SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
FOR ANNUAL AND TRANSITION REPORTS
PURSUANT TO SECTIONS 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
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 No.)
Richmond, Virginia 23230
(Address of principal executive offices, including zip code)
------------
Registrant's telephone number, including area code: (804) 287-5680
------------
Securities registered pursuant to Section 12(g) of the Act:
Cadmus Communications Corporation Common Stock, $.50 par value, and
Preferred Stock Purchase Rights
(Title of Class)
------------
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. { }
As of July 31, 1997, 7,821,906 shares of Registrant's common
stock were outstanding, and the aggregate market value of the Registrant's
common stock held by non-affiliates was approximately $121,580,398 based on the
last sale price on July 31, 1997. Documents Incorporated by Reference: Portions
of the Registrant's Annual Report to Shareholders for the fiscal year ended June
30, 1997 are incorporated in Parts I and II of this report. Portions of the
Proxy Statement of Registrant for the Annual Meeting of Shareholders to be held
on November 12, 1997 are incorporated in Part III of this report.
<PAGE>
INDEX
PART I Page
----
Item 1. Business...........................................................3
Item 2. Properties.........................................................6
Item 3. Legal Proceedings..................................................6
Item 4. Submission of Matters to a Vote of Security Holders................6
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.................................8
Item 6. Selected Financial Data............................................8
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations...............8
Item 8. Financial Statements and Supplementary Data........................8
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.........................8
PART III
Item 10. Directors and Executive Officers of the Registrant.................8
Item 11. Executive Compensation.............................................9
Item 12. Security Ownership of Certain Beneficial Owners
and Management..............................................9
Item 13. Certain Relationships and Related Transactions.....................9
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K........................................10
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
Cadmus Communications Corporation, a Virginia corporation, ("Cadmus" or
the "Company"), is an integrated communications company offering products and
services in the areas of Marketing Communications and Professional
Communications. Cadmus was formed in 1984 through the merger of The William Byrd
Press, Incorporated ("Byrd"), a leading regional publications printer in
Virginia, and Washburn Graphics, Inc. ("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
Company's principal executive offices are located at 6620 West Broad Street,
Suite 240, Richmond, Virginia 23230, and its telephone number is (804) 287-5680.
The Company's Internet address is http://www.cadmus.com. Unless the context
otherwise requires, references herein to Cadmus or the Company shall refer to
Cadmus Communications Corporation and its consolidated subsidiaries.
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); 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 of scientific, technical, and
medical 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.). In
fiscal 1996, the Company acquired all the outstanding stock of Lancaster Press,
Inc. and its subsidiaries, a Pennsylvania-based producer of scientific,
technical and medical journals; substantially all the assets and certain
liabilities of The Software Factory, Inc. (now known as Cadmus Technology
Solutions), an Atlanta-based provider of software packaging and media
duplication services; the assets of Na-Tex, Inc., the publisher of Collector's
World of Racing (subsequently named Tuff Stuff's RPM); certain assets of The
Mowry Company, a direct marketing agency located in Long Beach, California; the
assets of PeachWeb Corp., a developer of Internet web sites; and the assets of
the Atlanta division of Encryption Technology Corporation, a provider of
software packaging, media duplication, and documentation services.
Cadmus has developed new products and services that are 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 created and maintained by Cadmus.
Organizational Structure
During the fourth quarter of fiscal 1997, Cadmus announced a major
restructuring plan designed to exit or reshape those businesses which were not
performing or were non-core to its strategy, and to create a more efficient and
cost effective organizational structure. Contemporaneous with the restructuring,
the Company reorganized its operational structure to form Cadmus Marketing
Communications and Cadmus Professional Communications. Cadmus Marketing
Communications was formed by merging the former Graphics Communications and
Marketing groups. Cadmus Professional Communications was previously known as the
Periodicals Group. The restructuring plan also included the following actions:
closure of the Baltimore promotional printing facility (Garamond), closure of
the Long Beach-based direct marketing agency and consolidation of the Atlanta
and Richmond-based interactive divisions.
<PAGE>
The Company's previous organizational structure consisted of the
Periodicals, Graphic Communications, Marketing, and Publishing groups. Effective
with the sale of Tuff Stuff in the first quarter of fiscal 1997, the Publishing
Group ceased to exist and custom publishing was realigned into the Marketing
Group.
Product Lines
Product offerings as of June 30, 1997 were organized around the areas
of Marketing Communications and Professional Communications.
Marketing Communications
Marketing Communications includes tactical marketing
communications, specialty packaging and promotional printing, financial
communications, point of purchase and print outsourcing product lines.
Marketing Communications generated approximately 47% of the Company's net sales
in fiscal 1997.
Tactical Marketing Communications. Cadmus provides total marketing
communications solutions specializing in creative design, custom publishing
(including newsletters and catalogs), advertising, interactive media, and
direct-response marketing.
Specialty Packaging and Promotional Printing. Cadmus offers end-to-end
services for packaging and promotional products that function as a uniform
component of a client's overall marketing plan. Its competencies include
structural design, accompanying literature creation, front-end pre-press, print,
inventory management, fulfillment, and software manufacturing. This product line
specializes in high tech and retail clothing promotional services.
Financial Communications. Cadmus specializes in the management,
preparation, printing, electronic filing and distribution of documentation
required by the Securities and Exchange Commission. The financial communications
product line provides communications solutions for the legal, investment
banking, investment service and financial services markets.
Point of Purchase. Cadmus serves as a marketing liaison between parent
companies and franchise owners in the fast-food, transportation, and
hotel/lodging industries. This product line provides research-based consultation
on the most effective messages and media to stimulate point-of-sale purchases,
and then produces, catalogs and fulfills those promotional materials.
Print Outsourcing. Cadmus develops communications solutions that
significantly reduce the complexity of managing print and electronic message
dissemination for Fortune 1000 companies and trade associations. Print
Outsourcing produces and distributes general printing, promotional literature,
sales documents, directories and membership materials.
Professional Communications
Professional Communications includes the journal services product
line which specializes in journals, magazines and related communications
targeted to trade and professional audiences. Professional Communications
generated approximately 53% of the Company's net sales in fiscal 1997.
Journal Services. Cadmus Journal Services is an industry leader in the
production of scientific, technical and medical ("STM") professional journals.
Services are directed toward four distinct markets - STM society publishers, STM
commercial publishers, trade/professional associations and educational
institutions, providing a broad range of journal and magazine information
management solutions. Services include electronic editing, digital composition
and prepress, a full complement of press/finishing services, CD-ROM and Internet
services.
<PAGE>
Other Factors Affecting the Business of Cadmus
Seasonal Fluctuations
Seasonal fluctuations occur in the overall demand for printing.
Printing of both periodicals for the educational and scholarly market and
promotional materials tends to decline in the summer months. However, consumer
publications tend to peak before Christmas and before Easter. Printing of
interim financial statements clusters around the end of the first month in each
calendar quarter and printing of annual reports tends to fall into the first and
second calendar quarters. All of these factors combine to give Cadmus a seasonal
pattern with the months October through June typically stronger than the months
July through September.
Raw Materials
The principal raw material used in Cadmus' business is paper.
Significant stock inventories are not maintained except at Cadmus Financial in
Richmond and Cadmus Journal Services, where a supply of roll paper stock is
required to operate the web presses. The other companies generally purchase
paper on a direct order basis for specific jobs. Cadmus purchases its paper
requirements under agreements that guarantee tonnage and provide short range
price protection for three to six month intervals. The price of paper charged to
customers is subject to escalation so that, except in rare instances, Cadmus
does not have exposure to changes in the cost of paper.
The Company uses a variety of other raw materials including ink, film,
offset plates, chemicals and solvents, glue, wire, and subcontracted components.
In general, the Company has not experienced any significant difficulty in
obtaining raw materials.
Competition
Cadmus is subject to competition from a large number of companies, some
of which have greater resources and capacity. In recent years, there has been an
excess of capacity in the printing industry which has increased competition.
Rapid technological change has brought new competitors to the marketplace.
The markets served by Cadmus face competition based on a combination of
factors including quality, service levels, and price.
Employees
As of July 31, 1997, Cadmus employed approximately 3,000 persons,
approximately 7% of which are currently covered by collective bargaining
agreements. 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.
<PAGE>
ITEM 2. PROPERTIES
The Company considers all of its properties, together with the related machinery
and equipment contained therein, to be well-maintained, in good operating
condition, and adequate for its present needs. The Company will expand as
necessary for the continued development of its operations. The following table
contains information regarding the Company's primary facilities as of June 30,
1997:
<TABLE>
<CAPTION>
Location Cadmus Product Lines Served Building
-------- --------------------------- --------
<S> <C>
Richmond, Virginia Journal Services, Promotional Printing Owned;
274,000 sq. ft.
Easton, Maryland Journal Services Owned;
202,400 sq. ft.
Atlanta, Georgia Point-of-Purchase Owned;
179,000 sq. ft.
Charlotte, North Carolina Financial Communications, Specialty Packaging, Owned;
Promotional Printing 198,000 sq. ft.
