<PAGE>

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

                                    FORM 10-K

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

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999
                                       or

[ ]  Transition Report Pursuant to Section 13 or 15 (d) of the Securities
     Exchange Act of 1934.
             For the transition period from ___________to____________.

                         Commission File Number (1-8328)

                                  ANACOMP, INC.
             (Exact name of registrant as specified in its charter)

         INDIANA                                                35-1144230
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

                12365 CROSTHWAITE CIRCLE, POWAY, CALIFORNIA 92064
                                 (858) 679-9797

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

                               TITLE OF EACH CLASS
                               -------------------
                          COMMON STOCK, $.01 PAR VALUE
                              COMMON STOCK WARRANTS

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

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

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

The aggregate market value of the voting stock held by non-affiliates of the
registrant, as of November 30, 1999, was approximately $176,130,883 (based
upon the closing price for shares of the registrant's common stock as
reported by the NASDAQ National Market for November 29, 1999, the last
trading day prior to that date). Shares of common stock held by each of the
registrant's officers and directors, and by a certain holder of more than 10%
of the registrant's outstanding common stock, have been excluded in that such
persons may be deemed to be affiliates of the registrant; however, this
determination of affiliate status is not necessarily a conclusive
determination for any other purpose.

The number of shares outstanding of the registrant's common stock, $.01 par
value, as of November 30, 1999 was 14,341,039 shares.

<PAGE>

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive Proxy Statement to be filed with
the Securities and Exchange Commission pursuant to Regulation 14A in
connection with the registrant's 2000 Annual Meeting of Shareholders are
incorporated herein by reference into Part III of this Report. Such Proxy
Statement will be filed with the Securities and Exchange Commission not later
than 120 days after the registrant's fiscal year ended September 30, 1999.

<PAGE>

                                  ANACOMP, INC.

                                    FORM 10-K

                  FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999

                                      INDEX

<TABLE>
<CAPTION>
                                                                              Page
                                                                              ----
<S>         <C>                                                               <C>
PART I
  Item 1    Business                                                            1
  Item 2    Properties                                                         10
  Item 3    Legal Proceedings                                                  10
  Item 4    Submission of Matters to a Vote of Security Holders                11

PART II
  Item 5    Market for the Registrant's Common Equity and Related
            Stockholder Matters                                                13
  Item 6    Selected Consolidated Financial Data                               14
  Item 7    Management's Discussion and Analysis of Financial
            Condition and Results of Operations                                15
  Item 7A   Quantitative and Qualitative Disclosures About Market Risks        21
  Item 8    Financial Statements and Supplementary Data                        21
  Item 9    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                                21

PART III
  Item 10   Directors and Executive Officers of the Registrant                 22
  Item 11   Executive Compensation                                             22
  Item 12   Security Ownership of Certain Beneficial Owners and Management     22
  Item 13   Certain Relationships and Related Transactions                     22

PART IV
  Item 14   Exhibits, Financial Statement Schedules and Reports on Form 8-K    23
            Signatures                                                         26
</TABLE>
<PAGE>

                                     PART I

ITEM 1.  BUSINESS

         Certain statements in this Item 1, "Business", and in Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," constitute "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended (the "Securities Act"),
and Section 21E of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). Such forward-looking statements involve known and unknown
risks, uncertainties and other important factors that could cause the actual
results, performance or achievements of Anacomp, Inc. ("Anacomp" or the
"Company"), or industry results, to differ materially from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such risks, uncertainties and other important factors include
among others: general economic and business conditions; industry trends;
industry capacity; competition; raw materials costs and availability;
currency fluctuations; the loss of any significant customers; changes in
business strategy or development plans; successful development of new
products; availability, terms and deployment of capital; ability to meet debt
service obligations; availability of qualified personnel; changes in, or the
failure or inability to comply with, government regulations; and other
factors referenced in this report. The words "may", "could", "should",
"would", "believe", "anticipate", "estimate", "expect", "intend", "plan" and
similar expressions or statements regarding future periods are intended to
identify forward-looking statements. All forward-looking statements are
inherently uncertain as they involve substantial risks and uncertainties
beyond the Company's control. The Company undertakes no obligation to update
or revise any forward-looking statements for events or circumstance after the
date on which such statement is made. New factors emerge from time to time,
and it is not possible for the Company to predict all of such factors.
Further, the Company cannot assess the impact of each such factor on its
business or the extent to which any factor, or combination of factors, may
cause actual results to differ materially from those contained in any
forward-looking statements.

DOCUMENT MANAGEMENT INDUSTRY

         The document-management industry provides businesses and other
organizations with services and products for storing, distributing and
accessing documents. Today, the rapid increase in the number of documents
generated in both commercial and non-commercial sectors and the rapid advance
of digital technologies are fueling swift growth in this industry. Leading
analysts estimate that the overall document-management market exceeded $10
billion in 1999 and project a compound annual growth rate of more than 20%
over the next five years.

         Industry experts identify several key trends that are shaping the
document-management industry. One of these trends is that organizations want
to access and utilize the knowledge embedded in the billions of documents
they create, process and store. Increasingly, organizations want instant,
reliable access to the information they need, and they want that information
delivered to their personnel via the Internet, intranets or extranets, for
use with desktop browsers. Many organizations also want to provide this
web-based access to their customers via the Internet. This trend is leading
many organizations, especially document-intensive commercial entities, to
re-evaluate their document-management requirements and implement web-based
solutions to meet those requirements.

         Another trend shaping the document-management industry is the
increasing popularity of outsourcing. In general, by outsourcing non-core
business functions, an organization can increase its focus on its core
competencies while taking advantage of the expertise and economies of scale
offered by dedicated service providers. For many organizations, the
document-management function is an excellent candidate for outsourcing. By
choosing an outsource solution over an in-house system, the organization can
obtain superior capabilities, reduce operational and capital costs, have
faster time-to-market, and avoid the challenge of keeping pace with changes
in technology and user requirements. Many industry experts believe that
outsource-service providers with the expertise and resources to provide a
complete, cost-effective document-management solution will gain an increasing
share of the market in coming years.

<PAGE>

         A third trend shaping the document-management industry is heightened
focus on application-specific solutions. Organizations are no longer content
with generic document-management products or services; they demand solutions
tailored to the specific tasks their personnel and customers perform,
including the ability to have appropriate business information easily
available in customer interactions. As a result, leading document-management
providers are analyzing their customers' key business processes, particularly
interactions with the end-customer, and developing solutions tailored to
those processes.

         In response to these trends, expert Application Service Providers
("ASPs") have begun to offer Internet-based document-management solutions for
specific business applications, provided as an outsource service. These
web-based service solutions can provide an organization a significant
competitive advantage by giving its personnel and customers superior access
to information with lower cost and greater convenience than the organization
could achieve with an in-house system.

OVERVIEW OF THE COMPANY

         Anacomp is one of the world's leading document-management providers,
offering a broad range of document-management services and products. Building
on three decades of experience in applying technology to solve organizations'
document-management challenges, Anacomp specializes in using web-based and
media-based technologies to help its customers maximize the value of their
important documents.

BUSINESS STRATEGY

         In 1997, the Company developed a strategic plan, entitled Strategy
2000, to guide its activities for the next five years. The Company updates
the plan continually to reflect changes in its business and markets. The plan
currently sets forth these four strategic imperatives:

CAPITALIZE ON ITS BASE OF PREMIER CUSTOMERS, PROVIDING THEM WITH ADDITIONAL
APPLICATIONS TAILORED TO THE SPECIFIC REQUIREMENTS OF THEIR VERTICAL MARKETS

         The Company has a large base of premier customers, particularly in
the banking, insurance and brokerage sectors, with substantial and diverse
document-management needs. These customers and other potential customers in
these sectors, represent a prime opportunity for the Company. Through
Anacomp's Work Smart Process-SM-, the Company works closely with customers to
analyze their business requirements and processes, identify their full range
of document-management needs, and provide effective solutions to meet those
needs. The Company is currently expanding its range of outsource services,
especially web-based applications for these key sectors, to meet its
customers' full range of document-management needs. In this way, the Company
expects to provide customers with the greatest value and maximize the
Company's business with each customer.

BECOME THE WORLD'S LEADING APPLICATION SERVICE PROVIDER FOR DIGITAL
DOCUMENT-MANAGEMENT SOLUTIONS

         In light of the three key business trends outlined above
(Internet-based document management, outsourcing of non-core business
functions, and focus on application specific solutions), the Company believes
it has the opportunity to seize a leading position in the emerging
Application Service Provider segment for document-management outsource
services. The Company has three decades of experience in document-management
outsourcing, and has acquired extensive expertise in the development and
operation of web-based service solutions for specific business applications.
Combining this experience and expertise in its Internet Document Services
offering, the Company is pursuing this opportunity aggressively and in just
one year has attained a leading position according to several industry
analysts.

DELIVER CONSISTENT GROWTH IN REVENUE AND EARNINGS IN INTERNET DOCUMENT
SERVICES-SM- AND DOCUMENT MANAGEMENT SOLUTIONS, WITH THE MAJORITY ON A
RECURRING BASIS

         The Company places a strategic focus on providing
document-management outsource services, especially in its key banking,
insurance and brokerage market sectors. This service-based business model
generates recurring revenue and earnings from long-term customer agreements.
As the Company introduces new and expanded service solutions into its current
customer base and acquires new customers for these solutions, the Company
expects the growth of its service-based business to produce steadily
increasing recurring revenue and earnings.


                                       2
<PAGE>

MAXIMIZE EARNINGS AND CASH FLOW FROM ITS TRADITIONAL BUSINESSES

         The Company maintains leading positions in its traditional
document-management businesses: DatagraphiX - manufacturing hardware,
providing supporting software systems and supplies - and providing field
maintenance services. Although these businesses are mature, the Company
intends to maximize earnings and cash flow through increased operational
efficiencies and continued growth in overall market share. In addition, the
Company is introducing new products and services in these businesses to
generate new sources of revenue and earnings. These products and services are
described in more detail in the next section.

LINES OF BUSINESS

         Having divested its Magnetics Division during fiscal 1999 (see Note
3 of the Notes to the Consolidated Financial Statements), the Company has
progressively separated its activities into four essentially autonomous
business units. These business units (or lines of business) are described
below.

DOCUMENT MANAGEMENT SOLUTIONS BUSINESS UNIT

         The Company's primary business is document-management outsource
services. Anacomp is a global leader in this business, with a 31-year
tradition of service excellence and customer satisfaction. Through its
worldwide network of document-processing service centers, the Company serves
more than 7,000 outsource-service customers in the United States and Europe.

         Anacomp has industry-leading expertise and resources for analyzing
businesses' specific document-management requirements and for designing,
implementing and operating service solutions tailored to those requirements.
To maintain these capabilities, Anacomp continually invests in developing new
customer solutions and in upgrading its storage and delivery systems and
infrastructure to take advantage of new technologies. To ensure its
customers' continued success in today's dynamic business environment, Anacomp
works closely with its customers to ensure that their document-management
solutions continue to meet their changing requirements.

         The Company's principal business strategy is to capitalize on
current trends in the document-management industry by providing its large
base of premier customers with powerful, cost-effective, outsource-service
solutions for on-line and media-based document management, tailored to their
specific business applications.

         Anacomp's largest markets are the financial-services sectors of
banking, brokerage and insurance, all of which offer significant growth
opportunities. The Company is leveraging its traditional strength in these
sectors by developing service-based solutions for their specific business
applications. By providing ready access to critical documents such as
policies, statements, invoices and reports, these application-specific
solutions enable companies in these sectors to improve their competitiveness
by reducing capital and operating costs, enhancing their business processes,
and improving customer service.

         Anacomp provides online and media-based document-management services
and integrated system solutions using unique consulting, software, and
professional-service components. The offerings of this line of business are
sold and supported by the Company's direct sales force in the United States
and Europe. Document Management Solutions is expected to continue to be a
growth area for the Company, largely due to its digital offerings, which
accounted for approximately 23% of the total revenue in this line of business
during fiscal 1999. The Company expects the contribution from its digital
offerings in this line of business to increase as a percentage of total
revenue.

         Services are provided through the Company's network of
document-processing service centers in the U.S. and Europe, in which the
Company currently processes more than two billion original pages, or "images"
each month. The Company has consolidated its service-center network from 78
locations one year ago to 57 centers today. This consolidation has resulted
in significant cost savings from increased operational efficiencies while
maintaining a high level of service for its customers. At the same time,
seeking to increase its outsource-service business in Europe, the Company
continues to expand its service-center network in Europe through acquisitions
of service providers in several countries.


                                       3
<PAGE>

         The Company's large customer base includes banks, brokerage firms,
mutual funds, insurance companies, and to a lesser extent, utilities,
telecommunications providers, retailers and other providers of business
services. No single customer accounted for more than 5% of the Company's
outsource-service revenues in fiscal 1999. The typical service contract with
customers is exclusive, has a multi-year term with automatic renewal, and
provides for usage-based monthly fees. The Company believes that
approximately 75% of its outsource-service customers are under contract and
estimates that approximately 90% of these contracts are renewed automatically.

         The Company plans to continue to expand its outsource-services
business in both Internet-based and media-based solutions by capitalizing on
its strong presence within its large, loyal customer base and its expertise
in document-management technology and operations.

         CD DOCUMENT SERVICES.  Anacomp offers industry-leading outsource
services for storing, delivering and accessing documents using the Compact
Disc-Recordable (CD-R) medium. Anacomp's CD Document Services offering is a
consistently strong performer, growing an average of 25% per quarter over the
past 12 quarters.

         This outsource service provides customers an easy-to-use,
high-capacity, portable, standardized solution for document distribution,
access and storage. In this service, customers provide invoices, reports,
statements, policies, trade confirmations and other documents to the Company
in electronic form. In its service centers, these electronic documents are
indexed and written to compact disc (CD-R). Each disc also includes the
Company's powerful Windows-Registered Trademark--based tools for accessing
and viewing these documents. The customer needs no additional data or
software to use the documents on a disc. The Company delivers the discs to
the customer for use in various applications, including customer service,
audit, analysis, and long-term archive.

         Since entering the emerging field of CD-based document management in
1995, the Company has quickly become what it believes to be the world's
largest provider of CD-based services. Currently, the Company has
approximately 1,000 customers for CD Document Services. The majority of these
customers are in the U.S., currently representing 89% of the total revenue
from CD Document Services.

         The Company's CD Document Services business has grown at a rate
exceeding 100% per annum since its inception. In fiscal 1999, CD Document
Services totaled $18 million in revenue. This growth is due primarily to
aggressive marketing to both current and new customers. More than 400 of the
1,000 CD Document Services customers are new customers to Anacomp,
significantly expanding its market presence and overall share.

         INTEGRATED SYSTEM SOLUTIONS.  Through unique consulting, software
and professional services, the Company provides integrated system solutions
to customers to help them manage their documents. These capabilities are
offered principally in the Company's European markets, where the outsourcing
trend is not currently as strong as in the U.S. and where the Company is
still building its outsource-services infrastructure.

         In fiscal 1999, the Company invested in both acquisitions and
internal growth to build the capability to deliver complete digital system
solutions in its European markets. The Company acquired a leading Swiss
system integrator, BGIN Holding AG, complementing its existing digital
services and systems business in Switzerland. The Company also acquired
several smaller software development and integration businesses in the U.K.
and Italy. In addition, the Company invested internally to grow both its
document-management outsource services and its systems-integration capability
in Europe. The Company has enjoyed particular success in Switzerland,
Germany, Italy and the U.K. as a result of these efforts. Overall, the
Document Management Solutions business in Europe grew by 80% in fiscal 1999.

         SOFTWARE AND INFRASTRUCTURE DEVELOPMENT.  The Company also continued
to make improvements in its Document Management Solutions infrastructure,
with higher levels of automation in its document-processing service centers
and advanced electronic communications with its customers. In addition, the
Company continued to invest in its CD Document Services and ImageStar
offering in Europe, including acquisition of non-exclusive source-code
licenses from its primary software technology suppliers in these segments.

         COM DOCUMENT SERVICES.  The Company remains the unchallenged world
leader in Computer Output to Microfiche ("COM") services. With unsurpassed
technological and operational expertise in COM Document Services, the Company
images just under two billion original pages to microfiche each month for
more than 6,500 customers around the world.


                                       4
<PAGE>

         This line of business grew substantially in fiscal 1999 compared to
prior years as a result of the acquisition of First Image Management Company
("First Image") in June 1998. This acquisition brought the Company a large
base of new customers, along with the accompanying recurring revenue and
EBITDA (defined on page 15). In aggregate, the COM Document Services business
has declined at an average rate of approximately 3% per quarter during fiscal
1999. This decline was anticipated and reflects the overall trend in the
mature micrographics market segment.

