<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 16, 1995
REGISTRATION NO. 33-62655
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
CADMUS COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
VIRGINIA 54-1274108
(State or other jurisdiction
of incorporation or (I.R.S. Employer
organization) Identification No.)
</TABLE>
6620 WEST BROAD STREET, SUITE 500
RICHMOND, VIRGINIA 23230
(804) 287-5680
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
BRUCE V. THOMAS
CADMUS COMMUNICATIONS CORPORATION
6620 WEST BROAD STREET
SUITE 500
RICHMOND, VIRGINIA 23230
(804) 287-5680
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<TABLE>
<S> <C> <C>
COPIES TO:
C. PORTER VAUGHAN, III F. CLAIBORNE JOHNSTON, JR. JAMES D. PHYFE
HUNTON & WILLIAMS MAYS & VALENTINE DAVIS POLK & WARDWELL
RIVERFRONT PLAZA - EAST TOWER 1111 EAST MAIN STREET 450 LEXINGTON AVENUE
951 EAST BYRD STREET RICHMOND, VIRGINIA 23208-1122 NEW YORK, NEW YORK 10017
RICHMOND, VIRGINIA 23219-4074 (804) 697-1200 (212) 450-4000
(804) 788-8200
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC:
AS SOON AS PRACTICABLE AFTER THE REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. ( )
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. ( )
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. ( )
If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. ( )
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. ( )
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
SUBJECT TO COMPLETION
PROSPECTUS
DATED OCTOBER 16, 1995
1,500,000 SHARES
[CADMUS LOGO]
COMMON STOCK
(PAR VALUE $.50 PER SHARE)
All of the Common Stock, $.50 par value per share (the "Common Stock"), offered
hereby is being offered by Cadmus Communications Corporation, a Virginia
corporation ("Cadmus" or the "Company").
The Common Stock is quoted on The Nasdaq National Market under the symbol
"CDMS." On October 13, 1995, the last reported sale price of the Common Stock on
The Nasdaq National Market was $24.75 per share. See "Price Range of Common
Stock and Dividend Policy."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<TABLE>
<S> <C> <C> <C>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
Per Share $ $ $
Total (3) $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
See "Underwriting."
(2) Before deducting expenses of the offering payable by the Company estimated
at $250,000.
(3) The Company has granted to the Underwriters an option, exercisable within 30
days after the date of this Prospectus, to purchase up to an additional 225,000
shares of Common Stock on the same terms as set forth above, solely to cover
over-allotments, if any. If such option is exercised in full, the total Price to
Public, Underwriting Discount and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
The shares of Common Stock being offered by this Prospectus are offered by the
Underwriters, subject to prior sale, when, as and if delivered to and accepted
by the Underwriters, and subject to approval of certain legal matters by Davis
Polk & Wardwell, counsel for the Underwriters. It is expected that delivery of
the shares of Common Stock offered hereby will be made against payment therefor
on or about , 1995 at the offices of J.P. Morgan Securities Inc., 60
Wall Street, New York, New York.
J.P. MORGAN SECURITIES INC. INTERSTATE/JOHNSON LANE
CORPORATION
[RED HERRING]
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
, 1995
<PAGE>
[Map of the United States with Los Angeles, Denver, Atlanta, Charlotte,
Raleigh, Richmond, Easton, Washington, Baltimore,
New York and Barton indicated.]
[Graph of Net Sales (In millions)]
1991 1992 1993 1994 1995
$177.7 $188.0 $198.1 $247.7 $279.6
[Graph of Operating Income (In millions)]
1991 1992 1993 1994 1995
$8.9 $10.4 $11.3 $12.9 $18.1
[Graph of Net Income Per Share]
1991 1992 1993 1994 1995
$.50 $.65 $.76 $.86 $1.21
[Graph of Shareholder's Equity Per Share]
1991 1992 1993 1994 1995
$7.47 $7.95 $8.49 $9.03 $9.99
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH
THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING
TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE
WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "UNDERWRITING."
2
<PAGE>
[photograph of printed products produced by the different Cadmus product lines]
<PAGE>
No person is authorized to give any information or to make any representations
not contained or incorporated by reference in this Prospectus and, if given or
made, such information or representations must not be relied upon as having been
authorized by the Company or any Underwriter. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, the Common
Stock in any jurisdiction to any person to whom it is unlawful to make such
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances create any implication that there has
been no change in the affairs of the Company subsequent to the date hereof.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Available Information................................. 4
Incorporation of Certain Documents by Reference....... 4
Prospectus Summary.................................... 5
The Company........................................... 8
Use of Proceeds....................................... 9
Price Range of Common Stock and Dividend Policy....... 9
Capitalization........................................ 10
Pro Forma Consolidated Financial Statements........... 11
Selected Financial and Operating Data................. 15
</TABLE>
<TABLE>
<CAPTION>
PAGE
<S> <C>
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 16
Business.............................................. 21
Management............................................ 27
Description of Capital Stock.......................... 29
Underwriting.......................................... 32
Legal Matters......................................... 33
Experts............................................... 33
Index to Financial Statements......................... F-1
</TABLE>
3
<PAGE>
AVAILABLE INFORMATION
Cadmus Communications Corporation ("Cadmus" or the "Company") is subject to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith files reports and other
information with the Securities and Exchange Commission (the "Commission").
Reports and definitive proxy or information statements filed by the Company can
be inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at
its Regional Offices located at the Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and 75 Park Place, New York, New
York 10007. Copies of such material can be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
This Prospectus constitutes a part of a registration statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by the Company with the Commission under the Securities Act of
1933, as amended (the "Securities Act"), with respect to the securities offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. Reference is made to such
Registration Statement and the exhibits relating thereto for further information
with respect to the Company and the shares of the Common Stock, offered hereby
(the "Offering"). The Underwriters of the shares of Common Stock offered in the
Offering are herein collectively referred to as the "Underwriters."
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company's Annual Report on Form 10-K for the year ended June 30, 1995 and
the Current Report on Form 8-K dated October 16, 1995, as filed with the
Commission pursuant to the Exchange Act, are incorporated herein by reference
and made a part hereof.
In addition, all documents filed by the Company with the Commission pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Common Stock
offered hereby and the description of the Common Stock contained in the
Company's Registration Statement on Form 8-A shall be deemed to be incorporated
by reference into this Prospectus and to be a part hereof. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which is
incorporated by reference herein modifies or supersedes such earlier statement.
Any such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge upon request to each person to whom a
copy of this Prospectus is delivered a copy of any or all of the documents
specifically incorporated herein by reference, other than exhibits to such
documents (unless such exhibits are specifically incorporated by reference
therein). Requests should be addressed to: Bruce V. Thomas, Vice President --
Law and Development, Cadmus Communications Corporation, 6620 West Broad Street,
Suite 500, Richmond, Virginia 23230 (telephone 804-287-5680).
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL STATEMENTS
APPEARING ELSEWHERE IN THIS PROSPECTUS. EXCEPT AS SET FORTH IN THE FINANCIAL
STATEMENTS OR OTHERWISE NOTED HEREIN, THE INFORMATION CONTAINED IN THE
PROSPECTUS RELATING TO THE COMPANY'S CAPITAL STOCK, INCLUDING THE SUMMARY
FINANCIAL DATA, THE PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS, AND THE
SELECTED FINANCIAL AND OPERATING DATA, ASSUMES THAT THERE WILL BE NO EXERCISE OF
THE UNDERWRITERS' OVER-ALLOTMENT OPTION. REFERENCES HEREIN TO A PARTICULAR
FISCAL YEAR OF THE COMPANY SHALL MEAN THE YEAR ENDED JUNE 30 OF THE STATED YEAR.
UNLESS THE CONTEXT OTHERWISE REQUIRES, REFERENCES IN THIS PROSPECTUS TO "THE
COMPANY" OR "CADMUS" SHALL REFER TO CADMUS COMMUNICATIONS CORPORATION, A
VIRGINIA CORPORATION, AND ITS CONSOLIDATED SUBSIDIARIES.
THE COMPANY
Cadmus is a graphic communications company offering specialized products and
services in three areas: printing, marketing, and publishing. Cadmus was formed
in 1984 through the merger of The William Byrd Press, Incorporated ("Byrd"), a
leading publications printer based in Virginia, and Washburn Graphics, Inc.
("Washburn Graphics"), a graphic arts firm based in North Carolina.
The businesses in which Cadmus competes are currently undergoing unprecedented
change as a result of two major factors: technological development and evolving
customer needs. Technological development is changing the graphic communications
industry in two ways. Faster and more efficient printing technology has created
excess capacity and allowed companies to deliver higher quality products more
cost effectively. In addition, technological advances, such as digital
technology, have created alternative media for the dissemination of information
formerly delivered exclusively in print. As a result, there has been substantial
change in the cost, quality, and form of graphic communications.
Evolving customer needs are also forcing graphic communications companies to
adapt. Increasingly, customers are using more targeted marketing programs, which
require shorter print runs with specialized equipment and production processes.
In addition, customers are seeking ways to obtain more effective graphic
communications while reducing costs by outsourcing and through vendor
consolidation. Customers are selecting vendors that efficiently provide the most
effective graphic communications products and services -- specialists who can
interface with their in-house capabilities and provide full service product
offerings at an attractive price.
These factors will accelerate the pace of change in the graphic communications
industry. Within this changing market, Cadmus is seeking to play an increasingly
important role in helping its customers gain market share. In pursuit of this
goal, Cadmus has adopted a two-part business strategy: (i) seek profitable
positions in niche markets and (ii) become a full service provider of customers'
marketing and graphic communications needs.
Cadmus focuses on niche product segments that larger printers have not pursued.
By specializing in niche markets, Cadmus uses its knowledge of a customer's
industry to create innovative products and services that satisfy the customer's
specific needs. Services provided to these niche markets have greater perceived
value, allowing Cadmus to achieve higher margins and revenue growth. Cadmus also
has aligned its businesses to respond to the trends toward outsourcing and
vendor consolidation. Cadmus is well positioned to serve customers whose graphic
communications needs require a high degree of creativity and content generation.
Customers value Cadmus not only for its printing capabilities but also for its
ability to efficiently combine printing, marketing, and publishing skills in
unique and innovative ways.
In order to facilitate the development of profitable positions in niche markets
and the ability to provide full service offerings, Cadmus has aligned its
product offerings into three business groups: printing, marketing, and
publishing.
PRINTING. Cadmus printing operations provide customers a full range of services
which include state-of-the-art digital imaging, electronic prepress, sheetfed
and web offset printing, digital press multi-color printing, custom binding,
fulfillment, and distribution. Printing generated approximately 73% of net sales
in fiscal year 1995. Included in printing revenues are revenues from digital
imaging and composition services, which comprised approximately 18% of the net
sales of this group.
MARKETING. Cadmus provides its customers with creative, database management,
production, mailing, and fulfillment services for direct marketing,
point-of-purchase, retail catalogs, and interactive multimedia programs and
systems. Marketing generated approximately 20% of net sales in fiscal year 1995.
5
<PAGE>
PUBLISHING. Cadmus publishes its own special-interest magazines that target
consumers who have passionate interests in a hobby or sport. These magazines are
published, edited, managed, printed, and fulfilled by Cadmus. Cadmus also
provides custom publishing services to customers with narrowly defined target
audiences in the health care, travel, financial, technology, and non-profit
areas. Custom publishing services include design, editorial, advertising sales,
production, and distribution of newsletters and magazines. Publishing generated
approximately 7% of net sales in fiscal year 1995.
RECENT DEVELOPMENTS
In July 1995, Cadmus acquired the assets of Na-Tex, Inc., the publisher of
COLLECTOR'S WORLD OF RACING. In addition, in September 1995, the Company
acquired certain of the assets of The Mowry Company ("Mowry"), a direct
marketing agency located in Long Beach, California. Recently, Cadmus entered
into a definitive agreement to acquire the assets of The Software Factory, Inc.
("Software Factory"), a provider of software packaging and media duplication
services, and a letter of intent to acquire the assets of PeachWeb Corp.
("PeachWeb"), a developer of Internet web sites. The closings of these two
pending acquisitions, which are subject to certain conditions, would together
require total consideration of $11.8 million in cash and $2.0 million value of
Common Stock. See "Use of Proceeds" and "Pro Forma Consolidated Financial
Statements."
THE OFFERING
<TABLE>
<S> <C>
COMMON STOCK OFFERED (1).................................... 1,500,000 shares
COMMON STOCK OUTSTANDING AFTER THE OFFERING (1)(2)(3)....... 7,531,475 shares
USE OF PROCEEDS............................................. To repay approximately $11.2 million of long-term debt, plus a
$1.0 million prepayment penalty, to fund the $11.8 million cash
portion of the aggregate acquisition cost of the assets of the
Software Factory and the assets of PeachWeb, and to repay
approximately $8.0 million of borrowings to fund working
capital needs expected to be outstanding at the Offering date.
Any remaining proceeds will be used for general corporate
purposes. See "Use of Proceeds."
THE NASDAQ NATIONAL MARKET TRADING SYMBOL................... "CDMS"
DIVIDEND POLICY............................................. The Company has paid cash dividends on the Common Stock since
1984. Any future decision concerning the payment of dividends
on the Common Stock will depend upon the then prevailing
results of operations, financial condition, and capital
expenditure plans of the Company, as well as such other factors
as the Board of Directors, in its sole discretion, may consider
relevant. See "Price Range of Common Stock and Dividend
Policy."
</TABLE>
(1) Assumes that the Underwriters' over-allotment option to purchase up to
225,000 shares will not be exercised. See "Underwriting."
(2) Excludes approximately 607,000 shares of Common Stock issuable upon exercise
of outstanding and currently exercisable stock options as of June 30, 1995, at a
weighted average price of $12.73 per share.
(3) Excludes the issuance of 80,000 shares of Common Stock which represents the
$2.0 million value of Common Stock in partial consideration for the purchase of
the Software Factory assuming a market price of $25.00 per share.
6
<PAGE>
SUMMARY FINANCIAL DATA
The following table presents summary financial data for each of the fiscal years
in the five year period ended June 30, 1995. The financial data for the year
ended June 30, 1995 have been derived from the Company's audited consolidated
financial statements and notes thereto included elsewhere in this Prospectus
which have been audited by Arthur Andersen LLP. The financial data for each of
the years in the four year period ended June 30, 1994 have been derived from the
Company's audited consolidated financial statements and notes thereto which have
been audited by Coopers and Lybrand L.L.P. The data should be read in
conjunction with "Capitalization," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the Company's audited
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $279,641 $247,730 $198,126 $188,006 $177,691
Gross profit 70,226 63,642 52,095 45,581 42,140
Operating income 18,054 12,918(2) 11,342 10,405 8,875
Income before income taxes 12,682 7,933(2) 7,480 6,448 5,008
Net income 7,479 5,208(2) 4,533 3,901 2,987
Net income per share $ 1.21 $ .86 $ .76 $ .65 $ .50
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
DOLLARS IN THOUSANDS 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 32,413 $ 23,356 $ 16,539 $ 18,738 $ 18,927
Property, plant, and equipment, net 84,750 77,072 65,983 64,872 60,743
Total assets 171,570 160,129 134,189 123,054 115,106
Long-term debt 53,961 56,122 43,249 42,521 39,802
Shareholders' equity 61,882 54,929 50,693 47,571 44,865
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
DOLLARS IN THOUSANDS 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross profit margin 25.1% 25.7% 26.3% 24.2% 23.7%
Operating income margin 6.5% 5.2%(2) 5.7% 5.5% 5.0%
Depreciation and amortization $ 12,132 $ 11,474 $ 9,626 $ 9,041 $ 8,554
Capital expenditures 20,959 11,742 10,842 12,368 12,792
</TABLE>
(1) Certain previously reported amounts have been reclassified to conform to the
fiscal year 1995 presentation.
(2) After restructuring charge of $1.9 million pretax, $1.1 million after tax.
See Note 2 of Notes to Consolidated Financial Statements.
7
<PAGE>
THE COMPANY
Cadmus is a graphic communications company offering specialized products and
services in three areas: printing, marketing, and publishing. Cadmus was formed
in 1984 through the merger of Byrd, a leading publications printer based in
Virginia, and Washburn, a graphic arts firm based in North Carolina. Since the
merger, Cadmus has grown through enhancement of existing products, internal
development of new products, and acquisitions.
The businesses in which Cadmus competes are currently undergoing unprecedented
change as a result of two major factors: technological development and evolving
customer needs. These two factors are changing the types of products and
services offered, production processes employed, customer and supplier
relationships, and the competitive environment in general.
Technological development is changing the graphic communications industry in two
ways. Faster and more efficient printing technology has created excess capacity
and allowed companies to deliver higher quality products more cost effectively.
In addition, technological advances, such as digital technology, have created
alternative media for the dissemination of information formerly delivered
exclusively in print. As a result, there has been substantial change in the
cost, quality, and form of graphic communications.
Evolving customer needs are also forcing graphic communications companies to
adapt. Increasingly, customers are using more targeted marketing programs, which
require shorter print runs with specialized equipment and production processes.
In addition, customers are seeking ways to obtain more effective graphic
communications while reducing costs by outsourcing and through vendor
consolidation. Customers are selecting vendors that efficiently provide the most
effective graphic communications products and services -- specialists who can
interface with their in-house capabilities and provide full service product
offerings at an attractive price.
These factors will accelerate the pace of change in the graphic communications
industry. Within this changing market, Cadmus is seeking to play an increasingly
important role in helping its customers gain market share. In pursuit of this
goal, Cadmus has adopted a two-part business strategy: (i) seek profitable
positions in niche markets and (ii) become a full service provider of customers'
marketing and graphic communications needs.
Cadmus focuses on niche product segments that larger printers have not pursued.
By specializing in niche markets, Cadmus uses its knowledge of a customer's
industry to create innovative products and services that satisfy the customer's
specific needs. Services provided to these niche markets have greater perceived
value, allowing Cadmus to achieve higher margins and revenue growth. Cadmus also
has aligned its businesses to respond to the trends toward outsourcing and
vendor consolidation. Cadmus is well positioned to serve customers whose graphic
communications needs require a high degree of creativity and content generation.
Customers value Cadmus not only for its printing capabilities but also for its
ability to efficiently combine printing, marketing, and publishing skills in
unique and innovative ways.
In order to facilitate the development of profitable positions in niche markets
and the ability to provide full service offerings, Cadmus has aligned its
product offerings into three business groups: printing, marketing, and
publishing.
PRINTING. Cadmus printing operations provide customers a full range of services
which include state-of-the-art digital imaging, electronic prepress, sheetfed
and web offset printing, digital press multi-color printing, custom binding,
fulfillment, and distribution. Printing generated approximately 73% of net sales
in fiscal year 1995. Included in printing revenues are revenues from digital
imaging and composition services, which comprised approximately 18% of the net
sales of this group.
MARKETING. Cadmus provides its customers with creative, database management,
production, mailing, and fulfillment services for direct marketing,
point-of-purchase, retail catalogs, and interactive multimedia programs and
systems. Marketing generated approximately 20% of net sales in fiscal year 1995.
PUBLISHING. Cadmus publishes its own special-interest magazines that target
consumers who have passionate interests in a hobby or sport. These magazines are
published, edited, managed, printed, and fulfilled by Cadmus. Cadmus also
provides custom publishing services to customers with narrowly defined target
audiences in the health care, travel, financial, technology, and non-profit
areas. Custom publishing services include design, editorial, advertising sales,
production, and distribution of newsletters and magazines. Publishing generated
approximately 7% of net sales in fiscal year 1995.
The Company's principal executive offices are located at 6620 West Broad Street,
Suite 500, Richmond, Virginia 23230, and its telephone number is (804) 287-5680.
8
<PAGE>
USE OF PROCEEDS
The net proceeds from the Offering (assuming a public offering price of $25.00
per share and after deducting underwriting discounts and estimated expenses
associated with the Offering) are expected to be approximately $35.0 million
($40.3 million if the Underwriters' over-allotment option is exercised in full).
The Company will use the net proceeds to (i) repay $11.2 million of 9.76% Senior
Notes due June 2000, plus a $1.0 million prepayment penalty, (ii) fund the $11.8
million cash portion of the aggregate acquisition cost of the assets of the
Software Factory, a provider of software packaging and media duplication
services, and the assets of PeachWeb, a developer of Internet web sites (the
"Acquisitions"), and (iii) repay approximately $8.0 million of borrowings to
fund working capital needs with an interest rate of approximately 6.4% which
matures at February 1997 expected to be outstanding at the Offering date.
Payment of the prepayment penalty is expected to produce an after-tax charge to
net income of approximately $0.6 million in the period in which such payment is
made. Any remaining proceeds will be used for general corporate purposes,
including expenditures relating to other acquisitions. In the event the
Acquisitions do not occur, the additional proceeds will be used for general
corporate purposes.
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Common Stock is quoted on The Nasdaq National Market under the symbol
"CDMS." The following table presents the high and low sales prices as reported
by The Nasdaq National Market and the cash dividends declared per share, for the
periods indicated.
<TABLE>
<CAPTION>
CASH
DIVIDEND
HIGH LOW DECLARED
<S> <C> <C> <C>
Fiscal Year ended June 30, 1993
First Quarter $ 9.50 $ 6.75 $ .05
Second Quarter 9.75 6.25 .05
Third Quarter 11.00 9.00 .05
Fourth Quarter 10.25 8.50 .05
Fiscal Year ended June 30, 1994
First Quarter $10.25 $ 8.50 $ .05
Second Quarter 14.50 9.50 .05
Third Quarter 15.25 13.50 .05
Fourth Quarter 19.50 13.75 .05
Fiscal Year ended June 30, 1995
First Quarter $18.75 $15.00 $ .05
Second Quarter 18.75 14.87 .05
Third Quarter 19.25 14.50 .05
Fourth Quarter 24.75 17.00 .05
Fiscal Year ended June 30, 1996
First Quarter $27.25 $22.25 $ .05
Second Quarter (through October 13, 1995) 25.00 24.00
</TABLE>
On October 13, 1995, the last reported sale price of the Common Stock on The
Nasdaq National Market was $24.75 per share.
The Company has paid cash dividends on the Common Stock since 1984. Any future
decision concerning the payment of dividends on the Common Stock will depend
upon the then prevailing results of operations, financial condition, and capital
expenditures of the Company, as well as such other factors as the Board of
Directors, in its sole discretion, may consider relevant.
