolidated Statements of Operations.

Goodwill

The excess of purchase price over net assets of businesses acquired ("goodwill") was amortized on the straight-line method over the estimated periods
of future benefit through December 31, 2001, and has been eliminated as part of our reorganization and implementation of Fresh Start accounting (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 $0.5 million and $3.5 million at September 30, 2002 and 2001, respectively. The decrease of $3 million was due primarily
to the write-off of unamortized deferred issuance costs on the 107/8% senior subordinated notes remaining on the balance sheet prior to the implementation of Fresh Start
accounting. Unamortized debt issuance costs are included in "Other assets" in the accompanying Consolidated Balance Sheets. During the nine months ended September 30, 2002, the three months
ended December 31, 2001, and the years ended September 30, 2001 and 2000, the Company amortized $0.5 million, $0.2 million, $1.8 million and $1.6 million,
respectively, of debt issuance costs that are included in "Interest expense and fee amortization" in the accompanying Consolidated Statements of Operations.

Revenue Recognition

The Company adopted the provisions of Staff Accounting Bulletin ("SAB") 101, "Revenue Recognition in Financial Statements" during the fourth quarter of fiscal
2001, which did not have a material impact on the Company's results of operations.

Contract
revenue for the development and implementation of document services solutions under contracts is recognized over the contract period based on output measures as defined by
deliverable items identified in the contract. Provisions for estimated losses on contracts, if any, are made during the period when the loss becomes probable and can be reasonably estimated.

In
accordance with SOP 97-2, "Software Revenue Recognition", revenues from software license agreements are recognized, provided that all of the following conditions are met:
a non-cancelable license agreement has been signed, the software has been delivered, the fees are fixed or determinable, there are no material uncertainties regarding customer acceptance,
collection of the resulting receivable is deemed probable and the risk of concession is deemed remote, and no other significant vendor obligations exist. For contracts with multiple obligations, the
Company unbundles the respective components to determine revenue recognition using vendor-specific objective evidence (VSOE). In instances where VSOE cannot be determined, the related fees are
deferred and amortized over the life of the contract.

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Revenues
from sales of products and services or from leases of equipment under sales-type leases are recorded based on shipment of products (and transfer of risk of loss),
commencement of the lease, 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. Revenue from sales-type leases totaled
$0.3 million and $1.7 million for the three months ended December 31, 2001 and nine months ended September 30, 2002, respectivley. Operating lease revenues are recognized
during the applicable period of customer usage. Revenue from maintenance contracts is recognized ratably over the period of the related contract.

Long-Lived Assets

The Company previously evaluated potential impairment of long-lived assets and long-lived assets to be disposed of in accordance with SFAS
No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of". SFAS No. 121 established procedures for review of
recoverability and measurement of impairment (if necessary) of long-lived assets and certain identifiable intangibles held and used by an entity. SFAS No. 121 required that those
assets be reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of the respective asset may not be fully recoverable. SFAS No. 121 also required that
long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying amount or fair value less estimated selling costs. On December 31,
2001, we adopted SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and reporting for the impairment or disposal of
long-lived assets, and which supercedes SFAS No. 121.

The
Company recorded asset impairment charges in 2000 of $28.5 million (see Note 8).

Research and Development

Research and development costs are expensed as incurred. Engineering costs associated specifically with research and development amounted to $3.4 million,
$0.9 million, $3.6 million and $6.3 million for the nine months ended September 30, 2002, the three months ended December 31, 2001, and the years ended
September 30, 2001 and 2000, respectively. The Company supports several engineering processes, including basic technological research, service offering and product development, and sustaining
engineering for its existing products.

Income or Loss Per Share

Basic income or loss per share is computed based upon the weighted average number of shares of Anacomp's common stock outstanding during the period. For the nine
months ended September 30, 2002, potentially dilutive securities include 783,077 outstanding warrants to purchase Class B Common Stock which were issued as part of the reorganization.
These warrants were excluded from diluted income per share as they were anti-dilutive using the treasury stock method. Basic and diluted net income or loss for periods prior to the nine
months ended September 30, 2002 have not been presented as they are not comparable to subsequent periods due to the implementation of Fresh Start Reporting (see Note 3).

Management Estimates and Assumptions

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period.

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Estimates have been prepared on the basis of the most current available information and actual results could differ from those estimates.

Recent Accounting Pronouncements

Pursuant to Statement of Position 90-7, Anacomp has implemented the provisions of accounting principles required to be adopted within twelve months of
the adoption of Fresh Start Reporting as of December 31, 2001, including the following standards, however, excluding SFAS No. 146, which is not effective until after December 31,
2002:

On
October 3, 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets", which addresses financial accounting and
reporting for the impairment or disposal of long-lived assets, and which supercedes SFAS No. 121. SFAS No. 144 also reduces the threshold for discontinued operations
reporting to a component of an entity rather than a segment of a business as required under Accounting Principles Bulletin No. 30, "Reporting the Results of OperationsReporting the
Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions." The adoption of SFAS No. 144 on December 31, 2001 did not
have a material impact on our financial position or results of operations. However, as a result of the changes whereby a component of an entity can qualify for discontinued operations presentation,
the sale of our Switzerland subsidiary, effective October 1, 2002 (see Note 7) required such presentation whereas under APB 30 it would not have qualified. In accordance with the
provisions of SFAS No.144, we have separately disclosed the results of operations of our Switzerland subsidiaries for the 9 months ended September 30, 2002. We did not separately
disclose the results of operations of our Switzerland subsidiaries for the three months ended December 31, 2001, or for the years ended September 30, 2001 and 2000, as the related
amounts were deemed to be immaterial for each of the respective periods.

On
July 30, 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities", which addresses financial accounting and reporting for
costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity (including Certain Costs Incurred in a Restructuring)." The principal difference between Statement 146 and Issue 94-3 relates to Statement 146's requirements for recognition of a
liability for a cost associated with an exit or disposal activity. Statement 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is
incurred. Under Issue 94-3, a liability for an exit cost as generally defined in Issue 94-3 was recognized at the date of an entity's commitment to an exit plan. A fundamental
conclusion reached by the FASB in this Statement is that an entity's commitment to a plan, by itself, does not create an obligation that meets the definition of a liability. Therefore, this Statement
eliminates the definition and requirements for recognition of exit costs in Issue 94-3.

This
Statement also establishes that fair value is the objective for initial measurement of the liability. Severance pay under Statement 146, in many cases, would be recognized over time
rather than up front. The FASB decided that if the benefit arrangement requires employees to render future service beyond a "minimum retention period" a liability should be recognized as employees
render service over the future service period even if the benefit formula used to calculate an employee's termination benefit is based on length of service. The provisions of this Statement are
effective for exit or disposal activities that are initiated after December 31, 2002, with early application encouraged. We anticipate
adopting SFAS No. 146 in the second quarter of fiscal year 2003 and do not expect it to have a material impact on our financial position or results of operations.

In
June 2001, the FASB issued SFAS No. 141, "Business Combinations", and SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 requires that the
purchase method of accounting be used for all business combinations initiated after June 30, 2001. The Company adopted

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SFAS No. 142 beginning January 1, 2002 upon application of Fresh Start Reporting (See Note 3). As a result of the implementation of Fresh Start Reporting, all goodwill on the
books at December 31, 2001 was eliminated. Under SFAS No. 142, purchased goodwill and intangible assets with indefinite lives are no longer amortized, but instead tested for impairment
at least annually. Accordingly, the Company does not amortize goodwill and intangible assets with indefinite lives as of January 1, 2002. Intangible assets with finite lives, primarily customer
contracts and customer relationships and proprietary technology will be amortized over their useful lives.