         The Company is minimizing the impact of the declining micrographics
market on its COM Document Services business in two ways. First, it is
increasing its focus on transitioning customers who currently operate
in-house COM systems to outsource services. Outsourcing is an attractive
option for many customers, enabling them to eliminate capital and recurring
costs and operational burden. Second, the Company is aggressively encouraging
customers to migrate their COM applications to CD Document Services. This is
attractive to many customers because CD-R provides fast electronic access
unavailable with microfiche. By migrating customers to CD Document Services,
the Company retains its business and relationship with its customers and
provides the customer with an effective, useful solution.

         Currently, the Company has approximately 6,500 active customers for
COM Document Services worldwide. The majority of these customers are in the
U.S., currently representing 87% of the total revenue from COM Document
Services. As a result of the First Image acquisition and continued focus on
operational efficiencies, the Company has continued to increase the EBITDA
contribution from its COM Document Services despite declining market trends
and revenues.

         With the acquisition of First Image, the Company has no major
competitor in its core Document Management Solutions business for outsource
services. There are a number of document-management outsource-service
providers in the U.S. market, but these are generally small, regional
providers. There are also regional and national providers that focus on
document-conversion services (scanning, printing and reproduction), but these
are not directly competitive with the Company's offerings. In Europe, the
Company competes with document-management outsource-service providers within
individual countries. The Company also competes with several
document-management software providers, including FileNET Corporation,
Documentum, Inc., SER, Mobius Management Systems and IBM, who offer in-house
systems and some integration services as an alternative to outsourcing.

INTERNET DOCUMENT SERVICES-SM- BUSINESS UNIT

         Over the past several years, the Company has increased its
investment in developing new solutions by expanding the breadth of its
offerings through acquisition and through the application of new digital
technologies. The Company has established itself as a leader in the emerging
field of Internet-based document-management services, now offering Internet
Document Services from two mega-centers in the United States. The Company
expects to continue to increase its operational capability, investment and
business results in this area in the future.

         This all-in-one service manages customers' documents throughout
their lifecycle. The service transforms electronic documents of virtually any
type to a web-compatible format, indexes them for easy retrieval, and hosts
them in the Company's secure "e-warehouse" of integrated storage systems and
web servers at the Company's document-processing facilities. Customers of the
Company can authorize secure access for their own personnel and even their
customers to specific documents or pages of documents over private-networks
or the Internet through standard web browsers, using retrieval and viewing
tools developed for specific applications. As an outsource service, this
solution provides superior performance, economy, security, convenience and
support because of the Company's technological and operational expertise,
economies of scale and continual system enhancements.

         During fiscal 1999, the Company acquired Litton Adesso Software,
Inc. ("Adesso Software"), which had developed world-class software technology
for document ingestion, index, compression and storage, and which
complemented the Company's own software development capabilities and
activities. This acquisition provided key technology components and technical
expertise for the expansion of the Company's Internet Document Services
offerings.

         The Company's Internet Document Services provides electronic storage
of customer documents and delivery of these documents to customers using
private networks or the Internet via standard web browsers. These


                                       5
<PAGE>

new web-based storage and delivery solutions, provided as an outsource
service, offer better performance, value and longevity than most businesses
can achieve on their own with an internal document-management system. The
Internet Document Services offering is sold and supported by a dedicated and
specialized sales force in the United States.

         The effectiveness of the Company's Internet Document Services is
enhanced by Anacomp's Work Smart Process, a unique consultative approach for
identifying customer requirements that the Company acquired in fiscal 1998.
This process is a critical part of the Company's initial sales activities,
enabling the Company to apply its web-based services optimally in order to
fulfill its customers' requirements more effectively. This process
differentiates the Company from its competitors in the marketplace.

         As a dedicated ASP, the Company is focusing this new offering on
specific business applications. The Company is currently developing
capabilities to provide customers with web-based document management tailored
to several specific vertical market applications, such as insurance-policy
management, bank customer-research services, and delivery of brokerage
statements and transaction confirmations.

         Customer service is a common focus for this offering. With quick,
online access to customer-related documents, a company's service
representatives can resolve most customer inquiries in one telephone call or
communication, minimizing costly retrieval and research functions. Customers
of the Company can also use Internet Document Services to provide document
access and delivery directly to their customers over the Internet. With the
growing importance of customer service in today's commercial world, and the
move towards customer self-service, these capabilities can be a significant
competitive advantage for the Company's customers.

         The Company's engineering costs, including research and development,
were $10.0 million in fiscal 1999, compared to $9.0 million in fiscal 1998.
In fiscal 1999, approximately 50% of these expenses related to Internet
Document Services. The Company expects its current research and development
efforts and expenditures to increase as a result of acquisitions in fiscal
1999 as well as increased internal investment as it develops and introduces
new solutions in Internet Document Services and the other lines of business.

         Competition is currently undefined in this very new and emerging
market of Internet-based document-management services. There are several
smaller companies offering somewhat similar services, but these are generally
limited to vertical-market sectors or specific applications.

FIELD MAINTENANCE SERVICES BUSINESS UNIT

         Although document-management solutions are its primary line of
business, the Company also offers field maintenance service for a broad range
of electromechanical systems. Originally a maintenance service for the
Company's own products, this business has grown to include a wide variety of
systems from IBM, Sony, Overland Data, Inc. and many other suppliers,
including COM systems manufactured by Anacomp and others, optical disc
storage subsystems, computer tape subsystems, CD-R writers and jukeboxes,
high-speed laser printers and even large video scoreboards at sports
stadiums. The success of this business is based on the Company's technical
expertise and its proven ability to provide fast, expert, on-site service and
support around the clock. This maintenance and support service is provided in
the U.S., Canada and Europe by a force of approximately 500 highly- trained
technicians.

         THIRD-PARTY MAINTENANCE SERVICES.  The principal growth area for the
Company's field maintenance business is third-party maintenance services. By
providing service for systems from other manufacturers, the Company leverages
its considerable expertise and infrastructure by expanding its services far
beyond the range of its own systems.

         The Company offers its third-party maintenance services using two
approaches. In one approach, the Company is an alternative to maintenance
services provided by the original equipment manufacturer ("OEM"). For
example, the Company offers 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 only source of field
maintenance services for these critical printing systems. In the second
approach, the Company contracts with the OEM to provide field maintenance
service for the OEM's end users. This arrangement appeals to manufacturers
that have geographically limited maintenance capabilities or no capabilities
of their own, or whose own service operation is more costly than the
Company's service. The


                                       6
<PAGE>
Company services Sony CD jukeboxes, IBM optical disc subsystems, Overland
tape subsystems and 55 other systems under this type of arrangement.

         The Company is striving to grow its third-party maintenance business
through both acquisition and internal initiatives. Third-party maintenance
revenue grew 77% in fiscal 1999 compared to fiscal 1998. Revenue from
third-party maintenance represented 20% of Field Maintenance Services total
revenue in fiscal 1999, and the Company anticipates this percentage will
increase to approximately 40% in fiscal 2000. The growth in third-party
maintenance business currently offsets the decline in micrographics
maintenance services and the Company believes that growth in its third-party
business will exceed the decline in micrographics maintenance revenue in the
future.

         In the third-party maintenance business, the Company competes with a
number of other providers including the OEM for products such as Xerox laser
printers, and with other third-party maintenance providers such as
DecisionOne Holdings, TAB and Bell & Howell.

         COM AND MICROGRAPHICS MAINTENANCE SERVICES.  The Company believes
that it maintains virtually the entire installed base of Anacomp-manufactured
COM systems in use today, as well as a significant percentage of the COM
systems manufactured by other suppliers. In addition, the Company provides
maintenance services for other micrographics equipment, such as retrieval
devices, microfilm scanners, cameras and duplicators. Although this segment
of the business is declining, the Company has increased its maintenance
market share and continues to maintain earnings from this segment.

         The Company has no major competitor in its traditional COM and
microgaphics maintenance services business. The majority of the equipment
that the Company maintains is proprietary to the Company.

DATAGRAPHIX-Registered Trademark- BUSINESS UNIT

         The Company develops, manufactures, sells and supports a variety of
COM systems, CD authoring systems and related peripheral products. It also
sells and supports microfilm, chemicals and other consumable supplies for its
own and other systems, and it offers a contract manufacturing service to
produce products for other companies. The DatagraphiX business unit has its
own direct sales force in the U.S. and Europe and sells through a network of
distributors in many other countries around the world. In addition to
manufacturing and sales, DatagraphiX has its own dedicated hardware and
software development staff, support organization and material distribution
channel.

         COM SYSTEMS.  The Company is the world's leader in the COM systems
market. Building on its acquisition of DatagraphiX, Inc. in 1987, the Company
has an extensive installed base of COM systems at user sites around the
world. The Company's flagship XFP2000-Registered Trademark- COM system
remains the premier system in the marketplace, using extremely precise laser
optics and advanced film-processing techniques to produce high-quality
original and duplicate images of reports and other documents on microfiche or
roll microfilm. The XFP2000 is the most widely used COM system in the world,
with over 1,000 customer installations. The Company also uses the XFP2000 for
its own COM Document Services operations. The Company believes that its
placements of XFP2000 systems in fiscal 1999 represent the majority of
systems placed during this period in the marketplace.

         CD AUTHORING SYSTEMS.  The DatagraphiX business unit also produces
and sells automated, high-volume CD authoring systems for mainframe and
client/server environments, based primarily on a line of products acquired
through the Company's acquisition of Data/Ware Development, Inc.
("Data/Ware") in 1997. These systems are used by a variety of customers to
write reports, statements, invoices, check images and other important
documents in electronic form to high-capacity CD-R media for distribution and
archive purposes. The primary candidates for these systems are organizations
that need to produce CD media in large quantities, where economies of scale
can make in-house production a practical alternative to outsourcing. The
Company also uses these systems for its own CD Document Services operations.
The Company sold or leased 17 CD authoring systems in fiscal 1999.

         The Company also continued to make investments in its traditional
business to improve the throughput and functionality of the XFP2000 COM
system, to incorporate new CD technology and functionality in its CD-R
authoring systems, and to assess and, where necessary, remediate its products
and services for year 2000 purposes.

                                       7
<PAGE>

         CONTRACT MANUFACTURING SERVICES.  In the early 1990s, the Company
made a substantial investment in facilities, equipment and expertise to
develop the capability to manufacture high-precision optical and
electromechanical equipment in order to produce the XFP2000 COM system. More
recently, the Company has invested to achieve ISO 9001 certification for its
manufacturing and logistics functions. In fiscal 1999, to fully leverage this
capability, the Company launched a contract manufacturing business, wherein
it fabricates, assembles and tests high-technology products under contract to
other companies. The Company actively markets this service to design and
manufacturing firms that wish to bring a product to market but lack the
expertise or capacity to produce it cost-effectively themselves.

         This service enables the Company to leverage its current
manufacturing capabilities, and provides an alternate stream of revenue and
profit for the DatagraphiX business. One significant contract was executed
and initial production begun during fiscal 1999. The DatagraphiX line of
business is actively seeking additional contract manufacturing opportunities
to help absorb underutilized capacity and overhead and produce an alternate
stream of revenue and profit for the Company. The Company believes there is a
large potential market for these services and that further growth will be
realized from this segment.

         SUPPLIES.  Complementing the systems business within the DatagraphiX
line of business is the sale and distribution of consumable supplies for COM
and CD production. These supplies are sold through the DatagraphiX direct
sales force, through a centralized telesales group and through various
distributors worldwide.

         The primary products in the supplies business are 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 is sold in what the Company believes is a
proprietary package, and thus is currently available only from the Company.
The Company obtains its silver halide products through an exclusive
multi-year supply agreement with The Eastman Kodak Company ("Kodak"). The
DatagraphiX business also distributes non-proprietary duplicating film to its
installed base of COM systems and other micrographics users. The Company
obtains its duplicate film products through a long-term supply agreement with
SKC America, Inc. The Company believes that the users of its COM systems
purchase the majority of their original and duplicate film and related
chemicals from the Company.

         In fiscal 1999, the Company developed an innovative new product
called the Image Mouse-TM-. This new product is an inexpensive, hand-held
microfiche reader that uses CMOS imaging technology to capture a digital
microfiche image in real time, which can be easily viewed, printed, or used
in common PC applications. This innovative device has been well-received in
initial user test marketing and trials, and is planned for release in
production volume in early fiscal 2000. A patent for this device is pending,
and the Company is currently developing a version for roll microfilm. The
Company believes that, as a bridge between COM and digital solutions, the
Image Mouse can be a significant source of revenue growth in the future.

         The Company has no major competitor in its core COM systems and
proprietary XFP2000 original COM film business. The Company competes with
Fuji Photo Film U.S.A., Inc. ("Fuji"), Agfa-Gevaert AG ("Agfa") and Kodak in
original COM film market for older COM systems, and with Rexam Image Products
in the duplicate film segment. The Company also competes with a number of CD
system providers in the CD authoring systems segment, and with other
manufacturers for its contract manufacturing services.

ENGINEERING, RESEARCH, AND DEVELOPMENT

         Anacomp's engineering costs, including research and development,
totaled $10.0 million in fiscal 1999, $9.0 million in fiscal 1998, and $8.5
million in fiscal 1997. The Company expects its current research and
development efforts to increase as it introduces new document management
solutions.

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


                                       8
<PAGE>

         Development activity in fiscal 1999 included the acquisition of
Adesso Software from Litton Industries, which acquisition provided key
technology components and technical expertise for the expansion of the
Company's Internet Document Services offerings. The activity also included
significant increases in the internal technical staff, primarily to develop
and implement the expanded Internet Document Services offerings.

RAW MATERIALS AND SUPPLIERS

         Polyester is the principal raw material used in the manufacture of
both original and duplicate microfilm products. Costs for polyester remained
generally stable in fiscal 1999 as a result of a relative balance between
supply and demand. There can be no assurance, however, that the current trend
will continue.

         SKC America, Inc. and SKC Limited (collectively, "SKC") is Anacomp's
sole supplier of duplicate microfilm under a ten-year supply agreement
entered into in 1993. In connection with the supply agreement, SKC also
provided Anacomp with a $25 million trade credit facility, which was reduced
to $15 million in fiscal 1997 and further reduced to $5 million in the first
half of fiscal 1998. Under an amendment to the supply agreement executed in
1996, Anacomp agreed to certain price increases, retroactive to 1994, and
agreed to make deferred payments to SKC related to the retroactive price
increases. The Company has recognized the liability and is committed to pay
$0.8 million and $1 million in 2000 and 2001, respectively. In addition, the
parties amended and restated the supply agreement effective as of July 1,
1997 for the purpose of, among other things, deleting minimum purchase
commitments.

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

INDUSTRY SEGMENTS AND FOREIGN OPERATIONS

         As discussed previously, Anacomp manages its business through four
operating units providing document management services and solutions.
Financial information concerning the Company's four business units is
included in Note 17 of the Notes to the Consolidated Financial Statements.
Financial information concerning the Company's operations in different
geographical areas is included in Note 18 of the Notes to the Consolidated
Financial Statements.

ASSOCIATES

         As of September 30, 1999, Anacomp employed approximately 2,500
people at multiple facilities and offices in the United States, Canada,
Brazil, Japan and Europe.


                                       9
<PAGE>
ITEM 2.  PROPERTIES

         The Company's headquarters are located in Poway, California. This
facility houses the Company's management, systems manufacturing, software
development, engineering, customer service, marketing, technical service
operations, finance, accounting, legal and MIS groups. The Company also
leases standard office space for its sales and service centers in a variety
of locations around the world. Anacomp's manufacturing facilities have
received international recognition for quality standards and have earned
International Standards Organization ("ISO") 9001 certification.

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

<TABLE>
<CAPTION>
                                       OPERATING      OTHER
                                      FACILITIES    FACILITIES      TOTAL
                                      ----------    ----------      -----
         <S>                          <C>           <C>           <C>
         United States:
           Leased.................    1,324,771       214,923     1,539,694
           Owned..................           --            --            --
                                      ---------       -------     ---------
                                      1,324,771       214,923     1,539,694
                                      ---------       -------     ---------
         International:
           Leased.................      173,984        18,500       192,484
           Owned..................       25,000            --        25,000
                                      ---------       -------     ---------
                                        198,984        18,500       217,484
                                      ---------       -------     ---------
             Total................    1,523,755       233,423     1,757,178
                                      =========       =======     =========
</TABLE>

         "Other Facilities" consist primarily of leased space of abandoned
facilities. Approximately 215,000 square feet of the Other Facilities have
been sublet to others. The Company considers its facilities adequate for its
present needs and does not believe that it would experience any difficulty in
replacing any of its present facilities if any of its current agreements were
terminated.