9
<PAGE>
CAPITALIZATION
The table below sets forth the consolidated short-term debt and capitalization
of the Company as of June 30, 1995, and as adjusted to reflect the sale of the
shares of Common Stock in the Offering at an assumed public offering price of
$25.00 per share, the application of the estimated net proceeds therefrom
(assuming the Underwriters' overallotment option is not exercised), and the
issuance of shares of Common Stock in connection with the Acquisitions. See "Use
of Proceeds."
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
AS ADJUSTED FOR
THE ACQUISITIONS
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA ACTUAL AND THE OFFERING
<S> <C> <C>
Short-term borrowings $ 3,775
Current maturities of long-term debt 2,381 $ 184
Total short-term debt $ 6,156 $ 184
Long-term debt $ 53,961 $ 45,000
Shareholders' equity (1):
Common stock, $.50 par value, 16,000,000 shares authorized, 6,031,475 shares issued and
outstanding, and 7,611,475 shares issued and outstanding, as adjusted to give effect to
the Acquisitions and the Offering 3,015 3,805
Capital in excess of par value 12,448 48,658
Retained earnings 46,419 45,806
Total shareholders' equity 61,882 98,269
Total capitalization $115,843 $ 143,269
</TABLE>
(1) Excludes approximately 607,000 shares of Common Stock issuable upon exercise
of outstanding and currently exercisable stock options as of June 30, 1995, at a
weighted average exercise price of $12.73 per share.
10
<PAGE>
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited Pro Forma Consolidated Financial Statements of Cadmus
Communications Corporation and Subsidiaries give effect to the sale of the
shares of Common Stock in the Offering and to the acquisitions of the assets of
the Software Factory and PeachWeb, and certain of the assets of Mowry, as if
such transactions had occurred as of July 1, 1994 for the Pro Forma Consolidated
Statement of Income and as of June 30, 1995 for the Pro Forma Consolidated
Balance Sheet.
The pro forma information is based on the historical financial statements of the
acquired companies giving effect to the acquisitions under the purchase method
of accounting and the assumptions and adjustments described in the accompanying
Notes to Pro Forma Consolidated Financial Statements.
The pro forma information does not purport to be indicative of the combined
results of operations or financial position that would have been reported had
these transactions taken place as of July 1, 1994 with respect to the Statement
of Income data and as of June 30, 1995 with respect to the Balance Sheet data as
the case may be, or future results of operations or financial position of the
Company. The Pro Forma Consolidated Financial Statements should be read in
conjunction with the Company's separate historical consolidated financial
statements and related notes thereto, included elsewhere herein, and the
historical financial statements and notes thereto of the Software Factory,
incorporated herein by reference.
PRO FORMA CONSOLIDATED BALANCE SHEET (UNAUDITED)
<TABLE>
<CAPTION>
AS OF JUNE 30, 1995
PRO FORMA
HISTORICAL PRO FORMA PRO FORMA ADJUSTMENTS
CADMUS ADJUSTMENTS FOR FOR
DOLLARS IN THOUSANDS COMMUNICATIONS ACQUISITIONS FOR ACQUISITIONS ACQUISITIONS OFFERING
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 226 $ 1,036 $ (12,319)(a)(b) $ (11,057) $ 19,412 (f)
Accounts receivable, net 57,204 1,466 (728)(a) 57,942
Inventories 16,308 326 16,634
Deferred income taxes 1,092 1,092
Prepaid expenses and other 1,489 90 (55)(a) 1,524
Total current assets 76,319 2,918 (13,102) 66,135 19,412
Property, plant, and equipment, net 84,570 326 84,896
Investment in unconsolidated joint
venture
Other assets 2,400 46 (35)(a) 2,411
Goodwill and intangibles, net 8,281 13,383 (c) 21,664
TOTAL ASSETS $171,570 $ 3,290 $ 246 $ 175,106 $ 19,412
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 3,775 $ $ $ 3,775 $ (3,775)(g)
Current maturities of long-term
debt 2,381 3 2,384 (2,200)(g)
Accounts payable 18,818 1,063 (178)(a) 19,703
Accrued expenses
Compensation 10,905 386 (143)(a) 11,148
Restructuring charge 120 120
Other 7,907 366 8,273
Total current liabilities 43,906 1,818 (321) 45,403 (5,975)
Long-term debt 53,961 39 54,000 (9,000)(g)
Other long-term liabilities 7,180 7,180
Deferred income taxes 4,641 4,641
Commitments and contingencies
Shareholders' equity
Common stock 3,015 16 24 (d)(e) 3,055 750 (h)
Partnership equity 450 (450)(d)
Capital in excess of par value 12,448 1,960 (e) 14,408 34,250 (h)
Retained earnings 46,419 967 (967)(d) 46,419 (613)(i)
Total shareholders' equity 61,882 1,433 567 63,882 34,387
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $171,570 $ 3,290 $ 246 $ 175,106 $ 19,412
<CAPTION>
PRO
DOLLARS IN THOUSANDS FORMA
ASSETS
Current Assets
Cash and cash equivalents $ 8,355
Accounts receivable, net 57,942
Inventories 16,634
Deferred income taxes 1,092
Prepaid expenses and other 1,524
Total current assets 85,547
Property, plant, and equipment, net 84,896
Investment in unconsolidated joint
venture
Other assets 2,411
Goodwill and intangibles, net 21,664
TOTAL ASSETS $194,518
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $
Current maturities of long-term
debt 184
Accounts payable 19,703
Accrued expenses
Compensation 11,148
Restructuring charge 120
Other 8,273
Total current liabilities 39,428
Long-term debt 45,000
Other long-term liabilities 7,180
Deferred income taxes 4,641
Commitments and contingencies
Shareholders' equity
Common stock 3,805
Partnership equity
Capital in excess of par value 48,658
Retained earnings 45,806
Total shareholders' equity 98,269
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $194,518
</TABLE>
See Notes to Pro Forma Consolidated Financial Statements.
11
<PAGE>
PRO FORMA CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30, 1995
PRO FORMA
HISTORICAL PRO FORMA PRO FORMA ADJUSTMENTS
CADMUS ADJUSTMENTS FOR FOR
IN THOUSANDS, EXCEPT PER SHARE DATA COMMUNICATIONS ACQUISITIONS FOR ACQUISITIONS ACQUISITIONS OFFERING
<S> <C> <C> <C> <C> <C>
Net sales $ 279,641 $ 15,114 $ $ 294,755 $
Operating expenses
Cost of sales 209,415 10,281 219,696
Selling and administrative 52,172 2,194 (234)(a) 54,132
261,587 12,475 (234) 273,828
Operating income 18,054 2,639 234 20,927
Interest and other (income) expenses
Interest 5,351 (37) 37(c) 5,351 (1,794)(c)
Other (income) expenses, net 21 43 669(b) 733
5,372 6 706 6,084 (1,794)
Income before income taxes 12,682 2,633 (472) 14,843 1,794
Income taxes 5,203 820(d) 6,023 694 (d)
Net income $ 7,479 $ 2,633 $ (1,292) $ 8,820 $ 1,100
Net income per share $ 1.21 $ 1.41
Average common shares outstanding 6,195 80 6,275 1,500
</TABLE>
PRO
IN THOUSANDS, EXCEPT PER SHARE DATA FORMA
Net sales $294,755
Operating expenses
Cost of sales 219,696
Selling and administrative 54,132
273,828
Operating income 20,927
Interest and other (income) expenses
Interest 3,557
Other (income) expenses, net 733
4,290
Income before income taxes 16,637
Income taxes 6,717
Net income $ 9,920
Net income per share $ 1.28
Average common shares outstanding 7,775
See Notes to Pro Forma Consolidated Financial Statements.
12
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) BASIS OF REPORTING
The unaudited Pro Forma Consolidated Financial Statements of Cadmus give effect
to the sale of the shares of Common Stock in the Offering and to the
acquisitions of the assets of the Software Factory and PeachWeb and certain of
the assets of Mowry, as if such transactions had occurred as of July 1, 1994 for
the Pro Forma Consolidated Statement of Income and as of June 30, 1995 for the
Pro Forma Consolidated Balance Sheet.
The pro forma information is based on the historical financial statements of the
acquired companies giving effect to the acquisitions under the purchase method
of accounting and the assumptions and adjustments described in the accompanying
Notes to the Pro Forma Consolidated Financial Statements. Under the purchase
method of accounting the assets and liabilities were recorded at their fair
value with the excess of the purchase price over the fair value of identifiable
net assets acquired recorded as goodwill.
The pro forma information does not purport to be indicative of the combined
results of operations or financial position that would have been reported had
these transactions taken place as of July 1, 1994 with respect to the Statement
of Income data and as of June 30, 1995 with respect to the Balance Sheet data as
the case may be, or future results of operations or financial position of the
Company. The Pro Forma Consolidated Financial Statements should be read in
conjunction with the Company's separate historical consolidated financial
statements and related notes thereto, included elsewhere herein, and the
historical financial statements and notes thereto of the Software Factory,
incorporated herein by reference.
(2) CONSOLIDATED BALANCE SHEET PRO FORMA ADJUSTMENTS
The Pro Forma Consolidated Balance Sheet gives effect to the adjustments
described below.
(a) To exclude assets and liabilities not included in these transactions
(dollars in thousands):
<TABLE>
<S> <C>
ASSETS
Cash $ 469
Accounts receivable 728
Prepaid expenses and other 55
Other assets 35
Total assets $ 1,287
LIABILITIES
Accounts payable $ 178
Accrued expenses 143
Total liabilities $ 321
</TABLE>
(b) To record $11.9 million cash disbursed to purchase the acquired companies.
(c) To record the excess of the purchase price over the net assets acquired
under the purchase method of accounting for the acquisitions.
(d) To eliminate the equity of the acquired companies.
(e) To record the $2.0 million common stock portion of the consideration for the
purchase of the Software Factory which represents the issuance of 80,000 shares
of Common Stock assuming a market price of $25.00 per share.
(f) To record the net proceeds from the Offering after debt repayment and
prepayment penalty (See Note 4).
(g) To record the repayment of borrowings under the Company's revolving credit
facilities and of the 9.76% Senior Notes due 2000, from the proceeds of the
Offering (See Note 4).
(h) To record the 1.5 million shares issued in the Offering and the resulting
capital in excess of par value at an assumed public offering price of $25.00 per
share.
13
<PAGE>
(i) To record the after-tax effect of the prepayment penalty associated with the
9.76% Senior Notes which will be repaid from proceeds of the Offering.
(3) CONSOLIDATED STATEMENT OF INCOME PRO FORMA ADJUSTMENTS
The Pro Forma Consolidated Statement of Income gives effect to the adjustments
described below.
(a) To adjust for reductions in selling and administrative expenses associated
with the elimination of duplicate costs. Management expects that there will be
cost reductions as various selling and administrative functions and certain
operating facilities are combined.
(b) To amortize, over twenty years, the costs in excess of the net assets
acquired which were generated by applying the purchase method of accounting for
the acquisitions.
(c) To record the interest savings from the debt repayment and the interest
income from the excess of the proceeds from the Offering less the cash payments
for the companies acquired.
(d) To record the income taxes on the earnings of the acquired companies and to
record the tax effect of the pro forma adjustments at an effective tax rate of
38.7%. The Software Factory, which is qualified as an "S" corporation, and
Mowry, which is a partnership, had no income tax expense in fiscal year ended
June 30, 1995. Accordingly, the pro forma income tax expense has been recorded
for the reported earnings of the companies at an effective rate of 38.7%.
(4) NONRECURRING PREPAYMENT PENALTY
The Company will use a portion of the proceeds from the Offering to repay $11.2
million of 9.76% Senior Notes due 2000. Under the provisions of these notes, the
Company is obligated to pay an approximately $1.0 million, $0.6 million after
tax, prepayment penalty which will be recorded as interest expense in the period
in which the payment occurs. See "Use of Proceeds."
14
<PAGE>
SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth selected financial data with respect to the
Company as of the dates and for the periods indicated. The financial data for
the year ended June 30, 1995 have been derived from the Company's audited
consolidated financial statements and notes thereto included elsewhere in this
Prospectus which have been audited by Arthur Andersen LLP. The financial data
for each of the years in the four year period ended June 30, 1994 have been
derived from the Company's audited consolidated financial statements and notes
thereto which have been audited by Coopers & Lybrand L.L.P. These data should be
read in conjunction with "Capitalization," "Management's Discussion and Analysis
of Financial Condition and Results of Operations," and the Company's audited
consolidated financial statements and the notes thereto included elsewhere in
this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales $279,641 $247,730 $198,126 $188,006 $177,691
Operating expenses
Cost of sales 209,415 184,088 146,031 142,425 135,551
Selling and administrative 52,172 48,824 40,753 35,176 33,265
Restructuring charge 1,900
261,587 234,812 186,784 177,601 168,816
Operating income 18,054 12,918(2) 11,342 10,405 8,875
Interest and other expenses
Interest 5,351 4,813 3,233 3,248 3,285
Other expenses, net 21 172 629 709 582
5,372 4,985 3,862 3,957 3,867
Income before income taxes 12,682 7,933(2) 7,480 6,448 5,008
Income taxes 5,203 3,126 2,947 2,547 2,021
Income before cumulative effect of changes in accounting
principles 7,479 4,807(2) 4,533 3,901 2,987
Cumulative effect of changes in accounting for:
Postretirement benefits (net of income tax benefit of $355) (532)
Income taxes 933
Net income $ 7,479 $ 5,208(2) $ 4,533 $ 3,901 $ 2,987
Earnings per share:
Income before cumulative effect of changes in accounting
principles $ 1.21 $ .79(2) $ .76 $ .65 $ .50
Cumulative effect of changes in accounting for
postretirement benefits and income taxes .07
Net income $ 1.21 $ .86(2) $ .76 $ .65 $ .50
</TABLE>
<TABLE>
<CAPTION>
AS OF JUNE 30,
DOLLARS IN THOUSANDS 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital $ 32,413 $ 23,356 $ 16,539 $ 18,738 $ 18,927
Property, plant, and equipment, net 84,570 77,072 65,983 64,872 60,743
Total assets 171,570 160,129 134,189 123,054 115,106
Long-term debt 53,961 56,122 43,249 42,521 39,802
Shareholders' equity 61,882 54,929 50,693 47,571 44,865
</TABLE>
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
DOLLARS IN THOUSANDS 1995 1994 (1) 1993 (1) 1992 (1) 1991 (1)
<S> <C> <C> <C> <C> <C>
OTHER DATA:
Gross profit margin 25.1% 25.7% 26.3% 24.2% 23.7%
Operating income margin 6.5% 5.2%(2) 5.7% 5.5% 5.0%
Operating income return on average total capital 15.3% 12.0%(2) 11.7% 11.3% 10.2%
Depreciation and amortization $ 12,132 $ 11,474 $ 9,626 $ 9,041 $ 8,554
Capital expenditures 20,959 11,742 10,842 12,368 12,792
</TABLE>
(1) Certain previously reported amounts have been reclassified to conform to the
fiscal year 1995 presentation.
(2) After restructuring charge of $1.9 million pretax, $1.1 million after tax.
See Note 2 of Notes to Consolidated Financial Statements.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPANY HIGHLIGHTS
Fiscal 1995 financial highlights include:
(Bullet) Sales increased 12.9% to $279.6 million.
(Bullet) Operating income rose to $18.1 million, a 39.8% increase.
(Bullet) Net income climbed 43.6% to $7.5 million ($1.21 per share).
(Bullet) The operating income return on average total capital improved from
12.0% in fiscal 1994 to 15.3% in fiscal 1995.
In the fourth quarter of fiscal 1995, Cadmus was named by General Electric as a
preferred nationwide supplier of printing related services. To better serve
General Electric, the Company formed a new division dedicated to managing its
relationship with General Electric and to matching General Electric's business
needs with the appropriate Cadmus solutions. The formation of Cadmus
Interactive, an Atlanta-based multimedia company, in the first quarter of fiscal
1995, positioned the Company to offer its customers state-of-the-art interactive
multimedia products and services. In the fourth quarter of fiscal 1995, the
acquisition of Ronald James Direct expanded the Company's direct marketing
agency capabilities into Los Angeles and Denver. During the third quarter of
fiscal 1995, the Company sold its fifty percent joint venture interest in
Central Florida Press, L.C. ("CFP") to The Lanman Companies, Inc. ("Lanman") to
redirect its capital to those markets and products which offer the best
opportunities for growth and profitability.
In the second quarter of fiscal 1994, Cadmus acquired the net assets of the
Waverly Press printing division ("Waverly Press") from Waverly, Inc. Waverly
Press, a leading printer of scientific, technical, medical, and scholarly
journals, was renamed Cadmus Journal Services, Inc. ("Cadmus Journal Services")
following the acquisition. By combining the strengths and assets of Waverly
Press with the Company's existing research journal operations, the Company was
able to significantly improve the level of service as well as the nature of the
products offered to journal publishers. As part of the transaction, Waverly,
Inc. entered into a long-term printing agreement with Cadmus Journal Services,
which ensures important continuity of business.
RESULTS OF OPERATIONS
The following table presents the major components from the Consolidated
Statements of Income as a percentage of net sales:
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1995 1994 1993
<S> <C> <C> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 74.9 74.3 73.7
Gross profit 25.1 25.7 26.3
Selling and administrative expenses 18.6 19.7 20.6
Restructuring charge .8
Operating income 6.5 5.2 5.7
Interest expense 1.9 1.9 1.6
Other expenses, net .0 .1 .3
Income before income taxes 4.6 3.2 3.8
Income taxes 1.9 1.3 1.5
Income before cumulative effect of changes in accounting principles 2.7 1.9 2.3
Cumulative effect of changes in accounting principles .2
Net income 2.7% 2.1% 2.3%
</TABLE>
16
<PAGE>
COMPARISON OF FISCAL 1995 WITH FISCAL 1994
Net sales in fiscal 1995 were $279.6 million, representing an increase of 12.9%
over fiscal 1994 sales of $247.7 million. Sales growth occurred in each of the
Company's three business groups: printing 14.8%, marketing 12.6%, and publishing
5.7%. The growth in printing sales was driven by a 25.3% increase in journal
services sales, a 53.0% increase in specialty packaging sales, and a 13.2%
increase in sales of promotional printing. In addition, higher paper prices
accounted for 2.3% of the increase in fiscal 1995 printing sales. Excluding the
full year impact of the Waverly Press acquisition, journal services sales
increased 9.2% due primarily to an increase in the number of titles. The
increase in specialty packaging sales was principally the result of growth from
existing customers.
Increased sales for the marketing group resulted from a 22.1% growth in
point-of-purchase revenues combined with a 5.4% increase in direct marketing
sales. In addition, the formation of Cadmus Interactive in the first quarter of
fiscal 1995 accounted for 22.0% of the overall increase in marketing revenues.
These increases were partially offset by a decline in marketing services
revenues due to the loss of a customer in fiscal 1994. This customer entered
into a new contract with the Company in late fiscal 1995. Effective June 30,
1995, the Company ceased operating two marketing services programs, Kids Link
and Sports Marketing, which together contributed $1.9 million to fiscal 1995
sales.
Publishing sales growth resulted from new titles and expanded product
circulation, an increased market share, and a 25.3% cover price increase for
TUFF STUFF magazine. New product circulation involved the introduction in March
1994 of MID-ATLANTIC SOCCER, a regional magazine focused on promoting youth
soccer. In addition, circulation of COLLECT!, a magazine serving the
non-sports collectibles market, was expanded through an increase in the
frequency of distribution from bi-monthly to monthly. Market share expansion was
achieved through extensive telemarketing efforts within consumer publishing
despite a decline in sports card collecting due in part to the baseball strike.
Gross profit in fiscal 1995 was 25.1% of sales compared with 25.7% in fiscal
1994. The gross profit decline in fiscal 1995 was a result of increased paper
prices and a change in sales mix due to the full year impact of the acquisition
of Waverly Press, which had a relatively lower gross margin. Excluding Waverly
Press, the gross margin was 27.0% and 26.8% for fiscal 1995 and 1994,
respectively. The decline in gross profit was partially offset by approximately
$1.3 million in savings generated in fiscal 1995 from the restructuring and
transfer of the Company's Springfield, Virginia composition and prepress
activities to Richmond, Virginia and Baltimore, Maryland.
Selling and administrative expenses as a percent of sales were 18.6% and 19.7%
in fiscal 1995 and 1994, respectively. The decrease in the selling and
administrative expense ratio in fiscal 1995 was primarily attributable to the
full year impact of the acquisition of Waverly Press, which had a lower selling
and administrative expense ratio of 8.8%. In addition, savings of approximately
$0.3 million generated from the restructuring and consolidation of composition
and prepress facilities in Richmond, Springfield, and Baltimore contributed to
the decline in the selling and administrative expense ratio in fiscal 1995.
Operating income improved to 6.5% of sales for fiscal 1995 from 5.2% in fiscal
1994. This improvement reflects the impact of sales growth and restructuring
savings. Operating income as a percent of sales before the restructuring charge
was 6.0% in fiscal 1994. Other expenses declined $0.2 million in fiscal 1995 due
primarily to a gain on sale of assets.
The effective income tax rate of 41.0% in fiscal 1995 increased from 39.4% in
fiscal 1994 due to a one-time liability of $0.3 million arising from the sale of
the Company's fifty percent joint venture interest in CFP. Exclusive of the sale
transaction, the effective rate would have been 38.7%, a decrease attributable
to both higher levels of pretax income and a decrease in the overall state
effective tax rate.
COMPARISON OF FISCAL 1994 WITH FISCAL 1993
Net sales in fiscal 1994 were $247.7 million compared to $198.1 million for
fiscal 1993 and included increases in each business group. The 22.9% increase in
printing sales for fiscal 1994 was due to growth of 92.5% in journal services
sales due primarily to the fiscal 1994 acquisition of Waverly Press, 30.8%
growth in specialty packaging sales, and a 55.2% increase in annual report
sales. Promotional printing sales were down 16.2% as a result of the
deconsolidation of Vaughan sales through the CFP joint venture in the third
quarter of fiscal 1993. Adjusted for the acquisition of Waverly Press and the
CFP joint venture, printing sales increased 4.9% over fiscal 1993.
The 11.8% increase in marketing sales for fiscal 1994 resulted from growth of
43.2% in direct marketing sales and growth of 13.5% in point-of-purchase
revenues. The increase in direct marketing revenues was attributable to growth
in sales to existing customers and the restructuring of the business into an
agency organization. Point-of-purchase revenues grew as a result of
relationships developed with new customers, coupled with growth in existing
accounts.