The
following table reconciles our net earnings before the cumulative effect of change in accounting to net earnings adjusted for the amortization of intangible assets and goodwill. Due
to our net loss tax position in prior years no tax benefit was realized from this expense.

|                                                            |  | Reorganized
Company |        | Predecessor Company |  
|----------------------------------------------------------- |  | ------------------- | ------ | ------------------- | -
|
|
|Net (loss) income as reported                               |  | $                   | (2,312 | )                   | $
|Goodwill amortization                                       |  |                     |       |                     |  
|                                                            |  |                     |        |                     |  
|Net (loss) income excluding effect of goodwill amortization |  | $                   | (2,312 | )                   | $
|                                                            |  |                     |        |                     |  

We
completed our annual goodwill impairment test as of September 30, 2002 and found no impairment.

NOTE 3.
FRESH START REPORTING:

Our enterprise value of $150 million before consideration of debt after reorganization at December 31, 2001 was determined based on the
consideration of many factors and various valuation methods, including:



The
cash flow valuation utilized five-year projections assuming a weighted average cost of capital rate of approximately 13.5%. A terminal value was determined using a
multiple of our estimated fifth year earnings before interest, other income, reorganization items, asset impairment and restructuring charges, taxes, depreciation and amortization, and extraordinary
items (referred to as "EBITDA"), together with the net present value of the five-year projected cash flows. The excess of the reorganization value over the fair value of identifiable net
assets of $73.2 million, as adjusted, is reported as "Reorganization value in excess of identifiable net assets" and will not be subject to future amortization (similar to goodwill) in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" as issued by the Financial Accounting Standards Board ("FASB").

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For enterprise valuation purposes, in January 2002 we estimated our revenues and cash flows through fiscal year 2006. We projected continued declines in Computer Output to
Microfiche ("COM") and COM-related revenues at a rate of approximately 20% annually and growth in digital and Multi-Vendor Services and product offerings. Our projections also assumed the
following:



In
developing the assumptions underlying the cash flow projections, management considered such factors as historical results as well as its best estimates of expected future market
conditions based on information available as of December 31, 2001. Actual future events and results could differ substantially from management's estimates, assumptions and projections
including, but not limited to, the matters discussed above. Unfavorable changes compared to our projections used for Fresh Start Reporting purposes could result in future impairments of our
reorganization asset and identifiable intangible assets.

In
the nine month period ended September 30, 2002, we recorded pre-reorganization liabilities for pension obligations of $1.4 million.

As
a result of Fresh Start Reporting, identifiable intangible assets were valued and consist of the following to be amortized over the useful lives indicated:

Life in Years

September 30, 2002(dollars in thousands; unaudited)Customer contracts and related customer relationships

10

$
7,600Digital technology and intellectual property

3


3,100COM technology and intellectual property

10


1,300COM production software

5


300Total




12,300Less: accumulated amortization




(1,487
)$
10,813


Based
on the intangible asset values noted above, related amortization expense will be approximately $2 million annually for the next three years.

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The
reorganization and the adoption of Fresh Start Reporting resulted in the following adjustments to our Condensed Consolidated Balance Sheet as of December 31, 2001:

|                                                              |  |   |          | Reorganization and Fresh Start
Adjustments |   |        
|------------------------------------------------------------- |  | - | -------- | ------------------------------------------ | - | -------
|
|
|
|Assets                                                        |  |   |          |                                            |   |        
|Total current assets                                          |  | $ | 78,261   |                                            | $ |       
|Property and equipment, net                                   |  |   | 30,565   |                                            |   | 2,483  
|Reorganization value in excess of identifiable assets         |  |   |         |                                            |   | 75,193 
|Goodwill                                                      |  |   | 83,644   |                                            |   |       
|Intangible assets                                             |  |   |         |                                            |   | 12,300 
|Other assets                                                  |  |   | 8,179    |                                            |   |       
|                                                              |  |   |          |                                            |   |        
|                                                              |  | $ | 200,649  |                                            | $ | 89,976 
|                                                              |  |   |          |                                            |   |        
|Liabilities and Stockholders' Equity (Deficit)                |  |   |          |                                            |   |        
|Current liabilities:                                          |  |   |          |                                            |   |        
|Current portion of senior secured revolving credit facility   |  | $ | 53,075   |                                            | $ | 43,825 
|107/8% senior subordinated notes payable                      |  |   | 310,926  |                                            |   | 310,926
|Accounts payable                                              |  |   | 11,051   |                                            |   |       
|Accrued compensation, benefits and withholdings               |  |   | 16,275   |                                            |   |       
|Accrued income taxes                                          |  |   | 4,220    |                                            |   | 3,027  
|Accrued interest                                              |  |   | 52,267   |                                            |   | 52,254 
|Other accrued liabilities                                     |  |   | 22,642   |                                            |   | 1,075  
|                                                              |  |   |          |                                            |   |        
|Total current liabilities                                     |  |   | 470,456  |                                            |   | 411,107
|Long-term liabilities:                                        |  |   |          |                                            |   |        
|Long-term portion of senior secured revolving credit facility |  |   |         |                                            |   |       
|Unfunded accumulated benefit obligation                       |  |   |         |                                            |   |       
|Other long-term liabilities                                   |  |   | 10,222   |                                            |   | 7,883  
|                                                              |  |   |          |                                            |   |        
|Total long-term liabilities                                   |  |   | 10,222   |                                            |   | 7,883  
|Stockholders' equity (deficit):                               |  |   |          |                                            |   |        
|Common stock                                                  |  |   | 146      |                                            |   | 146    
|Additional paid-in capital                                    |  |   | 111,324  |                                            |   | 111,324
|Accumulated other comprehensive loss                          |  |   | (4,273   | )                                          |   | 1,401  
|Accumulated deficit                                           |  |   | (387,226 | )                                          |   |       
|                                                              |  |   |          |                                            |   |        
|Total stockholders' equity (deficit)                          |  |   | (280,029 | )                                          |   | 112,871
|                                                              |  |   |          |                                            |   |        
|                                                              |  | $ | 200,649  |                                            | $ | 531,861
|                                                              |  |   |          |                                            |   |        

---

Explanations
of the above adjustment columns are as follows:



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Amount(in thousands; unaudited)Senior secured revolving credit facility

$
53,075New equity


96,925Enterprise value


150,000Plus: fair value of identifiable liabilities


53,839Less: fair value of identifiable assets


(128,646
)Reorganization value in excess of identifiable assets

$
75,193




During
the nine month period ended September 30, 2002, approximately $2 million of pre-reorganization net deferred tax assets were utilized as deductions for tax return
purposes and, therefore, reported as a reduction of the Reorganization asset to $73.2 million at September 30, 2002.

The
extraordinary gain on extinguishment of debt, net of taxes, for the period ended December 31, 2001, is calculated as follows:

Amount(in thousands; unaudited)Carrying value of senior subordinated notes

$
310,000Carrying value of related accrued interest


52,254Issuance of new common stock


(96,925
)Extraordinary gain on extinguishment of debt

$
265,329


The
holders of the senior subordinated notes received 99.9% of the new equity of the Reorganized Company; therefore, the net equity of the Reorganized Company was used as the basis for
consideration exchanged in determining the extraordinary gain on extinguishment of debt. There is no income statement tax effect from the extinguishment of debt (see Note 18).

