SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
( X ) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NUMBER 0-12954
CADMUS COMMUNICATIONS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
VIRGINIA 54-1274108
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
6620 WEST BROAD STREET, SUITE 500
RICHMOND, VIRGINIA 23230
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(804) 287-5680
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of January 31, 1996.
CLASS OUTSTANDING AT JANUARY 31, 1996
Common Stock, $.50 Par Value 7,872,806
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
December 31, 1995 and June 30, 1995
Consolidated Statements of Income -- 4
Three and Six-Month Periods Ended
December 31, 1995 and 1994
Consolidated Statements of Cash Flows -- 5
Six Months Ended December 31, 1995 and 1994
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE>
PART I. Financial Information
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1995 1995
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,710 $ 226
Accounts receivable, net 71,620 57,204
Inventories 21,827 16,308
Deferred income taxes 1,092 1,092
Prepaid expenses and other 2,310 1,489
-------- --------
Total current assets 99,559 76,319
Property, plant, and equipment (net of accumulated depreciation
of $81,299 at December 31, 1995 and $76,789 at June 30, 1995) 92,104 84,570
Other assets 3,497 2,400
Goodwill and intangibles, net 21,016 8,281
-------- --------
Total Assets $216,176 $171,570
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 3,775
Note payable - The Software Factory $ 5,000
Current maturities of long-term debt 121 2,381
Accounts payable 24,457 18,818
Accrued expenses:
Compensation 8,329 10,905
Other 13,964 7,907
Income taxes 948
Restructuring charge 40 120
-------- ---------
Total current liabilities 52,859 43,906
Long-term debt 44,903 53,961
Other long-term liabilities 8,111 7,180
Deferred income taxes 4,641 4,641
Shareholders' equity:
Common stock ($.50 par value; authorized-16,000 shares; issued and outstanding
shares-7,872 at December 31, 1995 and 6,030 at June 30, 1995) 3,935 3,015
Capital in excess of par value 52,538 12,448
Retained earnings 49,189 46,419
-------- --------
Total shareholders' equity 105,662 61,882
-------- --------
Total Liabilities and Shareholders' Equity $216,176 $171,570
======= =======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
------ ------ -------- ------
<S> <C> <C> <C> <C>
Net sales $85,835 $67,237 $160,508 $127,620
Operating expenses
Cost of sales 65,090 50,444 121,893 97,075
Selling and administrative 14,988 12,555 28,906 23,552
------ ------ ------- --------
Operating income 5,757 4,238 9,709 6,993
Interest and other (income) expenses
Interest 1,395 1,473 2,817 2,740
Other (23) (179) 34 (298)
-------- ------- --------- ---------
Income before income taxes 4,385 2,944 6,858 4,551
Income taxes 1,649 1,160 2,606 1,793
------- ------- -------- ---------
Income before extraordinary item 2,736 1,784 4,252 2,758
Extraordinary loss on debt prepayment, net
of $487 tax benefit 795 795
------- --------- --------
Net income $ 1,941 $ 1,784 $ 3,457 $ 2,758
======= ======= ======== =========
EARNINGS PER SHARE:
Income before extraordinary item $ .38 $ .29 $ .62 $ .45
Extraordinary loss on debt prepayment, net .12 .12
-------- --------- ---------
Net income per share $ .26 $ .29 $ .50 $ .45
======== ======== ========= ==========
Average number of common shares outstanding 7,458 6,195 6,886 6,191
======= ======= ======== =========
Cash dividends per common share $ .05 $ .05 $ .10 $ .10
======== ======== ========= ==========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1995 1994
------ -----
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 3,457 $ 2,758
Adjustments to reconcile net income to net cash
provided by operating activities:
Extraordinary loss on debt prepayment 795
Depreciation and amortization 6,443 5,989
Other, net 786 265
------- -------
11,481 9,012
------- ------
Changes in operating assets and liabilities, excluding effects of acquisitions:
Accounts receivable (11,008) (396)
Inventories (5,129) (2,765)
Accounts payable, accrued expenses, and income taxes 7,300 (732)
Other, net (1,144) (187)
-------- ------
(9,981) (4,080)
Net cash provided by operating activities 1,500 4,932
------- -------
INVESTING ACTIVITIES
