Anacomp, Inc. - Document Management - Category Directory

(858) 716-3400

15378 Avenue of Science

San Diego, CA 92128

www.anacomp.com

Sales

$204 million

Business Description

Anacomp®, Inc.is a global provider of information outsourcing services, maintenance support, and imaging and print solutions. Anacomp was incorporated in Indiana in 1968 and has active international subsidiaries in Austria, Belgium, Canada, France, Germany, Italy, the Netherlands, Scandinavia and the United Kingdom (U.K.).

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

We deliver our products and services to more than 7,000 businesses and organizations in 70 countries directly or through our worldwide network of dealers and distributors. We have a large base of premier customers in the banking, insurance and brokerage sectors, including approximately one half of the Fortune 500 companies. Our information outsourcing sales efforts are focused heavily on these three segments, each of which has substantial and diverse document management needs. We are currently expanding our range of outsource services, adding document imaging (scanning) services, printing services, e-mail archive, as well as report mining capabilities to meet the demanding requirements of these and other markets. By meeting our customers’ full range of information outsourcing needs in this way, we expect to provide increased value and to maximize our business with each customer.

The majority of our business relates to managing customer documents, supporting the devices these documents are captured, printed or stored on, and providing supplies and service for the same. We attempt to service our existing and future customers by “bundling” an expanded list of services (e.g., Web viewing, CD Services, printing, scanning and long-term archival storage).

Products and Services

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

Anacomp’s maintenance support services are offered in North America and Europe primarily through a dedicated, experienced organization of approximately 500 service and support professionals. We extend this service to approximately 50 countries through our worldwide network of affiliated, certified service technicians. We support more than 100 hardware manufacturers, resellers and distributors.

During fiscal year 2003, we focused on enhancing the capabilities of our digital offerings and our MVS services that we felt were important to strengthen Anacomp’s leadership position in the document management and related support services marketplace. Significant features and software capabilities such as report mining and scanning software integration were added into our docHarbor solution, while an expansion to our call center/depot repair capabilities will be completed to provide enhanced support and capacity for our OEM partners. The net effect of these additions was to introduce additional offerings to the market and to nurture the synergies between our customers’ business needs and Anacomp’s set of IT solutions.

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

docHarbor revenues increased by 20% in fiscal year 2003, growing from $15.7 million in fiscal year 2002 to $18.8 million in 2003. docHarbor revenues in fiscal year 2003 represent 9% of total Company revenues for the year. We expect continued growth in our docHarbor solution revenue stream in fiscal year 2004 based upon a number of factors, including increased customer awareness and recognition; a strong sales pipeline at the end of fiscal year 2003; increased acceptance of outsourcing non-core business processes; and tighter regulations around financial reporting and record keeping. docHarbor revenues are currently generated primarily in North America. We are working to expand these services to customers throughout the U.K. and Italy.

Competition is growing in the Internet-based document management services market. In the U.S., several smaller companies are offering somewhat similar services on a regional basis. Some nationwide competitors have also emerged and are focused on vertical market sectors or specific, more narrowly focused applications such as check presentment, enrollment or e-mail support. In particular, there is intense competition in the area of online document viewing. Nevertheless, the major competition for Anacomp’s docHarbor solution in North America is in-house solutions (i.e., software licenses sold to corporations for running a Web service on internal computer equipment). Providers of technology for compatible in-house solutions include Mobius Management Systems, IBM, FileNET, Documentum, and Computer Associates. During the last year, some of these in-house software solutions providers, recognizing the merits and potential revenues of a services-based solution, have begun initiating competing service offerings, by partnering with existing document services providers. The current economic conditions and widely reported limitations on capital spending by companies worldwide favor outsourcing as a more economical means of acquiring Internet-based document management solutions. In the U.K. and Italy, Anacomp competes with both global providers such as IBM and individual document management outsource service providers within each country.

Multi-Vendor Services. Multi-Vendor Services (MVS) is the second principal growth area for us. By providing installation and maintenance for products made by other OEMs, we are able to leverage our considerable field services and support expertise and infrastructure by expanding beyond the range of our own products. We offer Multi-Vendor Services using two approaches. First, we contract with an OEM to provide maintenance services, including field services, as well as optional services such as call center/help desk support, logistics support and depot repair for the OEM’s end users. For example, we offer purchasers of Brocade fabric switches warranty and post-warranty support for their Storage Area Networks (SAN) infrastructure devices including installation, on-site repair and maintenance. As a second approach, Anacomp serves as an alternative to maintenance services provided by the OEM or its distributors. For example, we offer users of Xerox high-speed laser printers a high-quality, economical alternative to the service offered by Xerox Corporation itself. There is a large installed base of Xerox printers worldwide and, in most cases, Xerox has been the major source of field maintenance services for these critical printing systems.