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In
accordance with Statement of Position 90-7, transactions of the Predecessor Company resulting from the Chapter 11 reorganization are reported separately as reorganization
items in the accompanying Consolidated Statement of Operations for the period ended December 31, 2001, and are summarized below:

Three Months
Ended December 31,
2001(in thousands; unaudited)Adjustment of assets and liabilities to fair value

$
16,916Write off of deferred debt issuance costs and unamortized premiums and discounts


(2,216
)Professional fees and other reorganization costs


(1,023
)Settlement of facility lease contract


(349
)Reorganization items

$
13,328


NOTE 4.
SENIOR SECURED REVOLVING CREDIT FACILITY:

Concurrent with the emergence from bankruptcy on December 31, 2001, Anacomp and Fleet National Bank, as agent, and its syndicate of lenders (collectively,
"the Bank Group") entered into an Amended and Restated Revolving Credit Agreement. The amended facility included a $58.9 million credit commitment, with a $53.1 million sublimit for
direct borrowing and a $5.8 million letter of credit sublimit. In accordance with the new agreement, the $53.1 million direct borrowing sublimit was reduced to $44.8 million as of
September 30, 2002 as a result of scheduled principal repayments, issuance of a new letter of credit, and the sale of assets. The credit commitment will be further reduced by future periodic
scheduled amounts and by 85% of the net proceeds from the sale of the Switzerland subsidiaries. The facility is available for new borrowings when borrowings are below the direct borrowing sublimit.

At
September 30, 2002, the outstanding revolving credit borrowings were $30.0 million (plus outstanding standby letters of credit of $6.3 million). During the
nine-month period ended September 30, 2002, we made cash payments totaling $23.1 million, which is $16.1 million greater than our scheduled repayments, resulting in
$14.8 million of borrowing capacity, including the effect of other commitment reductions.

The
maturity date of the amended facility is June 30, 2003, with an extension to December 31, 2003 upon the receipt of at least $4 million net proceeds from the sale
of the Switzerland subsidiaries. The receipt of the required proceeds is expected to occur in early 2003. Upon receipt of the net proceeds, we will be required to permanently reduce the borrowing
sublimit of the credit facility commitment by 85% of the net sale proceeds. Substantially all of the net proceeds will be used to reduce the
outstanding revolving credit borrowings. The credit facility commitment was permanently reduced by $0.8 million upon the initial receipt of proceeds from the sale in October 2002.

The
amended facility bears interest at a base rate equal to the higher of a) the annual rate of interest announced from time to time by Fleet National Bank as its best rate, or
b) one-half of one percent above the Federal Funds Effective Rate, for the portion of the facility equal to a Formula Borrowing Base ("FBB"). The FBB equals 80% of eligible
accounts, which include U.S. and Canadian accounts receivable. The rate of interest is three percentage points higher than the base rate for the facility balance outstanding in excess of the FBB.
Interest is due and payable monthly in arrears. The interest rate was 4.75% for the FBB portion and 7.75% for the excess portion at September 30, 2002.

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At September 30, 2002, the FBB was $15.3 million and the excess of borrowings over the FBB was $14.7 million.

The
credit facility is secured by virtually all Anacomp assets and 65% of the capital stock of our foreign subsidiaries. The facility contains covenants relating to limitations on the
following:



The
credit facility also is subject to minimum EBITDA, interest coverage and leverage ratio covenants. In addition, we are required to remit to the Bank Group the net proceeds of any
capital asset sale.

Effective
December 19, 2002, we signed an amendment to the revolving credit agreement. The amendment modifies certain financial covenants to accommodate the sale of our
Switzerland operations and current business plans. Other changes to the agreement included a permanent reduction to the credit facility commitment of $10.0 million, a decrease in future
quarterly commitment reductions, and provisions for acquisitions and/or divestitures under specified conditions.

Under
the current facility as amended, the facility commitment and the direct borrowings sublimit will be permanently reduced in the future as follows:



In
connection with the December 31, 2001 facility amendment and restatement, we paid a fee of $0.8 million that has been capitalized, is included in "Other assets" in the
accompanying Condensed Consolidated Balance Sheet at September 30, 2002, and is being amortized through June 30, 2003.

NOTE 5.
SENIOR SUBORDINATED NOTES:

The Predecessor Company had outstanding $310 million of publicly traded 107/8% senior subordinated notes and related accrued interest of
$52.3 million at October 19, 2001. As detailed in Note 1, the notes and related accrued interest were extinguished in the reorganization. The accompanying Consolidated Statement
of Operations for the period ended December 31, 2001 includes approximately $1.7 million of interest expense on the notes through October 19, 2001, the date the Predecessor
Company filed for bankruptcy. Had interest on the senior subordinated notes continued to accrue beyond the October 19, 2001 bankruptcy filing date, we would have recognized an additional
$6.9 million in interest expense through December 31, 2001.

NOTE 6.
RESTRUCTURING CHARGES:

In fiscal year 2002, we recorded a restructuring charge of $2.1 million related to the reorganization of our operations from two business units to one. We
reorganized our workforce by combining the field organizations of Document Solutions and Technical Services into one organization, establishing an executive level position to oversee all sales and
marketing activities and implementing a single support group for our data centers, Web Presentment operations, field services operations and process quality. The restructuring charges included
$1.6 million in employee severance and termination-related costs for

A-20

---

approximately 100 employees, all of whom have left the company. The severance payments will be completed by the second quarter of fiscal 2003. The restructuring charges also include approximately
$0.4 million for the closure of a data center for which payments will continue until the lease expires in July 2004. Of the $0.4 million, $69 thousand represents a
non-cash charge to write off the net book value of leasehold improvements located in the closed data center.

In
the second and third quarters of 2000, we effected a reorganization of our workforce in the United States and Europe along our lines of business, reorganized parts of our corporate
staff and phased out our manufacturing operations. To accomplish the reorganization of our workforce and corporate staff, we reassessed job responsibilities and personnel requirements in each of our
continuing business units and corporate staff. The assessment resulted in substantial permanent personnel reductions and involuntary terminations throughout our organization, primarily in our European
operations and our corporate and manufacturing staff. We recorded restructuring charges of $14.6 million related to these actions. Employee severance and termination-related costs were for
approximately 300 employees, all of whom have left the company; we have paid all related severance. Other fees relate to professional fees associated with negotiations to terminate facility leases and
other costs associated with implementation of our new business unit structure and the reorganization of our business units into separate entities. We have also paid these fees. In the first quarter of
fiscal year 2002, we vacated our Japanese facility, terminated substantially all related personnel and undertook other procedures to wind down our Japanese subsidiary. As a result, we reversed
approximately $1 million of fiscal 2000 business restructuring reserves due to favorable circumstances related to the shutdown. Our closure costs to vacate the facility in Japan, costs to
fulfill our contract obligations and severance and related professional costs up to that time were less than we anticipated at the time we recorded the accrual. As of September 30, 2002, the
remaining liability related to international facility costs is expected to be paid by the end of December 2003.

In
the third quarter of fiscal year 2001, we reversed $1.2 million of business restructuring reserves ($333 thousand from the 1998 restructuring and $874 thousand
from the 2000 restructuring) primarily related to favorable experience in employee separations and facility-related costs, as well as reduced levels of professional and other fees.

In
fiscal 1998, we recorded restructuring charges of $8.5 million and reserves of $15.2 million related to the First Image acquisition. This liability has been fully paid
as of June 30, 2002.

The
restructuring reserves are included as a component of "Other accrued liabilities" in the accompanying Consolidated Balance Sheets.

