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Data Center Computer Data Center Computer
Consolidated Services Services Consolidated Services Services
..................................................................................................................................................

Revenues $109,599 $67,418 $42,181 $106,368 $67,899 $38,469
Operating pro¬t 12,451 8,504 3,947 18,191 7,294 10,897
Income before taxes 3,622 13,997
Depreciation and
amortization 6,054 3,636 2,418 3,859 2,527 1,332
Corporate depreciation
and amortization 654 509

June 30, 1982 June 30, 1981
.................................................... .....................................................
Identi¬able assets $155,039 $84,785 $70,254 $93,737 $57,332 $36,405
Corporate assets 56,621 37,061
$211,660 $130,798
..................................................................................................................................................


Approximately 19% of Anacomp™s ¬scal 1982 consolidated revenues were provided
by major computer services contracts which extend beyond one year, including those con-
tracts in process discussed in Note 3. Contracts of this type provided 18% of the 1981 and
20% of the 1980 revenue. This included system licensing and modi¬cation contracts, which
accounted for 13% of revenues in 1982, 11% in 1981 and 1980, and facility management
arrangements, which accounted for 6% of revenue in 1982, 7% in 1981 and 9% in 1980.
Revenues from various federal, state and local government agencies amounted to
approximately 11% of revenue in 1982 and 1981, and 14% in 1980.
756 Case: Anacomp, Inc.




26 Part 4 Additional Cases




Note 11. Income Taxes

Deferred taxes are provided where differences exist between the period in which
transactions affect taxable income and the period in which they enter into the determina-
tion of income for ¬nancial reporting purposes. Investment tax credits are re¬‚ected in
income in the year realized by reducing the current provision for federal taxes on income.
The following table sets forth the components of the provision for income taxes:

Year ended June 30, 1982 1981 1980
......................................................................................................................................

Charge equivalent to realized tax bene¬ts of pre-
acquisition losses of acquired companies $ 67 $ 164 $ 250
Charge equivalent to realized tax bene¬ts from early dis-
position of shares issued under quali¬ed stock option
and stock purchase plans 76 252 81
Charge equivalent to realized tax bene¬ts from certain
Anacomp




acquisition expenditures 276 ” ”
Taxes currently payable:
Federal 2,536 1,034 2,263
State 889 602 377
Deferred (3,001) 4,007 189
$ 843 $6,059 $3,160
......................................................................................................................................


The deferred income tax effects of timing differences are as follows:

Year ended June 30, 1982 1981 1980
......................................................................................................................................

Excess of tax over book depreciation $1,906 $265 $189
Use of cash basis accounting for tax purposes (3,830) 3,830 ”
Accrued interest on convertible debentures (1,282) (436) ”
Election of installment sale for tax purposes 506 (8) ”
Deferred income of foreign subsidiary 109 187 ”
Deferred income of DISC (156) 140 ”
Transfer from deferred to currently payable (264) ” ”
Other 10 29 ”
$(3,001) $4,007 $189
......................................................................................................................................


The following is a reconciliation of income taxes calculated at the United States fed-
eral statutory rate to the provision for income taxes:
757
Case: Anacomp, Inc.




27
Part 4 Additional Cases




Year Ended June 30, 1982 1981 1980
......................................................................................................................................

Provision for taxes on income at statutory rate $1,666 $6,439 $3,582
Investment tax credit (1,950) (333) (377)
State income taxes, net of federal income tax bene¬t 569 325 204

Nondeductible amortization of intangible assets 474 332 169
Difference between capital gain and statutory tax rates ” (316) (269)
Dividend deduction of 85% of dividend income (119) (179) ”
Interest on tax deposits, net of federal income tax bene¬t 302 ” ”
Other (99) (209) (149)
$ 843 $6,059 $3,160
......................................................................................................................................

At June 30, 1982, certain subsidiaries of Anacomp have net operating loss carry-




Anacomp
forwards of approximately $1,997. The carryforwards pertain to preacquisition losses of
the subsidiaries and therefore can be utilized only to the extent that the subsidiaries pro-
duce taxable income in the future. Any tax bene¬t resulting from the utilization of these
carryforwards will reduce the intangible assets recorded at the time of purchase of the
subsidiaries. The carryforwards expire in the following ¬scal years: 1992, $357; 1993,
$774; 1994, $514; and 1995, $352.


Note 12. Other Income and Extraordinary Credit

Year Ended June 30, 1982 1981 1980
.........................................................................................................................

Gain (loss) on transaction with Kalvar $(725) $ 898 $1,567
Gain on sale of certain assets 630 855 25
Other 705 947 246
$610 $2,700 $1,838
.........................................................................................................................