Purchases of property, plant, and equipment (11,880) (9,732)
Proceeds from sale of property and equipment 104 2,811
Cash paid for businesses acquired (8,334) (902)
Cash deposited in escrow for business acquired (500)
Other, net (287) 547
------- -------
Net cash used in investing activities (20,897) (7,276)
-------- ------
FINANCING ACTIVITIES
Proceeds from short-term borrowings 27,500 5,695
Repayment of short-term borrowings (31,275) (5,300)
Proceeds from long-term borrowings 171
Repayment of long-term borrowings (11,318) (34)
Penalty on early extinguishment of debt (1,282)
Proceeds from stock offering, net 38,684
Dividends paid (696) (600)
Proceeds from exercise of stock options 326 252
Other, net (58)
-------
Net cash provided by financing activities 21,881 184
------ ------
Increase (decrease) in cash and cash equivalents 2,484 (2,160)
Cash and cash equivalents at beginning of period 226 3,855
------- ------
Cash and cash equivalents at end of period $ 2,710 $ 1,695
======= ======
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
5
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim financial statements are unaudited. In the opinion of
management, they reflect all adjustments (which consist only of those of a
normal recurring nature) necessary for a fair presentation of results for
the periods indicated. The results of operations for any interim period are
not necessarily indicative of results for the full year. These financial
statements should be read in conjunction with the financial statements and
notes thereto contained in the Company's annual report for the year ended
June 30, 1995.
2. Net income per common share is computed based upon the weighted average
number of shares outstanding during the periods presented. Shares issuable
upon exercise of currently exercisable stock options are treated as common
stock equivalents for purposes of computing primary and fully diluted net
income per share.
3. Inventories are valued at the lower of cost or market, principally using the
last-in, first-out (LIFO) method (66.4% as of December 31, 1995 and 70.5% as
of June 30, 1995). The first-in, first-out (FIFO) method is used to value
the remaining inventories. The components of inventories were as follows (in
thousands):
December 31, June 30,
1995 1995
Raw materials and supplies $ 8,140 $ 6,044
Work in process:
Materials 4,605 3,270
Other manufacturing costs 7,058 5,315
Finished goods 2,024 1,679
------ ------
$21,827 $16,308
====== ======
4. On November 1, 1995, the Company acquired substantially all of the assets
and assumed certain liabilities of The Software Factory, Inc. (the "Software
Factory"). The Software Factory provides software packaging and media
duplication services and has annual sales of approximately $11.0 million.
The purchase price of $13.9 million consisted of $2.0 million value of
Cadmus common stock and $11.9 million in cash payments. The Company issued
79,681 common shares to the Software Factory shareholders based on an agreed
upon share price of $25.10. The cash payments included $0.5 million
deposited in escrow at closing and $6.4 million cash disbursed. The
remaining $5.0 million is evidenced by a note payable to the Software
Factory due January 1996. This note was paid in January 1996.
The following unaudited pro forma consolidated financial information
combines the results of the Software Factory as if they had been acquired as
of the beginning of the periods presented. The periods presented include the
impact of the following adjustments: amortization of the costs in excess of
the net assets acquired over twenty years and income taxes on the earnings
at an effective tax rate of 38.0% and 38.7% for the six months ended
December 31, 1995 and 1994, respectively, since the Software Factory
qualified as an "S" corporation which previously had no income tax expense.
<TABLE>
<CAPTION>
Six Months Ended December 31,
1995 1994
<S> <C> <C>
Net sales $164,360 $133,016
Income before extraordinary item 4,641 3,228
Net income 3,846 3,228
Earnings per share:
Income before extraordinary item $ .68 $ .51
Net income .56 .51
</TABLE>
The pro forma financial information is not necessarily indicative of what
would actually have occurred if the acquisition took place at the beginning
of the periods presented, nor is it intended to be indicative of future
results.