The
following tables present the activity and balances of the restructuring reserves from September 30, 2001 to September 30, 2002 (in thousands):

Fiscal Year 2002 Restructuring

Reorganized Company

December 31, 2001

Adjustments

Payments and
Deductions

September 30, 2002Employee Separations

$


$
1,638

$
(1,405
)
$
233Facility Closing





443


(118
)

325$


$
2,081

$
(1,523
)
$
558


A-21

---

Fiscal Year 2000 Restructuring

Reorganized Company

December 31, 2001

Adjustments

Cash Payments

September 30, 2002Facility Closing

$
120

$


$
(43
)
$
77Contract Obligations


170





(44
)

126$
290

$


$
(87
)
$
203


Predecessor Company

September 30, 2001

Adjustments

Cash Payments

December 31, 2001Employee Separations

$
269

$
(214
)
$
(55
)
$
Facility Closing


281


(149
)

(12
)

120Contract Obligations


511


(307
)

(34
)

170Professional and Other


313


(313
)




$
1,374

$
(983
)
$
(101
)
$
290


Fiscal Year 1998 Restructuring

Reorganized Company

December 31, 2001

Adjustments

Cash Payments

September 30, 2002Facility Closing

$
160

$


$
(160
)
$
$
160

$


$
(160
)
$



Predecessor Company

September 30, 2001

Adjustments

Cash Payments

December 31, 2001Facility Closing

$
276

$
(39
)
$
(77
)
$
160Other


10


(10
)




$
286

$
(49
)
$
(77
)
$
160


NOTE 7.
SALE OF SWITZERLAND AND OTHER OPERATIONS:

In May 2001, we announced our intention to sell all or parts of our European document-management business, Document Solutions International (DSI). A sale
of all of DSI is not currently planned. However, we completed a sale of our Switzerland subsidiaries and operations on October 18, 2002. We signed a sales agreement on September 27,
2002. The acquiring company assumed operational responsibility effective October 1, 2002.

Under
the terms of the sale agreement, we sold all of the outstanding shares of our two Swiss subsidiaries, Cominformatic AG and Anacomp Technical Services AG, to edotech Ltd. (a
UK company) at a sales price of CHF 26.7 million (Swiss francs).

The
sales price is payable as follows: CHF 4.6 million, or approximately $3.1 million, at closing; CHF 18.2 million upon completion of the Cominformatic share
exchange, no later than six months from the date closing; CHF 1.1 million on or before April 18, 2003; and CHF 2.8 million within the next 18 months upon expiration of
certain indemnification claim periods. The costs of the sale are estimated to be $2.1 million. Effectively all of the net proceeds (i.e. sales price less sale costs) will be used to reduce the
revolving balance outstanding and 85% of such proceeds will permanently reduce the total borrowing commitment under the terms of the senior secured revolving credit facility. Upon

A-22

---

receipt of at least $4 million in net proceeds from the Switzerland sale, the maturity date of the credit facility will be extended from June 30, 2003 to December 31, 2003.

In
addition, we sold two smaller operating units effective in the third quarter of fiscal 2002. A loss of $331 thousand was recognized and reported as Selling, General and
Administrative expenses in that period.

The
assets and liabilities of the Swiss and other operations have been classified separately as "Assets of discontinued operations" and "Liabilities of discontinued operations" in the
Consolidated Balance Sheet as of September 30, 2002. The net assets of the disposed operating units were summarized as follows:

September 30,
2002(dollars in thousands)Cash

$
2,749Accounts and notes receivable


2,288Inventories


1,067Property, plant and equipment


5,227Other assets


696Accounts payable and other accrued liabilities


(4,241
)Total net assets

$
7,786


Similarly,
the results of operations of the Switzerland and other operations have been reported separately as "Income from discontinued operations, net of taxes" in the Consolidated
Statements of Operations for the nine months ended September 30, 2002. The results of operations reported below for the three months ended December 31, 2001, and the years ended
September 30, 2001 and 2000 have not been segregated as discontinued operations in the Consolidated Statements of Operations for the respective periods as they were not material to the
operating results of Anacomp in total.

|                    |  | Reorganized
Company |        | Predecessor Company
|------------------- |  | ------------------- | ------ | -------------------
|
|
|Revenues            |  | $                   | 20,440 |                    
|Income before taxes |  |                     | 1,212  |                    
|Income taxes        |  |                     | 299    |                    
|Net income          |  | $                   | 913    |                    

NOTE 8.
ASSET IMPAIRMENT CHARGES:

During fiscal year 2000, we announced a restructuring of the DatagraphiX business unit, the merger of this unit into the Technical Services business unit and the
discontinuance of manufacturing operations effective October 1, 2000. In fiscal year 2000, we recorded a charge to cost of sales of $9 million for
inventory write-downs resulting from the decision to discontinue DatagraphiX manufacturing operations.

During
fiscal year 2000, we wrote off a note receivable with a carrying value of $2.7 million generated from the sale of our Magnetics division in fiscal 1999 due to the declining
operating results and liquidity of the acquirer. Additionally, due to our overall liquidity position, we abandoned a new

A-23

---

software product, as well as our Image Mouse product. As a result, we wrote off approximately $1.6 million of associated capitalized software development costs and approximately
$0.7 million of specialized manufacturing assets, respectively. Further, we recorded impairments of manufacturing equipment and leasehold improvements totaling approximately $2.0 million
as a result of the discontinuation of manufacturing operations effective October 1, 2000 pertaining to the former DatagraphiX segment.

We
recorded a goodwill impairment charge of $21.4 million related to our Document Solutions International businesses. During the fourth quarter of fiscal 2000, we reached an
agreement in principle with the Bank Group to amend the Facility and to provide Anacomp with a waiver, which was in effect through October 26, 2000, and among other restrictions, prevented us
from remitting funds to our foreign subsidiaries. Based on the inability to support our foreign subsidiaries by the terms of the forbearance agreement, and based on our liquidity issues and the
restructuring of our operations into four separate business units, we reviewed our expected future cash flows of our foreign operations assuming an inability to invest in or support their cash flows
from the U.S. The result of these reviews indicated that our Document Solutions International businesses would have negative cash flows from operations and operating losses that would worsen.

Due
to the above concerns, we announced in May 2001 our intention to sell all or parts of our European document-management business, Document Solutions International (DSI). A sale
of all of DSI is not currently planned; and we anticipate recovering the net book value of any DSI assets sold. See Note 7 for a discussion of our sale of Swiss subsidiaries in
October 2002. As a result of the expected future negative cash flows from operations and the preliminary expressions of interest in the Document Solutions International businesses, the only
long-lived asset that was deemed to be impaired is the goodwill associated with the Document Solutions International businesses.

Asset
impairment charges recorded in fiscal year 2000 are summarized as follows:

Assets

Year Ended
September 30, 2000(in thousands)Goodwill

$
21,390Magnetics note receivable


2,738Development assets


2,338Leasehold improvements and equipment


2,027$
28,493


As
reflected in the accompanying Consolidated Balance Sheet, the Company had goodwill related to the following acquisitions:

Business Acquisition

September 30, 2001(in thousands)First Image (15 year amortization period)

$
77,542Litton Adesso Software, Inc. (7 year amortization period)


7,408All Others (3 to 5 year amortization periods)


1,335$
86,285


As
explained in Note 1, we emerged from bankruptcy effective December 31, 2001, and we have implemented Fresh Start Reporting. Under Fresh Start accounting, we have
established a new basis of accounting for the Reorganized Company that eliminated the goodwill asset and established a reorganization value in excess of identifiable assets.