17
<PAGE>
The 76.3% increase in publishing sales for fiscal 1994 was the result of the
acquisition of Marblehead Communications, Inc. ("Marblehead"), a custom
publisher of newsletters and magazines, coupled with continued sales growth of
17.0% of its consumer magazines, including TUFF STUFF magazine. Expansion at
Marblehead resulted in an increase of 78.4% over prior year annualized sales due
to both additions of new accounts and increased sales to existing customers.
In fiscal 1994, gross profit was 25.7% of sales compared with 26.3% in fiscal
1993. Gross profit declined slightly in fiscal 1994 as a result of a change in
the sales mix due to the addition of Waverly Press, which had a relatively lower
gross margin. Excluding Waverly Press, the gross margin improved to 26.8%.
The decrease in selling and administrative expenses as a percent of sales was
primarily driven by the inclusion in fiscal 1994 of Waverly Press, which had a
lower selling and administrative expense ratio of 11.6%.
Operating income before the restructuring charge improved to 6.0% of sales for
fiscal 1994 from 5.7% in fiscal 1993. Operating income as a percent of sales
after the restructuring charge was 5.2% in fiscal 1994.
Interest expense increased slightly from 1.6% of sales in fiscal 1993 to 1.9% of
sales in fiscal 1994 due to increased average debt levels associated with the
purchase of Waverly Press in fiscal 1994. Other expenses declined $0.5 million
in fiscal 1994 due to the full year inclusion of earnings from the CFP joint
venture.
RESTRUCTURING CHARGE
In the fourth quarter of fiscal 1994, the Company announced a plan to
restructure its journal services and specialty magazine printing divisions,
resulting in a one-time pretax charge of $1.9 million. This charge resulted from
reductions in the workforce related to the closing of the Company's Springfield,
Virginia, composition and prepress facility and the transfer of these activities
to the Richmond and Baltimore facilities. These actions were substantially
complete by June 30, 1995. During fiscal 1995, the Company recognized pretax
cost savings of $1.6 million, primarily due to payroll-related savings. The full
year impact of cost savings are estimated to be $3.2 million for fiscal 1996.
Following is a schedule of the costs included in and the amounts charged against
the restructuring reserve to date:
<TABLE>
<CAPTION>
ORIGINAL CHARGES AS OF
RESERVE JUNE 30, 1995
<S> <C> <C>
DESCRIPTION (IN THOUSANDS)
Employee separations $ 1,630 $1,585
Equipment write-down 75 93
Other direct costs 195 102
$ 1,900 $1,780
</TABLE>
The employee separation costs relate to termination benefits of approximately
100 employees: twenty percent management and eighty percent production. During
fiscal 1995, all of these employees left the Company as a result of this plan.
Cash expenditures of approximately $0.1 million will occur in the first and
second quarter of fiscal 1996 due to the election by many of the terminated
employees to receive a stream of separation benefits, rather than a lump sum
payment.
CHANGES IN ACCOUNTING PRINCIPLES
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 106, "Employers' Accounting for Postretirement Benefits
Other than Pensions." The Company elected to immediately recognize the liability
for prior years' service as the cumulative effect of a change in accounting
principle. Accordingly, the Company recorded an accumulated postretirement
benefit obligation and a corresponding charge to net income of $0.9 million, and
a noncurrent deferred income tax benefit of $0.4 million, resulting in an
after-tax charge of $0.5 million in the first quarter of fiscal 1994.
The Company also adopted SFAS No. 109, "Accounting for Income Taxes," effective
July 1, 1993, which requires the liability method of accounting for deferred
income taxes, whereby enacted statutory tax rates are applied to the differences
between financial reporting and tax bases of assets and liabilities. The
cumulative effect of the change was a reduction in the deferred income tax
liability and a corresponding increase in net income of $0.9 million in the
first quarter of fiscal 1994.
18
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's major capital requirements are for investments in property, plant,
and equipment, working capital, and acquisitions. Management believes that the
Company has the financial resources and access to capital necessary to fund
internal growth and acquisitions.
COMPARISON OF FISCAL 1995 WITH FISCAL 1994
Net cash provided by operating activities in fiscal 1995 declined to $5.4
million from $26.0 million in 1994 due to a significant increase in working
capital investment. The increase in the Company's working capital investment
resulted from a $12.0 million increase in accounts receivable, resulting from
higher sales and a slowdown in collection cycles, and a $4.9 million increase in
inventories, primarily attributable to higher paper inventory balances. Slowdown
in collections occurred primarily in Fortune 500 companies and does not reflect
a deterioration of the quality of the Company's receivables portfolio. The
Company is undertaking efforts to enhance its billing processes, which are
expected to improve its collections.
Net cash used in investing activities totaled $9.9 million in fiscal 1995, down
from $31.0 million in fiscal 1994. Capital expenditures totaled $21.0 million in
fiscal 1995 but were partially offset by a $3.6 million sale of real estate,
$6.8 million in proceeds received from the sale of the Company's interest in
CFP, and proceeds from loans on Company-owned life insurance of $2.9 million.
Acquisition-related payments required funding of $1.5 million in fiscal 1995.
Cadmus reinvests in its businesses to remain current with technology, in order
to improve productivity and quality, and to develop new products and markets.
The Company is concentrating its expenditures in its higher growth and higher
margin product lines. During fiscal 1995, the Company invested $21.0 million in
property, plant, and equipment. These investments included the purchase of a new
manufacturing facility to consolidate the Company's Richmond promotional and
financial printing operations, a second ultraviolet six-unit sheetfed press and
a four-unit digital press for the point-of-purchase product line, a six-unit CD
sheetfed press for specialty packaging, and the relocation of the Company's
Baltimore journal composition operations. The Company projects that capital
spending in fiscal 1996 will be approximately $21.0 million.
During fiscal 1995, the Company entered into two interest rate swap agreements
with banks to convert debt with an aggregate notional value of $8.7 million from
floating-rate to fixed-rate debt. Both of these swap agreements have a term of
four years and were initiated to moderate exposure to interest rate changes.
Under the terms of these agreements, the Company makes payments at a fixed
interest rate of 8.061% and will receive payments based on six-month LIBOR in
arrears. These swaps are hedged against the $35.0 million fixed-to-floating rate
swap. These hedging activities increased interest expense by $0.7 million in
fiscal 1995 and by $0.5 million in fiscal 1994 and 1993. The net interest paid
or received is included in interest expense.
Total debt at June 30, 1995 was $60.1 million, representing an increase of $1.7
million from the $58.4 million at June 30, 1994. Despite the increase in debt
levels, the Company's debt-to-capital ratio improved from 51.5% at June 30, 1994
to 49.3% at June 30, 1995. The higher debt levels were required to fund
operations. At June 30, 1995, borrowings under the Company's $25.0 million
revolving credit agreements totaled $3.8 million, leaving an unused balance of
$21.2 million.
COMPARISON OF FISCAL 1994 WITH FISCAL 1993
During fiscal 1994, the Company experienced significant improvement in cash flow
performance. Net cash provided by operating activities rose to $26.0 million
from $10.4 million in fiscal 1993. This gain was primarily attributable to a
40.0% increase in income before the restructuring charge, higher depreciation
and amortization expense, and an $11.7 million reduction in operating assets and
liabilities. The $1.8 million increase in depreciation and amortization expense
was due to additions of property, plant, and equipment, both through the
acquisition of Waverly Press and through capital investments made for strategic
expansion and reinvestment. The reduction in operating assets and liabilities
was credited to improved receivables and paper inventory management, and more
aggressive utilization of trade credit.
The increase in fiscal 1994 in net cash used in investing activities of $17.6
million, and the increase in net cash provided by financing activities of $3.5
million were both primarily a result of transactions related to the acquisition
of Waverly Press. Cash paid or placed in escrow for this acquisition of $19.7
million and capital investments of $11.7 million account for the majority of the
investing activities. In fiscal 1993, cash used in investing activities included
$2.2 million related to the investment in the CFP joint venture as well as $10.7
million in capital investments. The financing activities in fiscal 1994 include
proceeds from the placement of $40.0 million in senior notes and the repayment
of $32.0 million in term loans and long-term debt. In fiscal 1993, cash provided
by financing activities of $3.2 million resulted from increased borrowings under
bank lines of credit of $7.0 million and the repayment of long-term debt of $2.4
million.
19
<PAGE>
Capital investment in property, plant, and equipment totaled $11.7 million
during fiscal 1994. Significant projects included in this amount were the
purchase of new composition software to integrate text and graphics for research
journals and the rebuilding of a six-unit web press. Other significant capital
investments included the purchase of a six-unit sheetfed press and the
installation of a financial network. In addition, the Company entered into two
long-term operating leases during the year, one for a new six-unit sheetfed
press and one for an eight-unit half-web press.
Total debt at June 30, 1994, was $58.4 million, representing an increase of $7.9
million from the $50.5 million at June 30, 1993. The Company's debt-to-capital
ratio at June 30, 1994 was 51.5% compared with 49.9% at June 30, 1993. This
increase was primarily due to additional debt incurred to purchase Waverly
Press. On December 23, 1993, the Company placed $40.0 million of senior notes
with two insurance companies. The proceeds from these notes were used to repay
short-term bridge loans incurred to finance the purchase of Waverly Press,
short-term revolving bank lines of credit, and a bank term loan. These senior
notes, which have an average life of 8.1 years with a final maturity of 10
years, carry a fixed interest rate of 6.74%. Concurrent with the placement of
the senior notes, the Company entered into an interest rate swap agreement to
effectively convert $35.0 million of the senior notes to floating-rate debt. The
Company also entered into agreements with four banks on February 14, 1994, for a
$25.0 million revolving credit facility. There were no outstanding borrowings
against these revolving credit lines at June 30, 1994.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
FISCAL 1995 QUARTERS ENDED
IN THOUSANDS, EXCEPT PER SHARE DATA SEP. 30 DEC. 31 MAR. 31 JUN. 30 TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $60,383 $67,237 $74,846 $77,175 $279,641
Gross profit 13,752 16,793 19,438 20,243 70,226
Operating income 2,755 4,238 5,482 5,579 18,054
Net income 974 1,784 2,068 2,653 7,479
Net income per share $ .16 $ .29 $ .33 $ .43 $ 1.21
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1994 QUARTERS ENDED (1)
IN THOUSANDS, EXCEPT PER SHARE DATA SEP. 30 DEC. 31 MAR. 31 JUN. 30 TOTAL
<S> <C> <C> <C> <C> <C>
Net sales $49,126 $61,448 $67,413 $69,743 $247,730
Gross profit 12,409 15,475 17,278 18,480 63,642
Operating income 2,381 3,666 4,097 2,774(2) 12,918
Income before cumulative effect of changes in accounting principles 836 1,510 1,682 779(2) 4,807
Net income 1,237 1,510 1,682 779(2) 5,208
Earnings per share:
Income before cumulative effect of changes in accounting
principles $ .14 $ .25 $ .28 $ .12(2) $ .79
Net income .21 .25 .28 .12(2) .86
</TABLE>
(1) Certain previously reported amounts have been reclassified to conform to the
fiscal year 1995 presentation.
(2) After restructuring charge of $1.9 million pretax, $1.1 million after tax.
See Note 2 of Notes to Consolidated Financial Statements.
20
<PAGE>
BUSINESS
Cadmus is a graphic communications company offering specialized products and
services in three areas: printing, marketing, and publishing. Cadmus was formed
in 1984 through the merger of Byrd, a leading publications printer based in
Virginia, and Washburn, a graphic arts firm based in North Carolina. Since the
merger, Cadmus has grown through enhancement of existing products, internal
development of new products, and acquisitions.
BACKGROUND
The businesses in which Cadmus competes are currently undergoing unprecedented
change as a result of two major factors: technological development and evolving
customer needs. These two factors are changing the types of products and
services offered, production processes employed, customer and supplier
relationships, and the competitive environment in general.
Technological development is changing the graphic communications industry in two
ways. Faster and more efficient printing technology has created excess capacity
and allowed companies to deliver higher quality products more cost effectively.
In addition, technological advances, such as digital technology, have created
alternative media for the dissemination of information formerly delivered
exclusively in print. As a result, there has been substantial change in the
cost, quality, and form of graphic communications.
Evolving customer needs are also forcing graphic communications companies to
adapt. Increasingly, customers are using more targeted marketing programs, which
require shorter print runs with specialized equipment and production processes.
In addition, customers are seeking ways to obtain more effective graphic
communications while reducing costs by outsourcing and through vendor
consolidation. Customers are selecting vendors that efficiently provide the most
effective graphic communications products and services -- specialists who can
interface with their in-house capabilities and provide full service product
offerings at an attractive price.
STRATEGY
Within this changing market, Cadmus is seeking to play an increasingly important
role in helping its customers gain market share. In pursuit of this goal, Cadmus
has adopted a two-part business strategy: (i) seek profitable positions in niche
markets and (ii) become a full service provider of customers' marketing and
graphic communications needs.
Cadmus focuses on niche product segments that larger printers have not pursued.
By specializing in niche markets, Cadmus uses its knowledge of a customer's
industry to create innovative products and services that satisfy the customer's
specific needs. Services provided to these niche markets have greater perceived
value, allowing Cadmus to achieve higher margins and revenue growth. Cadmus also
has aligned its businesses to respond to the trends toward outsourcing and
vendor consolidation. Cadmus is well positioned to serve customers whose graphic
communications needs require a high degree of creativity and content generation.
Customers value Cadmus not only for its printing capabilities but also for its
ability to efficiently combine printing, marketing, and publishing skills in
unique and innovative ways.
There are three elements to Cadmus' strategy:
(Bullet) Organize Cadmus as a single operating company;
(Bullet) Expand and enhance product offerings through increased
specialization, acquisitions, and new product development; and
(Bullet) Invest in technology to improve productivity and quality and to
support full service offerings.
ORGANIZE CADMUS AS A SINGLE OPERATING COMPANY
Cadmus has changed from a collection of separate businesses into a single
operating company organized around business groups and product lines. Cadmus
sales personnel focus on specific product lines, such as financial
communications or specialty packaging, and particular industries or markets,
such as banking or software publishing. Cadmus production personnel focus on
gaining efficiency and improving quality at each production facility. In
addition, all product lines and production facilities use the Cadmus name,
permitting Cadmus to develop name recognition and franchise value in its
markets.
In order to support this single operating company approach, Cadmus has largely
centralized its accounting, human resources, and information technologies
functions. This change has resulted in savings for the Company, focused
attention on the development of systems and procedures to facilitate information
and resource sharing, and improved the quality of services provided.
21
<PAGE>
Cadmus is also creating a corporate culture consistent with this new operating
approach. The Company has developed a comprehensive training and orientation
program -- "The Cadmus Way" -- that is designed to create a single,
values-driven culture. Employees are encouraged to consider themselves Cadmus
employees, rather than employees of any particular business group, and are given
training to facilitate collaboration throughout Cadmus. In addition,
compensation and incentive systems have been redesigned to support this new
approach.
These changes allow Cadmus to utilize all of its expertise and capabilities to
meet its customers' needs, improve its production performance, and expand and
enhance its product offerings.
EXPAND AND ENHANCE PRODUCT OFFERINGS THROUGH INCREASED SPECIALIZATION,
ACQUISITIONS, AND NEW PRODUCT DEVELOPMENT
In order to increase specialization, Cadmus has unified its marketing
focus -- organizing its sales personnel by product lines and by industry or
market. As a result of this focus, each business group and product line has
begun to develop more innovative and competitive products and services to
improve revenue growth and profitability. In addition, some of the special
skills formerly "locked in" at the business units are now shared across Cadmus.
This sharing is enhancing existing offerings, creating new products and
services, and supporting the development of full service offerings.
Cadmus will also continue to expand and enhance its product offerings through
acquisitions. When considering an acquisition opportunity, Cadmus evaluates how
it complements current product lines and business groups and how it furthers the
strategy of Cadmus. Factors considered in evaluating acquisition opportunities
include market growth, customer base, competition, management, geographic
location, and effect on earnings.
The most significant acquisitions to date include: in 1986, a company providing
promotional printing and production of point-of-purchase advertising materials
located in Atlanta, Georgia (American Graphics, Inc.); in 1987, a company
offering retail and other direct mail catalog production services located in
Atlanta, Georgia (Three Score, Inc.) and a printing company located in
Baltimore, Maryland (Garamond/Pridemark Press, Inc.); in 1992, a custom
publisher of newsletters and magazines located in Boston, Massachusetts
(Marblehead Communications, Inc.) and a publisher of specialty magazines located
in Richmond, Virginia (Tuff Stuff Publications, Inc.); in 1993, the assets of a
division engaged in the business of printing scientific, technical, medical, and
scholarly journals, located in Baltimore and Easton, Maryland (the Waverly Press
Division of Waverly, Inc.); and in 1995, a direct marketing agency located in
Los Angeles, California and Denver, Colorado (Ronald James Direct, Inc.),
certain of the assets of a second direct marketing agency located in Long Beach,
California (The Mowry Company), and the assets of Na-Tex, Inc., the publisher of
COLLECTOR'S WORLD OF RACING. More recently, Cadmus entered into a definitive
agreement to acquire the assets of the Software Factory, a provider of software
packaging and media duplication services, and a letter of intent to acquire the
assets of PeachWeb, a developer of Internet web sites. The closings of these two
pending acquisitions, which are subject to certain conditions, would together
require total consideration of $11.8 million in cash and $2.0 million value of
Common Stock. See "Use of Proceeds" and "Pro Forma Consolidated Financial
Statements." The Company believes that the continued consolidation in the
industry will provide attractive acquisition opportunities in the future.
Finally, Cadmus has developed new products and services. These new products and
services include extensions of its traditional product lines. Examples include
Cadmus' specialty packaging and point-of-purchase product lines. Cadmus is also
developing interactive products and services for tradeshows, kiosks, electronic
catalogs, and Internet and other electronic media. In its journal product line,
Cadmus has expanded the electronic products and services it offers to
scientific, technical, and medical journal publishers, developing a growing
portfolio of skills and capabilities to provide electronic publishing solutions,
ranging from fully searchable databases to Internet home pages maintained by
Cadmus. Cadmus' journal home page is found at HTTP://WWW.CADMUS.COM.
INVEST IN TECHNOLOGY TO IMPROVE PRODUCTIVITY AND QUALITY AND TO SUPPORT FULL
SERVICE OFFERINGS
Cadmus has spent approximately $60.0 million over the past five years investing
in technology to improve productivity and quality and to develop new products
and markets. The Company is concentrating its expenditures in its higher growth
and higher margin product lines. Improvements include:
(Bullet) a state-of-the-art text and graphics composition system in the
journal operations in Richmond and Baltimore, a system which has
significantly improved the range of services Cadmus can offer its
journal services customers and the efficiency of its journal
businesses;
(Bullet) a typesetting system for the financial communications product
line, electronically linking its facilities along the east coast
and permitting Cadmus to output typeset pages directly into its
customers' offices;
22
<PAGE>
(Bullet) a complete reequipping of its prepress operations in Baltimore,
Richmond, Charlotte, and Atlanta with state-of-the-art color and
image manipulation computers and software, permitting some of the
most sophisticated film production and image manipulation
possible;
(Bullet) a half-web press for the Charlotte production facility, enhancing
the range of products offered by the Company's financial
communications and promotional printing product lines;
(Bullet) two presses for the Atlanta production facility, equipped with
ultraviolet drying that permits high quality printing on plastics,
a capability which has helped expand the Company's offerings in
its profitable point-of-purchase product line; and
(Bullet) two presses capable of printing on board stock at the Charlotte
production facility, doubling its specialty packaging capacity.
Many of these investments enhance Cadmus' short to medium run length printing
capability, producing the lead time reductions and efficiencies required to meet
customers' more targeted graphic communications needs.
The Company also is standardizing the equipment at its production facilities.
Currently, across all Cadmus facilities, sheetfed presses are manufactured by
Heidelberg, composition operations are largely Xyvision-based, and prepress
operations are based upon Macintosh and Scitex equipment and technology. In
addition, Cadmus facilities, as well as customers and key suppliers, are being
electronically linked. Three important benefits result from standardizing
production equipment and linking production facilities. First, these efforts
enable Cadmus to implement a company-wide capacity management system that
permits better utilization of excess capacity. Second, standardization is the
necessary first step in obtaining the progressively higher quality demanded by
customers and required for ISO 9002 certification, a production quality
assurance standard developed by the International Standards Organization. Cadmus
is working to achieve ISO 9002 certification for all of its facilities by
January 1997. Finally, these efforts permit the development of databases,
on-line bulletin board systems, and other systems necessary to support full
service offerings to customers such as General Electric, Hardees, Delta Air
Lines, NationsBank, and Morningstar.
These investments and efforts have strengthened the Company's competitive
position and will help Cadmus control production costs and support full service
product offerings.
BUSINESS GROUPS AND PRODUCT LINES
In order to facilitate the development of profitable positions in niche markets
and the ability to provide full service offerings, Cadmus has aligned its
product offerings into three business groups: printing, marketing, and
publishing.
PRINTING
<TABLE>
<CAPTION>
FISCAL YEAR
1995 REVENUES
<S> <C>
(IN THOUSANDS)
PRODUCT LINE
Journal Services $ 93,615
Promotional Printing 41,760
Magazines 40,777
Financial Communications 19,132
7,822
Specialty Packaging
$203,106
Total Printing Revenues
</TABLE>
Cadmus printing operations provide customers a full range of services which
include state-of-the-art digital imaging, electronic prepress, sheetfed and web
offset printing, digital press multi-color printing, custom binding,
fulfillment, and distribution. Printing generated approximately 73% of net sales
in fiscal year 1995. Included in printing revenues are revenues from digital
imaging and composition services, which comprised approximately 18% of the net
sales of this group.
JOURNAL SERVICES. Cadmus is an industry leader in the production of medical and
biomedical, technical and scientific, learned and scholarly, and mathematics
journals. Cadmus offers a full range of journal production services, including
typesetting, editing, content management, printing, packaging, and fulfillment
services to many of the most prestigious scientific, technical, and medical
journal publishers. The Company operates one of the largest journal typesetting
operations in the United States. Its four production facilities are linked
through a sophisticated electronic network and high speed telephony. In response
to increasing
23
<PAGE>
interest in Internet products, the Company offers customers a full range of
electronic publishing products, ranging from Internet home pages to fully
searchable databases created and maintained by Cadmus.