The extraordinary credit in 1982 arose from the sale of a branch of¬ce which had
been acquired in 1981 as part of an acquisition accounted for as a pooling of interests.
The gain was $2,541 before income taxes, determined at the capital gains rate of $711.


Note 13. Lease and Other Commitments

Anacomp has commitments under long-term operating leases, principally for build-
ing space, covering periods generally up to ¬ve years. The following summarizes by year
the future minimum lease payments due within the next ¬ve years and under all noncan-
cellable operating lease obligations which extend beyond one year.
758 Case: Anacomp, Inc.




28 Part 4 Additional Cases




Fiscal As of June 30
.............................................................................................

1983 $3,933
1984 3,159
1985 2,362
1986 1,605
1987 565
1988 and thereafter 626
Total minimum payments required $12,250
.............................................................................................

Anacomp and Dr. Ronald D. Palamara, president and chairman of Anacomp, are
parties to a March 27, 1980, employment and noncompetition agreement pursuant to
which Anacomp agreed (a) to pay Dr. Palamara commencing July 1, 1980, a base
annual salary of $125 plus an amount equal to 3.54% of Anacomp™s annual income
Anacomp




before income taxes in excess of $1,000, (b) to make a one-time payment of $430 in
July, 1980, to Dr. Palamara for his agreement not to compete with Anacomp for three
years following any termination of service with Anacomp and (c) to sell Dr. Palamara, in
July, 1980, 428,688 shares of Anacomp common stock for a consideration of $6.08 per
share, that being the per share market price on the date of the agreement. Of the $6.08
per share consideration, Dr. Palamara agreed to pay $1.22 per share and granted Ana-
comp a right of ¬rst refusal to purchase such shares upon any resale by Dr. Palamara or
subsequent holders at $4.86 below the sale price, $4.86 being the balance of the $6.08
per share consideration.


Note 15. Supplementary Income Statement Information

Supplementary income statement information follows.

Year ended June 30, 1982 1981 1980
.........................................................................................................................

Maintenance and repairs $4,475 $3,738 $2,271
Depreciation and amortization of property,
equipment and purchased computer software
systems $4,789 $2,938 $2,246
Amortization of intangible assets $1,919 $1,430 $780
Taxes other than payroll and income taxes $1,000 $507 $410
Rents $7,503 $8,084 $4,819
.........................................................................................................................
759
Case: Anacomp, Inc.




29
Part 4 Additional Cases




REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Anacomp, Inc.
We have examined the consolidated balance sheet of Anacomp, Inc. and Subsidi-
aries as of June 30, 1982 and 1981, and the related consolidated statements of income,
stockholders™ equity, and changes in ¬nancial position for each of the three years in the
period ended June 30, 1982. Our examinations were made in accordance with generally
accepted auditing standards and, accordingly, included such tests of the accounting
records and such other auditing procedures as we considered necessary in the circum-
stances.
In our opinion, the ¬nancial statements referred to above present fairly the consoli-
dated ¬nancial position of Anacomp, Inc. and Subsidiaries as of June 30, 1982 and
1981, and the consolidated results of their operations and changes in ¬nancial position
for each of the three years in the period ended June 30, 1982, in conformity with gener-
ally accepted accounting principles applied on a consistent basis, after restatement for




Anacomp
the change, with which we concur, in the method of accounting for vacation pay as
described in Note 1 to the ¬nancial statements.

Coopers & Lybrand


Indianapolis, Indiana
September 1982
Brierley Investments Limited




In
late 1995, Paul Collins, the CEO of Brierley Investments Limited
(BIL), was concerned that the company™s stock was increasingly being undervalued in
the New Zealand market. In a discussion in the 1995 annual report, he stated:
We have been disappointed with [our] share price. In 1991 I made a prediction
that in 1995 the share price would be $2 after having paid $1 billion in cash divi-
dends. While we have been largely successful on the dividend front, the growth in
share price has not been achieved. That prediction was based on my con¬dence of
a substantial, sustainable lift in the Company™s performance which has been
achieved”pro¬ts have more than doubled, operating earnings from investments
have been signi¬cantly increased, debt levels have been slashed and new invest-
ments such as Sky City and Sealord provide the foundation for future growth.
Throughout 1995 the company™s stock price had steadily climbed from NZ$1.10 at
the beginning of the year to a close of NZ$1.20, well below the ¬rm™s target of NZ$2.
This performance also lagged the New Zealand stock market, which had grown by 20
percent during the same period. BIL had an equity beta of 0.85 and an estimated cost of

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