6
<PAGE>
On December 18, 1995, the Company acquired the assets of the Atlanta
division of Encryption Technology Corporation ("ETC") for approximately $2.3
million in cash payments. ETC provides software packaging, media
duplication, and documentation services. The cash payments consisted of $1.3
million paid at closing and $1.0 million paid in February 1996.
In July 1995, Cadmus acquired the assets of Na-Tex, Inc. ("Na-Tex"), the
publisher of Collector's World of Racing (subsequently renamed RPM). In
September 1995, the Company acquired certain assets of The Mowry Company
("Mowry"), a direct marketing agency located in Long Beach, California. In
October 1995, the Company acquired the assets of PeachWeb Corp.
("PeachWeb"), a developer of Internet web sites. The Na-Tex, Mowry, and
PeachWeb acquisitions were not material, either individually or in the
aggregate, to the Company's financial statements.
All acquisitions were accounted for under the purchase method and,
accordingly, the costs of the acquisitions were allocated to the assets
acquired and liabilities assumed based on their respective fair values, with
the excess of purchase price over the fair value amortized by the
straight-line method over twenty years. The funds used to acquire the
Software Factory, ETC, and PeachWeb were provided from the proceeds of the
issuance of 1.725 million shares of common stock (see Note 6).
5. On December 14, 1995, the Company retired $11.2 million principal of 9.76%
Senior Notes due June 2000, and recorded a $1.3 million ($0.8 million after
tax) extraordinary loss relating to the early retirement of this debt. The
funds used for the debt retirement were provided from the proceeds of the
issuance of 1.725 million shares of common stock (see Note 6).
On January 5, 1996, the Company entered into an agreement for a revolving
credit facility of $85 million with its four major banks, replacing the
former lines of credit. This new unsecured line of credit has a five-year
term expiring January 2001. The Company has the following interest rate
options: (i) adjusted LIBOR, (ii) the higher of the prime rate or one-half
of one percent above the federal funds rate or (iii) money market rate. This
agreement also requires an annual facility fee between 0.125% and 0.20% of
the facility based on the Company's ratio of funded debt to total capital.
6. On November 7, 1995, the Company completed the issuance of an additional
1.725 million shares of common stock through a public offering, resulting in
net proceeds (after deducting issuance costs) of $38.7 million. The Company
used the net proceeds to (i) repay $11.2 million of 9.76% Senior Notes due
June 2000, plus a $1.3 million prepayment penalty, (ii) fund the $14.5
million cash portion of the acquisition cost of the assets of the Software
Factory, ETC, and PeachWeb Corp., and (iii) repay short-term borrowings used
to fund seasonal working capital needs with an interest rate.
7
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Net sales for the second quarter of fiscal 1996 increased 27.7% to $85.8 million
compared to $67.2 million for the second quarter last year. Operating income for
the second quarter rose to $5.7 million in fiscal 1996 from $4.2 million for the
same period of fiscal 1995. Income before extraordinary item was $2.7 million,
or $.38 per share, for the second quarter which represents a 50.0% increase from
fiscal 1995 income before extraordinary item of $1.8 million, or $.29 per share.
There were 7,458,000 average outstanding shares for the second quarter of fiscal
1996, compared to 6,195,000 average outstanding shares for the same period of
last year. This increase reflects shares issued in connection with the Company's
equity offering completed on November 7, 1995.
For the six-month period ended December 31, 1995, net sales increased to $160.5
million up 25.8% from $127.6 million for the same period of fiscal 1995.
Operating income increased for the first six months of fiscal 1996 to $9.7
million up from $7.0 million for the same period of fiscal 1995. Income before
extraordinary item was $4.3 million, or $.62 per share, for the six months
ending December 31, 1995. This represents a 53.6% increase from fiscal 1995
income before extraordinary item of $2.8 million, or $.45 per share. There were
6,886,000 average outstanding shares for the second quarter of fiscal 1996
compared to 6,191,000 average outstanding shares for the same period of last
year.