Richmond, Virginia Promotional Printing, Financial Communications Owned;
89,100 sq. ft.
Baltimore, Maryland Journal Services Leased;
51,700 sq. ft.
Baltimore, Maryland Promotional Printing and Financial Communications Owned;
43,000 sq. ft.
Lancaster, Pennsylvania Journal Services Owned;
176,000 sq. ft.
Akron, Pennsylvania Journal Services Owned;
46,000 sq. ft.
Atlanta, Georgia Point of Purchase Leased;
61,000 sq. ft.
Richmond, Virginia Journal Services Leased;
72,000 sq. ft.
Atlanta, Georgia Specialty Packaging and Promotional Printing Leased;
88,000 sq. ft.
</TABLE>
ITEM 3. LEGAL 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.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
None.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of Cadmus are elected by the Board of Directors
("Board") of the Company to serve one-year terms. The following table contains
information about the executive officers of Cadmus:
<TABLE>
<CAPTION>
Other Business Experience
Name (Age) Position and Length of Service During Past Five Years
- ---------- ------------------------------ -------------------------
<S> <C>
C. Stephenson Gillispie, Jr. (55) Chairman of the Board, President, and President and Chief Operating
Chief Executive Officer, Cadmus 1992- Officer, Cadmus 1990-1992;
present. President and Chief Executive
Officer, Byrd 1989-1992.
Steven R. Isaac (49) Executive Vice President Group President, Cadmus Marketing
Marketing Communications, Cadmus, Group, Cadmus 1996 - 1997.
1997-present. Executive Vice President and Chief
Operating Officer, The Martin
Agency, 1996
Chairman and CEO, Martin Direct,
1979-1996
David G. Wilson (56) Executive Vice President Group President, Cadmus Periodicals
Professional Communications, Group, Cadmus 1996- 1997
Cadmus, 1997-present Senior Vice President & General
Group President and CEO of Cadmus Manager, Byrd, Cadmus 1993-1994
Journal Services, Cadmus 1994-present. Senior Vice President of Sales &
Marketing, Byrd, Cadmus 1990-1993
John H. Phillips (53) Vice President, Procurement and Vice President, Support and
Operations Finance, Cadmus 1997-present. Development, Cadmus 1996-1997
Vice President and Regional
Manufacturing Officer, Cadmus
1994-1996; Vice President
Operations and Chief Operating
Officer, Cadmus 1992-1994;
Executive Vice President and
Chief Operating Officer, Byrd
1990-1992.
Bruce V. Thomas (40) Senior Vice President and Chief Vice President and Chief
Financial Officer, Cadmus 1997- present. Financial Officer, Cadmus
1996-1997t Vice President, Law
and Development, Cadmus
1992-1996; Partner, Mays &
Valentine 1989-1992.
David E. Bosher (44) Vice President and Treasurer, Cadmus Vice President, Treasurer, and
1993-present. Chief Financial Officer, Cadmus
1990-1993.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Other Business Experience
Name (Age) Position and Length of Service During Past Five Years
- ---------- ------------------------------ -------------------------
<S> <C>
Gregory Moyer (48) Vice President, Human Resources, Vice President, Human Resources and
Cadmus 1997-present. Quality, Cadmus 1994-1997
Corporate Vice President of Human
Resources, Dyncorp 1993-1994; Vice
President of Human Resources and
Quality, P.R.C., Inc. 1989-1993.
Edward B. Fernstrom (48) Vice President, Information Vice President, Chief Information
Technology, Cadmus 1995-present. Officer, Dyncorp 1990-1995.
</TABLE>
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Cadmus common stock is traded in the over-the-counter market and has
been quoted in the National Association of Securities Dealers, Inc. Automated
Quotation System ("NASDAQ") under the symbol "CDMS" since July 2, 1984 and in
the NASDAQ National Market since April 16, 1985. Information with respect to
market prices is presented on page 27 of the Annual Report and is incorporated
herein by reference..
As of August 31, 1997, the approximate number of beneficial holders of
Cadmus common stock was 4,100, which includes stockholders recorded on security
position listings.
On August 12, 1997 Cadmus declared a regular quarterly cash dividend of
$.05 per share, payable on September 5, 1997, to shareholders of record as of
August 22, 1997. Additional information with respect to dividends declared is
presented on page 27 of the Annual Report and is incorporated herein by
reference.
Cadmus anticipates that it will continue its policy of paying regular
quarterly dividends. The amount of any future dividends will depend on general
business conditions encountered by Cadmus, as well as the financial condition,
earnings and capital requirements of Cadmus, and such other factors as the Board
of Directors may deem relevant. For additional information regarding
restrictions on payment of dividends, see the Notes to Consolidated Financial
Statements (Note 7) referenced in Item 8 of this report.
ITEM 6. SELECTED FINANCIAL DATA
The information presented under the caption "Selected Financial Data"
on page 21 of the Annual Report to Shareholders is incorporated herein by
reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information presented under the caption "Management's Discussion
and Analysis" on pages 22 through 26 of the Annual Report to Shareholders is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the registrant and
subsidiaries contained on pages 28 through 42 of the Annual Report to
Shareholders is incorporated herein by reference.
The supplementary data regarding quarterly results presented under the
caption "Selected Quarterly Data" on page 27 of the Annual Report to
Shareholders is incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Except as otherwise indicated, information called for by the following
items under Part III is contained in the Proxy Statement for the Annual Meeting
of Cadmus Stockholders ("Proxy Statement") to be mailed to the Stockholders on
or about October 2, 1997.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information on the directors of the Registrant is contained on
pages 5 through 8 and page 21 of the Proxy Statement and is incorporated herein
by reference.
Executive Officers
For more information regarding the executive officers of Cadmus, see
"Executive Officers of the Registrant" at the end of Part I of this report.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Information on Executive Compensation is contained on pages 11
through 16 of the Proxy Statement and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Information on Security Ownership of Certain Beneficial Owners and
Management is contained on pages 2 through 4 of the Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on Certain Relationships and Related Transactions is
contained on pages 9 and 10 of the Proxy Statement and is incorporated herein by
reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) Financial Statements and Schedules
The financial statements incorporated by reference into Item 8 of this
report and the financial statement schedules filed as part of this report are
listed in the Index to Financial Statements and Schedules of page 13 hereof.
(b) Reports on Form 8-K
On April 23, 1997, the Company filed a Form 8-K, which included the press
release regarding fiscal 1997 third quarter financial results, the
restructuring, and the share repurchase program, as well as a copy of the
prepared remarks made on a conference call to analysts on the same date.
(c) Exhibits
The Exhibits listed in the accompanying "Index of Exhibits" on pages
16 through 17 hereof are filed as a part of this report.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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, as of the 26th day of
September, 1997.
CADMUS COMMUNICATIONS CORPORATION
/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 Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated, as of the 26th day of September
1997.
Signature Title
--------- -----
/s/ C. Stephenson Gillispie, Jr. Chairman of the Board, President, and
- --------------------------------- Chief Executive Officer
C. Stephenson Gillispie, Jr. (Principal Executive Officer)
/s/ Bruce V. Thomas Senior Vice President and
- --------------------- Chief Financial Officer
Bruce V. Thomas (Principal Financial and
Accounting Officer)
*/s/ Frank Daniels, III Director
- -----------------------
Frank Daniels, III
*/s/ G. Waddy Garrett Director
- ---------------------
G. Waddy Garrett
*/s/ Price H. Gwynn, III Director
- ------------------------
Price H. Gwynn, III
*/s/ Jeanne M. Liedtka Director
- -----------------------
Jeanne M. Liedtka
*/s/ John D. Munford, II Director
- ------------------------
John D. Munford, II
*/s/ John C. Purnell, Jr. Director
- -------------------------
John C. Purnell, Jr.
*/s/ Jerry I. Reitman Director
- ---------------------
Jerry I. Reitman
*/s/ Russell M. Robinson, II Director
- ----------------------------
Russell M. Robinson, II
*/s/ John W. Rosenblum Director
- ----------------------
John W. Rosenblum
*/s/ Wallace Stettinius Director
- -----------------------
Wallace Stettinius
*/s/ Bruce A. Walker Director
- --------------------
Bruce A. Walker
*By /s/ C. Stephenson Gillispie, Jr.
- ------------------------------------
C. Stephenson Gillispie, Jr.
Attorney-in-fact
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
The Consolidated Balance Sheets of Cadmus Communications Corporation
and Subsidiaries as of June 30, 1997 and 1996, and the related Consolidated
Statements of Income and Cash Flows for each of the three years in the period
ended June 30, 1997, including the notes thereto, are included on pages 28
through 42 of the Registrant's Annual Report to Shareholders and are
incorporated herein by reference. With the exception of the information
incorporated by reference in numbered Items 5, 6, 7 and 8, no other data
appearing in the Annual Report is deemed to be "filed" as part of this 10K. The
following additional financial data should be read in conjunction with these
consolidated financial statements.