A-24

---

NOTE 9.
SALE OF THE MAGNETICS DIVISION:

In fiscal year 1999, we sold our Magnetics Division. The sale was effective June 1, 1999, and the sales price of $40 million included
$37 million in cash at closing and an interest-bearing $3 million subordinated note. In connection with the sale of the division, we agreed to provide administrative support to the
acquirer in Japan. The support services relate to the Japanese operations included in the Magnetics Division sale. At the sale date, the incremental cost of this administrative support obligation was
considered in the determination of the fiscal 1999 gain on sale. Such determination was based on the fact that we had other Japan-based operations for COM and other business lines. In the third
quarter of fiscal 2000, as part of the corporate reorganization, we elected to close our Japan-based operations, thereby increasing the remaining costs associated with the administrative obligations.
This resulted in a charge of $1.6 million being recorded in the third quarter of fiscal 2000. During the third quarter of fiscal 2000, we determined that the collectibility of the note
receivable, with a carrying value of $2.7 million, was impaired and wrote-off the $2.7 million note.

NOTE 10.
FAIR VALUES OF FINANCIAL INSTRUMENTS:

SFAS No. 107, "Disclosures About Fair Value of Financial Instruments", requires disclosure of fair value information for certain financial instruments. The
carrying amounts for trade and other receivables and payables are considered to be their fair values. The carrying amounts, net of unamortized discounts and premiums, and fair values of the Company's
other financial instruments at September 30, 2002 and 2001, are as follows:

|                                         |  | September 30, 2002 |        | September 30, 2001
|---------------------------------------- |  | ------------------ | ------ | ------------------
|
|
|Senior Secured Revolving Credit Facility |  | $                  | 29,975 |                   
|107/8% Senior Subordinated Notes         |  | $                  |       |                   

The
September 30, 2001 estimated fair values of Senior Subordinated Notes were based on quoted market values.

NOTE 11.
HEDGING:

Anacomp is exposed to the risk of future currency exchange rate fluctuations. To mitigate a portion of this risk, we have in the past entered into various foreign
currency swap agreements that were designated as, and were effective as, economic hedges of net investments of certain foreign subsidiaries. In accordance with SFAS No. 52 "Foreign Currency
Translation", realized and unrealized gains and losses, including terminations and maturities of swaps, are reflected in "Accumulated other comprehensive loss". Foreign currency swaps are marked to
market at each reporting period based on movements in the exchange rates of the underlying currencies. In November 2000, the Company terminated its only remaining currency swap agreement and
received $0.8 million in cash proceeds. This benefit is reflected in the 2001 Consolidated Balance Sheet as a component of "Accumulated other comprehensive loss" in "Stockholders' equity
(deficit)". At September 30, 2002, the Company did not have any currency swap agreements outstanding.

NOTE 12.
SUPPLIER CONCENTRATION RISK:

Intelicoat Technologies Agreement

Anacomp has a supply agreement with Intelicoat Technologies that expires October 1, 2004. Pursuant to the supply agreement, Anacomp can purchase coated
duplicate microfilm from Intelicoat at fixed prices for a one year period, which can be modified as defined in the agreement in future years. The supply agreement has no minimum purchase requirements.
During fiscal 2002, we obtained all of our duplicate microfilm from Intelicoat.

Kodak Agreement

We obtain our silver halide film used to produce master images principally from the Eastman Kodak Company under an multi-year supply agreement. The
supply agreement has no minimum purchase requirements.

A-25

---

NOTE 13.
COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:

|                                                                                             |  | Reorganized
Company |         | Predecessor
Company |  
|-------------------------------------------------------------------------------------------- |  | ------------------- | ------- | ------------------- | -
|
|
|Accounts Receivable:                                                                         |  |                     |         |                     |  
|Trade receivables, net of allowance for doubtful accounts of $2,693 and $4,538, respectively |  | $                   | 33,423  |                     | $
|Other                                                                                        |  |                     | 567     |                     |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  | $                   | 33,990  |                     | $
|                                                                                             |  |                     |         |                     |  
|Inventories:                                                                                 |  |                     |         |                     |  
|Finished goods, including purchased film                                                     |  | $                   | 1,766   |                     | $
|Work in process                                                                              |  |                     |        |                     |  
|Consumable spare parts and supplies                                                          |  |                     | 1,708   |                     |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  | $                   | 3,474   |                     | $
|                                                                                             |  |                     |         |                     |  
|Property and Equipment:                                                                      |  |                     |         |                     |  
|Buildings                                                                                    |  | $                   |        |                     | $
|Office furniture                                                                             |  |                     | 6,087   |                     |  
|Field support spare parts                                                                    |  |                     | 6,244   |                     |  
|Leasehold improvements                                                                       |  |                     | 7,080   |                     |  
|Processing and manufacturing equipment                                                       |  |                     | 18,152  |                     |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  |                     | 37,563  |                     |  
|Less accumulated depreciation and amortization                                               |  |                     | (16,115 | )                   |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  | $                   | 21,448  |                     | $
|                                                                                             |  |                     |         |                     |  
|Excess of Purchase Price Over Net Assets of Businesses Acquired:                             |  |                     |         |                     |  
|Goodwill                                                                                     |  | $                   |        |                     | $
|Less accumulated amortization                                                                |  |                     |        |                     |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  | $                   |        |                     | $
|                                                                                             |  |                     |         |                     |  
|Cash Surrender Values Included in Other Assets:                                              |  |                     |         |                     |  
|Cash surrender values in life insurance policies                                             |  | $                   | 730     |                     | $
|Loans against cash surrender values                                                          |  |                     |        |                     |  
|                                                                                             |  |                     |         |                     |  
|Net cash surrender values in Other Assets                                                    |  | $                   | 730     |                     | $
|                                                                                             |  |                     |         |                     |  
|Face amounts of life insurance policies                                                      |  | $                   | 1,395   |                     | $
|                                                                                             |  |                     |         |                     |  
|Other Accrued Liabilities:                                                                   |  |                     |         |                     |  
|Deferred revenues                                                                            |  | $                   | 7,117   |                     | $
|Sales tax and VAT liability                                                                  |  |                     | 1,173   |                     |  
|Restructuring reserves                                                                       |  |                     | 761     |                     |  
|EPA liabilities                                                                              |  |                     |        |                     |  
|Other                                                                                        |  |                     | 7,371   |                     |  
|                                                                                             |  |                     |         |                     |  
|                                                                                             |  | $                   | 16,422  |                     | $
|                                                                                             |  |                     |         |                     |  

A-26

---

NOTE 14.
LONG-TERM RECEIVABLES:

Reorganized
Company

Predecessor
CompanyLong-term receivables:

September 30,
2002

September 30,
2001(dollars in thousands)Lease contracts receivable

$
2,493

$
2,558Other





892,493


2,647Less current portion


(1,305
)

(1,395
)$
1,188

$
1,252


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

Year Ended
September 30,(dollars in thousands)2003

$
1,4592004


8382005


2812006


1122007


622,752Less deferred interest


(259
)$
2,493


NOTE 15.
RETIREMENT PLANS:

Defined Contribution Plans

Anacomp has a retirement savings plan for its U.S. employees that qualifies under Section 401(k) of the Internal Revenue Code. Participating employees may
contribute up to 15% of their pretax salary, but not more than statutory limits. Anacomp may contribute, at its discretion, up to fifty cents for each dollar a participant contributes, with a maximum
contribution of 3% of a participant's earnings. Company expense for matching contributions was $1.0 million, $0.3 million, and $0.7 million for the nine months ended
September 30, 2002, the three months ended December 31, 2001, and the year ended 2001, respectively. No company matching contribution expense was incurred in fiscal year 2000.