Net income for the second quarter and for the six months ended December 31,
1995, included an $0.8 million extraordinary loss resulting from the prepayment
of $11.2 million of 9.76% Senior Notes. After this extraordinary item, net
income was $1.9 million, or $.26 per share, compared to $1.8 million, or $.29
per share, for the second quarter of fiscal 1996 and 1995, respectively. Net
income for the first six months of fiscal 1996 was $3.5 million, or $.50 per
share, compared to $2.8 million, or $.45 per share, for the same period of
fiscal 1995.
The following table presents the major components from the Consolidated
Statements of Income as a percent of sales for the three and six-month periods
ended December 31, 1995 and 1994:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 75.8 75.0 75.9 76.1
------- ------- ------- ------
Gross profit 24.2 25.0 24.1 23.9
Selling and administrative 17.5 18.7 18.0 18.4
------- ------- ------- -------
Operating income 6.7 6.3 6.1 5.5
Interest expense 1.6 2.2 1.8 2.1
Other (income) expenses 0.0 (0.3) 0.0 (0.2)
------- ------- ------- -------
Income before income taxes 5.1 4.4 4.3 3.6
Income taxes 1.9 1.7 1.6 1.4
------- ------- ------- -------
Income before extraordinary item 3.2 2.7 2.7 2.2
Extraordinary loss on debt prepayment, net 0.9 0.5
------- -------- -------- -------
Net income 2.3% 2.7% 2.2% 2.2%
======= ======= ======= =======
</TABLE>
8
<PAGE>
RESULTS OF OPERATIONS (continued)
SALES
The Company groups sales into three business groups: printing, marketing, and
publishing. The table below displays net sales for each of these groups
expressed as a percent of net sales:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
------ ------ ------ -----
<S> <C> <C> <C> <C>
Printing 69.9% 75.1% 71.8% 74.4%
Marketing 23.0 18.2 21.5 18.2
Publishing 7.1 6.7 6.7 7.4
------ ------ ------ ------
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Sales increased in each business group for both the three and six-month periods
of fiscal 1996 compared to the same periods of fiscal 1995 as follows: printing
15.6% and 18.0% increases; marketing 56.0% and 43.9% increases; and publishing
32.2% and 10.7% increases. Adjusted for acquisitions and the cessation of
operations of Sports Marketing and Kids Link in June 1995, overall marketing
sales were up 37.9% for the second quarter and 32.9% for the first six months of
fiscal 1996.
PRINTING SALES
The increase in printing sales for both the second quarter and six-month period
ended December 31, 1995, compared to the same periods in fiscal 1995, was
attributable to growth in each of the five printing product lines. Strong
performance in the current fiscal year in the financial communications (81.3%
and 110.0% increases), magazines (28.9% and 31.2% increases) and research
journals (3.0% and 5.2% increases) product lines accounted for 86.8% of the
growth in printing sales. Sales in the financial communications product line
rose due to strong equity and debt new-issue markets, increased merger activity,
and increased mutual fund business. Sales growth in the magazines product line
is a result of the addition of several new accounts.
MARKETING SALES
The increase in marketing revenues for the second quarter and first six months
of fiscal 1996 compared to the same periods in fiscal 1995, was driven primarily
by increases in point-of-purchase revenues (26.7% and 28.2% increases), direct
marketing sales (65.1% and 45.3% increases), and catalog photography and design
revenues (76.2% and 59.9% increases). In addition, the introduction of the
software replication product line through the acquisition of The Software
Factory during the second quarter boosted marketing revenues. Point-of-purchase
revenue increases were the result of both growth in existing accounts and the
addition of several new accounts, primarily in the quick service restaurant
division. The growth in direct marketing revenues resulted primarily from the
acquisition of Ronald James Direct, Inc. in the fourth quarter of fiscal 1995
and the acquisition of The Mowry Company in the first quarter of fiscal 1996.