PROMOTIONAL PRINTING. Cadmus produces catalogs, directories, programs, corporate
identity and promotional brochures, specialty books, and product literature for
corporations, agencies, and educational institutions. Cadmus offers full service
graphic communications solutions to meet each customer's unique needs, including
creative design, complete prepress, multi-color sheetfed and web printing,
binding, and fulfillment and distribution services.
MAGAZINES. Cadmus offers print production services to publishers of
professional, trade, corporate, and consumer magazines. Such services include
electronic publishing, litho preparation, printing, finishing, and distribution.
The Company also offers customers consulting services in magazine production
planning, conversion to desktop publishing, and postal and other distribution
services.
FINANCIAL COMMUNICATIONS. Cadmus provides financial and shareholder
communication services to corporate customers. Services provided include design,
typesetting, printing, finishing, electronic filing, and fulfillment for debt
and equity offerings, proxy statements, annual reports, and quarterly reports.
Many of the Company's larger customers are electronically linked with Cadmus
facilities, giving Cadmus the ability to send documents directly to its
customers for review. Cadmus has also developed proprietary software, EDNA, to
assist in the conversion of Macintosh-based files and other graphical and
tabular material into EDGAR format for filing with the Commission.
SPECIALTY PACKAGING. Cadmus produces folding cartons, computer hardware and
software cartons, promotional packaging, portfolio folders, 3-D mailers, and
diskette sleeves for computer software publishers and technology and consumer
products companies. Specializing in short run production and using
state-of-the-art Heidelberg presses and Bobst die-cutting equipment, Cadmus
offers film preparation, structural engineering, printing, and finishing
services.
MARKETING
<TABLE>
<CAPTION>
FISCAL YEAR
1995 REVENUES
<S> <C>
(IN THOUSANDS)
PRODUCT LINE
Point-of-Purchase $31,581
Direct Marketing 14,530
Catalogs 9,649
1,406
Interactive
$57,166
Total Marketing Revenues
</TABLE>
Cadmus provides its customers with creative, database management, production,
mailing, and fulfillment services for direct marketing, point-of-purchase,
retail catalogs, and interactive multimedia programs and systems. Marketing
generated approximately 20% of net sales in fiscal year 1995.
POINT-OF-PURCHASE. Cadmus offers full service point-of-purchase support
including design, production, database management, fulfillment, and printing.
Additional services include merchandising, consulting, and point-of-purchase
program management. Through its fulfillment services, Cadmus maintains finished
goods inventories of point-of-purchase products and delivers these products for
Cadmus customers on an as needed basis. The Company's fulfillment capabilities
rely on a sophisticated inventory management system, customer database, and
telephonic and electronic links between Cadmus facilities and those of its
customers.
DIRECT MARKETING. Cadmus' fully integrated direct marketing agency provides
measurable, response-oriented advertising services, including research, design,
creative, database management, and marketing information analysis. The agency is
organized into customer-focused, cross-functional teams. Cadmus' direct
marketing services use a proprietary strategy development process that is
information-based. Advanced statistical analysis precedes all strategy and
creative development and is also performed following every advertising event.
CATALOGS. Cadmus offers catalog design, creative services, and photography for
nationwide customers in the retail industry. These services include design,
layout, copywriting, and studio and location photography.
INTERACTIVE. Cadmus creates and provides interactive and multimedia products,
including kiosks, CD-ROM, and Internet applications, to Fortune 1000 customers
in the hospitality, travel, banking, and telecommunications industries. Cadmus
has formed an interactive multimedia marketing and software solution development
team with significant technical expertise. Cadmus is also
24
<PAGE>
working to create interactive and multimedia products for retail sale by Cadmus
customers. These products will be marketed as inexpensive and impulse purchase
items to be sold on a national basis. Cadmus will obtain a fee for development
of the prototype and will collect a royalty on each unit sold.
PUBLISHING
<TABLE>
<CAPTION>
FISCAL YEAR
1995 REVENUES
<S> <C>
(IN THOUSANDS)
PRODUCT LINE
Consumer Publishing $10,387
8,982
Custom Publishing
$19,369
Total Publishing Revenues
</TABLE>
Publishing is comprised of two divisions, Consumer Publishing and Custom
Publishing. Publishing generated approximately 7% of net sales in fiscal year
1995.
CONSUMER PUBLISHING. Cadmus publishes its own special-interest magazines that
target consumers who have passionate interests in a hobby or sport. Currently
Cadmus owns five publications: TUFF STUFF; COLLECT!; KENNER GUIDE; MID-ATLANTIC
SOCCER; and RPM. TUFF STUFF, the largest Cadmus consumer publishing title, is a
225,000 run-length monthly magazine directed at trading card collectors.
COLLECT! is a monthly magazine directed at non-sport trading card collectors and
hobbyists. KENNER GUIDE is an annual guide to Kenner sports figurines.
MID-ATLANTIC SOCCER is a seasonal, regional magazine focused on promoting youth
soccer. RPM is a monthly magazine directed at collectors of NASCAR
racing-related memorabilia. These magazines are published, edited, managed,
printed, and fulfilled by Cadmus.
CUSTOM PUBLISHING. Cadmus provides custom publishing services to customers with
narrowly defined target audiences in the health care, travel, financial,
technology, and non-profit areas. Publishing services include design, editorial,
advertising sales, production, and distribution of newsletters and magazines.
Services also include research and marketing to assist the customer in
efficiently reaching its target audience. Current titles include PROFILES, a
Continental Airlines in-flight magazine, LIVING HEALTHY, a magazine for Blue
Cross and Blue Shield of Massachusetts, and UNION PLUS, a monthly magazine
published for Union Privilege, a consumer benefits organization of the AFL-CIO.
25
<PAGE>
PRODUCTION FACILITIES
The production operations of Cadmus are conducted at the following facilities:
<TABLE>
<CAPTION>
CADMUS
LOCATION PRODUCT LINES SERVED BUILDING MAJOR EQUIPMENT
<S> <C> <C> <C>
Richmond, Virginia Journal Services, Magazines, Owned; Hantscho web presses; Man Roland web
Promotional Printing, Consumer 274,000 sq. ft. presses; Heidelberg sheetfed presses;
Publishing, and Custom Publishing Mueller-Martini perfect binding; and
Xyvision composition
Easton, Maryland Journal Services Owned; Hantscho web presses (waterless);
202,400 sq. ft. Miller roll-fed sheetfed presses; CREO
direct-to-plate platemaking; and
Mueller-Martini perfect binding
Atlanta, Georgia Point-of-Purchase Owned; 120,000 Heidelberg sheetfed presses
sq. ft. (ultraviolet in-line); Heidelberg
digital press; Scitex electronic
prepress; and Bobst die-cutting
Charlotte, North Carolina Financial Communications, Specialty Owned; 118,000 Heidelberg sheetfed presses (board
Packaging, Promotional Printing, and sq. ft. capable); Heidelberg half-web press;
Direct Marketing Harris non-heatset web press; Scitex
electronic prepress; Datalogics
composition; and Bobst die-cutting
Richmond, Virginia Promotional Printing, Financial Owned; Heidelberg sheetfed presses
Communications, Journal Services, and 89,100 sq. ft. (waterless); Scitex electronic
Direct Marketing prepress; Harris non- heatset web
press; Datalogics composition; and
Mueller-Martini perfect binding
Baltimore, Maryland Journal Services Leased; Xyvision composition
51,700 sq. ft.
Baltimore, Maryland Promotional Printing and Financial Owned; Heidelberg sheetfed presses
Communications 43,000 sq. ft. (waterless); Scitex electronic
prepress; and Consolidated die-cutting
</TABLE>
EMPLOYEES
As of June 30, 1995, Cadmus employed approximately 2,380 persons. No employees
are currently covered by a collective bargaining agreement. Cadmus believes its
relationship with its employees is excellent.
REGULATION
The printing business uses or generates substantial quantities of inks,
solvents, and other waste products that require disposal. Cadmus usually returns
salvageable waste ink to its suppliers and contracts for the removal of other
waste products.
Cadmus believes it is in substantial compliance with all applicable air quality,
waste disposal, and other environmental-related rules and regulations, as well
as with other general employee health and safety laws and regulations.
LEGAL AND ADMINISTRATIVE PROCEEDINGS
The Company is a party to various legal actions that are ordinary and incidental
to its business. While the outcome of legal actions cannot be predicted with
certainty, management believes the outcome of these proceedings will not have a
materially adverse effect on its consolidated financial position or results of
operations.
26
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below are the names, ages, and positions, and a brief description of
the business experience, of the Company's executive officers and directors.
<TABLE>
<CAPTION>
NAME AGE POSITION IN THE COMPANY
<S> <C> <C>
C. Stephenson Gillispie, Jr. 53 Chairman of the Board, President, and Chief Executive Officer
Michael Dinkins 41 Vice President and Chief Financial Officer
John H. Phillips 51 Vice President and Regional Manufacturing Officer
Bruce V. Thomas 38 Vice President -- Law and Development
David E. Bosher 42 Vice President and Treasurer
Gregory Moyer 47 Vice President -- Human Resources and Quality
Edward B. Fernstrom 46 Vice President -- Information Technologies
Robert I. Dalton, Jr. 74 Director
Frank Daniels, III 39 Director
Lee P. Dudley 62 Director
Price H. Gwynn, III 72 Director
Jeanne M. Liedtka 40 Director
Frank G. Louthan, Jr. 75 Director
John D. Munford, II 67 Director
John C. Purnell, Jr. 54 Director
Russell M. Robinson, II 63 Director
John W. Rosenblum 51 Director
Wallace Stettinius 62 Director
Bruce A. Walker 61 Director
</TABLE>
C. STEPHENSON GILLISPIE, JR. has been Chairman of the Board of Directors of the
Company since February 1995 and has been President and Chief Executive Officer
of the Company since 1992. Mr. Gillispie was President and Chief Operating
Officer of the Company from 1990 to 1992, prior to which he served as President
and Chief Executive Officer of Byrd.
MICHAEL DINKINS has been Vice President and Chief Financial Officer of the
Company since 1993. Prior to joining the Company in 1993, Mr. Dinkins held a
variety of positions with General Electric Company.
JOHN H. PHILLIPS has been Vice President and Regional Manufacturing Officer of
the Company since 1994. From 1992 through 1994, Mr. Phillips was Vice
President -- Operations and Chief Operating Officer of the Company. Prior to
1992, Mr. Phillips served as Executive Vice President and Chief Operating
Officer and Senior Vice President of Manufacturing and Plant Operations at Byrd
from 1990 to 1992 and 1987 to 1990, respectively.
BRUCE V. THOMAS has been Vice President -- Law and Development of the Company
since June 1992. Prior to joining the Company, Mr. Thomas was a partner in the
Richmond, Virginia law firm of Mays & Valentine.
DAVID E. BOSHER has been Vice President and Treasurer of the Company since 1993.
Previously, Mr. Bosher served as Chief Financial Officer of the Company from
1990 to 1993 and Corporate Controller of the Company from 1988 to 1990.
GREGORY MOYER has been Vice President -- Human Resources and Quality since
November 1994. Prior to joining Cadmus, from 1993 to 1994, Mr. Moyer served as
Corporate Vice President, Human Resources at Dyncorp, Inc. and from 1989 to
1993, Mr. Moyer served as Vice President of Human Resources and Quality at
P.R.C. Inc.
EDWARD B. FERNSTROM has been Vice President -- Information Technologies since
February 1995. Prior to joining Cadmus, Mr. Fernstrom served as Vice President,
Chief Information Officer at Dyncorp, Inc.
ROBERT I. DALTON, JR. is President of Tech-Tex, Inc., a Charlotte, North
Carolina business brokerage firm. Formerly, Mr. Dalton was a partner of
Dalton-Briley and Company, a Charlotte, North Carolina business brokerage firm.
27
<PAGE>
FRANK DANIELS, III is Publisher of Nando.net and Vice President of The News and
Observer Publishing Company, Raleigh, North Carolina. Formerly, Mr. Daniels was
Executive Editor and Director of Operations of The News and Observer Publishing
Company.
LEE P. DUDLEY is Vice President -- Investments and Branch Manager of the
Richmond, Virginia office of A.G. Edwards & Sons, Inc., a broker-dealer
organization. Formerly, Mr. Dudley was Chairman and Chief Executive Officer of
Financial Corporation of Virginia, a Richmond, Virginia investment banking and
broker-dealer organization.
PRICE H. GWYNN, III is Chairman of Presbyterian Publishing Corporation.
Formerly, Mr. Gwynn was Vice President of Lance, Inc., Charlotte, North
Carolina.
JEANNE M. LIEDTKA is an Associate Professor at the Darden Graduate School of
Business Administration, University of Virginia. Formerly, Ms. Liedtka was an
Associate Professor at Rutgers University and Simmons College.
FRANK G. LOUTHAN, JR. is retired. Formerly, Mr. Louthan was Chairman and Chief
Executive Officer of RECO Industries, Inc., a privately-owned engineering
company headquartered in Richmond, Virginia.
JOHN D. MUNFORD, II is retired. Formerly, Mr. Munford was Vice Chairman and
Executive Vice President of Union Camp Corporation, Franklin, Virginia. He is a
director of Pulaski Furniture Corporation, Universal Corporation, Caraustar
Industries, Inc. and Mohawk Papermill, Inc.
JOHN C. PURNELL, JR. is Executive Director of Friends Association For Children,
Richmond, Virginia, a non-profit child welfare organization.
RUSSELL M. ROBINSON, II is Attorney-at-Law, President, Director and shareholder
of Robinson, Bradshaw & Hinson, P.A., Charlotte, North Carolina. Mr. Robinson is
a director of Caraustar Industries, Inc. and Duke Power Company.
JOHN W. ROSENBLUM is the Tayloe Murphy Professor of the Darden Graduate School
of Business Administration, University of Virginia. Formerly, Mr. Rosenblum was
Dean of the Darden School. He is a director of Chesapeake Corporation, Comdial
Corporation, Cone Mills Corporation and T. Rowe Price Associates.
WALLACE STETTINIUS is retired. Until February 1995, Mr. Stettinius was Chairman
of the Board of Cadmus. He is a director of American Filtrona Corporation and
Chesapeake Corporation.
BRUCE A. WALKER is President of Valco Graphics, Inc., a Seattle publication and
tabloid printing firm. Formerly, Mr. Walker was Marketing Representative of
Pacific Northwest, Anderson, Lithograph Company, Los Angeles, California.
28
<PAGE>
DESCRIPTION OF CAPITAL STOCK
GENERAL
The authorized capital stock of the Company consists of 16,000,000 shares of
Common Stock, par value $.50 per share, and 1,000,000 shares of Serial Preferred
Stock, par value $1.00 per share (the "Serial Preferred Stock"). As of June 30,
1995, 6,031,475 shares of Common Stock and no shares of the Serial Preferred
Stock were outstanding. All of the issued and outstanding shares of Common Stock
are fully paid and nonassessable.
The following summary description of the Common Stock and Serial Preferred Stock
does not purport to be complete and is qualified in its entirety by this
reference to the Company's Amended and Restated Articles of Incorporation (the
"Articles of Incorporation") and Amended and Restated Bylaws (the "Bylaws"),
copies of which have been filed as exhibits to the Registration Statement of
which this Prospectus forms a part, and to the applicable provisions of the
Virginia Stock Corporation Act (the "Virginia Act").
COMMON STOCK
The holders of validly issued and outstanding shares of Common Stock are
entitled to one vote per share of record on all matters to be voted upon by
shareholders. At a meeting of shareholders at which a quorum is present, a
majority of the votes cast decides all questions other than the election of
directors, unless the matter is one upon which a different vote is required by
express provision of law or the Articles of Incorporation or Bylaws. There is no
cumulative voting with respect to the election of directors (or any other
matter).
The holders of the Common Stock have no preemptive rights and have no rights to
convert their Common Stock into any other securities. In addition, there are no
redemption or sinking fund provisions applicable to the Common Stock.
In the event of a liquidation, dissolution or winding up of the Company, holders
of the Common Stock are entitled to participate equally and ratably, share for
share, in all assets remaining after payment of liabilities and obligations of
the Company and all preferential amounts to which the holders of shares at the
time outstanding of all classes of stock having prior rights thereto may be
entitled.
Subject to the rights of any holders of shares at the time outstanding of all
classes of stock having prior rights as to dividends, the holders of the Common
Stock are entitled to receive ratably such dividends as the Board of Directors
may declare out of funds legally available therefor, when and if so declared.
The payment by the Company of dividends, if any, rests within the discretion of
its Board of Directors and will depend upon the Company's then prevailing
results of operations, financial condition and capital expenditure plans, as
well as other factors considered relevant by the Board of Directors. The Company
may enter into bank credit agreements which include financial covenants
restricting the payment of dividends. See "Price Range of Common Stock and
Dividend Policy."
SERIAL PREFERRED STOCK
The Board of Directors is authorized, without further action by the
shareholders, to issue up to 1,000,000 shares of Serial Preferred Stock, in one
or more series, with such voting powers, preferences, special rights,
qualifications, limitations or restrictions as shall be set forth in resolutions
providing for the issue thereof adopted by the Board of Directors. As of the
date hereof, the Company has no shares of Serial Preferred Stock outstanding.
The Company has designated 100,000 shares of Series A Junior Participating
Preferred Stock ("Series A Preferred Stock") for possible future issuance
pursuant to the Rights Agreement described below under "Shareholder Rights
Plan."
The holders of the Serial Preferred Stock of each series will be entitled to
receive, if and when declared by the Board of Directors, dividends at the
dividend rate for such series, and not exceeding such rate except to the extent
of any participation right.
If any shares of any series of Serial Preferred Stock are outstanding, Cadmus
may not declare or pay dividends on the Common Stock or any other class of stock
junior to the Serial Preferred Stock, or for any shares of Serial Preferred
Stock which are entitled to participate with the Common Stock, unless all
accrued dividends on the Series Preferred Stock have been paid or declared and
set aside for payment.
The holders of the Serial Preferred Stock of each series will be entitled to a
liquidation preference for the fixed liquidation price for such series plus in
case such liquidation, dissolution or winding up shall have been voluntary, the
fixed liquidation premium for such series, if any, together in all cases with
29
<PAGE>
accrued and unpaid dividends and the full additional amount required by any
participation right. Upon any liquidation, dissolution or winding up, after the
holders of the Serial Preferred Stock have been paid preferential amounts, such
holders will have no right or claim to any of the remaining assets of the
Company.
SHAREHOLDER RIGHTS PLAN
Pursuant to a Rights Agreement dated February 1, 1989, the Company declared a
dividend of one right (the "Rights") for each outstanding share of Common Stock
to the shareholders of record on the close of business on February 13, 1989.
Unless the Board of Directors directs otherwise, one Right will be issued with
respect to each share of Common Stock that becomes outstanding prior to the
occurrence of certain potential change-in-control events (including the shares
of Common Stock offered hereby).
The Rights become exercisable upon certain potential change-in-control events.
When exercisable, the Rights entitle holders to purchase one one-thousandth of a
share (subject to adjustment) of Series A Preferred Stock. Thereafter, upon the
occurrence of certain additional events, the Rights entitle holders to purchase,
at a substantial discount, shares of Common Stock or other assets of the Company
or, under certain circumstances, common stock of the acquiring entity. In
addition, after the occurrence of certain change-in-control events, the Company
may exchange all or a part of the Rights for shares of Common Stock at an
exchange ratio of one share per Right (subject to adjustment).
After the occurrence of certain potential change-in-control events, Rights held
by a person that beneficially owns more than 20% of the outstanding shares of
the Common Stock (an acquiring person) or any affiliate or associate of an
acquiring person will become null and void and thereafter cannot be exercised or
exchanged by any such person.
Exercise or exchange of the Rights will cause substantial dilution to a person
or group attempting to acquire control of the Company without the approval of
the Board of Directors. Except under certain circumstances, the Board of
Directors may cause the Company to redeem the Rights in whole, but not in part,
at a price of $.01 per Right.
The Rights expire on February 13, 1999, if not earlier redeemed or exchanged.
The Rights have no voting or dividend privileges. Until such time as the Rights
become exercisable, they are attached to and do not trade separately from the
Common Stock.
The Rights Agreement is incorporated by reference to the Registration Statement
of which this Prospectus forms a part and a copy of the Rights Agreement is
available free of charge from the Rights Agent, First Union National Bank of
North Carolina, N.A. This summary description of the Rights and Rights Agreement
does not purport to be complete and is qualified in its entirety by reference to
the Rights Agreement.
CERTAIN PROVISIONS OF VIRGINIA LAW, AND THE ARTICLES OF INCORPORATION AND BYLAWS
The following summary description of certain provisions of Virginia law and the
Articles of Incorporation and Bylaws of the Company do not purport to be
complete and is qualified in its entirety by reference to Virginia law and the
Articles of Incorporation and Bylaws.
STAGGERED BOARD OF DIRECTORS; REMOVAL; VACANCIES
The Articles of Incorporation provide that the number of directors may be
determined by the Board of Directors or holders of at least two-thirds of the
outstanding shares entitled to vote but may be no less than eight nor more than
twenty. Pursuant to the Articles of Incorporation, Cadmus directors are divided
into three classes, and are elected to staggered, three year terms. Directors
may be removed by shareholders of the Company only for cause and with the
affirmative vote of at least two-thirds of the outstanding shares entitled to
vote. Any vacancy may be filled by a majority vote of the remaining directors
and the director elected will serve until the next annual meeting.
The Bylaws require that a shareholder give written notice of a nomination for
election of a director to the Secretary of the Company, in the case of an
election at an annual meeting of shareholders, no later than 90 days before the
first anniversary of the immediately preceding meeting and, in the case of an
election at a special meeting, no later than ten business days after the date on
which notice of such meeting is first given to shareholders.
SUPER MAJORITY VOTING PROVISION
In the event that at least two-thirds of the directors then in office do not
approve a proposed amendment to the Articles of Incorporation, a plan of merger
or exchange, a sale of substantially all of the Company's assets or a plan of
dissolution, the Articles of Incorporation require approval of the proposed
amendment or transaction by the affirmative vote of at least 80% of the
outstanding shares entitled to vote.
30
<PAGE>
LIABILITY OF OFFICERS AND DIRECTORS
As permitted under Virginia law, the Articles of Incorporation limit to $1.00
the liability of officers and directors of the Company to the Company or its
shareholders for monetary damages except for liabilities resulting from such
persons having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities law.