Certain
of our non-U.S. subsidiaries have retirement plans that cover substantially all regular employees, for which we deposit funds under various fiduciary-type
arrangements. Company contributions are generally based on years of service as well as on the employee's level of compensation. The ranges of assumptions that are used for these contributions reflect
the different economic environments and statutory requirements within the various countries. Company expense for contributions to the non-U.S. plans was $1.2 million,
$0.4 million, $1.5 million, and $1.6 million for the nine months ended September 30, 2002, for the three months ended December 31, 2001, and for the fiscal years
2001 and 2000, respectively.

A-27

---

Defined Benefit Plans

We have a retirement plan in place for our United Kingdom subsidiary that qualifies as a defined benefit plan. The plan provides benefits based primarily on years
of service and employee compensation levels. The plan covers approximately 619 participants, including 89 current employees, 484 former employees with vested rights to future benefits, and 46 retirees
and beneficiaries receiving benefits. Funding policy for the plans is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus
additional amounts as we may determine to be appropriate.

Funding
policy for the plans is to contribute amounts sufficient to meet minimum funding requirements as set forth in employee benefit and tax laws plus additional amounts as Anacomp may
determine to be appropriate.

Plan
assets are held in trust and consist primarily of equity securities. Anacomp common stock was not a material component of the plan assets during any of the periods presented.
Anacomp recorded assets and liabilities for the plans as follows:

As
of September 30, 2002, the UK pension plan is under funded by $6.2 million (using September 30, 2002 currency exchange rates) based upon a projected benefit
obligation of $21.5 million, accumulated benefit obligation of $19.3 million and the fair value of plan assets totaled $13.1 million. The under funded liability of
$6.2 million is classified as a long term liability on the September 30, 2002, Consolidated Balance Sheet. These actuarial projections were prepared assuming a discount rate of 6.25%, a
weighted average expected long-term rate of return on plan assets of 7.5% per year and weighted average annual compensation increases of 4%.

Changes
in the projected benefit obligation for the plans are as follows:

Fiscal Year
2002(in thousands)Beginning balance

$
17,696Service cost for benefits earned


347Participant contributions


156Interest cost


845Actuarial gains (losses)


1,313Foreign currency exchange rate changes


1,451Benefits paid


(336
)Ending balance

$
21,472


Changes
in the fair value of assets for the plans are as follows:

Fiscal Year
2002(in thousands)Beginning balance

$
15,119Actual return on plan assets


(3,177
)Employer contributions


361Participant contributions


156Foreign currency exchange rate changes


1,238Benefits paid


(336
)Ending balance

$
13,361


A-28

---

Plan
assets are held in trust and consist primarily of equity securities. Anacomp common stock was not a material component of the plan assets during any of the periods presented.

NOTE 16.
CAPITAL STOCK:

Bankruptcy Reorganization

Class A and Class B Common Shares

We are authorized to issue up to 40,000,000 shares of Class A Common Stock and 787,711 shares of Class B Common Stock. Each share of Class A
and Class B Common Stock is identical, including voting
rights, dividends, when and if declared, and liquidation rights, subject to any preference of preferred stock as may be issued in the future.

Preferred Stock

Our Board of Directors has the ability, at its discretion, to create one or more series of Preferred Stock and to determine each such series' preferences,
limitations, and relative voting and other rights. We are authorized to issue up to 1,000,000 shares of preferred stock, as established during our financial restructuring and reorganization (see
Note 1.). As of September 30, 2002, we have not issued any preferred stock.

Common Stock Repurchase Program

In February 1999, the Board of Directors authorized repurchases of up to two percent of the Company's outstanding shares of common stock per quarter.
Shares may be purchased on the open market from time to time and at such prices as management may determine, based on current prices and market conditions, subject to compliance with our credit
agreements. During fiscal 2000, we repurchased 93,200 shares of our common stock. On February 8, 2000, we terminated the stock repurchase program.

Warrants

As of September 30, 2002, we had 783,077 warrants outstanding to purchase common stock at an exercise price of $61.54 per share. These warrants were
authorized and issued in connection with our financial restructuring and reorganization (see Note 1).

NOTE 17.
STOCK PLANS:

Under the Plan of Reorganization all prior stock option plans were canceled.

Under
the Reorganization Plan effective December 31, 2001, the board of directors reserved 403,403 Class A Anacomp shares for issuance to employees of the company or its
subsidiaries as incentive compensation.

In
fiscal year 2002, we awarded 210,000 options to employees to purchase shares at a price of $26.00 per share.

A-29

---

The
following table summarizes transactions under the Company's stock option plans for the nine months ended September 30, 2002 and all options outstanding and exercisable by
price range as of September 30, 2002:

2002Shares

Weighted-Average
Exercise Price

Weighted-Average
Remaining
Contractual LifeOutstanding on January 1,



$


Granted

210,000


26.00

9.84Canceled






Exercised






Outstanding on September 30,

210,000

$
26.00

9.84


We
account for our employee stock option plans in accordance with APB Opinion No. 25, under which compensation expense is recognized only to the extent the exercise price of the
option is less than the fair market value of a share of stock at the date of grant. Accordingly, we have adopted the disclosure only requirements of SFAS No. 123, "Accounting for Stock Based
Compensation." Had employee compensation costs for these plans been determined based on their fair value on their grant date in accordance with SFAS No. 123, our net results would have been as
follows:

|                               |  | Reorganized
Company
Nine Months
Ended
September 30, 2002 |        | Predecessor Company |  
|------------------------------ |  | -------------------------------------------------------- | ------ | ------------------- | -
|
|
|Net income (loss) as reported  |  | $                                                        | (2,312 | )                   | $
|Pro forma net loss             |  |                                                          | (2,445 | )                   |  
|Net loss per share as reported |  |                                                          | (0.57  | )                   |  
|Pro forma net loss per share   |  |                                                          | (0.61  | )                   |  

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 2002 and
2000 (no options were granted in 2001), as well as the weighted average assumptions used to determine the fair values, are summarized below:

2002

2000Fair Value of Options Granted

$
9.05

$
15.05Risk-Free Interest Rate


3.32
%

5.36
%Expected Dividend Yield


0
%

0
%Expected Volatility


0.33
%

113
%Expected Life


5 Years


10 Years


A-30

---

NOTE 18.
INCOME TAXES:

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

|              |  | Reorganized
Company |        | Predecessor Company |  
|------------- |  | ------------------- | ------ | ------------------- | -
|
|
|United States |  | $                   | (1,947 | )                   | $
|Foreign       |  |                     | 2,746  |                     |  
|              |  |                     |        |                     |  
|              |  | $                   | 799    |                     | $
|              |  |                     |        |                     |  

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

|          |         | Reorganized
Company |       | Predecessor Company
|--------- | ------- | ------------------- | ----- | -------------------
|
|
|Current:  |         |                     |       |                    
|          | Federal |                     | $     | 636                
|          | Foreign |                     |       | 1,543              
|          | State   |                     |       | 150                
|          |         |                     |       |                    
|          |         |                     | 2,329 |                    
|Deferred: |         |                     |       |                    
|          | Federal |                     |       | 1,994              
|          |         |                     |       |                    
|          |         | $                   | 4,323 |                    
|          |         |                     |       |                    