The first approach appeals to manufacturers that have geographically limited maintenance capabilities or no capabilities of their own, or whose own service operations are more costly to provide than ours. We service many different makes and types of storage products, various routers and switches, high speed printing devices, tape subsystems and many other systems under these arrangements. The second approach appeals to end-users of devices that are looking for maintenance and support service alternatives to the more costly OEM.

We are striving to grow our MVS business by adding additional OEM partners and Value Added Resellers (VARs), and possibly through acquisitions. Revenues in 2003 from MVS were $34.1 million, representing 62% of total maintenance services revenues and 17% of total Company revenues for the year. Annual MVS revenues increased $7.1 million or 26% in fiscal year 2003 after increasing $4.7 million or 21% in fiscal year 2002 and $3.2 million or 17% in fiscal year 2001. MVS revenues of $34.1 million continued to exceed Micrographic Maintenance Services revenues of $20.8 million in fiscal year 2003.

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

CD Services. Anacomp offers industry-leading outsource services for storing, delivering and accessing documents using the CD-R medium. This outsource service provides customers with an easy-to-use, high-capacity, portable, standardized solution for the electronic distribution, access and storage of invoices, reports, statements, policies, trade confirmations and other important documents. Since entering the emerging field of CD-based document management in 1995, Anacomp has become one of the world’s largest outsource service providers. Overall, fiscal year 2003 CD Services revenues were $28.3 million and represented 14% of total Company revenues.

Our CD Services revenues declined by $5.4 million or 19% in fiscal year 2003 after a $2.1 million decrease in 2002. Prior to 2002, CD Services had been a consistently strong revenue contributor, but industry adoption of Web technologies and product commoditization continue to impact revenue. We expect the decline in CD revenues in fiscal year 2003 to continue into fiscal year 2004 and beyond as CD services are becoming increasingly commodity-driven and prices continue to erode. We believe we can mitigate these effects through increasing product sales by linking CD usage with our growing Web services segment. Primary competition in this market is from large document services providers such as Lason and EPSIIA (a Fiserv company), from hundreds of local and regional CD services providers, and from in-house on-line viewing systems. These revenues are reported as CD/Digital in our financial statements.

Micrographic Services. Anacomp is a world leader in Micrographic (COM) Services. With time-tested technological and operational expertise in COM, we image nearly two billion original pages to microfiche each month for thousands of customers worldwide. Overall, fiscal year 2003 Micrographic Services revenues were $70.8 million and represented 35% of total Company revenues.

Compared with prior years, this line of business continued to decline in fiscal year 2003 largely as the result of a decreased demand for the COM storage and retrieval medium. Overall, the Micrographic Services revenues declined $21.8 million in 2003, or 24%, reflecting the trend in the mature micrographics market segment. The decline in revenues in fiscal 2002 from 2001 was $27.7 million and represented a 23% decrease. We continue to manage the gross margin impact of the declining micrographics market on our Micrographic Services business and are currently implementing several cost containment strategies that are focused on retaining our business and relationships with our customers, while providing an effective and efficient production and delivery infrastructure.

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

Micrographic Maintenance Services. Anacomp maintains virtually the entire installed base of Anacomp-manufactured COM systems in use today, as well as COM systems manufactured by other suppliers. We also provide maintenance support for other micrographic equipment, such as retrieval devices, microfilm scanners, cameras and duplicators. Revenues from micrographic maintenance services were $20.8 million or 10% of total Company revenues in fiscal year 2003.

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

Imaging and Print Systems. Anacomp has the largest installed base of COM systems in the world. Our flagship XFP2000® imaging platform remains the premier system in the marketplace, using precise laser-optics and advanced film processing techniques to produce high-quality, original and duplicate images of reports and other documents on microfiche or 16mm roll film. The XFP2000 is the most widely used COM imaging system in the world. We also use the XFP2000 for our own Micrographic Services operations. While we no longer manufacture the XFP2000, we continue to offer “as new” XFP2000 imaging systems for sale, as well as refurbished laser printers. In addition, Anacomp expanded its relationship in 2003 with Hitachi Printing Solutions, America and Hitachi Ltd. in Europe to resell Hitachi’s line of high-speed production printers. Revenues from imaging and print systems and related equipment in fiscal year 2003 were approximately $2.1 million or 1% of total Company revenues in fiscal year 2003. Imaging Systems revenues are included in Equipment/Supplies revenues in our financial statements. For fiscal year 2004 and beyond, we expect COM imaging systems sales will continue to decline.