Virginia law permits, and the Articles of Incorporation require, indemnification
of the Company's directors against all liabilities imposed or asserted against
him by reason of having been a director of the Company, which may include
liabilities under the Securities Act. The Articles of Incorporation permit
indemnification of any person who was or is a party to any proceeding by reason
of the fact that he is or was an officer, employee or agent, unless in each case
such person engaged in willful misconduct or a knowing violation of the criminal
law.
Insofar as indemnification for liabilities under the Securities Act may be
permitted to directors, officers and controlling persons of the Company pursuant
to the foregoing provisions or otherwise, the Company has been informed that in
the opinion of the Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable.
POTENTIAL EFFECT OF CERTAIN PROVISIONS UPON AN ATTEMPT TO ACQUIRE CONTROL OF THE
COMPANY
Certain of the foregoing provisions of the Articles of Incorporation, Bylaws and
the Shareholder Rights Plan summarized above may discourage or make more
difficult the acquisition of control of the Company by means of a tender offer,
open market purchase, proxy fight or otherwise, including certain types of
coercive takeover practices and inadequate takeover bids. These provisions are
intended to encourage persons seeking to acquire control of the Company first to
negotiate with the Company. The Company believes the foregoing measures, many of
which are substantially similar to the takeover-related measures in effect for
many other publicly held companies, provide benefits by enhancing the Company's
potential ability to negotiate with the proponent of any unfriendly or
unsolicited proposal to take over or restructure the Company that outweigh the
disadvantages of discouraging such proposals because, among other things,
negotiation of such proposals could result in an improvement of their terms.
TRANSFER AGENT
The transfer agent and registrar for the Common Stock is The First Union
National Bank of North Carolina, Charlotte, North Carolina.
31
<PAGE>
UNDERWRITING
Under the terms and subject to the conditions set forth in an Underwriting
Agreement dated the date hereof (the "Underwriting Agreement"), the Underwriters
named below, for whom J.P. Morgan Securities Inc. and Interstate/Johnson Lane
Corporation are acting as representatives (the "Representatives"), have
severally agreed to purchase, and the Company has agreed to sell to them, the
respective number of shares of Common Stock set forth opposite their names
below:
<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
<S> <C>
J.P. Morgan Securities Inc.
Interstate/Johnson Lane Corporation
1,500,000
Total
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase shares of Common Stock are subject to the approval of
certain legal matters by counsel and certain other conditions. The Underwriters
are obligated to take and pay for all such shares of Common Stock, if any are
taken.
The Underwriters propose initially to offer such shares of Common Stock directly
to the public at the public offering price set forth on the cover page of this
Prospectus and to certain dealers at such price less a concession not in excess
of $ per share. The Underwriters may allow, and such dealers may reallow, a
concession not in excess of $ per share to certain other dealers. After the
shares of Common Stock are released for sale to the public, the offering price
and such concessions may be changed.
The Company has granted to the Underwriters an option, expiring at the close of
business on the 30th day after the date of this Prospectus, to purchase up to
225,000 additional shares of Common Stock at the public offering price, less the
underwriting discount. The Underwriters may exercise such option solely for the
purpose of covering over-allotments, if any. To the extent that the Underwriters
exercise such option, each Underwriter will have a firm commitment, subject to
certain conditions, to purchase approximately the same percentage of such
additional shares as the number set forth next to such Underwriter's name in the
preceding table bears to the total number of shares of Common Stock offered
hereby.
The Company and certain of its shareholders have agreed not to offer, sell,
contract to sell or otherwise dispose of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for shares of Common
Stock, for a period of 90 days after the date hereof, without the prior written
consent of J.P. Morgan Securities Inc., with certain limited exceptions.
Pursuant to regulations promulgated by the Commission, market makers in the
Common Stock who are Underwriters or prospective underwriters ("passive market
makers") may, subject to certain limitations, make bids for or purchases of
shares of Common Stock until the earlier of the time of commencement (the
"Commencement Date") of offers or sales of the Common Stock contemplated by this
Prospectus or the time at which a stabilizing bid for such shares is made. In
general, on and after the date two days prior to the Commencement Date (i) such
market makers' net daily purchases of the Common Stock may not exceed 30% of the
average daily trading volume in such stock for the two full consecutive calendar
months immediately preceding the filing date of the Registration Statement of
which this Prospectus forms a part, (ii) such market makers may not effect
transactions in, or display bids for, the Common Stock at a price that exceeds
the highest bid for the Common Stock by persons who are not passive market
makers, and (iii) bids by passive market makers must be identified as such.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
32
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Mays & Valentine, Richmond, Virginia. Certain legal matters in
connection with the Offering will be passed upon for the Company by Hunton &
Williams, Richmond, Virginia, and for the Underwriters by Davis Polk & Wardwell,
New York, New York.
EXPERTS
The financial statements included herein and in this Registration Statement, to
the extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP and Coopers & Lybrand L.L.P., independent public
accountants, and are included herein in reliance upon the reports of said firms
and upon the authority of said firms as experts in accounting and auditing.
Reference is made to said reports, which include an explanatory paragraph with
respect to the change in the method of accounting for postretirement benefits
and the change in the method of accounting for income taxes as discussed in
Notes 12 and 10 to the financial statements.
33
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Reports of Independent Public Accountants F-2
Consolidated Statements of Income for the Years Ended June 30, 1995, 1994, and 1993 F-4
Consolidated Balance Sheets as of June 30, 1995 and 1994 F-5
Consolidated Statements of Cash Flows for the Years Ended June 30, 1995, 1994, and 1993 F-6
Notes to Consolidated Financial Statements F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Cadmus Communications Corporation:
We have audited the accompanying consolidated balance sheet of Cadmus
Communications Corporation and Subsidiaries as of June 30, 1995, and the related
consolidated statements of income and cash flows for the year then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform an 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 audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Cadmus Communications
Corporation and Subsidiaries as of June 30, 1995, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
As discussed in Notes 12 and 10 to the consolidated financial statements,
effective as of July 1, 1994, the Company changed its method of accounting for
postretirement benefits other than pensions to conform with Statement of
Financial Accounting Standards No. 106 and its method of accounting for income
taxes to conform with Statement of Financial Accounting Standards No. 109.
ARTHUR ANDERSEN LLP
Richmond, Virginia,
August 1, 1995
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Cadmus Communications Corporation:
We have audited the consolidated financial statements of Cadmus Communications
Corporation and Subsidiaries as of June 30, 1994, and for each of the two years
in the period ended June 30, 1994. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with 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 financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cadmus
Communications Corporation and Subsidiaries as of June 30, 1994, and the
consolidated results of their operations and their cash flows for each of the
two years in the period ended June 30, 1994 in conformity with generally
accepted accounting principles.
As discussed in Notes 10 and 12 to the consolidated financial statements,
effective as of the beginning of 1994, Cadmus changed its method of accounting
for income taxes to conform with Statement of Financial Standards No. 109 and
its method of accounting for postretirement benefits other than pensions to
conform with Statement of Financial Accounting Standards No. 106.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
August 2, 1994
F-3
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1995 1994 1993
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales $279,641 $247,730 $198,126
Operating expenses
Cost of sales 209,415 184,088 146,031
Selling and administrative 52,172 48,824 40,753
Restructuring charge 1,900
261,587 234,812 186,784
Operating income 18,054 12,918 11,342
Interest and other expenses
Interest 5,351 4,813 3,233
Other expenses, net 21 172 629
5,372 4,985 3,862
Income before income taxes 12,682 7,933 7,480
Income taxes 5,203 3,126 2,947
Income before cumulative effect of changes in accounting principles 7,479 4,807 4,533
Cumulative effect of changes in accounting for:
Postretirement benefits (net of income tax benefit of $355) (532)
Income taxes 933
Net income $ 7,479 $ 5,208 $ 4,533
Earnings per share:
Income before cumulative effect of changes in accounting principles $ 1.21 $ .79 $ .76
Cumulative effect of changes in accounting for postretirement benefits and income taxes .07
Net income $ 1.21 $ .86 $ .76
Average common shares outstanding 6,195 6,085 5,972
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-4
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AT JUNE 30,
1995 1994
<S> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE DATA)
ASSETS
Current Assets
Cash and cash equivalents $ 226 $ 3,855
Accounts receivable, less allowance for doubtful accounts
($1,153 in 1995 and $1,514 in 1994) 57,204 44,747
Inventories 16,308 11,219
Deferred income taxes 1,092 1,227
Prepaid expenses and other 1,489 889
Total current assets 76,319 61,937
Property, plant, and equipment, net 84,570 77,072
Investment in unconsolidated joint venture 6,831
Other assets 2,400 6,672
Goodwill and intangibles, net 8,281 7,617
TOTAL ASSETS $171,570 $160,129
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings $ 3,775
Current maturities of long-term debt 2,381 $ 2,318
Accounts payable 18,818 17,312
Accrued expenses
Compensation 10,905 10,612
Restructuring charge 120 1,900
Other 7,907 6,439
Total current liabilities 43,906 38,581
Long-term debt 53,961 56,122
Other long-term liabilities 7,180 7,575
Deferred income taxes 4,641 2,922
Commitments and contingencies
Shareholders' equity
Common stock ($.50 par value; authorized -- 16,000 shares; issued and outstanding
shares -- 6,031 at June 30, 1995; and 5,984 at June 30, 1994) 3,015 2,992
Capital in excess of par value 12,448 11,796
Retained earnings 46,419 40,141
Total shareholders' equity 61,882 54,929
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $171,570 $160,129
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-5
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED JUNE 30,
1995 1994 1993
<S> <C> <C> <C>
(IN THOUSANDS)
OPERATING ACTIVITIES
Net income $ 7,479 $ 5,208 $ 4,533
Adjustments to reconcile net income to net cash provided by operating activities
Cumulative effect of changes in accounting for:
Postretirement benefits 532
Income taxes (933)
Depreciation and amortization 12,132 11,474 9,626
Restructuring charge 1,900
Deferred income taxes 2,080 284 352
Other, net 1,010 657 738
22,701 19,122 15,249
Changes in working capital sources (requirements), excluding debt and effects of
acquisitions
Accounts receivable, net (11,999) (2,515) (6,398)
Inventories (4,897) 2,780 (481)
Accounts payable, accrued expenses, and income taxes 624 6,959 1,683
Other, net (1,069) (353) 327
(17,341) 6,871 (4,869)
Net cash provided by operating activities 5,360 25,993 10,380
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (20,959) (11,742) (10,842)
Proceeds from sale of property and equipment 3,610 502 173
Sale of unconsolidated joint venture 6,800
Proceeds from life insurance loans 2,940 159 86
Payments for businesses acquired (1,519) (19,740)
Investment in unconsolidated joint venture 248 (254) (2,150)
Other, net (988) 73 (670)
Net cash used in investing activities (9,868) (31,002) (13,403)
FINANCING ACTIVITIES
Proceeds from short-term borrowings 79,825 43,709 34,002
Repayment of short-term borrowings (76,050) (47,709) (27,000)
Proceeds from long-term borrowings 111 40,069
Repayment of long-term borrowings (2,250) (28,112) (2,435)
Dividends paid (1,201) (1,192) (1,196)
Repurchase of common stock (215)
Proceeds from exercise of stock options 449 220
Other, net (5) (327) 51
Net cash provided by financing activities 879 6,658 3,207
Increase (decrease) in cash and cash equivalents (3,629) 1,649 184
Cash and cash equivalents at beginning of year 3,855 2,206 2,022
Cash and cash equivalents at end of year $ 226 $ 3,855 $ 2,206
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
F-6
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA
(1) SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The consolidated financial statements include the accounts and operations of
Cadmus Communications Corporation and Subsidiaries ("Company"), including its
unconsolidated fifty percent owned equity investment (see Note 7). All
significant intercompany accounts and transactions have been eliminated in
consolidation.
REVENUE RECOGNITION
Substantially all printing, marketing, and publishing products are produced to
customer specifications. The Company recognizes revenue when service projects
are completed or products are shipped.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all cash balances and highly liquid
investments with an original maturity of three months or less.
INVENTORIES
Inventories are valued at the lower of cost or market, principally using the
last-in, first-out (LIFO) method (70% in 1995 and 73% in 1994). The first-in,
first-out (FIFO) method is used to value the remaining inventories.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are stated at cost net of accumulated
depreciation. Major renewals and betterments are capitalized, whereas ordinary
maintenance and repair costs are expensed as incurred. Gains or losses on
disposition of assets are reflected in earnings and the related asset costs and
accumulated depreciation are removed from the respective accounts. Depreciation
is calculated principally by the straight-line method based on useful lives of
thirty years for buildings and three to ten years for machinery and equipment.
GOODWILL AND INTANGIBLES
Goodwill and intangibles include the costs in excess of the purchase price over
the net assets of businesses acquired and other valued intangibles and are being
amortized by the straight-line method over twenty years. The carrying value of
goodwill and intangible assets is periodically reviewed and if there were
evidence these values are impaired, the Company's carrying value of the
intangible assets would be reduced to its estimated fair value. Accumulated
amortization was $3,842 and $3,278 at June 30, 1995 and 1994, respectively.
INCOME TAXES
Effective July 1, 1993, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes." SFAS No. 109 requires
the liability method of accounting for deferred income taxes, whereby enacted
statutory tax rates are applied to the differences between the financial
reporting and tax bases of assets and liabilities (see Note 10). The Company had
previously accounted for income taxes in accordance with the method prescribed
by Accounting Principles Board Opinion No. 11.
EARNINGS PER SHARE
Earnings per share is computed on the basis of weighted average common shares
outstanding and common equivalent shares in the form of stock options.
RECLASSIFICATIONS
Certain previously reported amounts have been reclassified to conform to the
1995 presentation.
(2) RESTRUCTURING CHARGE
In the fourth quarter of fiscal 1994, the Company recorded a restructuring
charge of $1.9 million. This charge resulted from reductions in its workforce
related to the decision to close its Springfield, Virginia composition and
prepress facility and to transfer these activities to Richmond, Virginia and
Baltimore, Maryland, facilities. The Company recorded a pretax charge of
F-7
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
$1.6 million related to employee termination benefits, with the remaining $0.3
million charge related to equipment write-offs and miscellaneous other direct
costs associated with the discontinuation of the operations and other exit
costs. During fiscal year 1995, the Company substantially completed its
restructuring plan. Actual amounts charged against the reserve for fiscal year
ended June 30, 1995, were $1.8 million.
(3) ACQUISITION OF WAVERLY PRESS
On November 1, 1993, the Company acquired the net assets of the Waverly Press
printing division ("Waverly Press") from Waverly, Inc. ("Waverly") for
approximately $20.0 million, which was funded through the placement of senior
notes with two insurance companies (see Note 9). Waverly Press, a leading
printer of scientific, technical, medical, and scholarly journals, was renamed
Cadmus Journal Services, Inc. ("Cadmus Journal Services") following the
acquisition. The acquisition was accounted for under the purchase method and,
accordingly, the costs of the acquisition were allocated to the assets acquired
and liabilities assumed based upon their respective fair values. The operating
results of Waverly Press have been included in the consolidated operating
results since the date of acquisition.
(4) ACQUISITION OF TUFF STUFF PUBLICATIONS MINORITY INTEREST
During the first quarter of fiscal 1995, the Company purchased the remaining
twenty percent equity interest in Tuff Stuff Publications, Inc. ("Tuff Stuff")
under the original repurchase agreement for approximately $0.6 million to bring
the Company's equity interest in Tuff Stuff to one hundred percent. The Company
purchased the initial eighty percent equity interest in April 1992, at which
time the acquisition was accounted for using the purchase method. Accordingly,
the assets and liabilities were recorded at their estimated fair value with the
excess of the purchase price over the fair value of the identifiable net assets
acquired recorded as goodwill. The additional $0.6 million equity interest was
recorded first as a reduction of the existing minority interest ownership and
then as an addition to goodwill which is being amortized on a straight-line
basis over the remaining life of the original goodwill (approximately seventeen
years).
(5) INVENTORIES
Inventories as of June 30, 1995 and 1994 consist of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Raw materials and supplies $ 6,044 $ 3,997
Work in process:
Materials 3,270 2,219
Other manufacturing costs 5,315 3,623
Finished goods 1,679 1,380
Inventories $ 16,308 $ 11,219
</TABLE>
The current cost of inventories exceeded the LIFO value of inventories by $1,844
and $1,578 at June 30, 1995 and 1994, respectively.
During fiscal 1994, inventory quantities were reduced resulting in liquidations
of LIFO inventory quantities carried at lower costs which prevailed in prior
years as compared with the cost of current purchases. The effect of the
inventory reduction increased net income by $0.2 million. There were no
significant reductions of inventories in fiscal 1995 and 1993.
F-8
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(6) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment as of June 30, 1995 and 1994 consist of the
following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Land $ 2,866 $ 3,071
Buildings and improvements 39,844 34,496
Machinery, equipment, and fixtures 118,471 110,145
Transportation equipment 178 178
Total property, plant, and equipment 161,359 147,890
Less: accumulated depreciation 76,789 70,818
Property, plant, and equipment, net $ 84,570 $ 77,072
</TABLE>
Commitments outstanding for the purchase of machinery, equipment, and fixtures
at June 30, 1995 totaled $3.3 million.
The Company leases office, production and storage space, and equipment under
various noncancelable operating leases. A number of leases contain renewal
options and some contain purchase options. Certain leases require the Company to
pay utilities, taxes, and other operating expenses.
Future minimum rental payments required under operating leases that have initial
or remaining noncancellable lease terms in excess of one year as of June 30,
1995, are as follows: 1996 -- $3.4 million; 1997 -- $3.4 million; 1998 -- $3.3
million; 1999 -- $3.1 million; 2000 -- $2.1 million; and thereafter -- $7.3
million.
Total rental expense charged to operations was $4.1 million, $3.0 million, and
$2.0 million in fiscal 1995, 1994, and 1993, respectively. Substantially all
such rental expense represented the minimum rental payments under operating
leases.
On September 29, 1994, the Company sold the land, building, and building
improvements ("property") of Three Score, Inc., in Tucker, Georgia for $2.9
million (which approximated net book value) under sale and leaseback agreements.
The lease is classified as an operating lease in accordance with SFAS No. 13,
"Accounting for Leases." The Company has lease renewal options after the initial
fifteen year lease term at projected future fair market values under the lease.
Average annual rental payments on the lease are $0.3 million.
(7) INVESTMENT IN JOINT VENTURE
On February 28, 1995, the Company sold its fifty percent joint venture interest
in Central Florida Press, L.C. ("CFP") to The Lanman Companies, Inc. ("Lanman"),
the other owner of CFP, for $6.8 million in cash. The sale resulted in an
after-tax charge of $0.4 million, or $.06 per share, arising primarily from
certain tax liabilities related to the transaction.
The Company completed the joint venture with Lanman to form CFP in March 1993
whereby the Company invested $6.5 million for a fifty percent interest in CFP
and Lanman contributed net assets of its subsidiary, Central Florida Press, for
its fifty percent interest. This investment was accounted for on the equity
basis. Equity income from unconsolidated joint venture totaled $0.3 million for
the fiscal 1995 and 1994, and $0.1 million for fiscal 1993.
(8) OTHER BALANCE SHEET INFORMATION
Other accrued expenses include $5,174 and $3,467 of deferred revenue at June 30,
1995 and 1994, respectively. Other long-term liabilities consist principally of
amounts recorded under deferred compensation arrangements with certain executive
officers and other employees and amounts recorded under the pension and other
postretirement benefit plans (see Notes 11 and 12).
F-9
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(9) DEBT
Debt at June 30, 1995 and 1994 consists of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Long-term debt
Senior unsecured notes, 9.76%, due 2000 $ 11,200 $ 13,400
Senior unsecured notes, 6.74%, due 2003 40,000 40,000
Tax-exempt variable rate industrial development bonds, weighted average
interest rate of
3.7% to 5.0%, due serially through 2011 4,482 4,532
Various mortgage and other notes 660 508
Total long-term debt 56,342 58,440
Less: current maturities 2,381 2,318
Long-term debt $ 53,961 $ 56,122
</TABLE>
The Company completed placement of $40.0 million in senior notes with two
insurance companies on December 23, 1993. The placement has a fixed interest
rate of 6.74% with an average life of 8.1 years and is due in 2003. The proceeds
of this placement were used to fund the acquisition of Waverly Press and to
refinance approximately $20.0 million of revolving bank credit and term loans.
During fiscal 1994, the Company entered into agreements for revolving credit
facilities aggregating $25.0 million with its four major banks, replacing the
former lines of credit. These new unsecured, committed lines of credit have a
three-year term expiring in February 1997, at which time any loans outstanding
under the facility convert to term loans with a two-year maturity. The Company
has the following interest rate options: (i) adjusted CD rate or (ii) adjusted
LIBOR. These agreements also require commitment fees of 1/4 to 1/2 percent per
annum on any unused portion of the lines of credit. At June 30, 1995, borrowings
under these revolving credit facilities totaled $3.8 million, leaving an unused
balance of $21.2 million. At June 30, 1994 there were no outstanding borrowings
under these agreements.
The Company periodically enters into interest rate swap agreements to moderate
its exposure to interest rate changes and to lower the overall cost of
borrowing. The notional values and applicable rates are as follows:
<TABLE>
<CAPTION>
PAID FIXED, PAID FLOATING,
RECEIVED FLOATING RECEIVED FIXED
NOTIONAL VALUE: 1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Beginning balance $ 9,125 $10,000 $10,000 $35,000 $ 0 $ 0
New contracts 10,000 35,000
Expired contracts (1,750) (875)
Ending balance $17,375 $ 9,125 $10,000 $35,000 $35,000 $ 0
</TABLE>
<TABLE>
<CAPTION>
WEIGHTED AVERAGE
AGGREGATE NOTIONAL VALUE INTEREST RATES
TYPE OF SWAP: 1995 1996 1997 1998 1999 PAID RECEIVED
<S> <C> <C> <C> <C> <C> <C> <C>
Paid fixed, received floating $ 17,375 $ 17,400 $ 17,900 $ 18,700 $ 0 8.342% 5.843%
Paid floating, received fixed 35,000 35,000 35,000 35,000 35,000 6.125 5.265
</TABLE>
Hedging activities increased interest expense by $0.7 million, $0.5 million, and
$0.5 million in fiscal 1995, 1994, and 1993, respectively.
During fiscal 1995, the Company entered into two interest rate swap agreements
with two banks to convert debt with an aggregate notional value of $8.7 million
from floating-rate to fixed-rate debt. These swaps have a term of four years.