In addition, Cadmus Interactive, which was formed at the end of first quarter
fiscal 1995, contributed 4.2% and 7.3% of the overall increase in marketing
revenues for the three and six-month periods ended December 31, 1995,
respectively. This multimedia product line, which provides state-of-the-art
computer graphics, has attracted several Fortune 1000 customers to deliver a
wide variety of presentations aimed toward both marketing impact and educational
programs. The Company has further expanded its capabilities in this area with
the acquisition of PeachWeb Corp., a developer of Internet web sites, in October
1995.
9
<PAGE>
RESULTS OF OPERATIONS (continued)
PUBLISHING SALES
After a slight decline in first quarter of fiscal 1996, publishing revenues rose
32.2% in the second quarter resulting in an increase of 10.7% for the first six
months of this fiscal year compared to the first six months of fiscal 1995. The
increase in publishing revenues was attributable to increases for the custom
publishing product line of 78.1% and 43.8% for the second quarter and first six
months of fiscal 1996, respectively. These increases are due to the addition of
several new accounts combined with record advertising sales. The growth in
advertising sales was the result of the SkyBuy program introduced in the second
quarter of fiscal 1996 which expands in-flight readership through a partnering
of Cadmus and Continental Airlines with TWA and America West. The consumer
publishing product line posted a gain for the second quarter; however, sales
were down slightly for the first six months of fiscal 1996. The decrease in
consumer publishing sales for the first six months resulted from the timing of a
trade show and the absence of a Tuff Stuff special edition, which were included
in fiscal 1995 first quarter revenues. Consumer publishing revenues are expected
to remain relatively flat as the Company looks to expand the circulation of the
new RPM and publication of Mid-Atlantic Soccer! has been suspended. In addition
to expanding the circulation of RPM, the Company will continue to produce
various special issues targeted toward niche markets such as Gamer, for gaming
card collectors, Kenner, for Kenner figurine collectors, and Grid Iron, for
football enthusiasts.
COSTS AND OTHER EXPENSES
Cost of sales for the second quarter of fiscal 1996 were up by 0.8% of sales.
However, selling and administrative expenses decreased by 1.2% of sales for the
second quarter. The increase in the cost of sales and the decrease in the
selling and administrative expenses as a percent of sales are a result of a
change in the sales mix combined with various capacity issues which resulted in
a higher level of outsourcing.
Cost of sales decreased to 75.9% of sales for the first six months of fiscal
1996 compared to 76.1% of sales for the same period last year. Selling and
administrative expenses also decreased for the first six months of fiscal 1996
to 18.0% of sales compared to 18.4% of sales in fiscal 1995. Both the cost of
sales and the selling and administrative expense ratios were positively impacted
by the savings generated from reductions in the workforce related to the
restructuring of the Company's composition and prepress operations which began
during the first quarter of fiscal 1995. In addition, savings generated from
procurement activities with rebates and freight consolidation contributed to the
overall decrease in the cost of sales ratio. However, restructuring savings in
selling and administrative expenses were offset somewhat by costs associated
with establishing the team to service the General Electric contract, launching
the project to unify Cadmus, establishing and operating a New York office for
the financial communications product line, and adding human resources and
information technologies executives and support staff.
Other (income) expenses as a percent of sales shifted from income of 0.3% and
0.2% of sales for the second quarter and first six months, respectively of
fiscal 1995 to zero percent for the current year. This shift was due to the sale
of the Company's fifty percent ownership in Central Florida Press, L.C. during
the third quarter of fiscal 1995. During the second quarter and first six months
of fiscal 1995, equity income from this partnership totaled $0.2 million and
$0.4 million, respectively.
The effective income tax rate changed from 39.4% for the second quarter and
first six months of fiscal 1995 to 38.0% for the same period of fiscal 1996, a
decrease attributable to both higher levels of pretax income and a decrease in
the overall effective state tax rate.