Page
----
Report of Independent Public Accountants on Schedule II........ 14
Financial Statement Schedules: *
II - Valuation and Qualifying Accounts ....................... 15
* All other schedules have been omitted since the required information is not
present in amounts sufficient to require submission of the schedules, or
because the information required is included in the consolidated financial
statements, including the notes thereto.
<PAGE>
Report of Independent Public Accountants on Schedule II
To the Shareholders and Board of Directors of
Cadmus Communications Corporation:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Cadmus Communication Corporation's
annual report to shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated July 31, 1997. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed in the accompanying index is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of the basic
financial statements. The schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion,
fairly states in all material respects the financial data required to be set
forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Richmond, Virginia
September 26, 1997
<PAGE>
CADMUS COMMUNICATIONS CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
SCHEDULE II
<TABLE>
<CAPTION>
Additions
----------------------
Reserves and Allowances Charged to Charged
Deducted from Asset Balance at Costs and to Other Balance
Accounts: Allowance Beginning other Accounts- Deductions- at End of
for Doubtful Accounts of Period Expenses Deescribe Describe(A) Period
- ---------------------- ---------- --------- --------- ----------- ---------
<S> <C>
Years Ended:
June 30, 1995 $1,514 $ 860 $ 55(B) $1,276 $1,153
June 30, 1996 1,153 963 1,005(C) 811 2,310
June 30, 1997 2,310 1,046 497(D) 1,603 2,250
</TABLE>
- -----------------
(A) Uncollectible accounts charged off, net of recoveries.
(B) Allowance for doubtful accounts of fiscal 1995 acquisitions which included
Cadmus Interactive and Ronald James Direct.
(C) Allowance for doubtful accounts of fiscal 1996 acquisitions which included
Lancaster Press, Inc., and its subsidiaries, The Software Factory, Inc.,
Na-Tex, Inc., The Mowry Company, Peachweb Corp., and Encryption Technology
Corporation.
(D) Includes allowance for doubtful accounts purchase accounting adjustments
for Lancaster Press, Inc. and its subsidiaries.
<PAGE>
INDEX OF EXHIBITS
3.1 Restated Articles of Incorporation of Cadmus Communications
Corporation, as amended -- incorporated herein by reference from
Exhibit 3.1 of the Form 10-K for the fiscal year ended June 30, 1993.
3.2 Bylaws of Cadmus Communications Corporation, as amended, filed
herewith.
4.1 Cadmus agrees to furnish to the Commission upon request any
instrument with respect to long-term debt as to which the total
amount of securities authorized thereunder does not exceed 10% of
Cadmus total consolidated assets.
4.2 $160,000,000 Revolving Credit/Term Loan Facility Agreement dated as
of October 15, 1996, incorporated herein by reference from Exhibit 4
of the Form 10-Q for the fiscal quarter ended September 30, 1997.
10.1 Cadmus Executive Incentive Plan dated July 30, 1985 --
incorporated herein by reference from Exhibit 10.1 of the Form 10-K
for the fiscal year ended June 30, 1985 (Commission File No.
0-12954).
10.2 Cadmus Supplemental Executive Retirement Plan, as restated
effective July 1, 1992 -- incorporated herein by reference from
Exhibit 10.2 of Form SE dated September 25, 1992.
10.3 Cadmus 1984 Stock Option Plan -- incorporated herein by reference
from Exhibit 10.3 of the Form 10-K for the fiscal year ended June 30,
1985 (Commission File No. 0-12954).
10.4 Cadmus 1992 Non-Employee Director Stock Compensation Plan --
incorporated herein by reference from Exhibit 10.5 of the Form SE
dated September 25, 1992.
10.5 Cadmus 1990 Long Term Stock Incentive Plan, as amended effective
August 14, 1996 -- incorporated by reference from the Company's Proxy
Statement on Schedule 14A in connection with Annual Meeting of
Shareholders held on November 13, 1996.
10.6 Cadmus Deferred Compensation Plan, effective July 1, 1995 --
incorporated by reference from Exhibit 10.7 of the Form 10-K for the
fiscal year ended June 30, 1995.
10.7 Cadmus Non-Qualified Thrift Plan, effective July 1, 1995,
incorporated by reference from Exhibit 10.8 of the Form 10-K for the
fiscal year ended June 30, 1995.
10.8 Employee Retention Agreement dated as of September 1, 1991,
between Cadmus Communications Corporation and C. Stephenson
Gillispie, Jr. -- incorporated by reference from Exhibit 10.9 of
the Form SE dated September 23, 1991 (Commission File No. 0-12954).
10.9 Employee Retention Agreement dated as of September 1, 1991, between
Cadmus Communications Corporation and David E. Bosher -- incorporated
herein by reference from Exhibit 10.10 of the Form SE dated September
23, 1991 (Commission File No. 0-12954).
10.10 Employee Retention Agreement dated as of May 1, 1992, between Cadmus
Communications Corporation and Bruce V. Thomas -- incorporated herein
by reference from Exhibit 10.11 of the Form SE dated September 25,
1992.
10.11 Employee Retention Agreement dated as of September 1, 1991, between
Cadmus Communications Corporation and John H. Phillips --
incorporated herein by reference from Exhibit 10.12 of the Form 10-K
for the fiscal year ended June 30, 1993.
<PAGE>
10.12 Employee Retention Agreement dated as of August 1, 1994, between
Cadmus Communications Corporation and Gregory Moyer -- incorporated
by reference from Exhibit to 10.14 of the Form 10-K for the fiscal
year ended June 30, 1995.
10.13 Employee Retention Agreement dated as of April 12, 1995, between
Cadmus Communications Corporation and Edward B. Fernstrom --
incorporated by reference from Exhibit to 10.15 of the Form 10-K for
the fiscal year ended June 30, 1995.
10.14 Employee Retention Agreement dated as of July 1, 1996, between Cadmus
Communications Corporation and Steven R. Isaac, filed herewith.
10.15 Employee Retention Agreement dated as of September 25, 1991, between
Cadmus Communications Corporation and David G. Wilson, Jr., filed
herewith.
11. Statement Regarding Computation of Net Income Per Share, filed
herewith.
13. Portions of the Annual Report to Shareholders for the fiscal year
ended June 30, 1997 which are incorporated by reference in this
report on Form 10K, filed herewith.
21. Subsidiaries of the Registrant, filed herewith.
23 Consent of Arthur Andersen LLP, filed herewith.
24. Powers of Attorney, filed herewith.
27. Financial Data Schedule, filed herewith.
Note: Exhibits 10.1-10.15 are management contracts or compensatory plans
and arrangements
EXHIBIT 3.2
(February, 1997)
RESTATED BYLAWS
OF
CADMUS COMMUNICATIONS CORPORATION
ARTICLE I
Meetings of Stockholders
Section 1. Places of Meetings: All meetings of the stockholders shall
be held at the principal office of the Corporation or at such other place as
may be stated in the notice or waiver of notice of any such meeting.
Section 2. Annual Meeting: The annual meeting of the stockholders of
the Corporation shall be held at a time and place to be determined by the
Chairman of the Board, the President, the Board of Directors or the Executive
Committee, which time and place shall be stated in the notice of the annual
meeting.
Section 3. Special Meetings: Except as otherwise specifically
provided by law, a special meeting of the stockholders shall be held only
upon the call of the Chairman of the Board, the President, the Board of
Directors or the Executive Committee.
Section 4. Notice of Meeting. Written notice stating the place, day and
hour of every meeting of the stockholders and the purpose or purposes for which
the meeting is called, shall be given not less than ten nor more than sixty days
previous thereto (except as otherwise required by law), either personally or by
mail, by or at the direction of the Chairman of the Board, the President, any
Vice President, the Secretary, or by the persons calling the meeting, to each
stockholder of record entitled to vote at the meeting.
Section 5. Quorum Any number of stockholders together holding a
majority of the shares issued and outstanding of the Corporation entitled to
vote (which shall not include any treasury stock held by the Corporation), who
shall be present in person or represented by proxy at any meeting, shall
constitute a quorum for the transaction of business, including the election of
directors. If less than a quorum shall be present or represented by proxy at the
time for which a meeting shall have been called, the meeting may be adjourned
from time to time by a majority of the stockholders present or represented by
proxy, without notice other than by announcement at the meeting, until quorum
shall be present or represented by proxy.
Section 6. Organization: The Chairman of the Board and in his
absence, the President, and in the absence of the Chairman of the Board and
the President, a chairman appointed by the stockholders present shall call
the meeting of the stockholders to order and shall act as chairman thereof.
Section 7. Voting: At any meeting of the stockholders, each stockholder
entitled to vote shall have one vote, in person or by proxy appointed by an
instrument in writing, subscribed by such stockholder or by his duly authorized
<PAGE>
attorney; at all meetings, each stockholder shall have one vote, for each share
of stock registered in his name.
Section 8. Listing of Stockholders: At each meeting of the stockholders
a full, true and complete list, in alphabetical order, of all the stockholders
entitled to vote at such meeting, with the number of shares held by each,
certified by the secretary, assistant secretary or the transfer agent, shall be
furnished.