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

|                                                          |  | Reorganized
Company |       | Predecessor Company
|--------------------------------------------------------- |  | ------------------- | ----- | -------------------
|
|
|Provision for income taxes before discontinued operations |  | $                   | 4,024 |                    
|Discontinued operations                                   |  |                     | 299   |                    
|                                                          |  |                     |       |                    
|                                                          |  | $                   | 4,323 |                    
|                                                          |  |                     |       |                    

A-31

---

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

|                                                              |  | Reorganized
Company |        | Predecessor Company |  
|------------------------------------------------------------- |  | ------------------- | ------ | ------------------- | -
|
|
|Benefit for income taxes at U.S. statutory rate               |  | $                   | 280    |                     | $
|Reorganization items                                          |  |                     |       |                     |  
|Life insurance                                                |  |                     | 2,590  |                     |  
|U.S. tax on dividends from foreign subsidiaries               |  |                     | 3,157  |                     |  
|Foreign tax credits generated                                 |  |                     | (4,940 | )                   |  
|Nondeductible amortization and write-off of intangible assets |  |                     |       |                     |  
|State and foreign income taxes                                |  |                     | 1,113  |                     |  
|Increase in deferred tax asset valuation allowance            |  |                     | 1,771  |                     |  
|Other                                                         |  |                     | 53     |                     |  
|                                                              |  |                     |        |                     |  
|                                                              |  | $                   | 4,024  |                     | $
|                                                              |  |                     |        |                     |  

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

|                                                                    |                                          | Reorganized
Company
September 30,
2002 |         | Predecessor
Company
September 30,
2001 |  
|------------------------------------------------------------------- | ---------------------------------------- | -------------------------------------- | ------- | -------------------------------------- | -
|
|Tax effects of future temporary differences related to:             |                                          |                                        |         |                                        |  
|                                                                    | Accrued expenses and reserves            |                                        | $       | 9,023                                  |  
|                                                                    | Depreciation and amortization            |                                        |         | 32,104                                 |  
|                                                                    | Other                                    |                                        |         |                                       |  
|                                                                    |                                          |                                        |         |                                        |  
|Net tax effects of future differences                               |                                          |                                        | 41,127  |                                        |  
|                                                                    |                                          |                                        |         |                                        |  
|Tax effects of carryforward benefits:                               |                                          |                                        |         |                                        |  
|                                                                    | Federal net operating loss carryforwards |                                        |         |                                       |  
|                                                                    | Federal tax credits                      |                                        |         |                                       |  
|                                                                    | Foreign tax credits                      |                                        |         | 2,139                                  |  
|                                                                    |                                          |                                        |         |                                        |  
|Tax effects of carryforwards                                        |                                          |                                        | 2,139   |                                        |  
|                                                                    |                                          |                                        |         |                                        |  
|Tax effects of future taxable differences and carryforward benefits |                                          |                                        | 43,266  |                                        |  
|Less valuation allowance                                            |                                          |                                        | (43,266 | )                                      |  
|                                                                    |                                          |                                        |         |                                        |  
|Net deferred tax asset                                              |                                          | $                                      |        |                                        | $
|                                                                    |                                          |                                        |         |                                        |  

As
of December 31, 2001, we had deferred tax assets totaling approximately $43.5 million, which were fully offset by a valuation allowance. Such deferred tax assets are
comprised primarily of temporary differences related to U.S. federal and certain state tax deductions.

The
tax benefits of pre-reorganization deferred tax assets will be reported first as a reduction of the Reorganization Asset and then as a credit to equity. These tax
benefits will not reduce income tax expense for financial reporting purposes, although such assets when recognized or amortized as an

A-32

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expense for tax return purposes may reduce U.S. federal and certain state taxable income if any, and therefore reduce the income tax payable. During the period ended September 30, 2002,
approximately $2 million of pre-reorganization net deferred tax assets were utilized as deductions for tax return purposes and, therefore, were reported as a reduction of the
reorganization asset. The income tax provision of $4.3 million in the nine months ended September 30, 2002, may appear disproportionate to pretax income of $0.8 million. The
$2 million noted above is the primary cause for this and does not result in taxes payable.

On
October 19, 2001, the Company filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code. Under the terms of the plan of reorganization, the Company has
cancellation of debt ("COD"). As a result, the Company is required to reduce, for federal income tax purposes, certain tax attributes, including net operating loss carryforwards, tax credit
carryforwards, and property basis, by the amount of the COD. In general, the amount of attribute reduction is equal to the excess of the debt discharged in bankruptcy over the fair market value of the
stock issued in the reorganization.

Additionally,
the Company experienced an ownership change under section 382 as a result of the reorganization, which will limit the Company's ability to utilize certain tax
attributes and possibly certain built-in losses recognized within a five year period.

Undistributed
earnings of the Company's foreign subsidiaries amounted to approximately $21.3 million at September 30, 2002. Those earnings are considered to be indefinitely
reinvested and, accordingly, no provision for U.S. federal and state income taxes has been provided thereon. Upon distribution of those earnings in the form of dividends or otherwise, we would be
subject to both U.S. income taxes (subject to an adjustment for foreign tax credits) and withholding taxes payable to the various foreign countries. Determination of the amount of unrecognized
deferred U.S. income tax liability is not practicable because of the amount of the complexities associated with its hypothetical calculation; however, unrecognized foreign tax credit carryforwards
would be available to reduce some portion of the U.S. liability.

NOTE 19.
COMMITMENTS AND CONTINGENCIES:

Lease Commitments

Anacomp has commitments under long-term operating leases, principally for building space and data service center equipment expiring at various dates
through May 2011. The following summarizes the future minimum lease payments under all noncancelable operating lease obligations that extend beyond one year:

Lease Payments

Sublease Income(dollars in thousands)Year Ended September 30,2003

$
10,897

$
8852004


8,951


7652005


7,437


7312006


6,680


7452007


5,530


759Thereafter


17,500


2,046$
56,995

$
5,931


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The
Company's rent and lease expense was $9.8 million, $3.3 million, $13.9 million and $17.1 million for the nine months ended September 30, 2002, the
three months ended December 31, 2001, and the years ended September 30, 2001 and 2000, respectively.

Environmental Liability

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. At September 30, 2002, we have an estimated EPA liability for cleanup costs for the aforementioned locations and
other sites totaling $1.2 million. During fiscal 2001, we recorded a $1.0 million reduction to our EPA liability previously estimated and accrued upon release from certain further
clean-up activity. In the opinion of management, no material losses are expected in excess of the liability recorded. We have reclassified the liability to long term in the current balance
sheet presentation.

Legal Matters

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, of which Anacomp is the successor by merger, and the Eastman Kodak Company. On April 20, 2001, management settled this matter through the execution of an
agreement, the terms of which are confidential, among Anacomp, ASI and other parties. The Company recorded a $5.4 million charge related to this matter in the second quarter of fiscal 2001 that
is included in selling, general and administrative expense for the year ended September 30, 2001.