ITEM 3.  LEGAL PROCEEDINGS

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

         On August 29, 1997, Access Solutions International, Inc. ("ASI")
filed a complaint for patent infringement in the U.S. District Court,
District of Rhode Island, against Data/Ware, of which Anacomp is the
successor by merger, and Kodak. The complaint seeks injunctive relief and
unspecified damages, including attorney's fees, for alleged infringement by
Data/Ware and Kodak of ASI's United States Letters Patent No. 4,775,969 for
"Optical Disk Storage Format, Method and Apparatus for Emulating a Magnetic
Tape Drive" and No. 5,034,914 for "Optical Disk Storage Method and Apparatus
with Buffered Interface." The Company has assumed the defense of this matter
on behalf of both Data/Ware and Kodak. Discovery in this case continues, with
any trial to occur probably not before the second calendar quarter of 2000.
Although there can be no assurance as to the eventual outcome of this matter,
the Company believes that it has numerous meritorious arguments and intends
to pursue them vigorously.

         In a related matter, the Company has brought a lawsuit in California
State court against the principal selling shareholder of Data/Ware, seeking
to enforce that shareholder's obligation to indemnify the Company in the ASI
litigation. The state court granted the Company's motion for summary
adjudication of the shareholder's duty to fund most of the defense of the ASI
case, which the shareholder is currently paying into the court's escrow
account. Discovery in the state court litigation continues.


                                      10
<PAGE>

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

         No matters were submitted during the three months ended September
30, 1999, to a vote of Anacomp's security holders through the solicitation of
proxies or otherwise.

                      EXECUTIVE OFFICERS OF THE REGISTRANT

         The current executive officers of the Company, their ages (as of
December 14, 1999) and their positions with the Company are listed in the
following table:

<TABLE>
<CAPTION>
NAME                    AGE   POSITION
---------------------   ---   ------------------------------------------------------
<S>                     <C>   <C>
Ralph W. Koehrer         54   President, Chief Executive Officer and Director
David B. Hiatt           53   Executive Vice President and Chief Financial Officer
Donald W. Thurman        53   Executive Vice President
Peter Williams           47   Executive Vice President
William C. Ater          59   Senior Vice President and Chief Administrative Officer
Jeffrey R. Cramer        46   Senior Vice President
William E. Farrant       45   Senior Vice President
Linster W. Fox           50   Senior Vice President and Corporate Controller
George C. Gaskin         40   Senior Vice President, General Counsel and Secretary
Hasso Jenss              56   Senior Vice President
Richard V. Keele         50   Senior Vice President
Thomas J. Magazzine      54   Senior Vice President
Kevin M. O'Neill         45   Senior Vice President
Emery E. Skarupa         47   Senior Vice President
Thomas L. Brown          43   Vice President and Treasurer
</TABLE>

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

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

         DAVID B. HIATT joined Anacomp in April 1999 as Executive Vice
President and Chief Financial Officer. Prior to joining Anacomp, Mr. Hiatt
served as Senior Vice President, Finance and Administration and Chief
Financial Officer for Molecular Simulations Inc. from April 1992 to October
1998. Before that, Mr. Hiatt served as Vice President, Finance and
Administration, and Chief Financial Officer at Language Technology Inc. from
October 1986 to September 1991.

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

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


                                      11
<PAGE>

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

         WILLIAM C. ATER was elected Senior Vice President on August 13, 1997
and Chief Administrative Officer in February 1988. He served as Secretary
from March 1985 until November 1999.

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

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

         LINSTER W. FOX was elected Senior Vice President and Corporate
Controller on August 2, 1999, having served as Vice President and Controller
since July 1998. From January 1996 to June 1998, Mr. Fox served as Vice
President and U.S. Controller. Mr. Fox served as Vice President and
Controller of Poway Operations from May 1995 to December 1995. From October
1992 to May 1995, Mr. Fox was Vice President of Finance and Administration
for Poway Operations. Mr. Fox served as Vice President of Finance and
Administration for International Operations from October 1990 to October 1992.

         GEORGE C. GASKIN was elected Secretary on November 15, 1999, and was
previously elected Senior Vice President, General Counsel and Assistant
Secretary on November 17, 1997. He had served as Vice President - Legal and
Assistant Secretary since June 1996. From July 1990 to June 1996, Mr. Gaskin
served as Corporate Counsel and Assistant Secretary.

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

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

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

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


                                      12
<PAGE>

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

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

                                     PART II

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

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

<TABLE>
<CAPTION>
                                  Fiscal Year 1999      Fiscal Year 1998
                                  ----------------      ----------------
                                    High     Low          High     Low
                                  -------  -------      -------  -------
            <S>                   <C>       <C>         <C>      <C>
            First Quarter         $ 18.63  $  8.88      $ 16.25  $ 12.38
            Second Quarter          18.50    13.50        17.75    14.63
            Third Quarter           19.25    15.50        24.38    14.81
            Fourth Quarter          18.50    15.81        23.38    12.00
</TABLE>

         The Company currently intends to retain all future earnings, if any,
for the use in the operation and development of its business and, therefore,
does not expect to declare or pay any cash dividends on the Company's capital
stock. In addition, the Company's borrowing agreements prohibit the payment
of cash dividends on the Company's capital stock. As of November 30, 1999,
there were approximately 124 holders of record of the Company's common stock.
The number of beneficial shareholders of record as of that date was
approximately 1,350.


                                      13
<PAGE>

ITEM 6.  SELECTED CONSOLIDATED FINANCIAL DATA

         The following Selected Consolidated Financial Data of the Company
should be read in conjunction with the other sections of "Management's
Discussion and Analysis of Financial Condition and Results of Operations" in
Item 7 of this report and the consolidated financial statements and the
related notes thereto included elsewhere herein. (in thousands, except per
share data):

<TABLE>
<CAPTION>

                                                 Reorganized Company (a)                        Predecessor Company (a)
                                    -----------------------------------------------------       ------------------------
                                                                                   Four           Eight
                                                                                  months         months
                                    Year ended     Year ended     Year ended       Ended          Ended       Year ended
                                      9/30/99        9/30/98        9/30/97       9/30/96        5/31/96       9/30/95
                                    ----------     ----------     ----------     --------       --------      ----------
<S>                                 <C>            <C>            <C>            <C>            <C>           <C>
Revenues.........................   $442,162       $394,938       $359,275       $117,723       $256,320      $ 460,581
Income from operations before
  amortization of reorganization
  asset, acquired in-process
  research & development,
  asset impairment charge and
  restructuring charges..........     51,055         46,516         56,171         17,812         36,626         47,588
Income (loss) from operations....    (28,539)       (33,829)       (15,820)        (6,568)        36,626       (121,996)

Income (loss) before
  extraordinary items............    (67,782)       (66,635)       (56,850)       (22,009)       112,528       (238,326)
Net income (loss)................    (67,992)(b)    (67,749)(b)    (67,811)(b)    (22,009)(b)    164,970(c)    (238,326)(e)

Basic and diluted loss
  per share......................   $  (4.78)      $  (4.85)      $  (5.05)      $  (2.19)         (d)            (d)
</TABLE>


<TABLE>
<CAPTION>

                                                              As of September 30,
                                          --------------------------------------------------------
                                                                                       Predecessor
                                                           Reorganized Company           Company
                                          -------------------------------------------   -----------
                                             1999        1998       1997       1996        1995
                                          -------------------------------------------   -----------
<S>                                       <C>         <C>        <C>        <C>        <C>
Current assets..........................  $ 117,603    $147,629   $164,485   $160,553    $ 174,538
Current liabilities.....................    133,642     119,859    117,625    146,276      566,915
Total assets............................    330,517     411,837    381,411    428,570      408,910
Long-term debt, less current portion....    313,885     338,851    247,889    217,042        --
Stockholders' equity (deficit)..........   (117,636)    (47,492)    14,520     58,569     (188,243)
</TABLE>

(a)  On May 20, 1996, the Company's Plan of Reorganization was confirmed by the
     United States Bankruptcy Court and on June 4, 1996, the Company emerged
     from bankruptcy reorganization. The Plan of Reorganization resulted in a
     reduction of approximately $174 million in principal and accrued interest
     on the Company's debt obligations and in liquidation amount and accrued
     dividends on its preferred stock. As a result of the Reorganization, the
     recording of the restructuring transaction and the implementation of Fresh
     Start Reporting, the Company's results of operations after May 31, 1996
     (the cutoff date used for financial reporting purposes) (the "Reorganized
     Company") are not comparable to results reported in prior periods (the
     "Predecessor Company"). See Note 2 to the accompanying Consolidated
     Financial Statements for information on the consummation of the Plan of
     Reorganization and implementation of Fresh Start Reporting.

(b)  The net loss for the fiscal years ended September 30, 1999, 1998 and 1997
     and the four months ended September 30, 1996, includes $68.4, $71.9 and
     $72.0 and $24.4 million of Reorganization Asset amortization, respectively.
     During the 1999 fourth quarter, the Company recorded an $8.2 million asset
     impairment charge and a $3 million write-off of in-process research and
     development. The 1998 third quarter included an $8.5 million restructuring
     charge and an "Extraordinary loss on extinguishment of debt, net of taxes"
     of $11.0 million was recorded in 1997.

(c)  The net income for the eight months ended May 31, 1996, includes $92.8
     million of Reorganization items and an extraordinary gain of $52.4 million
     related to the Company's financial reorganization.

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

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


                                      14
<PAGE>

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

RESULTS OF OPERATIONS

         On May 31, 1999, the Company completed the sale of the Magnetics
Division ("Magnetics"). The results of the Magnetics business have been
reported separately as discontinued operations in the Consolidated Statements
of Operations. Prior year's results have been restated to present Magnetics
as a discontinued operation. Revenues of Magnetics were $50.5 million for the
six months ended March 31, 1999, $104.1 million in 1998 and $103.2 million in
1997.

         On June 18, 1998, the Company completed its acquisition of assets
constituting substantially all of the business and operations of First Image.
For reporting purposes, the acquisition date was set as June 1, 1998 and was
accounted for as a purchase transaction. The First Image acquisition resulted
in incremental revenues and earnings before interest, other income,
reorganization items, special and restructuring charges, taxes, depreciation
and amortization and extraordinary items ("EBITDA") of $37.7 million and $9.7
million, respectively, for the period June 1, 1998 to September 30, 1998,
which are included in the Company's results of operations for the fiscal year
ended September 30, 1998. See Note 7 to the accompanying Consolidated
Financial Statements for additional information related to this acquisition.

         On May 20, 1996, the Company's Plan of Reorganization was confirmed
by the United States Bankruptcy Court and on June 4, 1996, the Company
emerged from bankruptcy reorganization. The Plan of Reorganization resulted
in a reduction of approximately $174 million in principal and accrued
interest on the Company's debt obligations and in liquidation amount and
accrued dividends on its preferred stock. As a result of the Reorganization,
the recording of the restructuring transaction and the implementation of
Fresh Start Reporting, the Company's results of operations after May 31, 1996
(the cutoff date used for financial reporting purposes) are not comparable to
results reported in prior periods. See Note 2 to the accompanying
Consolidated Financial Statements for information on the consummation of the
Plan of Reorganization and implementation of Fresh Start Reporting.

     GENERAL

         In fiscal 1999 Anacomp moved to a four business unit reporting
structure. The four business units include Internet Document Services,
Document Management Solutions ("DMS"), Field Services, and DatagraphiX. In
addition, the Company disposed of the Magnetics business during fiscal 1999.
As a result, the following financial results identify and differentiate the
four business units where material and do not include financial results for
Magnetics.

         Anacomp reported a net loss of $68 million in fiscal 1999, compared
to a loss of $67.7 million and $67.8 million in fiscal 1998 and 1997,
respectively. EBITDA was $94.9 million (21.5% of revenues) in fiscal 1999,
compared to EBITDA of $73 million (18.5% of revenues) and $71.2 million
(19.8% of revenues) in fiscal 1998 and 1997, respectively.

FISCAL YEAR ENDED SEPTEMBER 30, 1999 VS. FISCAL YEAR ENDED SEPTEMBER 30, 1998

         REVENUES.  The Company's revenues increased by 12%, or $47.3
million, from $394.9 million in fiscal 1998 to $442.2 million in fiscal 1999.
The Company experienced increased revenues of $65.1 million (14.7% of
revenues) in its DMS business line, increased revenues of $1.2 million in its
Internet Document Services business line, and a revenue decline of $18.6
million (4.2% of revenues) in its DatagraphiX product lines.

         The $65.1 million increase in DMS revenue resulted primarily from
the June 1, 1998 acquisition of First Image and the inclusion of its
operating results for the entire year ended September 30, 1999, compared to
four months in the prior year.


                                       15
<PAGE>

         The $1.2 million increase in Internet Document Services revenue in
fiscal 1999 is a 347% increase from 1998 and reflects the company's continued
emphasis on new technology. The Company secured new contracts with four major
customers in 1999. In addition, 1999 results included a full year of revenues
from contracts initiated in 1998.

         The $18.6 million decrease in DatagraphiX revenue was the result of
the company's discontinuance of the sale of duplicate microfilm to the
reseller market in the 1998 fourth quarter, as well as the declining sales of
original COM microfilm and duplicate microfilm, which is consistent with the
gradual decline of COM units in service worldwide.

         GROSS MARGIN.  The Company's gross margins increased 11.1% from
$158.4 million (40.1% of revenues) in fiscal 1998 to $176.0 million (40.0% of
revenues) in fiscal 1999.

         The DMS margins, as a percentage of revenue, decreased 2.8
percentage points from 1998 to 1999. The decrease was the result of decreases
in average selling prices and of costs incurred for the consolidation of the
First Image business data centers. The Field Services margins, as a
percentage of revenue, were essentially unchanged from 1998 to 1999. The
DatagraphiX margins, as a percentage of revenue, increased 3.8 percentage
points because of an increase in hardware sales and the discontinuance in the
1998 fourth quarter of lower margin duplicate film sales.

         ENGINEERING, RESEARCH AND DEVELOPMENT.  The Company's research and
development spending increased 10.5% from $9.0 million in fiscal 1998 to
$10.0 million in fiscal 1999. Spending on digital product offerings,
including the Electronic Policy Warehouse ("EPW") and Internet Document
Services, increased $3.2 million, or 69%, to $7.9 million in 1999, from $4.7
million in 1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  Selling, general and
administrative ("SG&A") expenses increased 2.1% from $90.7 million (23% of
revenues) in fiscal 1998 to $92.6 million (20.9% of revenues) in fiscal 1999.
This increase in expense resulted primarily from operating costs of the First
Image business and costs related to the new strategic marketing initiatives.

         WRITE-OFF OF ACQUIRED IN-PROCESS RESEARCH AND DEVELOPMENT.  The
write-off of acquired in-process research and development costs of $3.0
million, incurred in the fourth quarter of 1999, relates to the acquisition
of Adesso Software.

         The value of acquired in-process research and development was
computed using a discounted cash flow analysis on the anticipated income
stream of the related product sales. The value assigned to acquired
in-process research and development was determined by estimating the costs to
develop the acquired in-process research and development into commercially
viable products, estimating the resulting net cash flows from the products
and discounting the net cash flows to their present value. With respect to
the acquired in-process research and development, the calculations of value
were adjusted to reflect the value creation efforts Adesso created prior to
the close of the acquisition.

         AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible
assets increased 82.9% from $12.2 million (3.1% of revenues) in fiscal 1998
to $22.4 million (5.1% of revenues) in fiscal 1999. This increase is
primarily related to the amortization of goodwill associated with the First
Image acquisition in the 1998 third quarter.

         INTEREST EXPENSE AND FEE AMORTIZATION.  Interest expense increased
16.7% from $34.6 million in fiscal 1998 to $40.4 million in 1999. This was
the result of the increased level of debt, related to the June 1998
acquisition of First Image, for an entire year.

         PROVISION FOR INCOME TAXES.  The provision for income taxes on
continuing operations in fiscal 1999 includes $3.1 million on earnings of
Anacomp's foreign subsidiaries and $1.9 million of domestic taxes, after
considering the impact of the extraordinary loss. Of the $1.9 million
domestic tax provision, approximately $0.6 million is currently payable. The
Company's effective tax rate increased from 42% of taxable income from
continuing operations in fiscal 1998 to 213% of taxable income in 1999. This
increase in percentage was


                                       16
<PAGE>

primarily the result of the 1999 charges for impaired assets and write-off of
acquired in-process research and development that were not deductible for tax
purposes. In addition, 1999 results included an increase over the prior year
in amortization expense, also non-deductible for tax purposes, of goodwill.
This was primarily the result of a full year of amortization expense related
to the First Image acquisition compared to only four months of related
expense in 1998. See Note 15 to the accompanying Consolidated Financial
Statements for further discussion.

         DISCONTINUED OPERATIONS.  During the second quarter of 1999 the
Company adopted a plan to divest its Magnetics business. For financial
reporting purposes, the divestiture was effective as of the end of the second
quarter of fiscal 1999. Magnetics recognized income from operations of $0.8
million for the six months ending March 31, 1999 compared to $2.2 million for
all of 1998. The Company recognized a net gain of $2.2 million on the sale of
Magnetics in 1999.