10
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
For the six-month period, net cash provided by operating activities declined
from $4.9 million for fiscal 1995 to $1.5 million for fiscal year 1996. This
decrease resulted primarily from an $11.0 million increase in accounts
receivable and a $5.1 million increase in inventories, somewhat offset by a $7.3
million increase in accounts payable, accrued expenses and income taxes. The
increase in accounts receivable was due to both the timing of higher sales and a
slowdown in collection cycles. September accounted for approximately half of the
increase in sales from the prior year first quarter. Slowdown in collections
occurred primarily in Fortune 1000 companies and does not reflect a
deterioration of the quality of the Company's receivable portfolio. The Company
is undertaking efforts to enhance its billing processes, which are expected to
improve collections. The $5.1 million increase in inventory levels was driven
primarily by a $3.1 million increase in work in process which typically turns
around within a quarter. In addition, finished goods and raw materials
inventories were up $0.3 million and $2.1 million, respectively. Increases in
all components of inventories were consistent with projected sales volume.
Net cash used in investing activities totaled $20.9 million for the first six
months of fiscal 1996 compared to $7.3 million for the same period of fiscal
1995. The increase was due primarily to $8.8 million cash paid in connection
with acquisitions during the current fiscal year.
For the first six months of fiscal 1996, net cash provided by financing
activities totaled $21.9 million, which represents a $21.7 million change from
the $0.2 million used in financing activities for the first six months of fiscal
1995. The change from prior year was due to $38.7 in net proceeds received from
the issuance of 1.725 million shares of common stock, partially offset by the
use of these funds to repay $11.2 million of 9.76% Senior Notes and the $1.3
million prepayment penalty, and to repay short-term borrowings which were used
to finance seasonal working capital needs.
Capital investment in property, plant, and equipment totaled $11.9 million
during the first six months of fiscal 1996. Significant projects included in
this amount were presses for both the Richmond and Baltimore manufacturing
facilities, various prepress equipment, an automated imposing platemaker for the
magazine product line in Richmond, a platesetter for the Easton manufacturing
facility, and a die cutter and gluer for the Charlotte manufacturing facility.
For fiscal 1996, the Company projects that capital spending will total
approximately $21.0 million.
Total debt at December 31, 1995 was $45.0 million, representing a $15.1 million
decrease from the $60.1 million at June 30, 1995. The decline in debt levels was
due to the repayment of 9.76% Senior Notes and short-term borrowings used to
fund seasonal working capital needs. The Company's debt-to-capital ratio at
December 31, 1995 was 32.1% compared to 49.3% at June 30, 1995. At December 31,
1995, there were no borrowings under the Company's $25 million revolving credit
agreements.
On January 5, 1996, the Company entered into an agreement for a revolving credit
facility of $85 million with its four major banks, replacing the former lines of
credit. This new unsecured line of credit has a five-year term expiring January
2001. The Company has the following interest rate options: (i) adjusted LIBOR,
(ii) the higher of the prime rate or one-half of one percent above the federal
funds rate or (iii) money market rate. This agreement also requires an annual
facility fee between 0.125% and 0.20% of the facility based on the Company's
ratio of funded debt to total capital.
On November 7, 1995, the Company completed the issuance of an additional 1.725
million shares of common stock through a public offering, resulting in net
proceeds (after deducting issuance costs) of $38.7 million. The Company used the
net proceeds to (i) repay $11.2 million of 9.76% Senior Notes due June 2000,
plus a $1.3 million prepayment penalty, (ii) fund the $14.5 million cash portion
of the acquisition cost of the assets of the Software Factory, ETC, and PeachWeb
Corp., and (iii) repay short-term borrowings used to fund seasonal working
capital needs with an interest rate of approximately 6.4% which mature at
February 1997.
11
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) At the 1995 Annual Meeting of Shareholders of the Company ("Annual
Meeting") held on November 8, 1995, 5,536,207 shares of the
Company's outstanding common stock were present in person or by
proxy and entitled to vote.
(b) At the Annual Meeting, the following matters were voted upon and
received the vote set forth below:
(1) Election of Directors. Each nominee for director was elected,
having received the following
vote:
<TABLE>
<CAPTION>
Nominee For Withheld Broker Non-vote
<S> <C> <C> <C>
Price H. Gwynn, III 5,530,179 6,028 0
John C. Purnell, Jr. 5,530,395 5,812 0
Russell M. Robinson, II 5,530,695 5,512 0
John W. Rosenblum 5,530,687 5,520 0
Jeanne M. Liedtka 5,528,508 7,699 0
</TABLE>
(2) Ratification of designation of Arthur Andersen LLP as
independent public accountants for the current year.