ARTICLE II
Directors
Section 1. General Powers: The business and affairs of the
Corporation otherwise expressly provided by law or by the Articles of
Incorporation, or by these By-laws, all of the powers of the Corporation shall
be vested in said Board.
Section 2. Number and Qualification: The number of directors comprising
the Board of Directors shall be as established in the Articles of Incorporation.
Directors need not be stockholders or residents of the State of Virginia. A
majority of the directors actually elected and serving at the time of any given
meeting shall constitute a quorum for the transaction of business and the act of
the majority of the directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 3. Election of Directors: The directors shall be elected at
the annual meeting of shareholders in accordance with the Article of
Incorporation.
Section 4. Meetings of Directors: Regular meetings of the Board shall
be held at such times as the Board may determine, and special meeting shall be
held whenever called by the direction of the Chairman of the Board or the
President, or by any two directors for the time being in office. Unless
otherwise specified in the notice thereof, any and all business may be
transacted at a special meeting. Meetings of the Board of Directors shall be
held at places in or outside the State of Virginia and at times fixed by
resolution of the Board, or upon call of the Chairman of the Board or the
President. The Secretary, or officer performing his duties, shall give at least
24 hours' notice by telegraph, letter, or telephone of all meetings of the
directors; provided, that notice need not be given of regular meetings held at
times and places fixed by resolution of the Board. Meetings may be held at any
time without notice if all directors are present, or if those not present waive
notice either before or after the meeting.
Section 5. Action Without a Meeting: Any action which is required or
which may be taken at a meeting of the directors or of a committee, may be taken
without a meeting if a consent in writing, setting forth the actions so to be
taken, shall be signed before such action by all the directors, or all of the
members of the committee, as the case may be.
Section 6. Nominations of Director Candidates: The Nominating Committee
appointed by the Board of Directors in accordance with Article III, Section 6
shall select and recommend a slate of nominees to be voted on for election as
directors at each annual meeting. However, any shareholder entitled to vote in
the election of directors generally may nominate one or more persons for
election as directors at a meeting, but only if written notice of such
stockholder's intent to make such nomination(s) has been given, either by
<PAGE>
personal delivery or by United States mail, postage prepaid, to the Secretary of
the Corporation not later than (i) with respect to an election to be held at
annual meeting of stockholders, ninety days prior to the anniversary date of the
immediately preceding annual meeting of stockholders and (ii) with respect to an
election to be held at a special meeting of stockholders for the election of
directors, the close of business on the tenth day following the date on which
notice of such meeting is first given to stockholders. Each such notice of a
stockholders' intention to make nomination(s) shall set forth: (a) the name and
address of the stockholder who intends to make the nomination of the person(s)
and of the person(s) to be nominated; (b) a representation that the stockholder
is the owner of the stock of the Corporation entitled to vote at such meeting an
intends to appear in person or by proxy at the meeting to nominate the person(s)
specified in the notice; (c) a description of all arrangements or understandings
between the stockholder and each nominee for director and any other person(s)
(naming such person(s)) pursuant to which the nomination(s) are to be made by
the stockholder; (d) such other information regarding such nominee proposed by
such stockholder as would be required to be included in the proxy statement
filed pursuant to the proxy rules of the Securities and Exchange Commission, had
the nominee been nominated, or intended to be nominated, by the Board of
Directors; and (e) the written consent of each nominee to serve as a director of
the Corporation if so elected. The presiding officer at any meeting may refuse
to acknowledge the nomination of any person not made in compliance with the
foregoing sentence.
Section 7. Changes in Principal Occupation: In the event that a
director changes his principal occupation, the director shall submit a letter of
resignation to the Chairman of the Board, indicating the nature of his new
principal occupation. If the new principal occupation results in a conflict of
interest or otherwise necessitates immediate action, the Executive Committee
shall promptly take such action as it deems appropriate with respect to the
resignation. Otherwise, the Executive Committee shall defer action on the
resignation until the expiration of the director's current term. At such time,
the Executive Committee shall consider whether to nominate such director for
re-election, taking into consideration the nature of the director's new
occupation, the attributes and qualifications necessary to maintain a
well-balanced Board, and such other factors as the Executive Committee deems
relevant.
ARTICLE III
Committees
Section 1. Committees: There will be an Executive Committee, a Benefits
and Investment Committee, an Audit Committee, a Nominating Committee and such
other committees as the Board of Directors may, from time to time, create for
such purposes with such powers as the Board may determine.
Section 2. Executive Committee: The Board of Directors shall appoint
from among the directors an Executive Committee consisting of not less than
three (3) nor more than seven (7) members (or such other number as the Board may
appoint). This Committee shall have power to do any and all acts and to exercise
any and all authority between the meetings of the Board of Directors which the
Board of Directors is authorized and empowered to exercise, except as otherwise
limited under Virginia law and under the Articles of Incorporation and Bylaws of
the Corporation.
The Executive Committee shall fix its own rules of proceeding and shall
meet where and as provided by such rules, but in every case the presence of at
least a majority of the Executive Committee shall be necessary to constitute a
<PAGE>
quorum. In every case, the affirmative vote of a majority of all the members of
the Executive Committee present at the meeting shall be necessary for the
adoption of any resolution.
The Chairman of the Corporation shall serve as the Chairman of the
Executive Committee. The Chairman shall preside at meetings of the Executive
Committee and shall have such other powers and duties as shall be conferred upon
him from time to time by the Board of Directors.
All actions of the Executive Committee shall be reported to the Board
of Directors at its next succeeding meeting.
Section 3. Benefits and Investment Committee. The Board of Directors
shall appoint from among its members a Benefits and Investment Committee,
consisting of not less than three (3) nor more than seven (7) (or such other
number as the Board may appoint). The Board shall appoint one member of the
Committee as Chairman. The responsibilities of the Benefits and Investment
Committee shall be to review the operation of the employee benefit plans and
programs and other fringe benefits provided by the Corporation and to review and
monitor compliance thereof with applicable law; and to select and evaluate the
performance of any Plan Administrator(s), trustee(s) and Investment Manager(s)
and to recommend changes deemed advisable. Additionally, the Committee shall
periodically review the status of associate relations and ensure that the
company's human resources policies and practices support the creation of a
positive work environment that is in full compliance with regulatory and legal
requirements. The Committee shall also review the actions being taken by
management to develop and fully utilize the capabilities of associates. The
Benefits and Investment Committee shall report at least once a year to the Board
of Directors.
Section 4. Executive Compensation and Organization Committee: The Board
of Directors shall appoint from among its members who are not officers or
employees of the Corporation or its subsidiaries ("Non-management Members") an
Executive Compensation and Organization Committee consisting of not less than
three (3) nor more than seven (7) members (or such other number as the Board may
appoint). The Board shall appoint one member of the Committee as Chairman. The
responsibilities of the Executive Compensation and Organization Committee shall
be to approve the design of, and to administer, senior management salary and
incentive plans and related perquisites and benefits; to make awards to
employees under the Corporation's stock incentive plan; to review and evaluate
the organizational structure, management development and succession plans as
presented by the President of the Corporation; and to review and evaluate the
goals and performance of the Chairman and the President and their evaluation of
key employees. The Executive Compensation and Organization Committee shall
report at least once a year to the Board of Directors.
Section 5. Audit Committee: The Board of Directors shall appoint from
among its Non-management Members an Audit Committee of five (5) members (or such
other number as the Board may appoint). The Board shall appoint one member of
the Committee as Chairman. Management members of the Board shall be counted for
the purpose of determining the presence of a quorum at meetings of the Board of
Directors at which the Audit Committee members are appointed, but shall have no
vote upon the membership of the Audit Committee.
The Audit Committee shall meet each year (i) preceding the selection of
the external auditors to perform the annual audit, (ii) at least once after
these auditors have been selected and before the audit begins or during the
early stages of the audit, and (iii) at least once after the report of the
<PAGE>
external auditors is received. Other meetings may be held as necessary or
convenient. A quorum for any meeting of the Audit Committee shall be any two
members, but there shall be an attempt to have all members present at each
meeting.
The Audit Committee shall report to the Board of Directors at least
once each year, recommending any appropriate change in operating or accounting
practices that are or may be illegal or contrary to the interests of the
Corporation or to which the attention of the Board should be called for other
reasons, and focusing particularly on the integrity and adequacy of disclosure
of financial information relating to the Corporation and the identification of
any problem areas relating thereto.
The Chairman of the Board of the Corporation shall designate an officer
of the Corporation to serve as a liaison between the Audit Committee and the
officers. The Audit Committee or any one or two of its members may interview any
employee, agent, customer or former or potential customer, supplier, auditor or
former or potential auditor, or any other person, or examine any document, at
any time and without offering any reasons so long as such action is in the
discharge of the responsibilities of the Audit Committee. No officer or employee
of the Corporation shall be present at such interview or examination or seek to
learn the substance or subject of the inquiry, without the consent of the Audit
Committee or the member or members acting. The Audit Committee may consult at
any time with counsel regularly retained by the Corporation, and may after
informing the Board of Directors consult with other counsel at the cost of the
Corporation.