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

Primary products in our supplies business include silver halide original COM film (used to produce master images) and non-silver duplicating microfilm (used to produce copies of master images). The majority of silver halide original COM film for use of Anacomp’s XFP2000 systems is sold in a proprietary package and is currently available only from Anacomp. We obtain our proprietary silver halide products through an exclusive multi-year supply agreement with Kodak. The supplies business also distributes non-proprietary duplicating film to our installed base of imaging systems users. We obtain our duplicate film products through a long-term supply agreement with Intelicoat Technologies. We believe the users of our imaging systems purchase the majority of their original, duplicate film and related chemicals from us. Revenues from supplies sales in fiscal year 2003 were $29.1 million or 14% of total Company revenues and were reported as part of Equipment/Supplies revenues in our financial statements. One customer comprises 10% of total Equipment/Supplies revenue.

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

Information Technology (IT) Services Market

The IT Services market, in which Anacomp provides outsourcing services in the areas of content / document management, as well as Multi-Vendor Services and Support, is a dynamic and rapidly growing industry. Today, the rapid increase in the number of unstructured content documents (i.e., documents, images, emails) generated, the increase in the amount of structured data stored, combined with the desire in both the commercial and non-commercial sectors to increase productivity and reduce cost by outsourcing non-core business processes, is fueling growth in the IT Services industry and demand for advanced digital technologies and other cost and efficiency improvements. Anacomp provides these businesses and organizations with products and services for storing, distributing and accessing critical documents, as well as supporting and maintaining the capture, print, storage and network devices on which organizations depend. The overall information technology and related services market is projected to reach $633.6 billion in 2004 and is forecasted to grow at a 6.3% compound annual growth rate between 2001 and 2006. We believe Anacomp’s IT outsourcing solutions (document management and multi-vendor services) meet the needs of the following customer requirements within the IT Services market:

Outsourcing Alternatives – Businesses are increasingly looking to outsource non-core activities. It is estimated that approximately 60% of businesses regularly use outsourcers. Document management has been identified as a potential candidate for outsourcing. Most companies can implement document management solutions faster, more effectively and less expensively by utilizing third parties. Maintenance Service and Support has also become an accepted outsourcing strategy for Original Equipment Manufacturers (OEM’s). Many manufacturers are looking to shed non-core support activities surrounding their products and focus instead on development and sale of their products.

Immediate Access to Information – To react quickly and effectively to changing business conditions, companies need ready access to information on their business and on their customers. They also need to provide their customers with immediate access to their account information via the Web in order to compete effectively in the financial marketplace.

Application Focused Support – Businesses are no longer content with generic document management products or services; rather, they demand solutions that are tailored to the specific tasks their personnel and customers perform, including the ability to have vital business information readily available in customer interactions. To meet this need, document management companies must focus on developing expertise on particular business processes in selected industries.

Independent Service and Support – IT manufacturers are reassessing their organizations, business structure and the specific tasks their personnel and distributors perform in order to refocus on core activities around research and development and channel enhancement. Independent Service Organizations can provide critical services for customer installations, warranty support, call center and depot repair of equipment. To meet this IT Services need, multi-vendor service companies must focus on developing expertise in business processes, supporting technologies and deploying appropriately trained personnel to maintain a large array of OEM equipment.

Government Regulation – Current events have also begun to drive the adoption of new document management systems. In the wake of numerous government investigations, financial failures and corporate misconduct, financial institutions and public companies are being driven by new regulations (e.g. Sarbanes-Oxley Act) to record and retain all activity related to their ongoing business. In addition, modifications to and stricter enforcement of existing rules (e.g. SEC Rule 17a-4) that govern how financial documents (including e-mails and Instant Messages) must be stored, and newly issued HIPAA regulations, which affect the record-keeping requirements of all health insurance providers, are pushing faster adoption of document management technologies that provide the required retention, access and control of regulated content. The “government regulation” factor has only recently begun to impact the document management market, but could have a substantial effect in the long-term.

Ticker

ANCPA

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