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

         REVENUES.  The Company's revenues increased 9.9% from $359.3
million in fiscal 1997 to $394.9 million in fiscal 1998. The Company
experienced increased revenues of $55.7 million in its DMS business line,
decreased revenues of $15.7 million in its DatagraphiX business line and
decreased revenues of $4.7 million in its Field Services business line.

         The $55.7 million increase in DMS revenues was primarily the result
of the First Image acquisition of and the inclusion of its COM service
revenues for the four months ending September 30, 1998 ($37.7 million). Also,
excluding the results of First Image, COM service volumes increased by
approximately 23% while average selling prices decreased by approximately
12%. Certain data center acquisitions in Europe and several large customer
gains contributed to both the increase in volumes and the decrease in average
selling prices. Additionally, DMS revenues were favorably impacted by the
growth of CD services ($4.6 million) and by the growth of Digital software
sales ($4.7 million).

         The $15.7 million decrease in DatagraphiX revenues was primarily
caused by the expected decrease in micrographics supplies revenues. This
decline was the result of the Company's discontinuance of the sale of
duplicate film to the reseller market, as well as declining sales of original
COM film and duplicate film, which is consistent with long-term trends.
Additionally, 1997 revenues included a $3.6 million cash receipt from a
negotiated amendment to an OEM agreement with Kodak.

         The $4.7 million decrease in Field Service revenues was primarily
caused by the expected decline in COM maintenance ($8.7 million). This
decline was offset by the growth of third party maintenance opportunities
($4.0 million).

         GROSS MARGIN.  The Company's gross margins increased 6.7% from
$148.4 million (41.3% of revenues) in fiscal 1997 to $158.4 million (40.1% of
revenues) in fiscal 1998 (excluding the one-time cash settlement in fiscal
1997 discussed above). Gross margins generated by DMS decreased as a
percentage of revenues by 5.0 percentage points which was primarily the
result of decreases in COM services average selling prices. The decrease in
average selling prices was in part due to the large customer gains that
received favorable pricing due to their large volumes and acquisitions that
increased sales volume at lower average selling prices. Gross margins
generated by COM systems sales as a percent of revenues increased by
approximately 2.9 percentage points, which was primarily the result of
product mix changes and manufacturing efficiencies realized during fiscal
1998.

         SELLING, GENERAL AND ADMINISTRATIVE EXPENSES.  SG&A expenses
increased 12.8% from $80.4 million (22.4% of revenues) in fiscal 1997 to
$90.7 million (23.0% of revenues) in fiscal 1998. This increase was primarily
the result of increased expenses associated with the First Image and other
acquisitions. Additionally, the Company increased its sales efforts, sales
support and product development for the digital systems products.

         AMORTIZATION OF INTANGIBLE ASSETS.  Amortization of intangible
assets increased 265% from $3.3 million (0.9% of revenues) in fiscal 1997 to
$12.2 million (3.1% of revenues) in fiscal 1998. This increase was primarily
the result of amortization of goodwill associated with the First Image
acquisition.


                                       17
<PAGE>

         RESTRUCTURING CHARGES.  Restructuring charges totaled $8.5 million
(2.2% of revenues) in fiscal 1998. These charges resulted from the Company's
acquisition of First Image and the related plans to close down Anacomp sites
with multiple market presence in certain cities and convert First Image
customers to Anacomp equipment. These restructuring activities were
substantially completed during fiscal year 1999. The restructuring charges
consisted of personnel-related costs of $2.7 million, facility closedown
costs of $4.8 million, and other costs of $1.0 million.

         INTEREST EXPENSE.  Interest expense decreased 3.6% from $35.9
million in fiscal 1997 to $34.6 million in fiscal 1998. This decrease was the
result of the Company refinancing substantially all of its debt obligations
at lower interest rates during fiscal 1998 and 1997, which was partially
offset by additional borrowings used to finance the acquisition of First
Image.

         PROVISION FOR INCOME TAXES.  The Company's effective tax rate
decreased by approximately 3% from 45% of taxable income in fiscal 1997 to
42% of taxable income in 1998. This decrease was the result of a substantial
portion of the Company's taxable income being generated in countries with
lower income tax rates relative to the prior period. See Note 15 to the
accompanying Consolidated Financial Statements for further discussion.

LIQUIDITY AND CAPITAL RESOURCES

         Anacomp had negative working capital of $16 million at September 30,
1999, compared to working capital of $27.8 million at September 30, 1998. In
1999, working capital was utilized to purchase and retire $25 million of the
Company's long-term debt, repurchase $8.8 million of Company stock and
acquire twelve businesses for an aggregate purchase price that included $40.1
million in cash. Net cash provided by operating activities increased 66% to
$40.8 million for the fiscal year ended September 30, 1999, compared to $24.6
million in the comparable prior period. Fiscal 1999 included $11.2 million of
non-cash special charges and a $6.8 million increase in depreciation and
amortization expense.

         As of September 30, 1999 the Company had $314 million of its 10 7/8%
Senior Subordinated Notes (the "Subordinated Notes") outstanding, down from
$339 million as of September 30, 1998. Interest on these Subordinated Notes
is payable semi-annually and they are due in April, 2004.

         Net cash used in investing activities was $28.5 million in the
current period, compared to $142.7 million in the comparable prior period.
This decrease was primarily the result of the First Image acquisition in 1998.

         Net cash used by financing activities was $20.3 million for the
fiscal year ended September 30, 1999, compared to cash flows provided of
$79.6 million in the comparable prior period. This change was primarily the
result of the Company's acquisition of $25 million in Subordinated Notes and
its repurchase of $8.9 million of Company common stock during the current
period, compared with the issuance of $135 million of the Subordinated Notes
during 1998.

         The Company's cash balance as of September 30, 1999 was $11.1
million, compared to $22.0 million (including restricted cash) at September
30, 1998. The Company also has available a $75 million revolving credit
facility. As of September 30, 1999, $8.9 million was outstanding under the
revolving credit facility.

         The Company has significant debt service obligations. The ability of
the Company to meet its debt service and other obligations will depend upon
its future performance and is subject to financial, economic and other
factors, some of which are beyond its control. However, the Company believes
that cash on hand, cash generated from operations and cash available under
the revolving credit facility will be sufficient to fund its debt service
requirements, acquisition strategies and working capital requirements in the
foreseeable future.

STATE OF YEAR 2000 READINESS

         Anacomp has undertaken a comprehensive year 2000 program for the
products that it sells or distributes in the marketplace. Under this program,
the Company has assessed all of its critical software and hardware products
to determine what remediation, if any, is necessary for the proper
functioning of these systems in the year


                                       18
<PAGE>

2000 and beyond. The Company has worked with its outside suppliers to ensure
that they will continue to support the products that they supply to Anacomp
for resale, including the performance by the suppliers of any required year
2000 remediation. Anacomp has also analyzed and updated for year 2000
purposes certain software and hardware systems that it uses internally. The
Company continues to consider year 2000 issues for all new products and
services as well as those in development or included in business acquisitions.

     STATE OF READINESS

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

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

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

         Anacomp has categorized approximately 850 of its suppliers into one
of four categories depending upon the criticality of the product or service
and the amount of time necessary to implement the contingency plans which
Anacomp has identified. If a supplier does not declare its readiness to
Anacomp in enough time to permit implementation of its contingency plans
before December 31, 1999, Anacomp may replace the supplier, have the supplier
hold additional inventory of the supplier's products, or implement
alternative contingency plans depending upon the product or service provided.

         As of September 30, 1999, Anacomp had received written responses to
Anacomp's year 2000 readiness questionnaire from 100% of the 125 suppliers
that Anacomp deems critical to its operations. Anacomp has either received
declarations of readiness from, or established contingency plans for, all
critical suppliers. For example, Anacomp is currently interviewing
alternative sources of key products as part of its contingency planning but
has no reason to believe that any of its critical suppliers will not be ready
in time. The Company is increasing its supply of certain key consumable
products such as original film, duplicate film, and digital production
materials in order to increase the minimum supply of such consumables in
twelve of the Company's strategically located data centers for the month of
January, 2000. Anacomp also continues to monitor the readiness of its
non-critical suppliers.

         For those Anacomp products that incorporate the products of a third
party supplier, Anacomp continues to request that its suppliers disclose test
procedures and results. Anacomp has also requested that its vendors in the
human resources area, such as its retirement, health and insurance providers,
respond in writing as to their readiness, but there can be no assurance that
such vendors will either respond or achieve readiness in a timely fashion.
The contingency planning for these vendors is based upon their level of
criticality and in some cases requires manual processing of claims or
replacement of the vendor.


                                       19
<PAGE>

         Anacomp has identified all internal software and hardware products
used in its corporate headquarters in Poway, California, including those used
to assimilate and report financial information and to handle billing,
collections and electronic commerce. In those instances where remediation or
renovation was required, Anacomp has completed such remediation or
renovation. Anacomp has also completed the documentation of such efforts for
its year 2000 archives. All critical building facilities at the Company's
Poway headquarters have been assessed, remediated and tested, and changes
have been implemented where necessary, except for the headquarters'
door-entry security system, which is scheduled to be replaced by the end of
the calendar year.

         All of the Company's domestic offices have requested statements of
year 2000 readiness from their vendors, including electric utilities and
providers of HVAC, electronic security systems, electronic sprinkler systems,
fire prevention systems, courier services, time clock vendors, consumable
suppliers, consumable delivery services, office equipment and voice and data
communication. Anacomp has formulated contingency plans depending upon the
responses from the vendors. If a vendor has issued a statement of year 2000
compliance, no additional follow up will be conducted. If a vendor has
indicated a target date for year 2000 compliance, Anacomp will continue to
monitor the vendor until receiving a definitive statement. If the vendor has
not responded, Anacomp is implementing alternative plans and back-up
arrangements.

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

     COSTS

         Anacomp estimates that total expenditures on its year 2000 project,
including costs of outside parties such as consultants and attorneys, costs
of hardware and software remediation, internal labor, travel and out of
pocket expenses, will total approximately $0.3, $2.3, and $1.5 million in
fiscal year 1997, 1998, and 1999, respectively. These figures include
estimates from the engineering, manufacturing, legal and information
technology departments of the Company.

     RISKS

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

         The Company relies upon the continuous provision of services from
third parties such as electrical and telecommunication utilities around the
world, and the Company plans to enhance its electronic data transmission
capabilities. Any sustained disruption of such service or capability could
adversely impact the Company's ability to operate its business.

         Finally, there can be no assurance that, if left unremedied, the
products or services that the Company sells or distributes would remain
competitive in the marketplace or the products that the Company uses
internally would not have a material effect upon the ability of the Company
to report its financial results.

     CONTINGENCY PLANS

         Anacomp believes that existing technical support resources, as
backed-up by current overflow capabilities, will be able to handle customer
inquiries during the century rollover. Nevertheless, as an added precaution,
the Company will increase its 24-hour support staffing during such rollover,
although no assurance can be given that such staffing will be able to handle
all customer contingencies.

         In those instances where the Company experiences a year 2000 problem
with its operational facilities, the Company believes that its business will
still be able to function without substantial interruption. Anacomp has


                                       20
<PAGE>

designated a year 2000 coordinator in each of its approximately 50 national
data centers. Each coordinator must report its center's year 2000 status to a
central coordinator on the morning of January 1, 2000, who in turn must
notify senior management in the event of any problems. For each data center,
a primary (intra-region) and a secondary (inter-region) back-up data center
has been identified. Additional third-level support will be available in the
Company's San Diego headquarters facility, where additional COM, CD and
selected laser print equipment will be available. This will enable data
centers which experience, for example, a loss of power due to a third party
utility's failure to identify or remediate an isolated year 2000 problem, to
shift work to another data center without substantial interruption. The plan
includes the potential replacement of electronic transmission of data with
manual delivery of data upon completion of certain modifications. In those
instances where an installed COM customer experiences a year 2000 problem
while operating its own COM equipment, Anacomp will offer its COM services to
the customer at one of its data centers upon completion of certain
modifications. This seamless nature of many of Anacomp's products and
services forms the basis of Anacomp's contingency planning.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS

         The Company has U.S. Dollar fixed rate indebtedness and in September
1999 entered into three cross currency swap agreements that hedge the U.S.
Dollar value of the Company's investment in the net assets of certain foreign
subsidiaries. These agreements effectively swapped higher fixed rate U.S.
Dollar debt for lower fixed rate debt in the subsidiaries' respective local
currencies. The Company is exposed to the risk of future currency exchange
rate fluctuations on such debt which are 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 foreign currency
translation component of stockholders' equity reported by the Company, and
such effect may be material in any individual reporting period.

         The Company's bank line of credit is affected by the general level
of U.S. interest rates and/or Libor. The Company had $8.9 million outstanding
under its bank line of credit on September 30, 1999.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         Financial statements and supplementary financial information appear
on pages A-1 to A-30 of this Annual Report on Form 10-K.

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

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


                                       21
<PAGE>

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         The Company hereby incorporates by reference the information
contained under the headings "Election of Directors" and "Section 16(a)
Beneficial Ownership Reporting Compliance" from its definitive Proxy
Statement (hereinafter, the "Proxy Statement") to be delivered to the
shareholders of the Company in connection with the 2000 Annual Meeting of
Shareholders to be held February 7, 2000. Certain information relating to
executive officers of the Company appears on pages 11 through 13 hereof.

ITEM 11. EXECUTIVE COMPENSATION

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

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
         MANAGEMENT

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

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

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


                                      22
<PAGE>

                                    PART IV

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

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

         Report of Independent Public Accountants.
         Consolidated Balance Sheets - September 30, 1999 and 1998.
         Consolidated Statements of Operations - Years Ended September 30, 1999,
           1998 and 1997.
         Consolidated Statements of Stockholders' Equity (Deficit) - Years
           Ended September 30, 1999, 1998 and 1997.
         Consolidated Statements of Cash Flows - Years Ended September 30,
           1999, 1998 and 1997.
         Notes to the Consolidated Financial Statements.

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

(b)      Reports on Form 8-K:

         During the quarter ended September 30, 1999, and prior to filing this
         Annual Report on Form 10-K, Anacomp filed one report on Form 8-K, dated
         July 2, 1999 (the "Form 8-K Amendment"). The Form 8-K Amendment was
         filed to amend the June 25, 1999 Form 8-K that the Company had
         previously filed reporting that the Company and Anacomp Ltd. had
         entered into an Asset Purchase Agreement with eMag, L.L.C. and MSG
         Acquisition (UK) Ltd. to sell the Company's Magnetics Solutions Group
         division. The Form 8-K Amendment was filed to update the Company's
         Unaudited Pro Forma Condensed Consolidated Balance Sheet as of March
         31, 1999, and the Unaudited Pro Forma Condensed Consolidate Statement
         of Operations for the six months ended March 31, 1999, that were
         included in the original Form 8-K filing.

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

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

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

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

3.1      Amended and Restated Articles of Incorporation of the Company as of
         February 8, 1999. (4)

3.2      Amended and Restated Bylaws of the Company as of February 9, 1998. (4)

4.1      Form of Common Stock Certificate.  (5)

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

4.3      Form of Warrant Certificate. (5)


                                      23
<PAGE>

4.4      Indenture, dated as of March 24, 1997, between the Company and IBJ
         Schroder Bank & Trust Company, as trustee, relating to the Company's
         10-7/8% Senior Subordinated Notes due 2004, Series B. (6)

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

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

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

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

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

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

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

10.3     General Release of All Claims and Non-Renewal of Employment Agreement,
         dated October 6, 1999, between the Company and Frederick F. Geyer.*

10.4     Employment Agreement, effective October 1, 1994, between the Company
         and Dr. Peter Williams. (7)

10.5     Employment Agreement, effective October 1, 1998, between the Company
         and Donald W. Thurman.*

10.6     Employment Agreement, effective September 1, 1997, between the Company
         and George C. Gaskin.*

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

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

10.9     Amended and Restated Master Supply Agreement, dated October 8, 1993, by
         and among the Company, SKC America, Inc. and SKC Limited. (9)

10.10    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)

10.11    Second Amended and Restated Master Supply Agreement, dated as of July
         1, 1997, by and among the Company, SKC America, Inc. and SKC Limited.*

21.1     Subsidiaries.*

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

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


                                      24
<PAGE>

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

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

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

(4)      Incorporated by reference to the Company's Form 10-Q for the quarterly
         period ended March 31, 1999.

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

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

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

(8)      Incorporated by reference to the Company's Form 10-K for the year ended
         September 30, 1998.

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

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


                                      25
<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.

                                          ANACOMP, INC.