Section 6. Nominating Committee: The Board of Directors shall appoint
from among its members a Nominating Committee consisting of not less than (3)
nor more than seven (7) members (or such other number as the Board may appoint).
The Board shall appoint one member of the Committee as Chairman. The
responsibilities of the Nominating Committee shall be to recommend to the Board
of Directors nominees for directors to be voted on at each annual shareholders
meeting; to recommend nominees to fill vacancies on the Board of Directors, to
make recommendations concerning membership on committees of the Board of
Directors, the functions of such committees, and the creation of new committees
or the discontinuance of existing committees, as well as such other related
functions as the Board of Directors may from time to time determine. Members of
the Nominating Committee who are officers or employees of the Corporation or any
of its subsidiaries shall have no vote on matters involving the nomination of
directors"
ARTICLE IV
Officers
Section 1. Election: The officers of the Corporation shall consist of a
Chairman of the Board, a President, a Secretary and an Treasurer, and persons
elected to such other offices as may be established from time to time by the
Board of Directors. All officers shall be elected by the Board of Directors, and
shall hold office until their successors are elected and qualify. Vacancies may
be filled at any meeting of the Board of Directors. Any two offices may be
combined in the same person as the Board of Directors may determine.
Section 2. Removal of Officers: Any officer of the corporation
may be removed summarily with or without cause, at any time by the Board of
Directors.
<PAGE>
Section 3. Duties: The Chairman of the Board shall preside at all
meetings of shareholders and directors and shall have such other duties and
authority as the Board shall provide from time to time. The President shall be
the Chief Executive Officer of the Corporation and shall have the power and
responsibility for carrying out policies of the Board of Directors. The officers
of the Corporation shall have such duties as generally pertain to their offices,
as well as such powers and duties as from time to time shall be conferred upon
them by the Board of Directors.
ARTICLE V
Capital Stock
Section 1. Issuance of Certificates of Stock: Certificates of capital
stock shall be in such form as may be prescribed by the Board of Directors and
may (but need not) bear the seal of the Corporation or a facsimile thereof. All
certificates shall be signed by the Chairman of the Board of the President, and
also by the Secretary or the Assistant Secretary, which signatures may be
facsimiles thereof.
Section 2. Certificates to be Entered: All certificates shall be
consecutively numbered, and shall contain the names of the owner, the number of
shares and the date of issue, a record whereof shall be entered in the
Corporation's books. The Corporation shall be entitled to treat the holder of
record of shares as the legal and equitable owner thereof and accordingly shall
not be bound to recognize any equitable or other claim with respect thereto on
the part of any other person so far as the right to vote and to participate in
dividends is concerned.
Section 3. Transfer of Stock: The stock of the Corporation shall be
transferable or assignable on the books of the Corporation by the holders in
person or by attorney on surrender of the certificate or certificates for such
shares duly endorsed, and, if sought to be transferred by attorney, accompanied
by a written power of attorney to have the same transferred on the books of the
Corporation. To the extent that any provision of the Rights Agreement between
the Corporation and First Union National Bank of North Carolina, NA., as Rights
Agent, dated as of February 1, 1989, is deemed to constitute a restriction on
the transfer of any securities of the Corporation, including, without
limitation, the Rights, as defined therein, such restriction is hereby
authorized by the bylaws of the Corporation.
Section 4. Lost, Destroyed and Mutilated Certificates: The holder of
stock of the Corporation shall immediately notify the Corporation of any loss,
destruction, or mutilation of the certificate therefor, and the Board of
Directors may in its discretion cause one or more new certificates for the same
number of shares in the aggregate to be issued to such stockholder upon the
surrender of the mutilated certificate, or upon satisfactory proof of such form
and amount and with such surety as the Board of Directors may require.
Section 5. Regulations: The Board of Directors may make such rules
and regulations as it may deem expedient regulating the issue, transfer and
registration of certificates of stock of the Corporation.
<PAGE>
Section 6. Determination of Stockholders of Record. The share transfer
books may be closed by order of the Board of Directors for not more than seventy
days for the purpose of determining stockholders entitled to notice of or to
vote at any meeting of the stockholders or any adjournment thereof (or entitled
to receive any distribution or in order to make a determination of stockholders
for any other purposes). In lieu of closing such books, the Board of Directors
may fix in advance as the record date for any such determination a date not more
than seventy days before the date on which such meeting is to be held (or such
distribution made or other action requiring such determination is to be taken).
If the books are not thus closed or the record date is not thus fixed, the
record date shall be the close of business on the day before the effective date
of the notice to stockholders.
ARTICLE VI
Miscellaneous Provisions
Section 1. Seal: The seal of the Corporation shall contain the name
of the Corporation and shall be in such form as shall be approved by the Board
of Directors.
Section 2. Fiscal: The fiscal year of the Corporation shall begin
on the 1st day of July and end on the 30th day of June.
Section 3. Examination of Books: The Board of Directors shall, subject
to the laws of the State of Virginia, have power to determine from time to time
whether and to what extent and under what conditions and limitations the
accounts and books of the Corporation, or any of them, shall be open to the
inspection of the stockholders.
Section 4. Contracts, Checks, Notes and Drafts:: All contracts, checks,
notes, drafts, and other orders for the payment of money shall be signed by such
persons as the Board of Directors from time to time may authorize.
Section 5. Amendment of By-Laws: These By-Laws may be amended, altered,
or repealed by the Board of Directors at any meeting. The stockholders shall
have the power to rescind, alter, amend, or repeal any By-Laws which, if so
expressed by the stockholders, may not be rescinded, altered, amended, or
repealed by the Board of Directors.
Section 6. Application of the Control Share Acquisition Act. Article
14.1 of Chapter 9 of Title 13.1 of the Code of Virginia, consisting of Sections
13.1-728.1 through 13.1-728.9, shall not apply to acquisitions of shares of the
Corporation.
EXHIBIT 10.14
July 1, 1996
Steven R. Isaac
12438 Elmont
Ashland, Virginia 23005
Dear Mr. Isaac,
Cadmus Communications Corporation (the "Corporation") considers it
essential to the best interests of its shareholders to foster the continuous
employment of its key management personnel. In this connection, the Board of
Directors of the Corporation (the "Board") recognizes that the possibility of a
change in control of the Corporation may exist and that such possibility, and
the uncertainty and questions which it may raise among management, may result in
the departure or distraction of management personnel to the detriment of the
Corporation and its shareholders.
The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Corporation's management, including yourself, to their assigned duties without
distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Corporation.
In order to induce you to remain in the employ of the Corporation, the
Corporation agrees that you shall receive the severance benefits set forth in
this letter agreement (the "Agreement") in the event your employment with the
Corporation is terminated under the circumstances described below subsequent to
a Change in Control (as defined in Section 2) of the Corporation.
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the Change in
Control Period (as defined in Section 1(b)) on which a Change in Control occurs.
Anything in this Agreement to the contrary notwithstanding, if a Change in
Control occurs and if your employment with the Corporation is terminated prior
to the date on which the Change in Control occurs, and if it is reasonably
demonstrated by you that such termination of employment (i) was at the request
of a third party who has taken steps reasonably calculated to effect the Change
in Control, or (ii) otherwise arose in connection with or anticipation of the
Change in Control, then for all purposes of this Agreement the "Effective Date"
shall mean the date immediately prior to the date of such termination of
employment.
(b) The "Change in Control Period" shall mean the period commencing on
the date hereof and ending on the second anniversary of such date; provided,
however, that commencing on the date one year after the date hereof, and on each
anniversary of such date (such date and each annual anniversary thereof shall be
hereinafter referred to as the "Renewal Date"), the Change in Control Period
shall be automatically extended as to terminate two years from such Renewal
Date, unless at least 60 days prior to the Renewal Date the Corporation shall
give notice to you that the Change in Control Period shall not be so extended.
2. Change in Control. No benefits shall be payable hereunder unless
there shall have been a Change in Control of the Corporation, as set forth
below. For purposes of this Agreement, a Change in Control shall mean:
(a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person") of beneficial ownership (within
the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of common stock of the Corporation (the
"Outstanding Cadmus Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of the Corporation entitled to vote generally in
<PAGE>
the election of directors (the "Outstanding Cadmus Voting Securities").