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

NOTE 20.
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 include sales by
subsidiaries and through distributors. Information as to U.S. and international operations for the nine months ended September 30, 2002, the three months ended December 31, 2001, and the
years ended September 30, 2001 and 2000 is as follows (dollars in thousands):

Nine Months Ended September 30, 2002 (Reorganized company)

|                                            |  | U.S. |         | International |   | Elimination |  | Consolidated
|------------------------------------------- |  | ---- | ------- | ------------- | - | ----------- |  | ------------
|Customer sales                              |  | $    | 128,008 |               | $ | 45,799      |  | $           
|Inter-geographic                            |  |      | 1,215   |               |   |            |  |             
|                                            |  |      |         |               |   |             |  |             
|Total sales                                 |  | $    | 129,223 |               | $ | 45,799      |  | $           
|                                            |  |      |         |               |   |             |  |             
|Operating income from continuing operations |  | $    | 839     |               | $ | 2,380       |  | $           
|                                            |  |      |         |               |   |             |  |             
|Long-lived assets                           |  | $    | 103,589 |               | $ | 5,000       |  | $           
|                                            |  |      |         |               |   |             |  |             

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Three Months Ended December 31, 2001 (Predecessor company)

|                                            |  | U.S. |         | International |   | Elimination |  | Consolidated
|------------------------------------------- |  | ---- | ------- | ------------- | - | ----------- |  | ------------
|Customer sales                              |  | $    | 45,807  |               | $ | 22,217      |  | $           
|Inter-geographic                            |  |      | 763     |               |   |            |  |             
|                                            |  |      |         |               |   |             |  |             
|Total sales                                 |  | $    | 46,570  |               | $ | 22,217      |  | $           
|                                            |  |      |         |               |   |             |  |             
|Operating income from continuing operations |  | $    | 990     |               | $ | 1,343       |  | $           
|                                            |  |      |         |               |   |             |  |             
|Long-lived assets                           |  | $    | 113,787 |               | $ | 10,390      |  | $           
|                                            |  |      |         |               |   |             |  |             

Year Ended September 30, 2001 (Predecessor company)

|                                          |  | U.S. |         | International |   | Elimination |   | Consolidated |       
|----------------------------------------- |  | ---- | ------- | ------------- | - | ----------- | - | ------------ | ------
|Customer sales                            |  | $    | 214,668 |               | $ | 91,680      |   | $            |      
|Inter-geographic                          |  |      | 3,903   |               |   |            |   |              | (3,903
|                                          |  |      |         |               |   |             |   |              |       
|Total sales                               |  | $    | 218,571 |               | $ | 91,680      |   | $            | (3,903
|                                          |  |      |         |               |   |             |   |              |       
|Operating loss from continuing operations |  | $    | (1,194  | )             | $ | (427        | ) | $            |      
|                                          |  |      |         |               |   |             |   |              |       
|Long-lived assets                         |  | $    | 117,416 |               | $ | 9,087       |   | $            |      
|                                          |  |      |         |               |   |             |   |              |       

Year Ended September 30, 2000 (Predecessor company)

|                                          |  | U.S. |         | International |   | Elimination |   | Consolidated |       
|----------------------------------------- |  | ---- | ------- | ------------- | - | ----------- | - | ------------ | ------
|Customer sales                            |  | $    | 268,312 |               | $ | 114,885     |   | $            |      
|Inter-geographic                          |  |      | 8,353   |               |   |            |   |              | (8,353
|                                          |  |      |         |               |   |             |   |              |       
|Total sales                               |  | $    | 276,665 |               | $ | 114,885     |   | $            | (8,353
|                                          |  |      |         |               |   |             |   |              |       
|Operating loss from continuing operations |  | $    | (54,076 | )             | $ | (13,572     | ) | $            |      
|                                          |  |      |         |               |   |             |   |              |       
|Long-lived assets                         |  | $    | 141,310 |               | $ | 11,537      |   | $            |      
|                                          |  |      |         |               |   |             |   |              |       

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NOTE 21.
QUARTERLY FINANCIAL DATA (UNAUDITED):

|                                         |                   | First
Quarter |         | Second
Quarter |   | Third
Quarter |      | Fourth
Quarter |        
|---------------------------------------- | ----------------- | ------------- | ------- | -------------- | - | ------------- | ---- | -------------- | -------
|
|
|Summary Results of Operations:           |                   |               |         |                |   |               |      |                |        
|Fiscal 2002                              |                   |               |         |                |   |               |      |                |        
|Revenues                                 |                   | $             | 68,024  |                | $ | 60,607        |      | $              | 56,534 
|Gross margin                             |                   |               | 21,520  |                |   | 20,152        |      |                | 17,517 
|Income (loss) from continuing operations |                   |               | 12,031  |                |   | 285           |      |                | (481   
|                                         |                   |               |         |                |   |               |      |                |        
|Net income (loss)                        |                   | $             | 277,360 |                | $ | 903           |      | $              | 7      
|                                         |                   |               |         |                |   |               |      |                |        
|Basic and diluted per share data:        |                   |               |         |                |   |               |      |                |        
|                                         | Net income (loss) |               |         |                |   | $             | 0.23 |                | $      
|                                         |                   |               |         |                |   |               |      |                |        
|Fiscal 2001 (Predecessor company)        |                   |               |         |                |   |               |      |                |        
|Revenues                                 |                   | $             | 82,141  |                | $ | 80,202        |      | $              | 73,028 
|Gross margin                             |                   |               | 28,181  |                |   | 26,775        |      |                | 22,622 
|Loss from continuing operations          |                   |               | (7,676  | )              |   | (15,707       | )    |                | (12,753
|                                         |                   |               |         |                |   |               |      |                |        
|Net loss                                 |                   | $             | (7,676  | )              | $ | (15,707       | )    | $              | (12,753
|                                         |                   |               |         |                |   |               |      |                |        
|Summary of Significant Charges:          |                   |               |         |                |   |               |      |                |        
|Fiscal 2002                              |                   |               |         |                |   |               |      |                |        
|Restructuring (credit) charge            |                   | $             | (1,032  | )              | $ |              |      | $              | 2,081  
|Fiscal 2001                              |                   |               |         |                |   |               |      |                |        
|Legal settlement charge                  |                   | $             |        |                | $ | 5,377         |      | $              |       
|Environmental reserve credit             |                   | $             |        |                | $ |              |      | $              | (1,012 
|Restructuring credit                     |                   | $             |        |                | $ |              |      | $              | (1,207 

A-36

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NOTE 22.
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, 2002, 2001 and
2000:

|                                                           |  | Balance at
beginning of
period |       | Charges
(credits) to
costs and
expenses |      | Deductions |        | Balance at
end of
period
|---------------------------------------------------------- |  | ------------------------------ | ----- | --------------------------------------- | ---- | ---------- | ------ | ------------------------
|
|Nine months ended September 30, 2002 (Reorganized Company) |  |                                |       |                                         |      |            |        |                         
|Allowance for doubtful accounts                            |  | $                              | 4,628 |                                         | (16  | )          | (1,919 | )                       
|                                                           |  |                                |       |                                         |      |            |        |                         
|Three months ended December 31, 2001 (Predecessor Company) |  |                                |       |                                         |      |            |        |                         
|Allowance for doubtful accounts                            |  | $                              | 4,538 |                                         | 123  |            | (33    | )                       
|                                                           |  |                                |       |                                         |      |            |        |                         
|Year ended September 30, 2001 (Predecessor Company)        |  |                                |       |                                         |      |            |        |                         
|Allowance for doubtful accounts                            |  | $                              | 4,922 |                                         | 163  |            | (547   | )                       
|                                                           |  |                                |       |                                         |      |            |        |                         
|Year ended September 30, 2000 (Predecessor Company)        |  |                                |       |                                         |      |            |        |                         
|Allowance for doubtful accounts                            |  | $                              | 5,815 |                                         | (195 | )          | (698   | )                       
|                                                           |  |                                |       |                                         |      |            |        |                         

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