                                          By: /s/ Ralph W. Koehrer
                                          -------------------------------------
                                          Ralph W. Koehrer
                                          President, Chief Executive
                                          Officer and Director
Dated:  December 27, 1999

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 27, 1999                 By: /s/ Ralph W. Koehrer
                                          -------------------------------------
                                          Ralph W. Koehrer
                                          President, Chief Executive
                                          Officer and Director


Dated:  December 27, 1999                 By: /s/ David B. Hiatt
                                          -------------------------------------
                                          David B. Hiatt, Executive Vice
                                          President and Chief Financial Officer


Dated:  December 27, 1999                 By: /s/ Richard D. Jackson
                                          -------------------------------------
                                          Richard D. Jackson,
                                          Co-Chairman of the Board


Dated:  December 27, 1999                 By: /s/ Lewis Solomon
                                          -------------------------------------
                                          Lewis Solomon,
                                          Co-Chairman of the Board


Dated:  December 27, 1999                 By: /s/ Talton R. Embry
                                          -------------------------------------
                                          Talton R. Embry, Director


Dated:  December 27, 1999                 By: /s/ Darius W.  Gaskins, Jr.
                                          -------------------------------------
                                          Darius W. Gaskins, Jr., Director


Dated:  December 27, 1999                 By: /s/ Jay P. Gilbertson
                                          -------------------------------------
                                          Jay P. Gilbertson, Director


Dated:  December 27, 1999                 By: /s/ George A. Poole, Jr.
                                          -------------------------------------
                                          George A. Poole, Jr., Director


                                      26
<PAGE>

                                   APPENDIX A


ANNUAL REPORT ON FORM 10-K
ANACOMP, INC.

<TABLE>
<CAPTION>
                                                                        PAGE
                                                                        ----
<S>                                                                     <C>
Report of Independent Public Accountants.............................    A-2
Consolidated Balance Sheets - September 30, 1999 and 1998............    A-3
Consolidated Statements of Operations - Years Ended
  September 30, 1999, 1998 and 1997..................................    A-4

Consolidated Statements of Stockholders' Equity (Deficit) -
  Years Ended September 30, 1999, 1998 and 1997 .....................    A-5

Consolidated Statements of Cash Flows -
  Years Ended September 30, 1999, 1998 and 1997......................    A-6

Notes to the Consolidated Financial Statements.......................    A-8
</TABLE>


                                     A-1
<PAGE>

                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To Anacomp, Inc.:

         We have audited the accompanying consolidated balance sheets of
Anacomp, Inc. (an Indiana corporation) and subsidiaries as of September 30,
1999 and 1998, and the related consolidated statements of operations,
stockholders' equity (deficit), and cash flows for each of the three years in
the period ended September 30, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

         In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Anacomp, Inc. and subsidiaries as of September 30, 1999 and 1998, and the
results of their operations and their cash flows for each of the three years
in the period ended September 30, 1999, in conformity with generally accepted
accounting principles.


                                                           Arthur Andersen LLP


San Diego, California
November 5, 1999


                                     A-2
<PAGE>

CONSOLIDATED BALANCE SHEETS
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                        September 30,
                                                                   ------------------------
                                                                      1999          1998
                                                                   ---------      ---------
(dollars in thousands, except share amounts)
<S>                                                                <C>            <C>
ASSETS
Current assets:
  Cash and cash equivalents....................................    $  11,144      $  17,721
  Restricted cash..............................................         --            4,285
  Accounts and notes receivable, net...........................       75,259         63,288
  Current portion of long-term receivables, net................        2,952          5,641
  Inventories..................................................       19,659         16,485
  Net assets of discontinued operations........................         --           29,939
  Prepaid expenses and other...................................        8,589         10,270
                                                                   ---------      ---------
Total current assets...........................................      117,603        147,629

Property and equipment, net....................................       47,439         35,092
Long-term receivables, net of current portion..................        7,635          9,002
Goodwill.......................................................      132,965        120,654
Reorganization value in excess of identifiable assets, net.....       12,003         83,818
Other assets...................................................       12,872         15,642
                                                                   ---------      ---------
                                                                   $ 330,517      $ 411,837
                                                                   =========      =========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
  Current portion of long-term debt............................    $   9,987      $   1,152
  Accounts payable.............................................       34,058         28,961
  Accrued compensation, benefits and withholdings..............       17,229         17,327
  Accrued income taxes.........................................       16,509         15,197
  Accrued interest.............................................       17,061         18,158
  Other accrued liabilities....................................       38,798         39,064
                                                                   ---------      ---------
Total current liabilities......................................      133,642        119,859
                                                                   ---------      ---------

Noncurrent liabilities:
  Long-term debt, net of current portion.......................      313,885        338,851
  Other noncurrent liabilities.................................          626            619
                                                                   ---------      ---------
Total noncurrent liabilities...................................      314,511        339,470
                                                                   ---------      ---------

Commitments and contingencies

Stockholders' equity (deficit):
  Preferred stock, 1,000,000 shares authorized, none issued....         --             --
  Common stock, $.01 par value; 40,000,000 and 20,000,000
    shares authorized, respectively; 14,386,089 and
    14,263,569 issued and outstanding, respectively............          149            143
  Additional paid-in capital...................................      108,997        109,486
  Accumulated other comprehensive income (loss)................       (1,222)           447
  Accumulated deficit..........................................     (225,560)      (157,568)
                                                                   ---------      ---------
Total stockholders' deficit....................................     (117,636)       (47,492)
                                                                   ---------      ---------
                                                                   $ 330,517      $ 411,837
                                                                   =========      =========
</TABLE>


          See the notes to the consolidated financial statements.


                                     A-3
<PAGE>

CONSOLIDATED STATEMENTS OF OPERATIONS
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                           Year Ended
                                                          ---------------------------------------------
                                                          September 30,   September 30,   September 30,
(in thousands, except per share amounts)                      1999            1998            1997
                                                          -------------   -------------   -------------
<S>                                                       <C>             <C>             <C>
Revenues:
  Internet Document Services............................    $  1,568 $      $    351        $   --
  Document Management Solutions.........................     227,269         162,209         106,517
  Field Services........................................      71,962          72,458          77,118
  DatagraphiX...........................................     141,363         159,920         175,640
                                                            --------        --------        --------
                                                             442,162         394,938         359,275
Cost of revenues:
  Costs of Internet Document Services...................       1,539             202            --
  Costs of Document Management Solutions................     144,933          99,027          59,184
  Costs of Field Services...............................      37,607          38,272          40,118
  Costs of DatagraphiX..................................      82,074          98,991         111,559
                                                            --------        --------        --------
                                                             266,153         236,492         210,861
                                                            --------        --------        --------

Gross profit............................................     176,009         158,446         148,414
Costs and expenses:
  Engineering, research and development.................       9,992           9,043           8,519
  Selling, general and administrative expenses..........      92,607          90,667          80,375
  Amortization of reorganization asset..................      68,370          71,851          71,991
  Amortization of intangible assets.....................      22,355          12,220           3,349
  Write-off of acquired in-process research
    and development.....................................       3,000            --              --
  Asset impairment charges..............................       8,224            --              --
  Restructuring charges.................................        --             8,494            --
                                                            --------        --------        --------
Operating loss from continuing operations...............     (28,539)        (33,829)        (15,820)
Other income (expense):
  Interest income.......................................       2,322           2,339           4,346
  Interest expense and fee amortization.................     (40,358)        (34,598)        (35,896)
  Other.................................................         530            (517)         (1,285)
                                                            --------        --------        --------
                                                             (37,506)        (32,776)        (32,835)
                                                            --------        --------        --------
Loss from continuing operations before
  income taxes..........................................     (66,045)        (66,605)        (48,655)
Provision for income taxes..............................       4,960           2,194          10,508
                                                            --------        --------        --------
Loss from continuing operations.........................     (71,005)        (68,799)        (59,163)
Income from discontinued operations, net of taxes.......         980           2,164           2,313
Gain on sale of discontinued operations,
  net of taxes..........................................       2,243            --              --
                                                            --------        --------        --------
Loss before extraordinary loss..........................     (67,782)        (66,635)        (56,850)
Extraordinary loss on extinguishment of debt,
  net of taxes..........................................        (210)         (1,114)        (10,961)
                                                            --------        --------        --------
Net loss................................................    $(67,992)       $(67,749)       $(67,811)
                                                            ========        ========        ========
Basic and diluted per share data:
Loss from continuing operations.........................    $  (4.99)       $  (4.92)       $  (4.40)
Income from and gain on sale of discontinued
  operations, net of taxes.. ...........................        0.23            0.15            0.17
Extraordinary loss on extinguishment of debt,
  net of taxes..........................................       (0.02)          (0.08)          (0.82)
                                                            --------        --------        --------
Basic and diluted net loss..............................    $  (4.78)       $  (4.85)       $  (5.05)
                                                            ========        ========        ========
Shares used in computing basic and diluted
  net loss per share....................................      14,232          13,963          13,432
                                                            ========        ========        ========
</TABLE>

      See the notes to the consolidated financial statements.


                                     A-4
<PAGE>

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

<TABLE>
<CAPTION>
                                                                   Accumulated
(dollars in thousands)                               Additional       other
                                            Common    paid-in     comprehensive   Accumulated
                                             Stock    capital     income (loss)     Deficit      Total
                                            ------   ----------   -------------   -----------   --------
<S>                                         <C>      <C>          <C>             <C>           <C>

BALANCE AT SEPTEMBER 30, 1996............    $101     $ 80,318       $   159       $ (22,009)   $  58,569
---------------------------------------------------------------------------------------------------------
Net loss.................................      --           --            --         (67,811)     (67,811)
Translation adjustment...................      --           --          (145)             --         (145)
Unrealized loss on currency
  swap contract..........................      --           --        (1,145)             --       (1,145)
                                                                                                ----------
COMPREHENSIVE LOSS.......................                                                         (69,101)
                                                                                                ----------
Common stock issued for exercise
  of rights..............................      36       24,511            --              --       24,547
Common stock issued for exercise
  of stock options.......................       1          500            --              --          501
Other....................................      --           --            --               1            1
---------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1997............     138      105,329        (1,128)        (89,819)      14,520
---------------------------------------------------------------------------------------------------------
Net loss.................................      --           --            --         (67,749)     (67,749)
Translation adjustment...................      --           --         1,575              --        1,575
                                                                                                ----------
COMPREHENSIVE LOSS.......................                                                         (66,174)
                                                                                                ----------
Common stock issued for exercise of
  stock options and warrants.............       4        2,668            --              --        2,672
Common stock issued for employee
  stock purchases........................       1          905            --              --          906
Common stock issued as incentive
  compensation...........................      --          584            --              --          584
---------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1998............     143      109,486           447        (157,568)     (47,492)
---------------------------------------------------------------------------------------------------------
Net loss.................................      --           --            --         (67,992)     (67,992)
Translation adjustment...................      --           --        (1,669)             --       (1,669)
                                                                                                ----------
COMPREHENSIVE LOSS.......................                                                         (69,661)
                                                                                                ----------
Common stock issued for exercise of
  stock options and warrants.............       9        3,843            --              --        3,852
Common stock issued for employee
  stock purchases........................      --          781            --              --          781
Common stock purchased and retired.......      (5)      (8,784)           --              --       (8,789)
Common stock issued for acquisitions.....       2        3,671            --              --        3,673
---------------------------------------------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1999............    $149     $108,997       $(1,222)      $(225,560)   $(117,636)
=========================================================================================================
</TABLE>


          See the notes to the consolidated financial statements.


                                     A-5
<PAGE>

CONSOLIDATED STATEMENTS OF CASH FLOWS
Anacomp, Inc. and Subsidiaries

<TABLE>
<CAPTION>
                                                                            Year Ended
                                                           ---------------------------------------------
                                                           September 30,   September 30,   September 30,
(dollars in thousands)                                          1999           1998             1997
                                                           -------------   -------------   -------------
<S>                                                        <C>             <C>             <C>
Cash flows from operating activities:
  Net loss..............................................     $(67,992)       $ (67,749)      $ (67,811)
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
    Extraordinary items.................................          210            1,114          10,961
    Asset impairment charge.............................        8,224             --              --
    Write-off of acquired in-process research
      and development...................................        3,000             --              --
    Income from discontinued operations.................         (980)          (2,164)         (2,313)
    Gain on sale of discontinued operations.............       (2,243)            --              --
    Depreciation and amortization.......................      109,952          103,103          92,203
    Non-cash compensation...............................        1,103            1,004           1,012
    Non-cash charge in lieu of taxes....................        1,527             --               700
    Other...............................................         --               --             6,278
Restricted cash requirements............................        4,285            3,147           2,164
Change in assets and liabilities, net of effects
  from acquisitions:
      Decrease in accounts and long-term receivables....          877            2,989           8,866
      Decrease in inventories and prepaid expenses......          656              660           5,811
      Increase in other assets..........................       (1,572)          (1,951)         (1,247)
      Increase (decrease) in accounts payable and
        accrued expenses................................      (14,520)         (14,663)            807
      Decrease in other noncurrent liabilities..........       (1,699)            (934)         (6,447)
                                                             --------        ---------       ---------
        Net cash provided by continuing operations......       40,828           24,556          50,984
        Net operating cash provided by (used in)
          discontinued operations                               1,620             (662)          6,393
                                                             --------        ---------       ---------
        Net cash provided by operating activities.......       42,448           23,894          57,377
                                                             --------        ---------       ---------

Cash flows from investing activities:
  Proceeds from sale of discontinued operations
    and other assets....................................       41,422             --              --
  Purchases of property and equipment...................      (24,660)         (11,724)         (9,934)
  Payments to acquire companies and customer rights,
    net of the proceeds from the sale of DAS and
    DPDS business lines in 1998.........................      (45,284)        (130,936)        (22,443)
                                                             --------        ---------       ---------
        Net cash used in investing activities...........      (28,522)        (142,660)        (32,377)
                                                             --------        ---------       ---------
Cash flows from financing activities:
  Proceeds from issuance of common stock, options
    and warrants........................................        4,633            3,015             412
  Proceeds from revolving line of credit and
    long-term borrowings, net...........................        8,900          214,286         253,853
  Proceeds from exercise of common stock rights.........          ---             --            24,548
  Repurchases of common stock...........................       (8,789)            --              --
  Principal payments on long-term debt..................      (25,000)        (132,197)       (271,288)
  Payments related to the issuance and
    extinguishment of debt..............................         --             (5,541)        (12,647)
                                                             --------        ---------       ---------
        Net cash provided by (used in)
          financing activities..........................      (20,256)          79,563          (5,122)
                                                             --------        ---------       ---------
Effect of exchange rate changes on cash.................         (247)          (1,136)            (16)
                                                             --------        ---------       ---------
Increase (decrease) in cash and cash equivalents........       (6,577)         (40,339)         19,862
Cash and cash equivalents at beginning of period........       17,721           58,060          38,198
                                                             --------        ---------       ---------
Cash and cash equivalents at end of period..............     $ 11,144        $  17,721       $  58,060
                                                             ========        =========       =========
</TABLE>


            See the notes to the consolidated financial statements.


                                     A-6
<PAGE>

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

<TABLE>
<CAPTION>
                                                                            Year Ended
                                                           ---------------------------------------------
                                                           September 30,   September 30,   September 30,
(dollars in thousands)                                          1999           1998             1997
                                                           -------------   -------------   -------------
<S>                                                        <C>             <C>             <C>
Cash paid during the period for:
  Interest............................................        $34,463         $27,277         $15,016
  Income taxes........................................        $ 5,425         $ 5,150         $ 6,612
</TABLE>


SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:

<TABLE>
<CAPTION>
                                                                            Year Ended
                                                           ---------------------------------------------
                                                           September 30,   September 30,   September 30,
(dollars in thousands)                                          1999           1998             1997
                                                           -------------   -------------   -------------
<S>                                                        <C>             <C>             <C>
  Assets acquired by assuming liabilities............          $9,824         $11,955         $ 1,553
  Interest on subordinated notes satisfied
    with additional notes............................            --              --           $11,960
  Stock issued for acquisitions......................          $3,673            --              --
</TABLE>


            See the notes to the consolidated financial statements.


                                     A-7
<PAGE>

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

NOTE 1.
SUMMARY OF SIGNIFICANT ACCOUNTING:

THE COMPANY

Anacomp, Inc. ("Anacomp" or the "Company") is a global application services
provider for digital document-management outsource services utilizing the
Internet and other technologies. The Company is also a leading provider of
field maintenance services and document management systems and supplies. The
Company primarily serves customers in the banking, insurance and brokerage
market sectors.

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 repurchase agreements and money market
funds that are convertible to a known amount of cash and carry an
insignificant risk of change in value. The Company has periodically
maintained balances in various operating accounts in excess of federally
insured limits.

RESTRICTED CASH

Restricted cash in 1998 represented cash reserved as collateral for letters
of credit issued by the Company or cash held in escrow primarily to secure
certain contingent obligations of the Company. The contingent obligations
were primarily related to environmental liabilities and certain insurance
policies requiring letters of credit.