Notwithstanding the foregoing, the following acquisitions shall not constitute a
Change in Control: (i) any acquisition directly from the Corporation, (ii) any
acquisition by the Corporation, (iii) any acquisition by, or benefit
distribution from any employee benefit plan (or related trust) sponsored or
maintained by the Corporation or any corporation controlled by the Corporation,
(iv) any acquisition pursuant to any compensatory stock option or stock purchase
plan for employees, or (v) any acquisition pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii), and (iii) of Subsection (c) of
this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the Board (the
"Incumbent Board") cease for any reason to constitute at least a majority of the
Board; provided, however, that any individual becoming a director subsequent to
the date hereof whose election or nomination for election was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board (with his predecessor thereafter ceasing to be a member); or
(c) Approval by the shareholders of the Corporation of the
reorganization, merger, or consolidation of the Corporation unless, following
such reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting securities of
the resulting corporation is then beneficially owned by all or substantially all
of the beneficial owners, respectively, of the Outstanding Cadmus Common Stock
and Outstanding Cadmus Voting Securities immediately prior to such
reorganization, merger, or consolidation, (ii) no Person (excluding (A) the
Corporation, (B) any employee benefit plan (or related trust) of the Corporation
or such corporation resulting from such reorganization, merger, or
consolidation, and (C) any Person beneficially owning, immediately prior to such
reorganization, merger, or consolidation, 20% or more of the Outstanding Cadmus
Common Stock or Outstanding Cadmus Voting Securities, as the case may be)
beneficially owns 20% or more of the then outstanding shares of common stock or
the combined voting power of the then outstanding voting securities of the
resulting corporation, and (iii) at least a majority of the members of the board
of directors of the resulting corporation were members of the Incumbent Board at
the time of the execution of the initial agreement providing for such
reorganization, merger, or consolidation; or
(d) Approval by the shareholders of the Corporation of (i) a complete
liquidation or dissolution of the Corporation, or (ii) the sale or other
disposition of all or substantially all of the assets of the Corporation other
than to a corporation with respect to which, following such sale or other
disposition, (A) more than 60% of the outstanding shares of common stock and the
then outstanding voting securities of such corporation is beneficially owned by
all or substantially all of the beneficial owners, respectively, of the
Outstanding Cadmus Common Stock and Outstanding Cadmus Voting Securities
immediately prior to such sale or disposition; (B) no Person (excluding (I) the
Corporation, (II) any employee benefit plan (or related trust) of the
Corporation or such corporation, and (III) any Person beneficially owning,
immediately prior to such sale or other disposition, 20% or more of the
Outstanding Cadmus Common Stock or Outstanding Cadmus Voting Securities, as the
case may be) beneficially owns 20% or more of the then outstanding shares of
common stock or the combined voting power of the then outstanding voting
securities of such corporation, and (C) at least a majority of the members of
the board of directors of such corporation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to continue, or
cause to be continued, your employment with the Corporation for the period
commencing on the Effective Date and ending on the second anniversary of such
date (the "Employment Period").
4. Termination.
(a) Your employment with the Corporation shall terminate automatically
upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or mental
illness (as determined by the Corporation) you shall have been absent from the
full-time performance of your duties with the Corporation for six (6)
<PAGE>
consecutive months (your "Disability"), the Corporation may give you written
notice of its intention to terminate your employment. In such event, your
employment with the Corporation shall terminate effective on the 30th day after
your receipt of such notice (the "Disability Effective Date"), provided that
within 30 days after your receipt of such notice you have not returned to
full-time performance of your duties.
(c) The Corporation may terminate your employment during the Employment
Period for Cause. For purposes hereof, "Cause" shall mean (i) the willful and
continued failure by you to substantially perform your duties with the
Corporation (other than any such failure resulting from your incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination (as defined in Section 4(e)) by you for Good
Reason (as defined in Section 4(d)), after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) the willful engagement by you in
conduct which is demonstrably and materially injurious to the Corporation,
monetarily or otherwise, or (iii) your conviction of a felony involving moral
turpitude. For purposes of this subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in the
best interest of the Corporation.
(d) You may terminate your employment with the Corporation during the
Employment Period for Good Reason. For purposes of this Agreement, "Good Reason"
shall mean:
(i) the assignment to you of any duties inconsistent with the position
(including status, offices, titles, and reporting requirements) or authority in
the Corporation that you held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your responsibilities
or the conditions of your employment from those in effect immediately prior to
such Change in Control;
(ii) a reduction by the Corporation in your annual base salary as in
effect on the date hereof or as the same may be increased from time to time;
(iii) the relocation of the Corporation's principal executive offices
to a location outside the Richmond Metropolitan Area or the Corporation's
requiring you to be based anywhere other than the Corporation's principal
executive offices except for required travel on the Corporation's business to an
extent substantially consistent with your present business travel obligations;
(iv) except in the event of reasonable administrative delay, the
failure by the Corporation to pay to you any portion of your current
compensation or to pay to you any portion of an installment of deferred
compensation under any deferred compensation program of the Corporation within
seven (7) days of the date such compensation is due;
(v) the failure by the Corporation to continue in effect any
compensation plan in which you participate immediately prior to the Change in
Control that is material to your total compensation or any substitute plans
adopted prior to the Change in Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan, or the failure by the Corporation to continue your
participation therein (or in such substitute or alternative plan) on a basis not
materially less favorable, both in terms of the amount of benefits provided and
the level of your participation relative to other participants, as it existed at
the time of the Change in Control;
(vi) the failure by the Corporation to continue to provide you with
benefits substantially similar to those enjoyed by you under any of the
Corporation's life insurance, medical, health and accident, or disability plans
in which you were participating at the time of the Change in Control, the taking
of any action by the Corporation which would directly or indirectly materially
reduce any of such benefits or deprive you of any material fringe benefit
enjoyed by you at the time of the Change in Control, or the failure by the
Corporation to provide you with the number of paid vacation days to which you
are entitled on the basis of years of service with the Corporation in accordance
with the Corporation's normal vacation policy in effect at the time of the
Change in Control;
<PAGE>
(vii) the failure of the Corporation to obtain a satisfactory agreement
from any successor to assume and agree to perform this Agreement, as
contemplated in Section 6 hereof; or
(viii) any purported termination of your employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of
subsection (e) hereof (and, if applicable, the requirements of Subsections (b)
and (c) hereof), which purported termination shall not be effective for purposes
of this Agreement.
Your right to terminate your employment pursuant to this subsection
shall not be affected by your incapacity due to physical or mental illness and
your continued employment shall not constitute consent to, or a waiver of rights
with respect to, any circumstance constituting Good Reason hereunder.
(e) Any purported termination of your employment by the Corporation or
by you shall be communicated by written Notice of Termination to the other party
hereto in accordance with Section 8. For purposes hereof, "Notice of
Termination" shall mean a notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) sets forth in reasonable detail
the facts and circumstances that provide a basis for termination of your
employment under the provision so indicated, and (iii) if the Date of
Termination (as defined below) is other than the date of receipt of such notice,
specifies the termination date.
(f) "Date of Termination" means (i) if your employment is terminated by
the Corporation for Cause or is terminated by you for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as the
case may be, (ii) if your employment is terminated by the Corporation other than
for Cause or Disability, the Date of Termination shall be the date on which the
Corporation notifies you of such termination, and (iii) if your employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of your death or the Disability Effective Date, as the case may be.
5. Compensation upon Termination. Following a Change in Control,
you shall be entitled to the following benefits upon termination of your
employment provided that such termination occurs during the Employment Period:
(a) If your employment is terminated by reason of your death during the
Employment Period, this Agreement shall terminate without further obligations to
your legal representatives under this Agreement, other than for (i) payment of
your Base Salary (as defined in Section 5(g) hereof) through the Date of
Termination at the same rate in effect at such date, and (ii) all other amounts
to which you are entitled under any compensation plan or any other plan, policy,
or arrangement of the Corporation, at the time such payments are due.
(b) During any period that you fail to perform your full-time duties
with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section 5(g))
at the rate in effect at the commencement of any such period, together with all
compensation payable to you under any long-term disability plan maintained by
the Corporation in your name or for your benefit or other similar plan during
such period. Thereafter, your benefits shall be determined under the
Corporation's retirement, insurance and other compensation programs then in
effect in accordance with the terms of such program; however, your receipt of
benefits under any long-term disability plan maintained by the Corporation in
your name or for your benefit will not be affected by your termination under
this Agreement.
(c) If, during the Employment Period, your employment with the
Corporation shall be terminated by the Corporation for Cause or by you other
than for Good Reason, the Corporation shall pay you your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in effect
at the time Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations to you
under this Agreement.