Under the terms of these agreements, the Company makes payments at a fixed
interest rate of 8.061% and will receive payments based on
F-10
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
six-month LIBOR in arrears. The net interest paid or received is included in
interest expense. These swaps are hedged against the $35.0 million
fixed-to-floating rate swap described below. At June 30, 1995, the fair value of
these contracts was negative $0.9 million.
The Company also entered into a fixed-to-floating interest rate swap agreement
with a notional value of $35.0 million to convert that amount of the 2003 senior
notes to floating-rate debt. This swap has an initial term of three years, which
is renewable at the bank's option for an additional two years. Under the terms
of this agreement, the Company makes payments at variable rates, which are based
on six-month LIBOR, and receives payments at a fixed interest rate of 5.265%.
The net interest paid or received is included in interest expense. The variable
rate at June 30, 1995 was 5.9063% and the fair value of this contract was
negative $1.2 million.
During fiscal 1990, the Company entered into two interest rate swap agreements
with a notional value of $10.0 million which expire in December 1995. The swap
agreements originally converted certain variable-rate term loans into fixed-rate
obligations with a fixed rate of 9.01%. Under the terms of these agreements, the
Company makes payments at a fixed interest rate of 8.34% and receives payments
at variable rates, which are based on LIBOR. The net interest paid or received
is included in interest expense. In fiscal 1994, the Company repaid the balance
of these term loans and utilized these swap agreements as a hedge against the
$35.0 million fixed-to-floating rate swap mentioned above. At June 30, 1995, the
fair value of this contract was negative $0.1 million.
The notional value of the swap contracts does not represent exposure to credit
loss. In the event of default by the counterparties, the risk, if any, in these
transactions is the cost of replacing the swap agreement at current market
rates. The Company continually monitors its positions and the credit rating of
its counterparties and limits the amount of agreements it enters into with any
one party. Management does not anticipate nonperformance by the counterparties;
however, if incurred, any such loss would be immaterial.
The fair value of long-term debt as of June 30, 1995 was $53.9 million based on
the market value of debt with similar maturities and covenants.
Under the terms of the various debt instruments, approximately $46.3 million of
retained earnings at June 30, 1995, is not available for payment of cash
dividends.
Maturities of long-term debt for the five years ending June 30, 2000 are as
follows: 1996 -- $2.4 million; 1997 -- $2.3 million; 1998 -- $3.6 million;
1999 -- $5.2 million; 2000 -- $6.9 million; and $33.6 million thereafter. The
book value of all encumbered properties as of June 30, 1995, totaled $0.7
million.
The Company incurred interest expense of $5.4 million, $4.8 million, and $3.7
million for fiscal 1995, 1994, and 1993, respectively, of which $0.1 million for
fiscal 1995, and $0.5 million for fiscal 1993 were capitalized. Interest paid,
net of amounts capitalized, totaled $5.3 million, $4.8 million, and $3.2 million
for fiscal 1995, 1994, and 1993 respectively.
(10) INCOME TAXES
Effective July 1, 1993, the Company adopted SFAS No. 109, "Accounting for Income
Taxes." SFAS No. 109 requires the liability method of accounting for deferred
income taxes, whereby enacted statutory tax rates are applied to the differences
between the financial reporting and tax bases of assets and liabilities. The
cumulative effect of the change in accounting principle was a reduction in the
deferred income tax liability and a corresponding increase in net income of $933
in the first quarter of fiscal 1994. Under the provisions of SFAS No. 109, the
Company elected not to restate prior years' consolidated financial statements.
F-11
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
Income taxes for the years ended June 30, 1995, 1994, and 1993 consist of the
following:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current
Federal $3,052 $2,313 $2,365
State 297 360 230
3,349 2,673 2,595
Deferred
Federal 1,743 133 288
State 111 320 64
1,854 453 352
Income taxes $5,203 $3,126 $2,947
</TABLE>
Cash paid for income taxes totaled $3.3 million, $3.0 million, and $2.3 million
for fiscal 1995, 1994, and 1993, respectively.
The amounts of income tax expense differ from the amounts obtained by
application of the statutory U.S. rates to income before income taxes for the
reasons shown in the following table:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Computed at statutory U.S. rate $4,312 $2,697 $2,542
State income taxes, net of Federal tax benefit 269 449 194
Goodwill amortization 221 242 227
Charitable contribution (127)
Sale of joint venture 295
Other 106 (135) (16)
Income taxes $5,203 $3,126 $2,947
</TABLE>
The net current and noncurrent components of deferred income taxes recognized in
the balance sheet at June 30, 1995 and 1994, are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Net current assets $ 1,092 $ 1,227
Net noncurrent liabilities 4,641 2,922
Net liability $ 3,549 $ 1,695
</TABLE>
The Company has state net operating loss carryforwards aggregating approximately
$15.3 million which expire during fiscal years 2004 to 2010. A valuation
allowance of $0.3 million has been established for state net operating loss
benefits that are not expected to be realized. There was no significant change
in the valuation allowance during fiscal 1995 and there was a $0.1 million
decrease in the valuation allowance during fiscal 1994.
F-12
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The tax effects of the significant temporary differences which comprise the
deferred tax assets and liabilities at
June 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Assets:
Allowance for doubtful accounts $ 368 $ 512
Inventory 135 137
Employee benefits 3,056 2,604
Restructuring reserve 45 760
State net operating loss carryforwards 501 465
Charitable contribution carryover 32 219
Gross deferred tax assets 4,137 4,697
Liabilities:
Property, plant, and equipment 7,230 5,908
Intangible assets 158 179
Other 24 68
Gross deferred tax liabilities 7,412 6,155
Less: Valuation allowance 274 237
Net liability $ 3,549 $ 1,695
</TABLE>
(11) RETIREMENT PLANS
Retirement benefits are provided to substantially all employees principally
through a noncontributory, defined benefit pension plan ("Core Plan") and a
thrift savings plan. The Core Plan is a defined benefit plan and benefits are
based on the plan provisions relating to employees' compensation and years of
service. Assets under the plans consist of marketable securities and are held in
trust funds managed by independent investment advisors. These plans are
qualified plans under the Internal Revenue Code. The policy of the Company is to
fund the Core Plan at amounts not less than the minimum requirements of the
Employee Retirement Income Security Act of 1974. A supplementary nonqualified,
nonfunded, pension plan ("Supplemental Plan") for certain key executives is also
maintained and is being provided for by charges to earnings sufficient to meet
the projected benefit obligation. The pension cost for this plan is based on
substantially the same actuarial assumptions as those used for the Core Plan.
The components of net pension costs follow:
<TABLE>
<CAPTION>
CORE PLAN SUPPLEMENTAL PLAN
1995 1994 1993 1995 1994 1993
<S> <C> <C> <C> <C> <C> <C>
Present value of benefits earned $ 1,685 $ 1,056 $ 1,129 $ 78 $ 80 $ 116
Interest cost on plan
liabilities 1,647 1,419 1,480 299 237 272
Return on plan assets:
Actual (2,257) (14) (1,578)
Deferred 371 (1,921) (464)
Amortization of transition
(asset) obligation (180) (215) (188) 68 37 53
Net pension costs $ 1,266 $ 325 $ 379 $ 445 $ 354 $ 441
</TABLE>
F-13
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
The actuarial assumptions used in determining net pension cost and the related
benefit obligations for the Core Plan were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Discount rate for liabilities 8.5% 8.5% 8.0%
Discount rate for expenses 8.5% 8.5% 9.0%
Rate of increase in compensation 4.5% 4.5% 6.0%
Long-term rate of return on plan assets 9.0% 9.0% 10.0%
</TABLE>
A summary of the funded status of the pension plans at June 30, 1995 and 1994
follows:
<TABLE>
<CAPTION>
CORE PLAN SUPPLEMENTAL PLAN
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Plan assets at market value $24,192 $21,318 $ * $ *
Plan liabilities:
Present value of benefit obligation:
Vested 18,896 16,078 2,886 2,384
Nonvested 637 420 411 525
Accrued benefit obligation 19,533 16,498 3,297 2,909
Adjustment for future salary increases 4,154 3,240 637 695
Projected benefit obligation 23,687 19,738 3,934 3,604
(Excess) deficiency of plan assets over plan
liabilities (505) (1,580) 3,934 3,604
Unrecognized transition asset (obligation) 2,449 2,629 (838) (903)
Adjustment required to reflect minimum
liability 219 134
Unrecognized gains (losses) (79) 917 (65) 33
Accrued pension costs $ 1,865 $ 1,966 $ 3,250 $ 2,868
</TABLE>
* The Supplemental Plan is technically a nonfunded plan; however, the Company
has acquired life insurance contracts ($14.5 million and $13.9 million face
amount at June 30, 1995 and 1994, respectively) intended to be adequate to
fund future benefits. The cash surrender value of these contracts, net of
policy loans, was $1.1 million and $3.6 million at June 30, 1995 and 1994,
respectively, and is included in other assets in the Consolidated Balance
Sheets.
The Company's contribution to the Core Plan was $1.4 million in fiscal 1995. Due
to the overfunded status, no contributions were made in fiscal 1994 and fiscal
1993.
The thrift savings plan enables employees to save a portion of their earnings on
a tax-deferred basis and also provides for matching contributions from the
Company for a portion of the employees' savings. Additionally, the plan provides
for individual subsidiary companies to make profit sharing contributions. The
Company's expense under this plan was $1.5 million, $1.1 million, and $1.0
million for 1995, 1994, and 1993, respectively.
(12) OTHER POSTRETIREMENT BENEFITS
All employees of the Company are eligible for retiree medical coverage if they
retire on or after attaining age 55 with ten or more years of service. Benefits
differ depending upon the date of retirement. For those employees who retired
prior to April 1, 1988, and are under 65, coverage is available at a cost to the
retiree equal to the cost to the Company for an active employee less the fixed
company subsidy. Once employees in this group have reached 65, coverage is
available at a cost to the retiree equal to the cost to the Company for a
post-65 retiree less the fixed company subsidy.
F-14
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
For those employees who retired on or after April 1, 1988, but before January 1,
1994, coverage is available until the earlier of the death of the retiree or
attainment of age 65. The retiree contributes the full active rate. Upon
reaching 65, coverage under the Company's plan ceases and the retiree becomes
covered by Medicare.
For those employees who retire on or after January 1, 1994, coverage is
available until the earlier of the death of the retiree, or attainment of age
65. The retiree contributes the full retiree rate, which is equal to the cost to
the Company for a pre-65 retired employee. Upon reaching 65, coverage under the
Company's plan ceases and the retiree becomes covered by Medicare.
Effective July 1, 1993, the Company adopted SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions." SFAS No. 106 requires
recognition of the cost of postretirement benefits during the employees' service
periods. Previously, such expenses were accounted for on a cash basis. The
Company elected to immediately recognize the liability for prior years' service
as the cumulative effect of a change in accounting principle. Accordingly, in
the first quarter of fiscal 1994, the Company recorded an accumulated
postretirement benefit obligation and a corresponding charge to net income of
$887 and a noncurrent deferred income tax benefit of $355, resulting in an
after-tax charge of $532. This is an unfunded plan.
The accumulated postretirement benefit obligation ("APBO") existing at July 1,
1995 was $388. The discount rate used in determining the APBO was 8%. An 11%
rate of increase in the per capita cost of covered health care benefits was
assumed for fiscal 1995, with the rates gradually decreasing to 5.5% in the year
2003 and remaining level thereafter. A one percentage-point increase in the
assumed health care cost trend rates would increase the APBO approximately 0.8%
or $3.
(13) SHAREHOLDERS' EQUITY
Shareholders' equity consists of the following:
<TABLE>
<CAPTION>
COMMON STOCK
($.50 PAR VALUE;
16,000 SHARES CAPITAL IN
AUTHORIZED) EXCESS OF RETAINED
SHARES AMOUNT PAR VALUE EARNINGS
<S> <C> <C> <C> <C>
Balance -- June 30, 1992 5,975 $2,987 $ 11,796 $ 32,788
Net income 4,533
Cash dividends -- $.20 per share (1,196)
Shares repurchased (27) (13) (202)
Balance -- June 30, 1993 5,948 2,974 11,594 36,125
Net income 5,208
Cash dividends -- $.20 per share (1,192)
Net shares issued upon exercise of stock options 36 18 202
Balance -- June 30, 1994 5,984 2,992 11,796 40,141
Net income 7,479
Cash dividends -- $.20 per share (1,201)
Net shares issued upon exercise of stock options 47 23 652
Balance -- June 30, 1995 6,031 $3,015 $ 12,448 $ 46,419
</TABLE>
On February 1, 1989, as part of a shareholder rights plan, the Board of
Directors declared a dividend distribution of one preferred share purchase right
for each outstanding share of common stock. Each right entitles the shareholder
to buy one unit (one one-thousandth of a share) of Series A Preferred Stock at a
purchase price of $45 per share, subject to adjustment. The rights will become
exercisable initially only if a person or group acquires or announces a tender
offer for 20% or more of the Company's common stock ("Acquiring Person"), at
which time each right will be exercisable to purchase one unit of Series A
Preferred at the purchase price. At any time after a person becomes an Acquiring
Person, the Company may issue a share of common stock in exchange for each right
other than those held by the Acquiring Person. If an Acquiring Person acquires
30% or more of the Company's common stock or an Acquiring Person merges into or
combines with the Company, each right will entitle the holder, other than the
Acquiring Person, upon payment of the purchase price, to acquire Series A
Preferred or, at the option
F-15
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
of the Company, common stock, having a market value equal to twice the purchase
price. If the Company is acquired in a merger or other business combination in
which it does not survive or if 50% of its earnings power is sold, each right
will entitle the holder, other than the Acquiring Person, to purchase securities
of the surviving company having a market value equal to twice the purchase
price. Unless redeemed earlier, the rights expire on February 13, 1999. The
rights may be redeemed by the Board of Directors at any time prior to the tenth
day after a person becomes an Acquiring Person, subject to the Board of
Directors' ability to extend or reinstate the redemption period under certain
circumstances. The rights may have certain anti-takeover effects. An Acquiring
Person will experience substantial dilution under certain circumstances.
However, the rights should not interfere with any merger or other business
combination approved by the Board of Directors because the rights are generally
redeemable at the discretion of the Board.
The Board of Directors has authorized the purchase of up to 200 shares of the
Company's stock from time to time on the open market. The shares, if and when
purchased, may be used for the funding of employee benefit plans. As of June 30,
1995, 133 shares had been repurchased under this authorization.
In addition to its common stock, the Company authorized capital includes 1,000
shares of preferred stock ($1.00 par value), issuable in series, of which 100
shares are designated as Series A Preferred.
(14) STOCK OPTIONS
Under the Company's stock option plans, selected employees may be granted
options to purchase its common stock at prices equal to the fair market value of
the stock at the date the options are granted. There are no charges to earnings
resulting from the plans.
The following is a summary of changes in options outstanding:
<TABLE>
<CAPTION>
NUMBER OF OPTION PRICE OPTION PRICE
SHARES PER SHARE TOTAL
<S> <C> <C> <C>
Outstanding and exercisable at June 30, 1992 434 $ 4.60 to $28.00 $5,226
Granted 133 $ 9.00 to $10.63 1,210
Lapsed or canceled (97) $ 9.00 to $27.63 (1,847)
Outstanding and exercisable at June 30, 1993 470 $ 4.60 to $28.00 4,589
Exercised (43) $ 4.60 to $ 9.75 (301)
Granted 117 $ 9.45 to $14.13 1,144
Lapsed or canceled (91) $ 9.50 to $12.38 (1,067)
Outstanding and exercisable at June 30, 1994 453 $ 6.38 to $28.00 4,365
Exercised (50) $ 9.00 to $10.63 (486)
Granted 204 $16.75 to $19.19 3,846
Outstanding and exercisable at June 30, 1995 607 $ 6.38 to $28.00 $7,725
</TABLE>
At June 30, 1995, 1,099 shares of authorized but unissued common stock were
reserved for issuance upon exercise of options granted or grantable under the
plans. Options are exercisable under the plans for periods of five to ten years
from the date of grant.
(15) CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. Concentrations of credit
risk with respect to trade receivables are limited due to the large number of
customers comprising the Company's customer base, and their dispersion across
different businesses and geographic regions. As of June 30, 1995 and 1994, the
Company had no significant concentrations of credit risk.
F-16
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- CONTINUED
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Excluded from the consolidated statements of cash flows was the effect of
certain noncash activities. The Company assumed $0.2 million and $1.5 million of
obligations in conjunction with acquisitions for fiscal years ended June 30,
1995, and 1993 respectively. The Company also received in fiscal 1993 a $0.4
million note receivable in exchange for certain assets. There were no noncash
investing or financing activities in fiscal 1994.
(17) ROYALTY COMMITMENTS
In March, 1994, the Company entered into an agreement with National Football
League Properties, Inc., whereby the Company was granted a license to
manufacture, publish, and distribute a sports publication. Royalty expense under
the agreement was $0.5 million for fiscal 1995. There was no royalty expense for
fiscal 1994 or 1993.
(18) CONTINGENCIES
The Company is party to various legal actions which are ordinary and incidental
to its business. While the outcome of legal actions cannot be predicted with
certainty, management believes the outcome of any of these proceedings, or all
of them combined, will not have a materially adverse effect on its consolidated
financial position or results of operations.
F-17
<PAGE>
[CADMUS LOGO]
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses, other than underwriting discounts, in connection with
the Offering are as follows:
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee....................................... $ 15,020
NASD filing fee........................................................................... 4,856
The Nasdaq National Market listing fee.................................................... 17,500
Printing fees............................................................................. 35,000
Legal fees and expenses................................................................... 100,000
Accounting fees and expenses.............................................................. 35,000
Blue Sky fees and expenses, including legal fees.......................................... 20,000
Miscellaneous expenses.................................................................... 22,624
Total $250,000
</TABLE>
All of the above items, except the Securities and Exchange Commission
registration fee, the NASD filing fee, and The Nasdaq National Market listing
fee, are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Virginia Stock Corporation Act (the "Act") permits, and the registrant's
Articles require, indemnification of the registrant's directors and officers in
a variety of circumstances, which may include indemnification for liabilities
under the Securities Act. Under Sections 13.1-697 and 13.1-702 of the Act, a
Virginia corporation generally is authorized to indemnify its directors and
officers in civil or criminal actions if they acted in good faith and believed
their conduct to be in the best interests of the corporation and, in the case of
criminal actions, had no reasonable cause to believe that the conduct was
unlawful. As permitted under Section 13.1-704 of the Act, the registrant's
Articles require indemnification of directors, and permit indemnification of
officers, with respect to certain liabilities, expenses and other amounts
imposed upon them in all proceedings, including derivative proceedings, by
reason of having been a director, except in the case of willful misconduct or a
knowing violation of criminal law. In addition, the registrant carries insurance
on behalf of directors, officers, employees or agents that may cover liabilities
under the Securities Act. The registrant's Articles also provide that, to the
full extent the Act (as it presently exists or may hereafter be amended) permits
the limitation or elimination of the liability of directors and officers, no
director or officer of the registrant shall be liable to the registrant or its
shareholders for monetary damages in excess of $1.00 with respect to any
transaction, occurrence or course of conduct. Section 13.1-691.1 of the Act
presently permits the elimination of liability of directors and officers in any
proceeding brought by or in the right of the registrant or brought by or on
behalf of shareholders of the registrant, except for liability resulting from
such person's having engaged in willful misconduct or a knowing violation of the
criminal law or any federal or state securities law, including, without
limitation, any unlawful insider trading or manipulation of the market for any
security. Sections 13.1-692.1 and 13.1-696 to -704 of the Act are hereby
incorporated by reference herein.
ITEM 16. EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement (filed herewith)
4.1 Articles of Incorporation, as amended (filed as Exhibit 3.1 to the registrant's Annual Report on Form
10-K for the year ended June 30, 1993 and incorporated herein by reference)*
4.2 Bylaws, as amended (filed as Exhibit 3.2 to the registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, and incorporated herein by reference)*
4.3 Form of certificate representing shares of the registrant's Common Stock, $.50 par value per share,
(filed as Exhibit 1 to the registrant's Form 8-A dated as of October 26, 1985 and incorporated herein
by reference)*
4.4 Shareholder Rights Agreement dated as of February 1, 1989 (filed as Exhibit 1 to the registrant's Form
8-A dated February 7, 1989 and incorporated herein by reference)*
5 Opinion of Mays & Valentine*
12 Statement Regarding Computation of Ratios*
23.1 Consent of Mays & Valentine*
23.2 Consent of Arthur Andersen LLP (filed herewith)
23.3 Consent of Coopers & Lybrand L.L.P. (filed herewith)
24 Powers of Attorney*
</TABLE>
*Previously filed
II-1
<PAGE>
ITEM 17. UNDERTAKINGS
1. The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to Section 13(a) or 15(d) of the Exchange
Act that is incorporated by reference in the registration statement shall be
deemed to be a new registration statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.
2. Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the provisions described under Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
3. The undersigned registrant hereby undertakes that:
a. For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
b. For the purpose of determining any liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Richmond, Commonwealth of Virginia, on
October 13, 1995.
CADMUS COMMUNICATIONS CORPORATION
By: /s/ C. STEPHENSON GILLISPIE, JR.
C. STEPHENSON GILLISPIE, JR.
CHAIRMAN OF THE BOARD, PRESIDENT
AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1
to the Registration Statement has been signed below by the following persons in
the capacities indicated on October 13, 1995.
<TABLE>
<S> <C>
/s/ C. STEPHENSON GILLISPIE, JR. /s/ FRANK G. LOUTHAN, JR.*
C. STEPHENSON GILLISPIE, JR. FRANK G. LOUTHAN, JR.
CHAIRMAN OF THE BOARD, PRESIDENT, AND CHIEF DIRECTOR
EXECUTIVE OFFICER AND DIRECTOR (PRINCIPAL EXECUTIVE
OFFICER)
/s/ MICHAEL DINKINS* /s/ JOHN D. MUNFORD, II*
MICHAEL DINKINS JOHN D. MUNFORD, II
VICE PRESIDENT AND CHIEF FINANCIAL OFFICER DIRECTOR
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
/s/ ROBERT I. DALTON, JR.* /s/ JOHN C. PURNELL, JR.*
ROBERT I. DALTON, JR. JOHN C. PURNELL, JR.