Designation of the auditors was ratified, having received the
following vote:
For: 5,521,960
Against: 3,814
Abstain: 10,433
Broker Non-vote: 0
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Description
Exhibit 11 Statement Regarding Computation
of Net Income per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K:
(1) The Company filed a Form 8-K, dated October 16, 1995, to
report the acquisition of The Mowry Company, PeachWeb Corp.,
and The Software Factory, Inc., including the financial
statements of The Software Factory, Inc. and Cadmus proforma
financial statements as of June 30, 1995.
(2) The Company filed a Form 8-K, dated October 24, 1995,
reporting fiscal year 1996 first quarter earnings.
(3) The Company filed a Form 8-K, dated November 8, 1995,
reporting the consummation of the purchase of the assets of
The Software Factory, Inc.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CADMUS COMMUNICATIONS CORPORATION
Date: February 14, 1996
/s/ C. Stephenson Gillispie, Jr.
C. Stephenson Gillispie, Jr.
Chairman, President, and Chief Executive Officer
Date: February 14, 1996
/s/ Michael Dinkins
Michael Dinkins
Vice President and Chief Financial Officer
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1995 1994 1995 1994
---------- ---------- ----------- --------
<S> <C> <C> <C> <C>
Net income per share was computed as follows:
PRIMARY:
1) Net income $1,941,462 $1,784,931 $3,457,257 $2,757,655
========= ========= ========= =========
2) Weighted average common
shares outstanding 7,169,468 6,005,070 6,604,831 5,998,436
3) Incremental shares under stock options computed
under the treasury stock method using the
average market price of issuer's common stock
during the periods 288,881 189,894 280,403 192,439
--------- --------- --------- ---------
4) Weighted average common and common equivalent
shares outstanding 7,458,349 6,194,964 6,885,234 6,190,875
========= ========= ========= =========
5) Net income per share (item 1 divided by item 4) $ .26 $ .29 $ .50 $ .45
=========== =========== =========== ===========
FULLY DILUTED:
1) Net income $1,941,462 $1,784,931 $3,457,257 $2,757,655
========= ========= ========= =========
2) Weighted average common shares outstanding 7,169,468 6,005,070 6,604,831 5,998,436
3) Incremental shares under stock options computed
under the treasury stock method using the
market price of issuer's common at the end
of the periods if higher than the average
market price 301,058 189,894 300,246 192,439
--------- --------- --------- ---------
4) Weighted average common and common equivalent
shares outstanding 7,470,526 6,194,964 6,905,077 6,190,875
========= ========= ========= =========
5) Net income per share (item 1 divided by item 4) $ .26 $ .29 $ .50 $ .45
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 2,710
<SECURITIES> 0
<RECEIVABLES> 73,256
<ALLOWANCES> 1,636
<INVENTORY> 21,827
<CURRENT-ASSETS> 99,559
<PP&E> 173,402
<DEPRECIATION> 81,299
<TOTAL-ASSETS> 216,176
<CURRENT-LIABILITIES> 52,859
<BONDS> 44,903
<COMMON> 3,935
0
0
<OTHER-SE> 101,726
<TOTAL-LIABILITY-AND-EQUITY> 216,176
<SALES> 85,835
<TOTAL-REVENUES> 85,835
<CGS> 65,090
<TOTAL-COSTS> 65,090
<OTHER-EXPENSES> (23)
<LOSS-PROVISION> 427
<INTEREST-EXPENSE> 1,395
<INCOME-PRETAX> 4,385
<INCOME-TAX> 1,649
<INCOME-CONTINUING> 2,736
<DISCONTINUED> 0
<EXTRAORDINARY> (795)
<CHANGES> 0
<NET-INCOME> 1,941
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