<PAGE>
(d) If, during the Employment Period, your employment with the
Corporation shall be terminated by you for Good Reason or by the Corporation
other than for Cause, death, or Disability, then you shall be entitled to the
benefits provided below:
(i) the Corporation shall pay to you your full Base Salary (as defined
in Section 5(g) hereof) through the Date of Termination at the rate in effect at
the time Notice of Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you are entitled under
any compensation plan of the Corporation, at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to you for periods
subsequent to the Date of Termination, the Corporation shall pay as severance
pay to you, at the time and in the manner specified in subsection (e), a
severance payment (the "Severance Payment") equal to the product of (A) your
Base Salary (as defined in Section 5(g) hereof), and (B) a number (the
"Payment/Benefit Factor") determined by dividing by 52 the sum of (I) three
times the number of full years that you have been employed by the Corporation,
and (II) three times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided, however, that in no
event shall such Payment/Benefit Factor be less than .5 nor greater than 2, and
provided, further, that in no event shall such amount exceed the amount of your
Base Salary (as defined in Section 5(g)), on an undiscounted basis, which you
would have received had you remained in the employ of the Corporation until your
"Normal Retirement Date" (as defined in the Corporation's Pension Plan (or any
successor thereto) (the "Pension Plan");
(iii) A separate lump-sum supplemental retirement benefit (the amount
of such benefit shall be hereinafter referred to as the "Supplemental Retirement
Amount") equal to the difference between (A) the actuarial equivalent (utilizing
for this purpose the actuarial assumptions utilized in determining benefit
cash-outs with respect to the Corporation's Pension Plan during the 90-day
period immediately preceding the Effective Date) of the benefit payable under
the Pension Plan and any supplemental and/or excess benefit plan of the
Corporation providing benefits for you (the "SERP") which you would receive if
your employment continued at the compensation level in effect at the Date of
Termination for the remainder of the Employment Period, assuming for this
purpose that all accrued benefits are fully vested and that benefit accrual
formulas are no less advantageous to you than those in effect during the 90-day
period immediately proceeding the Effective Date, and (B) the actuarial
equivalent (utilizing for this purpose the actuarial assumptions utilized in
determining benefit cash outs with respect to the Pension Plan during the 90-day
period immediately preceding the Effective Date) of your actual vested benefit
(paid or payable), if any, under the Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your participation in, and
terminating distribution and vested rights under, the Corporation's Pension Plan
and other plans of deferred compensation shall be governed by the terms of those
respective plans;
(v) the Corporation shall pay to you all legal fees and expenses
incurred by you as a result of such termination, including all such fees and
expenses, if any, incurred in seeking to obtain or enforce any right or benefit
provided by this Agreement or in connection with any tax audit or proceeding to
the extent attributable to the application of Section 4999 of the Internal
Revenue Code of 1986, as amended (the "Code") to any payment or benefit provided
hereunder;
(vi) for a period of years (or portion thereof) (the "Payment Period")
equal to the Payment/Benefit Factor after such termination or until your "Normal
Retirement Date," whichever first occurs, the Corporation shall arrange to
provide you with life, disability, accident and group health insurance benefits
substantially similar to those which you were receiving immediately prior to the
Notice of Termination. Benefits otherwise receivable by you pursuant to this
clause (vi) shall be reduced to the extent comparable benefits are actually
received by you from any source (including a subsequent employer) during such
period following your termination, and any such benefits actually received by
you shall be reported to the Corporation;
(vii) you shall not be entitled to payments or benefits under this
Agreement to the extent (but only to the extent) that the sum of all payments
and benefits received or to be received by you in connection with a Change in
Control or the termination of your employment (whether pursuant to the terms of
<PAGE>
this Agreement ("Contract Payments") or any other plan, arrangement or agreement
with the Corporation, any person whose actions result in a Change in Control, or
any person affiliated with the Corporation or such person (collectively with the
Contract Payments, "Total Payments")) would , as determined by tax counsel
selected by the Corporation, result in "Excess Parachute Payments" as defined in
Section 280G of the Code. Furthermore, such payments or benefits provided to you
under this Agreement shall be reduced to the extent necessary so that no portion
thereof shall be subject to the excise tax imposed by Section 4999 of the Code,
but only if, by reason of such reduction, your net after tax benefit shall
exceed your net after tax benefit if such reduction were not made. "Net after
tax benefit" shall mean the sum of (A) all payments and benefits which you
receive or are then entitled to receive from the Corporation that would
constitute a "parachute payment" within the meaning of Section 280G of the Code,
less (B) the amount of federal income taxes payable with respect to the payments
and benefits described in (A) above calculated at the maximum marginal federal
income tax rate for each year in which such payments and benefits shall be paid
to you (based upon the rate in effect for such year as set forth in the Code at
the time of the first payment of the foregoing), less (C) the amount of excise
taxes imposed with respect to the payments and benefits described in (A) above
by Section 4999 of the Code; and
(viii) for a period of twelve (12) months following such termination,
the Corporation shall pay the expenses of such outplacement services as you may
require, with such services to be performed by such agency as the Corporation
shall designate.
(e) The payment provided for in subsection (d)(ii), shall be made in
lump-sum not later than the 30th day following the Date of Termination.
Notwithstanding anything contained in this Subsection (e) or in subsection
(d)(ii), you may elect to receive, in lieu of a lump-sum Severance Payment, the
benefits described in subsection (d)(ii) in equal monthly installments
commencing on the first day of the month following the Date of Termination and
ending on the first to occur of (A) the first day of the last month within the
Payment Period, or (B) the first day of the month in which occurs your "Normal
Retirement Date".
(f) Except as provided in subsection (d)(vi) hereof you shall not be
required to mitigate the amount of any payment provided for in this Section 5 by
seeking other employment or otherwise, nor shall the amount of any payment or
benefit provided for in this Section 5 be reduced by any compensation earned by
you as the result of employment by another employer, by retirement benefits, by
offset against any amount claimed to be owed by you to the Corporation, or
otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall mean the
greater of (i) the annual salary and bonus paid to you by the Corporation during
the fiscal year ended June 30, 1996, or (ii) the annual salary and target bonus
payable to you by the Corporation during the fiscal year in which a Change in
Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior written
consent of the Corporation shall not be assignable by you otherwise than by will
or the laws of descent and distribution. This Agreement shall inure to the
benefit of, and be enforceable by, your legal representatives.
(b) This Agreement shall inure to the benefit of, and be binding
upon, the Corporation and its successors and assigns.
(c) The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall mean
the Corporation as hereinbefore defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
<PAGE>
7. Resolution of Disputes. If there shall be any dispute between the
Corporation and you (i) in the event of any termination of your employment by
the Corporation, whether such termination was for Cause, or (ii) in the event of
any termination of employment by you, whether Good Reason existed, then, unless
and until there is a final, nonappealable judgment by a court of competent
jurisdiction declaring that such termination was for Cause or that Good Reason
did not exist for such termination by you, the Corporation shall pay all
amounts, and provide all benefits, to you and/or your family or other
beneficiaries, as the case may be, that the Corporation would be required to pay
or provide pursuant to Section 5(d) as though such termination were by the
Corporation without Cause or by you with Good Reason; provided, however, that
the Corporation shall not be required to pay any disputed amounts pursuant to
this Section 7 except upon receipt of an undertaking by or on behalf of you to
repay all such amounts to which you are ultimately adjudged by such court not to
be entitled.
8. Notice. For the purpose of this Agreement, notices and all other
communications provided for in this Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Corporation shall be directed to the
attention of the Board with a copy to the Secretary of the Corporation, or to
such other address as either party may have furnished to the other in writing,
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Virginia, without reference to principles
of conflict of laws. The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(c) The Corporation may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict compliance
with any provision hereof or any other provision of this Agreement or the
failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for Good
Reason pursuant to Section 4(d) or the Corporation's right to terminate your
employment for Cause pursuant to Section 4(c), shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(e) You and the Corporation acknowledge that, except as may otherwise
be provided under any other written agreement between you and the Corporation,
your employment by the Corporation is "at will" and if, prior to the Effective
Date, your employment with the Corporation terminates, then you shall have no
rights under this Agreement.
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment, modification, or
termination shall be binding and effective without any requirement for
notification of, or consent by, you. Notwithstanding the foregoing, on or after
the Effective Date, this Agreement may not be amended, modified or terminated
otherwise than by written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement, together with a letter agreement
between you and Cadmus dated as of the date hereof, sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
<PAGE>
If this letter sets forth our agreement on the subject matter hereof,
kindly sign and return to the Corporation the enclosed copy of this letter,
which will then constitute our agreement on this subject
Sincerely,
CADMUS COMMUNICATIONS CORPORATION
By:
---------------------------------------
Name:
Title:
Accepted and agreed to:
- -------------------------------------
EXHIBIT 10.15
September 25, 1991
Mr. David G. Wilson, Jr.
2901 Byrdhill Road
Richmond, Virginia 23228
Cadmus Communications Corporation ("Cadmus") considers it
essential to the best interest of its shareholders to foster the continuous
employment of its key management personnel at both the parent and subsidiary
level. In this connection, the Board of Directors of Cadmus (the "Board")
recognizes that the possibility of a change in control of Cadmus may exist and
that such possibility, and the uncertainty and questions which it may raise
among management of Cadmus and its subsidiaries, may result in the departure or
distraction of management personnel to the detriment of Cadmus and its
shareholders.
The Board and the various Board of Directors of Cadmus
subsidiaries have determined that appropriate steps should be taken to reinforce
and encourage the continued attention and dedication of the key management
personnel at Cadmus and its subsidiaries, including yourself, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a change in control of Cadmus.
In order to induce you to remain in the employ of The William
Byrd Press, Incorporated (the "Corporation"), the Corporation agrees that you
shall receive the severance benefits set forth in this letter agreement (the
"Agreement") in the event your employment with the Corporation is terminated
under the circumstances described below subsequent to a Change in Control (as
defined in Section 2) of Cadmus.
1. Certain Definitions.
(a) The "Effective Date" shall mean the first date during the
Change in Control Period (as defined in Section 1(b)) on which a Change in
Control occurs. Anything in this Agreement to the contrary notwithstanding, if a
Change in Control occurs and if your employment with the Corporation is
terminated prior to the date on which the Change in Control occurs, and if it is
reasonably demonstrated by you that such termination of employment (i) was at
the request of a third party who has taken steps reasonably calculated to effect
the Change in Control, or (ii) otherwise arose in connection with or
anticipation of the Change in Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.