DIRECTOR DIRECTOR
/s/ FRANK DANIELS, III* /s/ RUSSELL M. ROBINSON, II*
FRANK DANIELS, III RUSSELL M. ROBINSON, II
DIRECTOR DIRECTOR
/s/ LEE P. DUDLEY* /s/ JOHN W. ROSENBLUM*
LEE P. DUDLEY JOHN W. ROSENBLUM
DIRECTOR DIRECTOR
/s/ PRICE H. GWYNN, III* /s/ WALLACE STETTINIUS*
PRICE H. GWYNN, III WALLACE STETTINIUS
DIRECTOR DIRECTOR
/s/ JEANNE M. LIEDTKA* /s/ BRUCE A. WALKER*
JEANNE M. LIEDTKA BRUCE A. WALKER
DIRECTOR DIRECTOR
</TABLE>
*By: /s/ C. STEPHENSON GILLISPIE, JR.
C. STEPHENSON GILLISPIE, JR.
ATTORNEY-IN-FACT
II-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
<S> <C> <C>
1.1 Form of Underwriting Agreement
23.2 Consent of Arthur Andersen LLP
23.3 Consent of Coopers & Lybrand L.L.P.
</TABLE>
II-4
CADMUS COMMUNICATIONS CORPORATION
1,500,000 Shares
Common Stock
Underwriting Agreement
_____________, 1995
J.P. Morgan Securities Inc.
Interstate/Johnson Lane Corporation
As Representatives
of the Several Underwriters
Listed in Schedule I hereto
c/o J.P. Morgan Securities Inc.
60 Wall Street
New York, New York 10260
Dear Sirs:
Cadmus Communications Corporation, a Virginia corporation (the
"Company"), proposes to issue and sell to the several Underwriters listed
in Schedule I hereto (the "Underwriters"), for whom you are acting as
representatives (the "Representatives"), an aggregate of 1,500,000 shares
of common stock, par value $.50 per share, of the Company (the
"Underwritten Shares") and, for the sole purpose of covering
over-allotments in connection with the sale of the Underwritten Shares, at
the option of the Underwriters, up to an additional 225,000 shares of
common stock, par value $.50 per share, of the Company (the "Option
Shares"). The Underwritten Shares and the Option Shares are herein
referred to as the "Shares." The shares of common stock of the Company to
be outstanding after giving effect to the sale of the Shares are herein
referred to as the "Common Stock." Each Share will have attached thereto a
Preferred Stock Purchase Right (a "Right").
The Company has prepared and filed with the Securities and Exchange
Commission (the "Commission") in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations of the
Commission thereunder (collectively, the "Securities Act"), a registration
statement on Form S-3 (file no. 33-62655), including a prospectus, relating
to the Shares and Rights. Such registration statement, as amended at the
time when it shall become effective, or, if a post-effective amendment is
filed with respect thereto, as amended by such post-effective amendment at
the time of its effectiveness, including in each case information (if any)
deemed to be part of the registration statement at the time of
effectiveness pursuant to Rule 430A under the Securities Act, together with
any related registration statement filed with the Commission for
registration of a portion of the Shares which registration statement
becomes effective pursuant to Rule 462(b) under the Securities Act, is
referred to in this Agreement as the "Registration Statement," and the
prospectus in the form first used to confirm sales of Shares is referred to
in this Agreement as the "Prospectus." Any reference in this Agreement to
the Registration Statement, any preliminary prospectus or the Prospectus
shall be deemed to refer to and include the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Securities Act,
as of the effective date of the Registration Statement or the date of such
preliminary prospectus or the Prospectus, as the case may be, and any
reference to "amend," "amendment" or "supplement" with respect to the
Registration Statement, any preliminary prospectus or the Prospectus shall
be deemed to refer to and include any documents filed after such date under
the Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder (collectively, the "Exchange
Act"), that are deemed to be incorporated by reference therein.
The Company hereby agrees with the Underwriters as follows:
1. The Company agrees to issue and sell the Underwritten Shares
to the several Underwriters as hereinafter provided, and each Underwriter,
upon the basis of the representations and warranties herein contained, but
subject to the conditions hereinafter stated, agrees to purchase, severally
and not jointly, from the Company the respective number of Underwritten
Shares set forth opposite such Underwriter's name in Schedule I hereto at a
purchase price (the "Purchase Price") of $____ per share.
In addition, the Company agrees to issue and sell the Option Shares
to the several Underwriters as hereinafter provided, and the Underwriters
on the basis of the representations and warranties herein contained, but
subject to the conditions hereafter stated, shall have the option to
purchase, severally and not jointly, from the Company up to an aggregate of
225,000 Option Shares at the Purchase Price for the sole purpose of
covering over-allotments (if any) in the sale of Underwritten Shares by the
several Underwriters.
If any Option Shares are to be purchased, the number of Option
Shares to be purchased by each Underwriter shall be the number of Option
Shares which bears the same ratio to the aggregate number of Option Shares
being purchased as the number of Underwritten Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such amount increased as
set forth in Section 9 hereof) bears to the aggregate number of
Underwritten Shares being purchased from the Company by the several
Underwriters, subject, however, to such adjustments to eliminate any
fractional shares as the Representatives in their sole discretion shall
make.
2
The Underwriters may exercise the option to purchase the Option
Shares at any time (but not more than once) on or before the thirtieth day
following the date of this Agreement, by written notice from the
Representatives to the Company. Such notice shall set forth the aggregate
number of Option Shares as to which the option is being exercised and the
date and time when the Option Shares are to be delivered and paid for which
may be the same date and time as the Closing Date (as hereinafter defined)
but shall not be earlier than the Closing Date nor later than the tenth
full Business Day (as hereinafter defined) after the date of such notice
(unless such time and date are postponed in accordance with the provisions
of Section 9 hereof). Any such notice shall be given at least two Business
Days prior to the date and time of delivery specified therein.
2. The Company understands that the Underwriters intend (i) to
make a public offering of the Shares as soon after the Registration
Statement and this Agreement have become effective as in the judgment of
the Representatives is advisable and (ii) initially to offer the Shares
upon the terms set forth in the Prospectus.
3. Payment for the Shares shall be made to the Company or to its
order by certified or official bank check or checks payable in New York
Clearing House or other next day funds (unless the Company requires payment
in same day funds, in which event the Company shall pay the Underwriters
for the costs associated with payment in same day funds) at the office of
J.P. Morgan Securities Inc., 60 Wall Street, New York, New York 10260 at
10:00 A.M., New York City time, in the case of the Underwritten Shares, on
_________, 1995, or at such other time on the same or such other date, not
later than the fifth Business Day thereafter, as the Representatives and
the Company may agree upon in writing or, in the case of the Option Shares,
on the date and time specified by the Representatives in the written notice
of the Underwriters' election to purchase such Option Shares. The time and
date of such payment for the Underwritten Shares are referred to herein as
the Closing Date and the time and date for such payment for the Option
Shares, if other than the Closing Date, are herein referred to as the
Additional Closing Date. As used herein, the term "Business Day" means any
day other than a day on which banks are permitted or required to be closed
in New York City.
Payment for the Shares to be purchased on the Closing Date or
Additional Closing Date, as the case may be, shall be made against delivery
to the Representatives for the respective accounts of the several
Underwriters of the Shares to be purchased on such date registered in such
names and in such denominations as the Representatives shall request in
writing not later than two full Business Days prior to the Closing Date or
the Additional Closing Date, as the case may be, with any transfer taxes
payable in connection with the transfer to the Underwriters of the Shares
duly paid by the Company. The certificates for the Shares will be made
available for inspection and packaging by the Representatives at the office
of J.P. Morgan Securities Inc. set forth above not later than 1:00 P.M.,
New York City time, on the Business Day prior to the Closing Date or the
Additional Closing Date, as the case may be.
3
4. The Company represents and warrants to each Underwriter that:
(a) no order preventing or suspending the use of any preliminary
prospectus has been issued by the Commission, and each preliminary
prospectus filed as part of the Registration Statement as originally
filed or as part of any amendment thereto, or filed pursuant to Rule 424
under the Securities Act, complied when so filed in all material
respects with the Securities Act, and did not contain an untrue
statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
provided that this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in
writing by such Underwriter through the Representatives expressly for
use therein;
(b) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceeding for that purpose has been
instituted or, to the knowledge of the Company, threatened by the
Commission; and the Registration Statement and Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or
supplements thereto) comply, or will comply, as the case may be, in all
material respects with the Securities Act and do not and will not, as of
the applicable effective date as to the Registration Statement and any
amendment thereto and as of the date of the Prospectus and any amendment
or supplement thereto, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and the
Prospectus, as amended or supplemented at the Closing Date, if
applicable, will not as of the Closing Date contain any untrue statement
of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which
they were made, not misleading; except that the foregoing
representations and warranties shall not apply to statements or
omissions in the Registration Statement or the Prospectus made in
reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by such Underwriter
through the Representatives expressly for use therein;
(c) the documents incorporated by reference in the Prospectus, when
they were filed with the Commission, conformed in all material respects
to the requirements of the Exchange Act and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they are made, not misleading; and any
further documents so filed and incorporated by reference in the
Prospectus, when such documents are filed with the Commission, will
conform in all material respects to the requirements of the Exchange
Act, and will not contain an untrue statement of a material fact or omit
to state a material fact necessary to make the statements therein, in
4
the light of the circumstances under which they were made, not
misleading;
(d) the financial statements, and the related notes thereto,
included or incorporated by reference in the Registration Statement and
the Prospectus present fairly the consolidated financial position of the
Company and its consolidated subsidiaries as of the dates indicated and
the results of their operations and the changes in their consolidated
cash flows for the periods specified; said financial statements have
been prepared in conformity with generally accepted accounting
principles applied on a consistent basis throughout the periods
indicated, and the supporting schedules included or incorporated by
reference in the Registration Statement present fairly the information
required to be stated therein; the pro forma financial information,
including the related notes thereto, included or incorporated by
reference in the Registration Statement and the Prospectus has been
prepared in accordance with the applicable requirements of the
Securities Act and the Exchange Act, as applicable and is based upon
good faith estimates and assumptions believed by the Company to be
reasonable; and the accountants who have certified or shall certify the
financial statements filed or to be filed with the Commission as part of
the Registration Statement are independent accountants as required by
the Securities Act;
(e) since the respective dates as of which information is given in
the Registration Statement and the Prospectus, there has not been any
material adverse change, or any development involving a prospective
material adverse change, in or affecting the general affairs, business,
management, financial position, shareholders' equity or results of
operations of the Company and its subsidiaries, taken as a whole
("Material Adverse Change"), otherwise than as set forth or contemplated
in the Prospectus; and except as set forth or contemplated in the
Prospectus neither the Company nor any of its subsidiaries has entered
into any transaction or agreement (whether or not in the ordinary course
of business) material to the Company and its subsidiaries taken as a
whole;
(f) the Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the state of its
incorporation, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each other jurisdiction in
which it owns or leases properties, or conducts any business, so as to
require such qualification, other than where the failure to be so
qualified or in good standing could not reasonably be expected to have a
material adverse effect on the general affairs, business, management,
financial position, shareholders' equity or results of operations of the
Company and its subsidiaries taken as a whole ("Material Adverse
Effect");
5
(g) each of the Company's subsidiaries set forth in Annex A hereto
(the "Material Subsidiaries") has been duly incorporated and is validly
existing as a corporation under the laws of its jurisdiction of
incorporation, with corporate power and authority to own its properties
and conduct its business as described in the Prospectus, and has been
duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each jurisdiction in which it
owns or leases properties or conducts any business so as to require such
qualification, other than where the failure to be so qualified or in
good standing would not have a material adverse effect on the Company
and its subsidiaries taken as a whole; and all the outstanding shares of
capital stock of each subsidiary of the Company have been duly
authorized and validly issued, are fully-paid and non-assessable, and
(except in the case of foreign subsidiaries, for directors' qualifying
shares) are owned by the Company, directly or indirectly, free and clear
of all liens, encumbrances, security interests and claims;
(h) this Agreement has been duly authorized, executed and
delivered by the Company;
(i) the authorized capital stock of the Company conforms to the
description thereof set forth in the Registration Statement and the
Prospectus, and all of the outstanding shares of capital stock of the
Company have been duly authorized and validly issued, are fully paid and
non-assessable; and, except as described in or expressly contemplated by
the Prospectus, there are no outstanding rights (including, without
limitation, any preemptive or other rights to subscribe for shares of
capital stock), warrants or options to acquire, or instruments
convertible into or exchangeable for, any shares of capital stock or
other equity interest in the Company or any of its subsidiaries, or any
contract, commitment, agreement, understanding or arrangement of any
kind relating to the issuance of any capital stock of the Company or any
such subsidiary, any such convertible or exchangeable securities or any
such rights, warrants or options;
(j) the Shares to be issued and sold by the Company hereunder have
been duly authorized, and, when delivered to and paid for by the
Underwriters in accordance with the terms of this Agreement, will have
been duly issued and will be fully paid and non-assessable and will
conform to the descriptions thereof in the Prospectus; and the issuance
of the Shares is not subject to any preemptive or similar right;
(k) the Rights to be attached to the Shares have been duly
authorized and, when the Shares have been duly and validly issued in
accordance with the terms of this Agreement, will have been validly
issued;
(l) neither the Company nor any of its subsidiaries is, or with
the giving of notice or lapse of time or both would be, in violation of
or in default under, its Articles of Incorporation or By-Laws or any
indenture, mortgage, deed of trust, loan agreement or other agreement or
6
instrument to which the Company or any of its subsidiaries is a party or
by which it or any of them or any of their respective properties is
bound, except for violations and defaults which individually and in the
aggregate could not be expected to have a Material Adverse Effect; the
issue and sale of the Shares and the performance by the Company of its
obligations under this Agreement and the consummation of the
transactions contemplated herein will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, any indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries is bound
or to which any of the property or assets of the Company or any of its
subsidiaries is subject, except for defaults that individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect, nor will any such action result in any violation of the
provisions of the Articles of Incorporation or the By-Laws of the
Company or any applicable law or statute or any order, rule or
regulation of any court or governmental agency or body having
jurisdiction over the Company, its subsidiaries or any of their
respective properties, except for defaults that individually or in the
aggregate could not reasonably be expected to have a Material Adverse
Effect; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body
is required for the issue and sale of the Shares or the consummation by
the Company of the transactions contemplated by this Agreement, except
such consents, approvals, authorizations, registrations or
qualifications as have been obtained under the Securities Act and as may
be required under state securities or Blue Sky laws in connection with
the purchase and distribution of the Shares by the Underwriters;
(m) other than as set forth or contemplated in the Prospectus,
there are no legal or governmental proceedings pending or, to the
knowledge of the Company, threatened to which the Company or any of its
subsidiaries is or may be a party or to which any property of the
Company or any of its subsidiaries is or may be the subject which, if
determined adversely to the Company, could individually or in the
aggregate reasonably be expected to have a Material Adverse Effect, and,
to the Company's knowledge, no such proceedings are threatened or
contemplated by governmental authorities or threatened by others; and
there are no contracts or other documents of a character required to be
filed as an exhibit to the Registration Statement or required to be
described in the Registration Statement or the Prospectus which are not
filed or described as required;
(n) the Company and its subsidiaries have good and marketable
title in fee simple to all items of real property and good and
marketable title to all personal property owned by them, in each case
free and clear of all liens, encumbrances and defects except such as are
described or referred to in the Prospectus or such as could not be
expected to materially affect the value of such property and do not
interfere with the use made or proposed to be made of such property by
7
the Company and its subsidiaries; and any real property and buildings
held under lease by the Company and its subsidiaries are held by them
under valid, existing and enforceable leases with such exceptions as
could not reasonably be expected to have a Material Adverse Effect and
do not interfere with the use made or proposed to be made of such
property and buildings by the Company or its subsidiaries;
(o) [except for such rights that have been waived,] no person has
the right to require the Company to register any securities for offering
and sale under the Securities Act by reason of the filing of the
Registration Statement with the Commission or the issue and sale of the
Shares;
(p) the Company and its subsidiaries (i) are in compliance with
any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (ii) have received all permits,
licenses or other approvals required of them under applicable
Environmental Laws to conduct their respective businesses and (iii) are
in compliance with all terms and conditions of any such permit, license
or approval, except where such noncompliance with Environmental Laws,
failure to receive required permits, licenses or other approvals or
failure to comply with the terms and conditions of such permits,
licenses or approvals would not, singly or in the aggregate, reasonably
be expected to have a Material Adverse Effect;
(q) in the ordinary course of its business, the Company conducts a
periodic review of the effect of Environmental Laws on the business,
operations and properties of the Company and its subsidiaries, in the
course of which it identifies and evaluates material associated costs
and liabilities (including, without limitation, any material capital or
operating expenditures required for clean-up, closure of properties or
compliance with Environmental Laws or any permit, license or approval,
any material related constraints on operating activities and any
material potential liabilities to third parties). On the basis of such
review, the Company has reasonably concluded that such associated costs
and liabilities could not, singly or in the aggregate, reasonably be
expected to have a material adverse effect on the Company and its
subsidiaries, taken as a whole;
(r) the Company has complied with all provisions of Section
517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
5. The Company covenants and agrees with the several Underwriters
as follows:
(a) to use its best efforts to cause the Registration Statement to
become effective (if the Registration Statement shall not have been
declared effective prior to the effective time hereof) at the earliest
possible time and, if required, to file the final Prospectus with the
8
Commission within the time periods specified by Rule 424(b) and Rule
430A under the Securities Act;
(b) to deliver, at the expense of the Company, (i) to the
Representatives, three conformed copies of the Registration Statement
(as originally filed) and three signed copies of each amendment thereto,
in each case including exhibits and documents incorporated by reference
therein, (ii) to each other Underwriter a conformed copy of the
Registration Statement (as originally filed) and each amendment thereto,
in each case without exhibits but including the documents incorporated
by reference therein and (iii) upon request as many copies of the
Prospectus (including all amendments and supplements thereto and
documents incorporated by reference therein) as the Representatives may
reasonably request;
(c) before filing any amendment or supplement to the Registration
Statement or the Prospectus, whether before or after the time the
Registration Statement becomes effective under the Securities Act, to
furnish to the Representatives a copy of the proposed amendment or
supplement for review and not to file any such proposed amendment or
supplement to which the Representatives reasonably object by prompt
notice to the Company;
(d) to advise the Representatives promptly, and to deliver any
written communications from the Commission or any state securities
commission, (i) when the Registration Statement shall become effective
under the Securities Act, (ii) when any amendment to the Registration
Statement shall have become effective under the Securities Act, (iii) of
any request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for any
additional information, (iv) of the issuance by the Commission of any
stop order suspending the effectiveness of the Registration Statement or
the initiation or threatening of any proceeding for that purpose, and
(v) of the receipt by the Company of any notification with respect to
any suspension of the qualification of the Shares for offer and sale in
any jurisdiction or the initiation or threatening of any proceeding for
such purpose; and to use its best efforts to prevent the issuance of any
such stop order or notification and, if issued, to obtain as soon as
possible the withdrawal thereof;
(e) if, during such period of time after the first date of the
public offering of the Shares as in the opinion of counsel for the
Underwriters a prospectus relating to the Shares is required by law to
be delivered in connection with sales by the Underwriters or any dealer,
any event shall occur that is known to the Company or information shall
become known to the Company as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances at the time the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to amend
or supplement the Prospectus to comply with law, forthwith to prepare,
file with the Commission and furnish, at the expense of the Company, to
9
the Underwriters such amendments or supplements to the Prospectus as may
be necessary so that the statements in the Prospectus as so amended or
supplemented will not, in the light of the circumstances when the
Prospectus is delivered to a purchaser, be misleading or so that the
Prospectus will comply with law, provided that all expenses with respect
to any amendment of or supplement to the Prospectus required to correct
a misleading statement made therein in reliance upon or in conformity
with information relating to an Underwriter furnished to the Company in
writing by a Representative expressly for use therein shall be borne by
the Representatives;
(f) to endeavor to qualify the Shares for offer and sale under the
securities or Blue Sky laws of such jurisdictions as the Representatives
shall reasonably request and to continue such qualification in effect so
long as reasonably required for distribution of the Shares and to pay
all fees and expenses (including fees and disbursements of counsel to
the Underwriters) reasonably incurred in connection with such
qualification; provided that the Company shall not be required to file a
general consent to service of process in any jurisdiction;
(g) to make generally available to its security holders and to the
Representatives as soon as practicable an earnings statement covering a
period of at least twelve months beginning with the first fiscal quarter
of the Company occurring after the effective date of the Registration
Statement, that shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 of the Commission promulgated thereunder;
(h) for a period of five years from the date hereof, to furnish to
the Representatives copies of all reports or other communications
(financial or other) furnished to holders of Shares, and copies of any
reports and financial statements furnished to or filed with the
Commission, the Nasdaq National Market or any national securities
exchange;
(i) for a period of 90 days after the date of the initial public
offering of the Shares not to offer, sell, contract to sell or otherwise
dispose of any shares of common stock of the Company or any securities
convertible into or exercisable or exchangeable for shares of common
stock of the Company without the prior written consent of J.P. Morgan
Securities Inc., other than the Shares to be sold hereunder and any
shares of common stock of the Company issued upon the exercise of
options granted under existing employee stock option, savings or
purchase plans; and
(j) to pay all costs and expenses incident to the performance of
its obligations hereunder, including without limiting the generality of
the foregoing, all costs and expenses (i) incident to the preparation,
issuance, execution and delivery of the Shares, (ii) incident to the
preparation, printing and filing under the Securities Act of the
Registration Statement, the Prospectus and any preliminary prospectus
(including in each case all exhibits, amendments and supplements thereto
10
unless otherwise provided herein), (iii) incurred in connection with the
registration or qualification of the Shares under the laws of such
jurisdictions as the Representatives may designate (including fees of
counsel for the Underwriters and its disbursements), (iv) in connection
with the quotation of the Shares by the Nasdaq National Market, (v)
related to the filing with, and clearance of the offering by, the
National Association of Securities Dealers, Inc. and (vi) in connection
with the printing (including word processing and duplication costs) and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and the furnishing to the Underwriters and dealers of copies
of the Registration Statement and the Prospectus, including mailing and
shipping, as herein provided. It is understood that, except as provided
in Sections 7 and 10 hereof, the Underwriters shall pay their own costs
and expenses, including the fees of their counsel, stock transfer taxes
on resale of the Shares by them and any advertising expenses connected
with any offers they make.