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 is recorded at cost and depreciated or amortized using
the straight-line method over estimated useful lives. Buildings are
principally depreciated over ten to forty years. Leasehold improvements are
amortized over the shorter of their estimated useful life or the remaining
term of the related lease. Tooling costs are amortized over the total
estimated units of production, not to exceed three years. 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. Such costs are amortized over the
greater of the estimated units of sale or under the straight-line method not
to exceed three years. Unamortized deferred software costs were $0.4 million
and $0.6 million as of September 30, 1999 and 1998, respectively.


                                     A-8
<PAGE>

GOODWILL

Excess of purchase price over net assets of businesses acquired ("goodwill")
is amortized on the straight-line method over the estimated periods of future
benefit. Goodwill at September 30, 1999 is being amortized over periods of
three to fifteen years.

REORGANIZATION VALUE IN EXCESS OF IDENTIFIABLE ASSETS

As more fully discussed in Note 2, the Company has "Reorganization value in
excess of identifiable assets" ("Reorganization Asset") of $12.0 million and
$83.8 million at September 30, 1999 and 1998, respectively, net of
accumulated amortization. The Reorganization Asset is being amortized over a
three and one-half year period beginning May 31, 1996 and will be fully
amortized by November 30, 1999.

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 $6.9
million and $8.6 million at September 30, 1999 and 1998, respectively.
Unamortized debt issuance costs are included in "Other assets" in the
accompanying Consolidated Balance Sheets. During the years ended September
30, 1999, 1998 and 1997, the Company amortized $1.8 million, $1.6 million and
$0.9 million, respectively, of debt issuance costs that are included in
"Interest expense and fee amortization" in the accompanying Consolidated
Statements of Operations.

The Company retired $25.0 million of 10-7/8% Senior Subordinated Notes in the
fourth quarter of 1999 (see Note 12). This resulted in a $0.6 million
write-off, before income taxes, of unamortized debt issuance costs, which is
included in the "Extraordinary Loss on extinguishment of debt, net of taxes"
for the year ended September 30, 1999.

The Company refinanced certain long-term obligations in June 1998 and March
1997, which resulted in the write-off of $1.9 million and $16.9 million,
respectively, of unamortized debt issuance costs. These write-offs are
recorded in the accompanying Consolidated Statements of Operations as an
"Extraordinary loss on extinguishment of debt, net of taxes" for the years
ended September 30, 1998 and 1997.

INCOME TAXES

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

FOREIGN CURRENCY TRANSLATION

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

REVENUE RECOGNITION

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


                                     A-9
<PAGE>

During 1999, the Company entered into software contracts falling under the
provisions of Statement of Position 97-2, ("SOP 97-2"), "Software Revenue
Recognition". In accordance with SOP 97-2, revenues from software license
agreements are recognized currently, provided that all of the following
conditions are met: a non-cancelable license agreement has been signed, the
software has been delivered, 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 using vendor
specific objective evidence.

The Company recognizes revenue from maintenance and service ratably over the
period of the related contract.

Contract revenue for the development and implementation of document services
solutions under contracts is recognized using the percentage-of-completion
method with progress to completion measured by 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. Revenues recognized in excess of
amounts billed and project costs are classified as work in progress.

LONG-LIVED ASSETS

The Company evaluates potential impairment of long-lived assets and
long-lived assets to be disposed of in accordance with Statement of Financial
Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived
Assets to be Disposed Of" ("SFAS No. 121"). SFAS No. 121 establishes
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 requires 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 requires 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. Based on the Company's review of
each acquisition, projected future undiscounted cash flows and modifications
to the Company's strategic direction in the fiscal 1999 fourth quarter, the
Company recorded an impairment charge of $8.2 million, which is included in
the 1999 Consolidated Statement of Operations.

RESEARCH AND DEVELOPMENT

The engineering costs associated specifically with research and development
programs are expensed as incurred, and amounted to $6.7, $3.9 and $4.8
million for the years ended September 30, 1999, 1998 and 1997, respectively.
The Company supports several engineering processes, including basic
technological research, service offering and product development, and
sustaining engineering support for existing service customers and product
installations.

EARNINGS (LOSS) PER SHARE

Basic earnings (loss) per share is computed based upon the weighted average
number of shares of common stock outstanding during the period. Diluted
earnings (loss) per share is based upon the weighted average number of shares
of common stock outstanding and potentially dilutive securities outstanding
during the period. Potentially dilutive securities include options granted
under the Company's stock option plans and outstanding warrants, both using
the treasury stock method, and shares of common stock expected to be issued
under the Company's employee stock purchase plan. Potentially dilutive
securities were not used to calculate diluted earnings (loss) per share
because of their anti-dilutive effect.

MANAGEMENT ESTIMATES AND ASSUMPTIONS

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


                                     A-10
<PAGE>
NEW ACCOUNTING PRONOUNCEMENT

In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and for Hedging Activities".
SFAS No. 133 requires that all derivatives be recorded on the balance sheet
as an asset or liability measured at its fair value with changes in fair
value recognized currently in earnings unless hedge accounting criteria are
met. In June 1999, the FASB issued SFAS No. 137, which deferred the
implementation of SFAS No. 133 to fiscal years beginning after June 15, 2000.
A company may implement these provisions as of the beginning of any fiscal
quarter after June 15, 2000. The Company has not yet determined what impact,
if any, the adoption of SFAS No. 133 will have on its consolidated financial
statements, results of operations or related disclosures thereto.

NOTE 2.
FINANCIAL REORGANIZATION AND FRESH START REPORTING:

On May 20, 1996 (the "Confirmation Date"), the U.S. Bankruptcy Court
confirmed the Company's Third Amended Joint Plan of Reorganization (the
"Reorganization"), and on June 4, 1996, the Company emerged from bankruptcy.
Pursuant to the Reorganization, on that date certain indebtedness of the
Company was canceled in exchange for cash, new indebtedness, and/or new
equity interests, certain indebtedness was reinstated, certain other
prepetition claims were discharged, certain claims were settled, executory
contracts and unexpired leases were assumed or rejected, and the members of a
new Board of Directors of the Company were designated. The Company
simultaneously distributed to creditors approximately $22 million in cash,
$112.2 million principal amount of its 11-5/8% Senior Secured Notes due 1999
and $160 million principal amount of its 13% Senior Subordinated Notes due
2002, equity securities consisting of 10 million shares of new common stock,
and 362,694 warrants, each of which is convertible into 1.0566 shares of new
common stock during the five year period ending June 3, 2001 at an exercise
price of $11.57 per share.

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

As of May 31, 1996, the Company adopted Fresh Start Reporting in accordance
with the American Institute of Certified Public Accountant's Statement of
Position 90-7, "Financial Reporting by Entities in Reorganization under the
Bankruptcy Code". Fresh Start Reporting resulted in material changes to the
Consolidated Balance Sheet, including the valuation of assets, intangible
assets (including goodwill) and liabilities at fair market value, and the
valuation of equity based on the appraised reorganization value of the
ongoing business. The net result of the valuation of identifiable assets, the
recognition of liabilities at fair market value, and the valuation of equity
was that the Company recognized an asset entitled "Reorganization value in
excess of identifiable assets" totaling $267.5 million as of May 31, 1996
(see Note 1).

NOTE 3.
SALE OF THE MAGNETICS DIVISION:

In February 1999, the Company adopted a plan to dispose of its Magnetics
Division (the "Magnetics Division"), and on April 28, 1999, the Company
signed a definitive agreement to sell the Magnetics Division. The sale was
effective June 1, 1999, and the sales price of $40.0 million included $37.0
million in cash at closing, an interest-bearing $3.0 million subordinated
note, and incentive payments based upon sales of magnetic media products to
the Company's customer base over the next two years. A post-closing
adjustment resulted in the Company returning to the buyer $1.2 million to
reflect a shortfall in the agreed-upon working capital for the Magnetics
Division. The Company recognized a gain, net of income taxes, of
approximately $2.2 million as a result of the

                                     A-11
<PAGE>

sale, which is reflected in the 1999 Consolidated Statements of Operations as
a "Gain on sale of discontinued operations, net of taxes".

The assets and liabilities of the Magnetics Division have been classified
separately as "Net assets of discontinued operations" in the Consolidated
Balance Sheet as of September 30, 1998. The net assets of the Magnetics
Division were summarized as follows:

<TABLE>
<CAPTION>
                                                             September 30,
(dollars in thousands)                                           1998
                                                             -------------
<S>                                                          <C>
Accounts and notes receivable..............................     $15,821
Inventories................................................      12,133
Property and equipment.....................................       6,657
Other assets...............................................       4,644
Accounts payable and other accrued liabilities.............      (9,316)
                                                                -------
Net assets.................................................     $29,939
                                                                =======
</TABLE>

Similarly, the results of operations of the Magnetics Division have been
reported separately as "Income from discontinued operations, net of taxes" in
the Consolidated Statements of Operations for the years ended September 30,
1999, 1998 and 1997. The operating results of the discontinued operations are
summarized as follows:

<TABLE>
<CAPTION>
                                        Year ended September 30,
                                  -----------------------------------
(dollars in thousands)              1999         1998          1997
                                  -------      --------      --------
<S>                               <C>          <C>           <C>
Revenues                          $50,544      $104,079      $103,235
                                  =======      ========      ========

Operating income                  $ 2,763      $  6,470      $  7,305
Income taxes                        1,783         4,306         4,992
                                  -------      --------      --------
Net income                        $   980      $  2,164      $  2,313
                                  =======      ========      ========
</TABLE>

NOTE 4.
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, 1999, and 1998, are as follows:

<TABLE>
<CAPTION>
                                                    September 30, 1999       September 30, 1998
                                                  ---------------------    ---------------------
                                                  Carrying                 Carrying
(dollars in thousands)                             Amount    Fair Value     Amount    Fair Value
                                                  --------   ----------    --------   ----------
<S>                                               <C>        <C>           <C>        <C>
Long-term debt:
  Senior Secured Revolving Credit Facility....    $  8,900    $  8,900     $   --      $   --
  10-7/8% Senior Subordinated Notes...........     311,937     304,945      337,181     335,000
  Unrealized loss on currency swap
    contract (see Note 5).....................      (1,145)     (1,145)        --          --
</TABLE>

The September 30, 1999 and 1998 estimated fair values of Long-term debt were
based on quoted market values.


                                     A-12
<PAGE>

NOTE 5.
HEDGING:

During September 1999, the Company entered into three cross-currency swap
agreements that hedge the U.S. dollar value of the Company's investment in
the net assets of certain foreign subsidiaries. These agreements effectively
swapped higher fixed rate U.S. dollar debt for lower fixed-rate debt in the
subsidiaries' respective local currencies. The Company is exposed to the risk
of future currency exchange rate fluctuations on such debt. The amounts
outstanding as of September 30, 1999 are as follows:

<TABLE>
<CAPTION>
                                                                                  Unrealized Gain
                           Notional                                                (Loss) as of
Currency                    Amount      Maturity             Interest Rate      September 30, 1999
----------------------    ----------    -----------------    -------------      ------------------
<S>                       <C>           <C>                  <C>                <C>
Euro fixed-rate           28,860,029    April 1, 2002            8.69%             $  (862,000)
Swiss Franc fixed-rate    22,725,000    September 8, 2002        2.99%                  11,000
Swiss Franc fixed-rate    14,635,700    April 1, 2002            7.45%                (294,000)
                                                                                   -----------
                                                                                   $(1,145,000)
                                                                                   ===========
</TABLE>

The above net unrealized loss has been reflected as an increase to "Long-term
debt, net of current portion" in the 1999 Consolidated Balance Sheet (see
Note 12), with a corresponding adjustment to the cumulative translation
account.

NOTE 6.
ACQUISITIONS:

During the three years ended September 30, 1999, Anacomp made the
acquisitions set forth below, each of which has been accounted for under the
purchase method of accounting and, accordingly, the assets, including
in-process research and development, and the liabilities were recorded based
on their fair values at the date of acquisition and the results of operations
for each of the acquisitions have been included in the financial statements
for the periods subsequent to acquisition. Pro forma results have not been
presented because the effects of these acquisitions, excluding First Image,
were not significant.

In July 1999, Anacomp acquired Litton Adesso Software, Inc ("Adesso") for
$17.0 million and incurred additional costs of $1.6 million. Based upon an
independent third party appraisal, Anacomp allocated $3.0 million to
in-process research and development, $3.2 million to developed technology,
$10.8 million to goodwill and $1.6 million to the identifiable net assets.
The intangible assets are being amortized over three to seven years. The
in-process research and development was immediately written-off and is shown
as a "Write-off of acquired in-process research and development" in the 1999
Consolidated Statement of Operations. The fair values for all other
acquisitions were allocated between the net assets and goodwill.

The value of acquired in-process research and development was computed using
a discounted cash flow analysis on the anticipated income stream of the
related product sales. The value assigned to acquired in-process research and
development was determined by estimating the costs to develop the acquired
in-process research and development into commercially viable products,
estimating the resulting net cash flows from the products and discounting the
net cash flows to their present value. With respect to the acquired
in-process research and development, the calculations of value were adjusted
to reflect the value creation efforts Adesso created prior to the close of
the acquisition.

FISCAL 1999

During fiscal 1999, Anacomp acquired either the customer bases and other
assets or the stock of twelve businesses, including Adesso discussed above.
Total consideration paid at the closing was $50.0 million and 169,010 shares
of Anacomp common stock, of which approximately $31.6 million was assigned to
goodwill. The aggregate purchase prices consisted of $40.2 million in cash
and $9.8 million in assumed liabilities. In addition, one of the acquisitions
includes contingent future cash payments of up to a maximum of $12.0 million,
based upon future sales from that business unit above a defined level of
sales. Three of the other acquisitions include provisions for contingent cash
payments of up to approximately $0.7 million in the aggregate. In 1999, $3.8
million was paid and 14,400 unregistered shares of Anacomp common stock were
issued related to contract clauses included in the purchase agreements of
prior year acquisitions.


                                     A-13
<PAGE>

FISCAL 1998

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

FISCAL 1997

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

NOTE 7.
FIRST IMAGE ACQUISITION:

On June 18, 1998, the Company completed its acquisition (the "Acquisition")
of assets constituting substantially all of the business and operations (the
"First Image Businesses") of First Image Management Company ("First Image"),
a division of First Financial Management Corporation ("FFMC"), which was a
wholly owned subsidiary of First Data Corporation ("FDC"). The Company also
assumed substantially all of the ongoing liabilities of the First Image
Businesses. The purchase price paid by the Company to FFMC at the closing of
the Acquisition was $150.0 million, although a post-closing adjustment
resulted in FFMC returning to the Company $4.9 million to reflect a shortfall
in the agreed-upon working capital for the First Image Businesses. The
Acquisition was accounted for as a purchase, and the goodwill was
approximately $100.0 million, which is being amortized over a 15-year period
on a straight-line basis. For reporting purposes, the Acquisition date was
set as June 1, 1998 because the significant contingencies associated with the
definitive agreement between the Company, FFMC and FDC were all cleared. In
addition, the Company received the economic benefits and assumed the economic
risks associated with the operations of the First Image Businesses beginning
June 1, 1998.

The First Image Businesses included (i) image access services, primarily
Computer Output to Microfilm ("COM") and Compact Disc ("CD") services (the
"IAS Business"), (ii) document print and distribution services such as laser
print and mail and demand publishing services (the "DPDS Business"), and
(iii) document acquisition services such as health care and insurance claims
entry and data capture services (the "DAS Business"). The Company retained
and continues to operate the IAS Business. IAS Business revenues of $37.7
million and EBITDA of $9.7 million for the period June 1, 1998, to September
30, 1998 were included in the Company's results of operations for the fiscal
year ended September 30, 1998.

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

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

The unaudited pro forma consolidated operating data was prepared giving
effect to the IAS Business acquisition, the disposition of the DAS and DPDS
Businesses and the use of the proceeds thereof, the new Senior Secured


                                     A-14
<PAGE>

Revolving Credit Facility and Senior Subordinated Notes (as each such term is
described in Note 12 below), and the fiscal year 1997 refinancings as if they
had all occurred at the beginning of the applicable results of operations
period.

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

<TABLE>
<CAPTION>
                                                   Year ended September 30,
                                                   ------------------------
(dollars in thousands)                               1998            1997
                                                   --------       --------
<S>                                                <C>            <C>
Total revenues from continuing operations.....     $466,793       $468,218
Net loss from continuing operations before
  extraordinary item..........................      (62,270)       (48,312)
</TABLE>


NOTE 8.
RESTRUCTURING RESERVES:

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

Included in the Company's operating results for the year ended September 30,
1998, are restructuring charges of $8.5 million. These charges result from
the Company's acquisition of the First Image Businesses and the Company's
plans to close down Anacomp sites with multiple market presence in certain
cities and convert First Image customers to Anacomp equipment. The majority
of these restructuring activities were completed during fiscal year 1999. In
1999, $4.4 million was charged against the reserve. As of September 30, 1999,
a balance of $2.6 million remains, consisting primarily of reserves for idle
leased facilities.

