Anacomp Announces Third Quarter Financial Results Results Reflect First Image Acquisition
SAN DIEGO, Aug. 11 /PRNewswire/ -- Anacomp, Inc. (Nasdaq: ANCO), a world leader in information management solutions, today released third quarter financial results for the period ended June 30, 1998 that reflect the acquisition of First Image Management Company. Anacomp also announced that it has finalized the sale of two First Image business units to third parties.
THIRD QUARTER OVERVIEW
For the three months ended June 30, 1998, Anacomp reported revenues of $121.0 million, a 6% increase over the same period a year ago, when the company posted revenues of $114.0 million. EBITDA (earnings before interest, other income, taxes, depreciation, amortization, and a third quarter restructuring charge) for the third quarter was $20.0 million, a 5% increase over the $19.1 million reported in the year-ago period. The current results include one month of revenues and EBITDA, or $8.5 million and $2.2 million respectively, from the portions of the First Image business acquired and retained by Anacomp. For the nine-month period ended June 30, 1998, revenues were $356.4 million, compared to $341.4 million in the same period a year ago, and EBITDA was $57.8 million, compared to $58.9 million in the year-earlier period. These prior nine-month results exclude a special one-time $3.6 million payment from The Eastman Kodak(R) Company.
"Without a doubt, our focus in the third quarter was the First Image acquisition," commented Ralph W. Koehrer, Anacomp's president and chief executive officer. "This was a substantial and strategic transaction for us, and I couldn't be more pleased with the results so far. The integration of First Image's business is proceeding nicely, and we expect to achieve initial synergies during the fourth quarter. We expect to begin consolidating duplicate service centers in October, including the conversion of customer programming to Anacomp systems, with this process expected to be completed by the end of the next fiscal year."
DAS AND DPDS SALE
Anacomp also announced that it has completed the sale of two former First Image business units to third parties. Document Acquisition Services (DAS), which provides data entry and capture services, was sold to ACS (Affiliated Computer Services, Inc.). Document Print and Distribution Services (DPDS), which provides print-and-mail, demand publishing, and direct marketing services, was sold to Southern Micrographix Company LLC (now known as AccuDocs LLC). The sale of both businesses generated $45.0 million in cash. Combined, the two businesses accounted for $97.6 million of First Image's total 1997 revenues of $222.0 million and $8.4 million of First Image's total 1997 EBITDA of $34.4 million.
"Neither business fit our strategy, nor were they synergistic with our existing operations," commented Koehrer. "By selling them, not only did we raise $45 million, but we kept the most profitable parts of First Image." The proceeds from the sale of DAS and DPDS will be used to substantially pay down the outstanding portion of a new $80 million senior secured credit facility that Anacomp obtained concurrent with its purchase of First Image.
INTERNAL ORGANIZATIONAL STRUCTURE
Anacomp also completed a significant internal reorganization in the third quarter, designed to organize the company's activities into a portfolio of six business units; significantly reduce sales, general, and administrative costs; and optimize the integration of First Image's services business. As a result of the First Image acquisition and the reorganization, Anacomp recorded a $8.5 million restructuring charge in the quarter.
"The reorganization positions us to more effectively migrate our customers, including those we recently inherited from First Image, to our newer products and services," noted Koehrer, "while preserving a focus on our highly profitable traditional businesses. Plus, as a result of streamlining our organizational structure, we reduced our SG&A costs in the third quarter more than one million dollars - excluding any impact from the First Image acquisition."
BUSINESS UNIT HIGHLIGHTS
In addition to the positive effects of the First Image acquisition, third quarter results were positively impacted by a strong showing in Anacomp's new Outsource Services business unit, which - excluding First Image - increased revenues by 4% over the third quarter of fiscal 1997. (Including First Image's contribution in June, Outsource Services revenues increased by 32%.) Anacomp's International business unit, which encompasses sales and operations outside of the United States and Canada, continued its strong 1998 performance, with 18% higher revenues and substantially higher margins from the year-ago period. Technical and maintenance services remained firm in the quarter, as the company's efforts to diversify this business began to yield important contributions despite a continuing decline in the installed base of COM systems. Sales of magnetics products and services also held steady in the third quarter, and magnetics gross margins - one of the company's focuses for this traditional businesses - continued to make modest improvements.
The company placed 33 XFP2000 COM systems in the third quarter, compared to 28 placements in the second quarter, but revenue and income from COM systems and supplies were lower, partially due to a continued trend toward leasing and usage plans for COM systems. Although this trend reduced current revenues, it benefits the company's long-term strategy of increasing its base of recurring business. Sales of digital systems remained on track internationally but declined in the domestic market, mainly due to the reorganization and the refocusing of the company's approach to this business. Anacomp believes that it has made significant progress in this area since the reorganization, including the closing of several orders and the development of a strong pipeline of qualified prospects.
"I believe the third quarter will prove to be pivotal for Anacomp," concluded Koehrer. "We successfully completed the purchase of First Image, and both the top- and bottom-line benefits from this transaction will be substantial. The First Image acquisition also gave us several thousand new customers and entry into some 20 new cities. In addition, we reorganized the company into integrated business units. Not only are we more streamlined and focused than before, but we are well positioned to manage each of our business units for self-renewal and to fulfill our objective to be our customers' trusted partner as they migrate to new technologies."
Serving thousands of clients around the world, Anacomp's services and products store and manage more customer documents than anyone else in the world. The company is a leading provider of COM and CD outsource services, digital and analog systems, consulting services, and technical support. For more information, please visit Anacomp's web site at www.anacomp.com. |