6. The several obligations of the Underwriters hereunder to
purchase the Underwritten Shares are subject to the performance by the
Company of its obligations hereunder and to the following additional conditions:
(a) the Registration Statement shall have become effective (or if
a post-effective amendment is required to be filed under the Securities
Act, such post-effective amendment shall have become effective) not
later than 5:00 P.M., New York City time, on the date hereof; and no
stop order suspending the effectiveness of the Registration Statement
shall be in effect, and no proceedings for such purpose shall be pending
before or threatened by the Commission; the Company shall have filed, if
required, the final Prospectus with the Commission within the time
periods and in the manner specified by Rule 424(b) and Rule 430A under
the Securities Act; and all requests for additional information shall
have been complied with to the satisfaction of the Representatives;
(b) the representations and warranties of the Company contained
herein are true and correct on and as of the Closing Date as if made on
and as of the Closing Date and the Company shall have complied with all
agreements and all conditions on its part to be performed or satisfied
hereunder at or prior to the Closing Date;
(c) subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, there shall not have occurred any
downgrading, nor shall any notice have been given of (i) any intended or
potential downgrading or (ii) any possible change that does not indicate
an improvement, in the rating accorded any securities of or guaranteed
by the Company by any "nationally recognized statistical rating
organization", as such term is defined for purposes of Rule 436(g)(2)
under the Securities Act the effect of which is in the Representatives'
judgement so material and adverse as to make it impracticable or
inadvisable to proceed with the public offering or delivery of the
Shares on the terms and in the manner contemplated in the Prospectus;
11
(d) since the respective dates as of which information is given in
the Prospectus there shall not have been any Material Adverse Change or
any development involving a prospective Material Adverse Change,
otherwise than as set forth or contemplated in the Prospectus, the
effect of which in the judgment of the Representatives makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Shares on the terms and in the manner contemplated in
the Prospectus;
(e) the Representatives shall have received on and as of the
Closing Date a certificate of an executive officer of the Company
satisfactory to the Representatives to the effect set forth in
subsections (a) through (c) of this Section and as to whether there has
occurred any Material Adverse Change, or any development involving a
prospective Material Adverse Change from that set forth or contemplated
in the Registration Statement;
(f) Hunton & Williams, counsel for the Company, shall have
furnished to the Representatives their written opinion, dated the
Closing Date, in form and substance satisfactory to the Representatives,
to the effect that:
(i) the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation, with corporate power and authority
to own its properties and conduct its business as described in the
Prospectus;
(ii) the Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each other jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or
in good standing would not have a Material Adverse Effect;
(iii) each of the Company's subsidiaries has been duly
incorporated and is validly existing as a corporation under the
laws of its jurisdiction of incorporation with corporate power and
authority to own its properties and conduct its business as
described in the Prospectus and has been duly qualified as a
foreign corporation for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns
or leases properties, or conducts any business, so as to require
such qualification, other than where the failure to be so qualified
and in good standing would not have a Material Adverse Effect; and
all of the outstanding shares of capital stock of each subsidiary
have been duly and validly authorized and issued, are fully paid
and non-assessable, and (except in the case of foreign
subsidiaries, for directors' qualifying shares) are owned directly
or indirectly by the Company, free and clear of all liens,
encumbrances, equities or claims;
12
(iv) other than as set forth or contemplated in the
Prospectus, there are no legal or governmental proceedings pending
or, to such counsel's knowledge, threatened to which the Company or
any of its subsidiaries is or may be a party or to which any
property of the Company or its subsidiaries is or may be the
subject which, if determined adversely to the Company or such
subsidiaries, could individually or in the aggregate reasonably be
expected to have a Material Adverse Effect; to such counsel's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; and such counsel
does not know of any contracts or other documents of a character
required to be filed as an exhibit to the Registration Statement or
required to be described in the Registration Statement or the
Prospectus that are not filed, referred to or described as
required;
(v) this Agreement has been duly authorized, executed and
delivered by the Company;
(vi) the issue and sale of the Shares and the performance by
the Company of its obligations under this Agreement and the
consummation of the transactions contemplated herein will not
conflict with or result in a breach of any of the terms or
provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other agreement or
instrument known to such counsel to which the Company or any of its
subsidiaries is a party or by which the Company or any of its
subsidiaries is bound or to which any of the property or assets of
the Company or any of its subsidiaries is subject, except for
conflicts or breaches that individually or in the aggregate could
not reaonable be expected to have a Material Adverse Effect, nor
will any such action result in any violation of the provisions of
the Articles of Incorporation, or the By-Laws of the Company or any
applicable law or statute or any order, rule or regulation of any
court or governmental agency or body having jurisdiction over the
Company, its subsidiaries or any of their respective properties,
except for violations that individually or in the aggregate could
not reasonably be expected to have a Material Adverse Effect;
(vii) no consent, approval, authorization, order, registration
or qualification of or with any court or governmental agency or
body is required for the issue and sale of the Shares or the
consummation of the other transactions contemplated by this
Agreement, except such consents, approvals, authorizations,
registrations or qualifications as have been obtained under the
Securities Act and as may be required under state securities or
Blue Sky laws in connection with the purchase and distribution of
the Shares by the Underwriter;
(viii) the statements in the Prospectus under "Description of
Capital Stock" and "Underwriting" in the Prospectus and in the
13
Registration Statement in Item 15, insofar as such statements
constitute a summary of the legal matters, documents or proceedings
referred to therein, fairly present in all material respects the
information called for with respect to such legal matters,
documents or proceedings; and
(ix) such counsel (A) is of the opinion that each document
incorporated by reference in the Registration Statement and the
Prospectus (except for the financial statements and statistical
data included therein as to which such counsel need express no
opinion) complied as to form in all material respects, when filed
with the Commission, with the Exchange Act; (B) is of the opinion
that the Registration Statement and the Prospectus and any
amendments and supplements thereto (except for the financial
statements and statistical data included therein as to which such
counsel need express no opinion) comply as to form in all material
respects with the requirements of the Securities Act and (C)
believes that (except for the financial statements and statistical
data included therein as to which such counsel need express no
belief) the Registration Statement and the prospectus included
therein at the time the Registration Statement became effective did
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus as
amended or supplemented, if applicable, does not contain any untrue
statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of
the circumstances under which they were made, not misleading.
In rendering such opinions, such counsel may rely (A) as to
matters involving the application of laws other than the laws of the
United States and the States of Virginia and New York, to the extent
such counsel deems proper and to the extent specified in such opinion,
if at all, upon an opinion or opinions (reasonably satisfactory to
Underwriters' counsel) of other counsel reasonably acceptable to the
Underwriters' counsel, familiar with the applicable laws; and (B) as to
matters of fact, to the extent such counsel deems proper, on
certificates of responsible officers of the Company and its subsidiaries
and certificates or other written statements of officials of
jurisdictions having custody of documents respecting the corporate
existence or good standing of the Company. The opinion of such counsel
for the Company shall state that the opinion of any such other counsel
is in form satisfactory to such counsel and, in such counsel's opinion,
the Underwriters and they are justified in relying thereon. With
respect to the matters to be covered in subparagraph (ix) above, counsel
may state their opinion and belief is based upon their participation in
the preparation of the Registration Statement and the Prospectus and any
amendment or supplement thereto (other than the documents incorporated
by reference therein) and review and discussion of the contents thereof
(including the documents incorporated by reference therein) but is
without independent check or verification except as specified.
14
(g) Mays & Valentine, counsel for the Company, shall have furnished
to the Representatives their written opinion, dated the Closing Date, in
form and substance satisfactory to the Representatives, to the effect
that:
(i) the authorized capital stock of the Company conforms as to
legal matters to the description thereof contained in the
Prospectus;
(ii) the shares of capital stock of the Company outstanding
prior to the issuance of the Shares to be sold by the Company have
been duly authorized and are validly issued, fully paid and
non-assessable;
(iii) the Shares to be issued and sold by the Company hereunder
have been duly authorized, and when delivered to and paid for the
Underwriters in accordance with the terms of this Agreement, will
be validly issued, fully paid and non-assessable and the issuance
of the Shares is not subject to any preemptive or other rights to
subscribe to shares;
(iv) The Rights to be attached to the Shares have been duly
authorized and, when the Shares have been duly and validly issued
in accordance with the terms of this Agreement, will have been
validly issued.
In rendering such opinions, such counsel may rely (A) as to matters
involving the application of laws other than the laws of the United States
and the States of Virginia and New York, to the extent such counsel deems
proper and to the extent specified in such opinion, if at all, upon an
opinion or opinions (reasonably satisfactory to Underwriters' counsel) of
other counsel reasonably acceptable to the Underwriters' counsel, familiar
with the applicable laws; and (B) as to matters of fact, to the extent such
counsel deems proper, on certificates of responsible officers of the
Company and its subsidiaries and certificates or other written statements
of officials of jurisdictions having custody of documents respecting the
corporate existence or good standing of the Company. The opinion of such
counsel for the Company shall state that the opinion of any such other
counsel is in form satisfactory to such counsel and, in such counsel's
opinion, the Underwriters and they are justified in relying thereon.
(h) on the effective date of the Registration Statement and the
effective date of the most recently filed post-effective amendment, if
any, to the Registration Statement and also on the Closing Date and the
Option Closing Date, if any, each of Arthur Andersen LLP and Coopers &
Lybrand L.L.P. shall have furnished to the Representatives letters,
dated the respective dates of delivery thereof, in form and substance
satisfactory to the Representatives, containing statements and
information of the type customarily included in accountants "comfort
letters" to underwriters with respect to the financial statements and
15
certain financial information contained in the Registration Statement
and the Prospectus;
(i) the Representatives shall have received on and as of the
Closing Date an opinion of Davis Polk & Wardwell, counsel to the
Underwriters, with respect to the due authority and valid issuance of
the Shares, the Registration Statement, the Prospectus and other related
matters as the Representatives may reasonably request, and such counsel
shall have received such papers and information as they may reasonably
request to enable them to pass upon such matters;
(j) the Shares shall have been approved for quotation by the
Nasdaq National Market, subject to official notice of issuance; and
(k) on or prior to the Closing Date the Company shall have
furnished to the Representatives such further certificates and documents
as the Representatives shall reasonably request.
The several obligations of the Underwriters to purchase Option Shares
hereunder are subject to satisfaction of the conditions set forth in
paragraphs (a) through (k) above on and as of the Additional Closing Date,
except that the certificate called for by paragraph (e) above, the opinions
called for by paragraphs (f), (g) and (i) above and the third letter called
for by paragraph (h) above shall be dated the Additional Closing Date.
7. The Company agrees to indemnify and hold harmless each
Underwriter and each person, if any, who controls any Underwriter within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act, from and against any and all losses, claims, damages and
liabilities (including, without limitation the legal fees and other
expenses incurred in connection with any suit, action or proceeding or any
claim asserted) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the
Prospectus (as amended or supplemented if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or
caused by any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, except insofar as such losses, claims, damages or
liabilities are caused by any untrue statement or omission or alleged
untrue statement or omission made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use therein;
provided that the foregoing indemnity with respect to any preliminary
prospectus shall not inure to the benefit of any Underwriter (or to the
benefit of any person controlling such Underwriter) from whom the person
asserting any such losses, claims, damages or liabilities purchased Shares
if such untrue statement or omission or alleged untrue statement or
omission made in such preliminary prospectus is eliminated or remedied in
the Prospectus (as amended or supplemented if the Company shall have
furnished any amendments or supplements thereto) and, if required by law, a
copy of the Prospectus (as so amended or supplemented) shall not have been
16
furnished to such person at or prior to the written confirmation of the
sale of such Shares to such person.
Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person who controls the Company within the
meaning of Section 15 of the Securities Act and Section 20 of the Exchange
Act, to the same extent as the foregoing indemnity from the Company to each
Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use in the Registration Statement, the
Prospectus, any amendment or supplement thereto, or any preliminary
prospectus.
If any suit, action, proceeding (including any governmental or
regulatory investigation), claim or demand shall be brought or asserted
against any person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such person (the "Indemnified
Person") shall promptly notify the person against whom such indemnity may
be sought (the "Indemnifying Person") in writing, and the Indemnifying
Person, upon request of the Indemnified Person, shall retain counsel
reasonably satisfactory to the Indemnified Person to represent the
Indemnified Person and any others the Indemnifying Person may designate in
such proceeding and shall pay the fees and expenses of such counsel related
to such proceeding. In any such proceeding, any Indemnified Person shall
have the right to retain its own counsel, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Person unless (i) the
Indemnifying Person and the Indemnified Person shall have mutually agreed
to the contrary, (ii) the Indemnifying Person has failed within a
reasonable time to retain counsel reasonably satisfactory to the
Indemnified Person or (iii) the named parties in any such proceeding
(including any impleaded parties) include both the Indemnifying Person and
the Indemnified Person and representation of both parties by the same
counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Person
shall not, in connection with any proceeding or related proceeding in the
same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for all Indemnified
Persons, and that all such fees and expenses shall be reimbursed as they
are incurred. Any such separate firm for the Underwriters and such control
persons of Underwriters shall be designated in writing by J.P. Morgan
Securities Inc. and any such separate firm for the Company, its directors,
its officers who sign the Registration Statement and such control persons
of the Company shall be designated in writing by the Company. The
Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the Indemnifying
Person agrees to indemnify any Indemnified Person from and against any loss
or liability by reason of such settlement or judgment. Notwithstanding the
foregoing sentence, if at any time an Indemnified Person shall have
requested an Indemnifying Person to reimburse the Indemnified Person for
17
fees and expenses of counsel as contemplated by the third sentence of this
paragraph, the Indemnifying Person agrees that it shall be liable for any
settlement of any proceeding effected without its written consent if (i)
such settlement is entered into more than 30 days after receipt by such
Indemnifying Person of the aforesaid request and (ii) such Indemnifying
Person shall not have reimbursed the Indemnified Person in accordance with
such request prior to the date of such settlement. No Indemnifying Person
shall, without the prior written consent of the Indemnified Person, effect
any settlement of any pending or threatened proceeding in respect of which
any Indemnified Person is or could have been a party and indemnity could
have been sought hereunder by such Indemnified Person, unless such
settlement includes an unconditional release of such Indemnified Person
from all liability on claims that are the subject matter of such
proceeding.
If the indemnification provided for in the first and second
paragraphs of this Section 7 is unavailable to an Indemnified Person in
respect of any losses, claims, damages or liabilities referred to therein,
then each Indemnifying Person under such paragraph, in lieu of indemnifying
such Indemnified Person thereunder, shall contribute to the amount paid or
payable by such Indemnified Person as a result of such losses, claims,
damages or liabilities (i) in such proportion as is appropriate to reflect
the relative benefits received by the Company on the one hand and the
Underwriters on the other hand from the offering of the Shares or (ii) if
the allocation provided by clause (i) above is not permitted by applicable
law, in such proportion as is appropriate to reflect not only the relative
benefits referred to in clause (i) above but also the relative fault of the
Company on the one hand and the Underwriters on the other in connection
with the statements or omissions that resulted in such losses, claims,
damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company on the one
hand and the Underwriters on the other shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total
underwriting discounts and the commissions received by the Underwriters, in
each case as set forth in the table on the cover of the Prospectus, bear to
the aggregate public offering price of the Shares. The relative fault of
the Company on the one hand and the Underwriters on the other shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Company or by the Underwriters and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission.
The Company and the Underwriters agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by
pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an Indemnified Person
18
as a result of the losses, claims, damages and liabilities referred to in
the immediately preceding paragraph shall be deemed to include, subject to
the limitations set forth above, any legal or other expenses incurred by
such Indemnified Person in connection with investigating or defending any
such action or claim. Notwithstanding the provisions of this Section 7,
in no event shall an Underwriter be required to contribute any amount in
excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities
Act) shall be entitled to contribution from any person who was not guilty
of such fraudulent misrepresentation. The Underwriters' obligations to
contribute pursuant to this Section 7 are several in proportion to the
respective number of Shares set forth opposite their names in Schedule I
hereto, and not joint.
The indemnity and contribution agreements contained in this Section
7 are in addition to any liability which the Indemnifying Persons may
otherwise have to the Indemnified Persons referred to above.
The indemnity and contribution agreements contained in this Section
7 and the representations and warranties of the Company set forth in this
Agreement shall remain operative and in full force and effect regardless of
(i) any termination of this Agreement, (ii) any investigation made by or on
behalf of any Underwriter or any person controlling any Underwriter or by
or on behalf of the Company, its officers or directors or any other person
controlling the Company and (iii) acceptance of and payment for any of the
Shares.
8. Notwithstanding anything herein contained, this Agreement (or
the obligations of the several Underwriters with respect to the Option
Shares) may be terminated in the absolute discretion of the
Representatives, by notice given to the Company, if after the execution and
delivery of this Agreement and prior to the Closing Date or, in the case of
the Option Shares, prior to the Additional Closing Date) (i) trading
generally shall have been suspended or materially limited on or by, as the
case may be, any of the New York Stock Exchange or the Nasdaq National
Market, (ii) trading of any securities of or guaranteed by the Company
shall have been suspended on any exchange or in any over-the-counter
market, (iii) a general moratorium on commercial banking activities in New
York shall have been declared by either Federal or New York State
authorities, or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in the judgment of the Representatives, is material and adverse and
which, in the judgment of the Representatives, makes it impracticable to
market the Shares on the terms and in the manner contemplated in the
Prospectus.
19
9. This Agreement shall become effective upon the later of (x)
execution and delivery hereof by the parties hereto and (y) release of
notification of the effectiveness of the Registration Statement (or, if
applicable, any post-effective amendment) by the Commission.
If, on the Closing Date or the Additional Closing Date, as the case
may be, any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such
date, and the aggregate number of Shares which such defaulting Underwriter
or Underwriters agreed but failed or refused to purchase is not more than
one-tenth of the aggregate number of Shares to be purchased on such date,
the other Underwriters shall be obligated severally in the proportions that
the number of Shares set forth opposite their respective names in Schedule
I hereto bears to the aggregate number of Underwritten Shares set forth
opposite the names of all such non-defaulting Underwriters, or in such
other proportions as the Representatives may specify, to purchase the
Shares which such defaulting Underwriter or Underwriters agreed but failed
or refused to purchase on such date; provided that in no event shall the
number of Shares that any Underwriter has agreed to purchase pursuant to
Section 1 be increased pursuant to this Section 9 by an amount in excess of
one-ninth of such number of Shares without the written consent of such
Underwriter. If, on the Closing Date or the Additional Closing Date, as
the case may be, any Underwriter or Underwriters shall fail or refuse to
purchase Shares which it or they have agreed to purchase hereunder on such
date, and the number of Shares with respect to which such default occurs is
more than one-tenth of the aggregate number of Shares to be purchased on
such date, and arrangements satisfactory to the Representatives and the
Company for the purchase of such Shares are not made within 36 hours after
such default, this Agreement (or the obligations of the several
Underwriters to purchase the Option Shares, as the case may be) shall
terminate without liability on the part of any non-defaulting Underwriter
or the Company. In any such case either the Representatives or the Company
shall have the right to postpone the Closing Date (or, in the case of the
Option Shares, the Additional Closing Date), but in no event for longer
than seven days, in order that the required changes, if any, in the
Registration Statement and in the Prospectus or in any other documents or
arrangements may be effected. Any action taken under this paragraph shall
not relieve any defaulting Underwriter from liability in respect of any
default of such Underwriter under this Agreement.
10. If this Agreement shall be terminated by the Underwriters, or
any of them, because of any failure or refusal on the part of the Company
to comply with the terms or to fulfill any of the conditions of this
Agreement, or if for any reason the Company shall be unable to perform its
obligations under this Agreement, the Company agrees to reimburse the
Underwriters or such Underwriters as have so terminated this Agreement with
respect to themselves, severally, for all out-of-pocket expenses (including
the fees and expenses of their counsel) reasonably incurred by the
Underwriters in connection with this Agreement or the offering contemplated
hereunder.
20
11. This Agreement shall inure to the benefit of and be binding
upon the Company, the Underwriters, any controlling persons referred to
herein and their respective successors, assigns, heirs and legal
representatives. Nothing expressed or mentioned in this Agreement is
intended or shall be construed to give any other person, firm or
corporation any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. No purchaser
of Shares from any Underwriter shall be deemed to be a successor by reason
merely of such purchase.
12. Any action by the Underwriters hereunder may be taken by the
Representatives jointly or by J.P. Morgan Securities Inc. alone on behalf
of the Underwriters, and any such action taken by the Representatives
jointly or by J.P. Morgan Securities alone shall be binding upon the
Underwriters. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
Underwriters shall be given to the Representatives c/o J.P. Morgan
Securities Inc., 60 Wall Street, New York, New York 10260, Attention:
Syndicate Department. Notices to the Company shall be given to it at
Cadmus Communications Corporation, 6620 West Broad Street, Suite 500,
Richmond, Virginia 23230, Attention: Bruce V. Thomas.
13. This Agreement may be signed in counterparts, each of which
shall be an original and all of which together shall constitute one and the
same instrument. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
the conflicts of laws provisions thereof.
If the foregoing is in accordance with your understanding, please
sign and return four counterparts hereof.
Very truly yours,
CADMUS COMMUNICATIONS
CORPORATION
By:_________________________
Title:
21
Accepted: _______________, 1995
J.P. Morgan Securities Inc.
Interstate/Johnson Lane Corporation
Acting severally on behalf of them-
selves and the several Underwriters
listed in Schedule I hereto.
By: J.P. Morgan Securities Inc.
Acting on behalf of itself and the
several Underwriters listed in
Schedule I hereto.
By:________________________
Title:
22
SCHEDULE I
Number of Shares
Underwriter To Be Purchased
J.P. Morgan Securities Inc. . . . . . .
Interstate/Johnson Lane Corporation . .
________________
Total: . . . . . . . . . 1,500,000
23
ANNEX A
[List of Material Subsidiaries]
24
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
(and to all references to our Firm) included in or made part of this Amendment
No. 1 to Registration Statement File No. 33-62655.
ARTHUR ANDERSEN LLP
Richmond, Virginia,
October 13, 1995
EXHIBIT 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this amendment no. 1 to the registration
statement of Cadmus Communications Corporation on Form S-3, of our report dated
August 2, 1994 on our audits of the consolidated financial statements and
financial statement schedules of Cadmus Communications Corporation and
Subsidiaries as of June 30, 1994, and for the years ended June 30, 1994 and
1993, which report is included in this Form S-3. We also consent to the
reference to our firm under the captions "Experts," "Summary Financial Data" and
"Selected Financial and Operating Data."
COOPERS & LYBRAND L.L.P
Richmond, Virginia
October 13, 1995