The Company also recorded $15.2 million in reserves in 1998 related to the
restructuring of the First Image Businesses and the Company's plans to
integrate the First Image corporate functions into Anacomp's and to close
down certain First Image sites where the Company had a multiple market
presence. The majority of these restructuring activities were completed
during fiscal year 1999. In 1999 and 1998, $9.2 and $1.9 million,
respectively was charged against the reserve. As of September 30, 1999, a
balance of $4.1 million remains, consisting primarily of reserves for idle
leased facilities and personnel severance.

NOTE 9.
SKC AGREEMENT:

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

In connection with the Supply Agreement, SKC also provided the Company with a
$25 million trade credit facility, which was reduced to $15 million in fiscal
1997 and further reduced to $5 million in fiscal 1998 (secured by up to $5
million of products sold to the Company by SKC. The $5 million trade credit
is outstanding at September 30, 1999. The trade credit arrangement bears
interest at 1.75% over the prime rate of The First National Bank of Boston
(10% as of September 30, 1999).

In connection with an amendment to the Supply Agreement in June 1996, the
Company agreed to certain price increases, retroactive to 1994, and the
Company agreed to make the deferred payments related to the retroactive price
increases to SKC. The Company is committed to pay SKC $0.8 million and $1.0
million in 2000 and 2001, respectively, which is accrued in "Current portion
of long-term debt" and "Long-term debt, net of current portion" in the
accompanying Consolidated Balance Sheets. In addition, the parties amended
and restated the supply


                                     A-15
<PAGE>

agreement effective as of July 1, 1997 for the purpose of, among other
things, deleting minimum purchase commitments.

NOTE 10.
COMPOSITION OF CERTAIN FINANCIAL STATEMENT CAPTIONS:

<TABLE>
<CAPTION>
                                                                September 30,
                                                            ---------------------
     (dollars in thousands)                                   1999         1998
                                                            --------     --------
     <S>                                                    <C>          <C>
     ACCOUNTS AND NOTES RECEIVABLE:
     Trade receivables, net of allowance for
       doubtful accounts of $5,815 and $6,957,
       respectively.....................................    $ 74,379     $ 60,798
     Other..............................................         880        2,490
                                                            --------     --------
                                                            $ 75,259     $ 63,288
                                                            ========     ========
     INVENTORIES:
     Finished goods.....................................    $  9,827     $  9,600
     Work in process....................................       2,433        2,071
     Raw materials and supplies.........................       7,399        4,814
                                                            --------     --------
                                                            $ 19,659     $ 16,485
                                                            ========     ========

     PROPERTY AND EQUIPMENT:
     Land and buildings.................................    $  4,651     $    777
     Office furniture...................................      12,526        6,165
     Manufacturing equipment and tooling................       4,983        5,431
     Field support spare parts..........................       4,433        5,077
     Leasehold improvements.............................      10,481        3,171
     Equipment leased to others.........................       1,950        2,552
     Processing equipment...............................      27,774       17,116
                                                            --------     --------
                                                              66,798       40,289
     Less accumulated depreciation and amortization.....     (19,359)      (5,197)
                                                            --------     --------
                                                            $ 47,439     $ 35,092
                                                            ========     ========

     EXCESS OF PURCHASE PRICE OVER NET ASSETS OF
       BUSINESSES ACQUIRED:
     Goodwill...........................................    $177,407     $134,467
     Less accumulated amortization......................     (44,442)     (13,813)
                                                            --------     --------
                                                            $132,965     $120,654
                                                            ========     ========

     OTHER ACCRUED LIABILITIES:
     Restructuring reserves (see Note 8)................    $  6,651     $ 20,302
     EPA reserve........................................       2,789        3,331
     Deferred revenues..................................      11,892        7,297
     Sales tax and VAT liability........................       3,837        3,560
     Other..............................................      13,629        4,574
                                                            --------     --------
                                                            $ 38,798     $ 39,064
                                                            ========     ========
</TABLE>


                                     A-16
<PAGE>

NOTE 11.
LONG-TERM RECEIVABLES:

<TABLE>
<CAPTION>
     (dollars in thousands)                            September 30,
                                                    -------------------
                                                      1999       1998
                                                    -------     -------
     <S>                                            <C>         <C>
     LONG-TERM RECEIVABLES:
     Lease contracts receivable.................    $ 7,214     $13,219
     Other......................................      3,373       1,424
                                                    -------     -------
                                                     10,587      14,643
     Less current portion.......................     (2,952)     (5,641)
                                                    -------     -------
                                                    $ 7,635     $ 9,002
                                                    =======     =======
</TABLE>

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:

<TABLE>
<CAPTION>
                                                     Year Ended
           (dollars in thousands)                   September 30,
                                                    -------------
           <S>                                      <C>
           2000................................        $ 3,157
           2001................................          2,742
           2002................................          1,878
           2003................................            445
           2004................................             64
                                                       -------
                                                         8,286
           Less deferred interest..............         (1,072)
                                                       -------
                                                       $ 7,214
                                                       =======
</TABLE>


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

<TABLE>
<CAPTION>
                                                              September 30,
                                                           -------------------
     (dollars in thousands)                                  1999        1998
                                                           --------   --------
     <S>                                                   <C>        <C>
     Senior Secured Revolving Credit Facility..........    $  8,900   $   --
     10-7/8% Senior Subordinated Notes, including
       net unamortized premium of $1.9 million and
       $2.2 million, respectively......................     311,937    337,181
     Other.............................................       1,890      2,822
                                                           --------   --------
                                                            322,727    340,003
     Less current portion..............................      (9,987)    (1,152)
     Plus unrealized hedging loss (see Note 5).........       1,145       --
                                                           --------   --------
                                                           $313,885   $338,851
                                                           ========   ========
</TABLE>


SENIOR SECURED REVOLVING CREDIT FACILITY

The Company has a $75 million Senior Secured Revolving Credit Facility (the
"Facility") with a syndicate of banks and BankBoston, N.A. ("BankBoston") as
agent. The Facility terminates on June 15, 2003.

The Facility is available for loans denominated in U.S. dollars and in
certain foreign currencies. In addition, up to $15 million of the Facility is
available for letters of credit. Letters of credit outstanding against the
Facility totaled $5.1 million and $3.4 million at September 30, 1999 and
1998, respectively.

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


                                     A-17
<PAGE>

the next business day plus 1/2%. The "Eurocurrency Rate" means the Eurodollar
Rate or the International Eurocurrency Rate as defined and offered by
BankBoston. The weighted average interest rate for the Facility borrowings at
September 30, 1999 was 7.1%.

The Facility is secured by virtually all of the Company's assets and 65% of
the capital stock of the Company's foreign subsidiaries. The Facility
contains covenants relating to limitations on capital expenditures,
limitations on additional debt, limitations on open market purchases of the
Company's Notes (as defined below), limitations on open market purchases of
the Company's common stock, limitations on mergers and acquisitions,
limitations on liens, minimum EBITDA requirements, minimum interest coverage
ratios and minimum leverage ratios.

10 7/8% SENIOR SUBORDINATED NOTES

The Company had outstanding $310 million of publicly traded 10-7/8% Senior
Subordinated Notes ("the Notes") at September 30, 1999. The Notes have no
sinking fund requirements and are due in full on April 1, 2004.

In 1997, the Company issued $200 million of Series B Notes at 98.2071% of the
face amount to yield proceeds of $196.4 million. The $3.6 million discount is
being amortized as additional interest expense over the life of the Series B
Notes. In 1998, the Company issued $135 million of Series D Notes at 104% of
face value to yield proceeds of $140.4 million. The $5.4 million premium is
being amortized as an offset to interest expense over the life of the Series
D Notes. The proceeds from the Series D Notes, along with available cash,
were used to finance the Acquisition (see Note 7).

In September 1999, the Company made open market purchases of $25 million of
the Notes at an average price of 100.4425% of the face amount and cancelled
them. In connection with the purchases, the Company recorded an
"Extraordinary loss on extinguishment of debt" of $0.6 million. The
associated income tax benefit was $0.4 million resulting in a net loss of
$0.2 million.

The Notes are not redeemable at the option of the Company prior to April 1,
2000. On or after such date and until April 1, 2003, the Notes will be
redeemable at the option of the Company in whole or in part at prices ranging
from 108.156% to 102.710% plus accrued and unpaid interest. On or after April
1, 2003, the Notes may be redeemable at 100% plus accrued and unpaid
interest. Prior to April 1, 2000, the Company may, at its option, use the net
cash proceeds of one or more Public Equity Offerings (as defined), to redeem
up to 35% of the aggregate principal amount at a redemption price equal to
110.875% plus unpaid interest to the date of redemption, provided that at
least $87.75 million of the aggregate principal amount of Notes originally
issued remains outstanding after such redemption. Also, upon a Change of
Control (as defined), the Company is required to make an offer to purchase
the Notes then outstanding at a purchase price equal to 101% plus accrued and
unpaid interest. Interest on the Notes is payable semi-annually on October 1
and April 1 of each year.

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

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

NOTE 13.
CAPITAL STOCK:

PREFERRED STOCK

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

                                     A-18
<PAGE>

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 the management of the Company may determine, based on current
prices and market conditions. The program is subject to compliance with the
Company's credit agreements. During 1999, the Company repurchased 534,156
shares of its common stock at an average price of $16.45 per share.

WARRANTS

As of September 30, 1999 and 1998 the Company had 356,064 and 362,015
warrants to purchase its common stock outstanding, respectively. Each warrant
is convertible into 1.0566 shares of common stock at an exercise price of
$11.57 per share. The warrants expire on June 3, 2001.

NOTE 14.
STOCK PLANS:

On July 22, 1996, the Company's Board of Directors approved the 1996
Restructure Recognition Incentive Plan. Under this Plan, effective August 22,
1996, the Company awarded to employees 947,500 stock options to acquire
common stock.

With regard to the stock options, the options were granted at an exercise
price of $4.63 per share of common stock, which will result in approximately
$3.2 million of compensation expense over the vesting period of the options
based on the market value of the stock at August 22, 1996. 75% of the options
vest ratably during the period from June 30, 1997 to June 30, 1999, and 25%
of the options will vest on November 15, 1999. The Company recognized $0.5,
$1.0 and $1.0 million of compensation expense related to the options issued
and the restricted stock awarded during the fiscal years ended September 30,
1999, 1998 and 1997 respectively. The options expire 10 years after the date
of the grant.

In April 1998, the Company awarded 35,000 shares of restricted common stock
that were valued at $0.5 million. The compensation expense related to this
award is being amortized to expense over the vesting period. Amortization
expense related to this award was $1.1 million and $0.3 million for the years
ended September 30, 1999 and 1998, respectively.

On February 3, 1997, the Company's shareholders approved the 1996 Long-Term
Incentive Plan, which provides for the future issuance of various forms of
common stock-related awards, including options, stock appreciation rights and
restricted shares. The Company has reserved 2.4 million shares of common
stock for issuance under this plan. Awards, including the nature of the
awards and related exercise prices, are to be determined at the discretion of
the Compensation Committee of the Board of Directors in accordance with the
plan provisions.

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

<TABLE>
<CAPTION>
                                  1999                         1998                         1997
                        --------------------------   --------------------------  ---------------------------
                                     Weighted-Avg.                Weighted-Avg.                Weighted-Avg.
                          Shares    Exercise Price     Shares    Exercise Price     Shares    Exercise Price
                        ---------   --------------   ---------   --------------   ---------   --------------
<S>                     <C>         <C>              <C>         <C>              <C>         <C>
Outstanding on
  October 1..........   2,005,706      $11.36        1,671,055       $ 7.96         947,500      $ 4.63
Grant................     653,150       16.65          979,375        14.31         939,205       10.64
Canceled ............    (152,749)      14.07         (335,336)        9.41        (135,650)       4.86
Exercised............    (345,777)       9.25         (309,388)        6.17         (80,000)       5.15
                        ---------                    ---------                    ---------
Outstanding on
  September 30.......   2,160,330      $13.12        2,005,706       $11.36       1,671,055      $ 7.96
                        =========                    =========                    =========
</TABLE>


                                     A-19
<PAGE>

The following table summarizes all options outstanding and exercisable by
price range as of September 30, 1999:

<TABLE>
<CAPTION>
                                                                                  Weighted-Avg.
                                     Weighted-        Weighted-                   Exercise Price
Number of     Range of Exercise       Average          Average        Options     Of Exercisable
 Options       Price Per Share    Exercise Price   Remaining Life   Exercisable       Options
---------    -----------------   --------------   --------------   -----------   --------------
<S>           <C>                 <C>              <C>              <C>           <C>
  438,505      $ 4.63 - $ 8.50        $ 5.59         7.0 Years        230,380         $ 5.05
  794,175      $10.63 - $15.88        $12.90         7.9 Years        519,731         $12.93
  927,650      $16.00 - $22.81        $16.88         9.3 Years         90,191         $17.29
---------
2,160,330
=========
</TABLE>

On February 3, 1997, the Company's shareholders approved the Anacomp, Inc.
1997 Qualified Employee Stock Purchase Plan (the "Stock Purchase Plan"). The
Stock Purchase Plan allows qualified employees to purchase shares of the
Company's common stock at the lower of 85% of the fair market value at the
date of purchase or 85% of the fair market value on the first day of each
quarterly offering period. A maximum of 500,000 shares of common stock is
available for purchase under the Stock Purchase Plan. As of September 30,
1999, 193,427 shares were issued under the plan.

The Company has reserved approximately 4.4 million shares of Anacomp common
stock for the exercise of stock options, the exercise of warrants, employee
stock purchases and other corporate purposes.

The Company accounts for its stock option plans in accordance with APB
Opinion No. 25 ("APB 25"), under which compensation expense is recognized
only to the extent the exercise price of the option is less than the fair
market value of a share of stock at the date of grant. During 1995, the FASB
issued SFAS No. 123, "Accounting for Stock Based Compensation" ("SFAS 123"),
which considers the stock options as compensation expense to the Company
based on their fair value at the date of grant. Under this standard, the
Company has the option of accounting for employee stock option plans as it
currently does or under the new method. The Company uses the APB 25 method
for accounting, but has adopted the disclosure requirements of SFAS 123.

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

<TABLE>
<CAPTION>
                                                               Year Ended
                                               ---------------------------------------------
                                               September 30,   September 30,   September 30,
(dollar in thousands, except per share data)        1999            1998            1997
                                               -------------   -------------   -------------
<S>                                            <C>             <C>             <C>
Net loss as reported........................     $(67,992)       $(67,749)       $(67,811)
Pro forma net loss..........................      (72,960)        (70,309)        (69,940)
Pro forma net loss per share................     $  (5.13)       $  (5.04)       $  (5.21)
</TABLE>


The fair value of each option grant is estimated on the date of grant using
the Black Scholes option pricing model. The weighted average fair value of
options granted during 1999, 1998 and 1997, as well as the weighted average
assumptions used to determine the fair values, are summarized below:

<TABLE>
<CAPTION>
                                                 1999        1998        1997
                                               -------     -------    ---------
     <S>                                       <C>         <C>        <C>
     Fair Value of Options Granted.........      $7.61       $7.30        $6.73
     Risk-Free Interest Rate...............      5.40%       5.69%        6.22%
     Expected Dividend Yield...............         0%          0%           0%
     Expected Volatility...................        43%         46%          40%
     Expected Life.........................    5 Years     5 Years     10 Years
</TABLE>


                                     A-20
<PAGE>

NOTE 15.
INCOME TAXES:

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

<TABLE>
<CAPTION>
                                                    Year Ended
                                    ---------------------------------------------
                                    September 30,   September 30,   September 30,
(dollars in thousands)                   1999            1998            1997
                                    -------------   -------------   -------------
     <S>                            <C>             <C>             <C>
     United States...............     $(74,793)       $(78,424)       $(58,878)
     Foreign.....................        8,748          11,819          10,223
                                      --------        --------        --------
                                      $(66,045)       $(66,605)       $(48,655)
                                      ========        ========        ========
</TABLE>


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

<TABLE>
<CAPTION>
                                                    Year Ended
                                    ---------------------------------------------
                                    September 30,   September 30,   September 30,
(dollars in thousands)                   1999            1998            1997
                                    -------------   -------------   -------------
      <S>                           <C>             <C>             <C>
      Current:
        Federal.................       $  672          $  --            $  300
        Foreign.................        5,498           5,000            5,400
        State...................          516             400              400
                                       ------          ------           ------
                                        6,686           5,400            6,100
      Tax reserve adjustment....          767             400            2,800
      Non-cash charge in
        lieu of taxes...........        1,527             --               700
                                       ------          ------           ------
                                       $8,980          $5,800           $9,600
                                       ======          ======           ======
</TABLE>


The non-cash charge in lieu of taxes represents the utilization of
pre-organization tax benefits that are reflected as reductions to the
Reorganization Asset.

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

<TABLE>
<CAPTION>
                                                    Year Ended
                                    ---------------------------------------------
                                    September 30,   September 30,   September 30,
(dollars in thousands)                   1999            1998            1997
                                    -------------   -------------   -------------
<S>                                 <C>             <C>             <C>
Provision for income taxes
  before discontinued operations
  and extraordinary item.........       $4,960          $2,194          $10,508
Discontinued operations..........        4,427           4,306            4,992
Extraordinary loss on discharge
  of indebtedness................         (407)           (700)          (5,900)
                                        ------          ------          -------
                                        $8,980          $5,800          $ 9,600
                                        ======          ======          =======
</TABLE>


                                     A-21
<PAGE>

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:

<TABLE>
<CAPTION>
                                                          Year Ended
                                          ---------------------------------------------
                                          September 30,   September 30,   September 30,
(dollars in thousands)                         1999            1998            1997
                                          -------------   -------------   -------------
<S>                                       <C>             <C>             <C>
Benefit for income taxes at U.S.
  statutory rate......................      $(23,115)       $(23,370)       $(16,769)
Nondeductible amortization and
  write-off of intangible assets......        26,607          25,450          22,654
State and foreign income taxes........           321             (76)          2,191
Tax reserve adjustment................         1,200             380           2,659
Alternative minimum tax...............          --              --               301
Other.................................           (53)           (190)           (528)
                                            --------        --------        --------
                                            $  4,960        $  2,194        $ 10,508
                                            ========        ========        ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                  September 30,
                                                               --------------------
(dollars in thousands)                                            1999        1998
                                                               --------    --------
<S>                                                            <C>         <C>
NET DEFERRED TAX ASSET:
Tax effects of future temporary differences related to:
  Inventory reserves........................................   $  5,100    $  5,000
  Reserves..................................................      2,200       6,500
  Depreciation and amortization.............................      5,400       3,500
  Other.....................................................      6,500       2,300
                                                               --------    --------
Net tax effects of future differences.......................     19,200      17,300
                                                               --------    --------
Tax effects of carryforward benefits:
  Federal net operating loss carryforwards..................     59,800      62,000
  Federal general business tax credits......................      1,100       1,100
  Foreign tax credits.......................................      3,000       3,000
                                                               --------    --------
Tax effects of carryforwards................................     63,900      66,100
                                                               --------    --------
Tax effects of future taxable differences
  and carryforwards.........................................     83,100      83,400
Less deferred tax asset valuation allowance.................    (83,100)    (83,400)
                                                               --------    --------
Net deferred tax asset......................................   $    --     $    --
                                                               ========    ========
</TABLE>

At September 30, 1999, the Company has federal net operating loss
carryforwards ("NOLs") of approximately $149.5 million available to offset
future U.S. taxable income. This amount will increase to $197.5 million as
certain temporary differences reverse in future periods. Usage of these NOLs
by the Company is limited to approximately $4 million annually. However, the
Company may authorize the use of other tax planning techniques to utilize a
portion of the remaining NOLs before they expire. In any event, the Company
expects that substantial amounts of the NOLs will expire unused.

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

The tax benefits of pre-reorganization net deferred tax assets will be
reported first as a reduction of the Reorganization Asset and then as a
credit to equity. Effective with the beginning of the year ended September
30, 1998, the Company intends to permanently reinvest the earnings of its
foreign subsidiaries, exclusive of those foreign subsidiaries in Brazil,
Canada and Japan. For those foreign subsidiaries in Brazil, Canada, and
Japan, the Company will continue to remit and record applicable U.S. income
and withholding tax expense on their earnings. As of September 30, 1999, the
Company has approximately $21.7 million in undistributed earnings from those
foreign subsidiaries that the Company intends to permanently reinvest. These
tax benefits will not reduce income tax expense for financial reporting
purposes.


                                     A-22
<PAGE>

NOTE 16.
COMMITMENTS AND CONTINGENCIES:

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

<TABLE>
<CAPTION>
                                                        Year Ended
      (dollars in thousands)                           September 30,
                                                       -------------
      <S>                                              <C>
      2000........................................        $11,605
      2001........................................          9,127
      2002........................................          7,692
      2003........................................          6,481
      2004........................................          5,102
      Thereafter..................................         16,319
                                                          -------
                                                          $56,326
                                                          =======
</TABLE>

The total of future minimum rentals to be received under noncancelable
subleases related to the above leases is $1.3 million. The Company's rent and
lease expense was $18 million, $18 million and $16.3 million for the years
ended September 30, 1999, 1998 and 1997, respectively.

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

On August 29, 1997, Access Solutions International, Inc. ("ASI") filed a
complaint for patent infringement in the U.S. District Court, District of
Rhode Island, against Data/Ware Development, Inc. ("Data/Ware"), of which
Anacomp is the successor by merger, and The Eastman Kodak Company ("Kodak").
The complaint seeks injunctive relief and unspecified damages, including
attorney's fees, for alleged infringement by Data/Ware and Kodak of ASI's
United States Letters Patent No. 4,775,969 for "Optical Disk Storage Format,
Method and Apparatus for Emulating a Magnetic Tape Drive" and No. 5,034,914
for "Optical Disk Storage Method and Apparatus with Buffered Interface." The
Company has assumed the defense of this matter on behalf of both Data/Ware
and Kodak. Discovery in this case continues, with any trial to occur probably
not before the second calendar quarter of 2000. Although there can be no
assurance as to the eventual outcome of this matter, the Company believes
that it has numerous meritorious arguments and intends to pursue them
vigorously.

In a related matter, the Company has brought a lawsuit in California State
court against the principal shareholder of Data/Ware, seeking to enforce that
shareholder's obligation to indemnify the Company in the ASI litigation. The
state court granted the Company's motion for summary adjudication of the
shareholder's duty to fund most of the defense of the ASI case, which the
shareholder is currently paying into the court's escrow account. Discovery in
the state court litigation continues.

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


                                     A-23
<PAGE>

NOTE 17.
OPERATING SEGMENTS:

Anacomp's business is focused in the document management industry. The Company
manages its business through four operating units: Internet Document Services,
which provides Internet-based document-management service; Document Management
Solutions ("DMS"); Field Services, which provides equipment maintenance services
for Anacomp and third-party manufactured products; and DatagraphiX, which
provides COM and CD systems, related supplies and contract manufacturing
services.

Management evaluates performance based upon earnings before interest, other
income, reorganization items, non-recurring and restructuring charges, taxes,
depreciation and amortization and extraordinary items ("EBITDA"). Segment profit
or loss also excludes acquired in-process research and development. These costs
are managed at the Corporate segment.

Information about the Company's operations by operating segment is as follows
(dollars in thousands):

<TABLE>
<CAPTION>
                                Internet
                                Document                    Field
                                Services        DMS        Services     DatagraphiX    Corporate   Consolidated
---------------------------- -------------- ------------ ------------- -------------   ---------   ------------
<S>                            <C>           <C>           <C>          <C>            <C>         <C>
1999
Digital/Renewal Revenue......  $ 1,568       $ 52,281      $14,698       $  5,015       $     --      $ 73,562
COM Revenue..................       --        174,988       57,264        136,348             --       368,600
                               -------       --------      -------       --------       --------      --------
Total Revenues...............    1,568        227,269       71,962        141,363             --       442,162
EBITDA.......................   (6,459)        50,100       30,749         42,326        (21,838)       94,878
Depreciation and
    amortization............       759         29,092        5,322          6,776         68,003       109,952
Identifiable operating
    assets..................    16,921        184,897       17,548         58,238         52,913       330,517
Capital Expenditures........     1,957         18,223        1,609          1,232          1,639        24,660
==============================================================================================================
1998
Digital/Renewal Revenue.....   $   351       $ 24,307      $ 8,300       $  4,274       $     --      $ 37,232
COM Revenue.................        --        137,902       64,158        155,646             --       357,706
                               -------       --------      -------       --------       --------      --------
Total Revenues..............       351        162,209       72,458        159,920             --       394,938
EBITDA......................    (1,755)        25,457       30,365         39,398        (20,452)       73,013
Depreciation and
    amortization............       101         12,495        2,456          7,017         81,034       103,103
Identifiable operating
    assets..................        72        159,542       15,238         74,391        162,594       411,837
Capital Expenditures........        --          6,316        2,027          1,341          2,040        11,724
==============================================================================================================
1997
Digital/Renewal Revenue.....   $    --       $  6,878      $ 4,295       $  6,387       $     --      $ 17,560
COM Revenue.................        --         99,639       72,823        169,253             --       341,715
                               -------       --------      -------       --------       --------      --------
Total Revenues..............        --        106,517       77,118        175,640             --       359,275
EBITDA......................        --         17,601       28,453         46,669        (21,531)       71,192
Depreciation and
    amortization............        --          5,218          760          6,033         80,192        92,203
Identifiable operating
    assets..................        --         38,785       12,241         55,468        274,917       381,411
Capital Expenditures........        --          5,595          719          3,461            159         9,934
==============================================================================================================
</TABLE>


                                      A-24
<PAGE>

NOTE 18.
INTERNATIONAL OPERATIONS:

Anacomp's international operations are conducted principally through
subsidiaries, a substantial portion of whose operations are located in Western
Europe. Total international sales includes sales by subsidiaries and through
distributors. Information as to U.S. and international operations for the years
ended September 30, 1999, 1998 and 1997 is as follows (dollars in thousands):

<TABLE>
<CAPTION>

YEAR ENDED SEPTEMBER 30, 1999

                                             U.S.    International     Elimination      Consolidated
                                          --------   -------------     -----------      ------------
<S>                                       <C>        <C>               <C>              <C>
  Customer sales.......................   $329,168        $112,994        $     --          $442,162
  Inter-geographic.....................     13,110              --         (13,110)               --
                                          --------        --------        --------          --------
  Total sales..........................    342,278         112,994         (13,110)          442,162
                                          ========        ========        ========          ========
  Operating income (loss) from
    continuing operations..............    (40,258)         11,719              --           (28,539)
                                          ========        ========        ========          ========
  Identifiable assets..................   $266,700        $ 63,817        $     --          $330,517
                                          ========        ========        ========          ========

YEAR ENDED SEPTEMBER 30, 1998

                                             U.S.    International     Elimination      Consolidated
                                          --------   -------------     -----------      ------------
  Customer sales.......................   $270,886        $124,052        $     --          $394,938
  Inter-geographic.....................     17,016              --         (17,016)               --
                                          --------        --------        --------          --------
  Total sales..........................    287,902         124,052         (17,016)          394,938
                                          ========        ========        ========          ========
  Operating income (loss) from
    continuing operations..............    (48,216)         14,387              --           (33,829)
                                          ========        ========        ========          ========
  Identifiable assets..................   $368,492        $ 43,345        $     --          $411,837
                                          ========        ========        ========          ========

YEAR ENDED SEPTEMBER 30, 1997

                                             U.S.    International     Elimination      Consolidated
                                          --------   -------------     -----------      ------------
  Customer sales.......................   $247,050        $112,225        $     --          $359,275
  Inter-geographic.....................     16,304              --         (16,304)               --
                                          --------        --------        --------          --------
  Total sales..........................    263,354         112,225         (16,304)          359,275
                                          ========        ========        ========          ========
  Operating income (loss) from
    continuing operations..............    (31,846)         16,026              --           (15,820)
                                          ========        ========        ========          ========
  Identifiable assets..................   $346,029        $ 35,382        $     --          $381,411
                                          ========        ========        ========          ========
</TABLE>


                                      A-25
<PAGE>

NOTE 19.
QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
                                                            First        Second        Third         Fourth
    (dollars in thousands, except per share amounts)       Quarter       Quarter       Quarter       Quarter
                                                          --------      ---------     ---------      --------
    <S>                                                   <C>           <C>           <C>            <C>
    FISCAL 1999
    Revenues.......................................       $114,365      $112,542      $106,250       $109,005
    Gross margin...................................         45,539        45,240        43,278         41,952
    Loss from continuing operations (1)............        (14,802)      (15,398)      (15,611)       (25,194)
    Gain on sale/income from discontinued
      operations, net of taxes.....................            289           520         3,056           (642)
    Loss before extraordinary item.................        (14,513)      (14,878)      (12,555)       (25,836)
    Extraordinary loss on extinguishment of debt,
      net of taxes.................................            --            --            --            (210)
                                                          --------      --------      --------       --------
    Net loss.......................................       $(14,513)     $(14,878)     $(12,555)      $(26,046)
                                                          ========      ========      ========       ========
    Basic and diluted per share data:
    Loss from continuing operations................       $  (1.04)     $  (1.08)     $  (1.10)      $  (1.78)
    Gain on sale/income from discontinued
      operations, net of taxes.....................           0.02          0.04           --            0.01
    Loss before extraordinary item.................          (1.02)        (1.04)        (1.10)         (1.77)
    Extraordinary loss on extinguishment of debt,
      net of taxes.................................            --            --            --           (0.01)
                                                          --------      --------      --------       --------
    Net loss.......................................       $  (1.02)     $  (1.04)     $  (0.88)      $  (1.84)
                                                          ========      ========      ========       ========
</TABLE>

    (1) Fourth quarter includes certain charges discussed in Notes 1 and 6.

<TABLE>
    <S>                                                   <C>           <C>           <C>            <C>
    FISCAL 1998
    Revenues.......................................       $ 92,474      $ 91,314      $ 94,976       $116,174
    Gross margin...................................         37,081        37,288        37,878         46,199
    Loss from continuing operations (2)............        (15,823)      (16,401)      (22,325)       (14,250)
    Gain on sale/income from discontinued
      operations, net of taxes.....................            455           546           576            587
    Loss before extraordinary loss.................        (15,368)      (15,855)      (21,749)       (13,663)
    Extraordinary loss on extinguishment of debt,
      net of taxes.................................            --            --         (1,857)           743
                                                          --------      --------      --------       --------
    Net loss.......................................       $(15,368)     $(15,855)     $(23,606)      $(12,920)
                                                          ========      ========      ========       ========
    Basic and diluted per share data:
    Loss from continuing operations................       $  (1.14)     $  (1.18)     $  (1.59)      $  (1.00)
    Gain on sale/income from discontinued
      operations, net of taxes.....................           0.03          0.04          0.04           0.04
    Loss before extraordinary item.................          (1.11)        (1.14)        (1.55)         (0.96)
    Extraordinary loss on extinguishment of debt,
      net of taxes.................................            --              --        (0.13)          0.05
                                                          --------      --------      --------       --------
    Net loss.......................................       $  (1.11)     $  (1.14)     $  (1.68)      $  (0.91)
                                                          ========      ========      ========       ========
</TABLE>

    (2) Third quarter includes a restructuring charge discussed in Note 8.


                                     A-26

<PAGE>

NOTE 20.
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, 1999, 1998 and 1997:

<TABLE>
<CAPTION>
                                                                  Charges
                                                   Balance at   (Credits) to                                Balance at
                                                   beginning      costs and                                   end of
                                                   of period      expenses      Deductions      Other         period
                                                   ----------   ------------    ----------      -----       ----------
    (dollars in thousands)
    <S>                                            <C>          <C>             <C>             <C>         <C>
    YEAR ENDED SEPTEMBER 30, 1999
    Allowance for doubtful accounts (a) ......      $ 6,957          (752)           (103)       (287)        $ 5,815
                                                    =======         =====         =======       ======        =======

    Restructuring reserves ...................      $20,302           --          (13,651)        --          $ 6,651
                                                    =======         =====         =======       ======        =======

    YEAR ENDED SEPTEMBER 30, 1998
    Allowance for doubtful accounts (b) ......      $ 5,206           249            (479)       1,981        $ 6,957
                                                    =======         =====         =======       ======        =======

    Restructuring reserves (b) ...............      $   --          8,494          (3,422)      15,230        $20,302
                                                    =======         =====         =======       ======        =======

    YEAR ENDED SEPTEMBER 30, 1997
    Allowance for doubtful accounts ..........      $ 6,473          (341)           (926)        --          $ 5,206
                                                    =======         =====         =======       ======        =======
</TABLE>

     (a)  Other deletions include the elimination of Magnetics related reserves
          (see Note 3).

     (b)  Other additions include restructuring liabilities and allowance for
          doubtful accounts recorded in connection with the First Image
          acquisition.


                                     A-27

<PAGE>

EXHIBIT INDEX

EXHIBIT NUMBER
(10) MATERIAL CONTRACTS.
(21) SUBSIDIARIES OF THE REGISTRANT.
(27) FINANCIAL DATA SCHEDULE (REQUIRED FOR ELECTRONIC FILING ONLY).


                                     A-28