(b) The "Change in Control Period" shall mean the period
commencing on the date hereof ending on the second anniversary of such date;
provided, however, that commencing on the date one year after the date hereof,
and on each anniversary of such date (such date and each annual anniversary
thereof shall be hereinafter referred to as the "Renewal Date"), the Change in
Control Period shall be automatically extended so as to terminate two years from
such Renewal Date, unless at least 60 days prior to the Renewal Date the
Corporation shall give notice to you that the Change in Control Period shall not
be so extended.
2. Change in Control. No benefits shall be payable hereunder
unless there shall have been a Change in Control of Cadmus, as set forth below.
For purposes of this Agreement, a Change in Control shall mean:
(a) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of
1934, as amended (the "Exchange Act")) (a "Person") of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or
more of either (i) the then outstanding shares of common stock of Cadmus (the
<PAGE>
"Outstanding Cadmus Common Stock") or (ii) the combined voting power of the then
outstanding voting securities of Cadmus entitled to vote generally in the
election of directors (the "Outstanding Cadmus Voting Securities").
Notwithstanding the foregoing, the following acquisitions shall not constitute a
Change in Control: (i) any acquisition directly from Cadmus, (ii) any
acquisition by Cadmus, (iii) any acquisition by, or benefit distribution from,
any employee benefit plan (or related trust) sponsored or maintained by Cadmus
or any corporation controlled by Cadmus, (iv) any acquisition pursuant to a
reorganization, merger or consolidation, if, following such reorganization,
merger or consolidation, the conditions described in clauses (i), (ii), and
(iii) of Subsection (c) of this Section 2 are satisfied; or
(b) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board; provided however, that any individual becoming a director
subsequent to the date hereof whose election or nomination for election was
approved by a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a member of
the Incumbent Board (with his predecessor thereafter ceasing to be a member); or
(c) Approval by the shareholders of Cadmus of the
reorganization, merger or consolidation of Cadmus unless, following such
reorganization, merger, or consolidation, (i) more than 60% of the then
outstanding shares of common stock and the then outstanding voting securities of
the resulting corporation is then beneficially owned by all or subsequently all
of the beneficial owners, respectively, of the Outstanding Cadmus Common Stock
and Outstanding Cadmus Voting Securities immediately prior to such
reorganization, merger, or consolidation, (ii) no Person (excluding (A) Cadmus,
(B) any employee benefit plan (or related trust) of Cadmus or such corporation
resulting from such reorganization, merger, or consolidation, and (C) any Person
beneficially owning, immediately prior to such reorganization, merger, or
consolidation, 20% or more of the Outstanding Cadmus Common Stock or Outstanding
Cadmus Voting Securities, as the case may be) beneficially owns 20% or more of
the then outstanding shares of common stock or the combined voting power of the
then members of the board of directors of the resulting corporation and (iii) at
least a majority of the members of the board of directors of the resulting
corporation were members of the Incumbent Board at the time of the execution of
the initial agreement providing for such reorganization, merger, or
consolidation; or
(d) Approval by the shareholders of Cadmus of (i) a complete
liquidation or dissolution of Cadmus, or (ii) the sale or other disposition of
all or substantially all of the assets of Cadmus other than to a corporation
with respect to which, following such sale or other disposition, (A) more than
60% of the outstanding shares of common stock and the then outstanding voting
securities of such corporation is beneficially owned by all or substantially all
of the beneficial owners, respectively, of the Outstanding Cadmus Common Stock
and Outstanding Cadmus Voting Securities immediately prior to such sale or
disposition; (B) no Person (excluding (I) Cadmus, (II) any employee benefit plan
(or related trust) of Cadmus or such corporation, and (III) any Person
beneficially owning, immediately prior to such sale or other disposition, 20% or
more of the Outstanding Cadmus Common Stock or Outstanding Cadmus Securities, as
the case may be) beneficially owns 20% or more of the then outstanding shares of
common stock or the combined voting power of the then outstanding voting
securities of such corporation, and (C) at least a majority of the members of
the board of directors of such corporation were members of the Incumbent Board
at the time of the execution of the initial agreement providing for such sale or
other disposition of the assets of the corporation.
3. Employment Period. The Corporation hereby agrees to
continue, or cause to be continued, your employment with the Corporation for
the period commencing on the Effective Date and ending on the second
anniversary of such date (the "Employment Period").
4. Termination.
(a) Your employment with the Corporation shall terminate
automatically upon your death during the Employment Period.
(b) If, as a result of your incapacity due to physical or
mental illness (as determined by the Corporation) you shall have been absent
from the full-time performance of your duties with the Corporation for six (6)
consecutive months (your "Disability"), the Corporation may give you written
notice of its intention to terminate your employment. In such event, your
employment with the Corporation shall terminate effective on the 30th day after
your receipt of such notice (the "Disability Effective Date"), provided that
within 30 days after your receipt of such notice you have not returned to
full-time performance of your duties.
(c) The Corporation may terminate your employment during the
Employment Period for Cause. For purposes hereof, "Cause" shall mean (i) the
willful and continued failure by you to substantially perform your duties with
the Corporation (other than any such failure resulting from your incapacity due
to physical or mental illness or any such actual or anticipated failure after
<PAGE>
the issuance of a Notice of Termination (as defined in Section 4(e)) by you for
Good Reason (as defined in Section 4(d)), after a written demand for substantial
performance is delivered to you by the Board, which demand specifically
identifies the manner in which the Board believes that you have not
substantially performed your duties, (ii) the willful engagement by you in
conduct which is demonstrably and materially injurious to the Corporation,
monetarily or otherwise, or (iii) your conviction of a felony involving moral
turpitude. For purposes of this subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in the
best interest of the Corporation.
(d) You may terminate your employment with the Corporation
during the Employment Period for Good Reason. For purposes of this Agreement,
"Good Reason" shall mean:
(i) the assignment to you of any duties inconsistent
with the position (including status, offices, titles, and
reporting requirements) or authority in the Corporation that
you held immediately prior to the Change in Control, or a
significant adverse alteration in the nature or status of your
responsibilities or the conditions of your employment from
those in effect immediately prior to such Change in Control;
(ii) a reduction by the Corporation in your annual base
salary as in effect on the date hereof or as the same may be
increased from time to time;
(iii) the relocation of the Corporation's principal
executive offices to a location outside the Richmond
Metropolitan Area or the Corporation's requiring you to be
based anywhere other than the Corporation's principal
executive offices except for required travel on the
Corporation's business to an extent substantially consistent
with your present business travel obligations;
(iv) except in the event of reasonable administrative
delay, the failure by the Corporation to pay to you any
portion of your current compensation or to pay to you any
portion of an installment of deferred compensation under any
deferred compensation program of the Corporation within seven
(7) days of the date such compensation is due;
(v) the failure by the Corporation to continue in effect
any compensation plan in which you participate immediately
prior to the Change in Control that is material to your total
compensation or any substitute plans adopted prior to the
Change in Control, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan) has been made
with respect to such plan, or the failure by the Corporation
to continue your participation therein (or in such substitute
or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the level
of your participation relative to other participants, as it
existed at the time of the Change in Control;
(vi) the failure by the Corporation to continue to
provide you with benefits substantially similar to those
enjoyed by you under any of the Corporation's life insurance,
medical, health and accident, or disability plans in which
you were participating at the time of the Change in Control,
the taking of any action by the Corporation which would
directly or indirectly materially reduce any of such benefits
or deprive you of any material fringe benefit enjoyed by you
at the time of the Change in Control, or the failure by the
Corporation to provide you with the number of paid vacation
days to which you are entitled on the basis of years of
service with the Corporation in accordance with the
Corporation's normal vacation policy in effect at the time of
the Change in Control; or
(vii) any purported termination of your employment that
is not effected pursuant to a Notice of Termination satisfying
the requirements of subsection (e) hereof (and, if applicable,
the requirements of Subsections (b) and (c) hereof), which
purported termination shall not be effective for purposes of
this Agreement.
For purposes of this subsection, any good faith determination
of "Good Reason" made by you shall be conclusive. In addition, your right to
terminate your employment pursuant to this subsection shall not be affected by
your incapacity due to physical or mental illness and your continued employment
shall not constitute consent to, or a waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
(e) Any purported termination of your employment by the
Corporation or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with Section 8. For purposes hereof,
"Notice of Termination" shall mean a notice which (i) indicates the specific
<PAGE>
termination provision in this Agreement relied upon, (ii) sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated, and (iii) if
the Date of Termination (as defined below) is other than the date of receipt of
such notice, specifies the termination date.
(f) "Date of Termination" means (i) if your employment is
terminated by the Corporation for Cause or is terminated by you for Good Reason,
the date of receipt of the Notice of Termination or any later date specified
therein, as the case may be, (ii) if your employment is terminated by the
Corporation other than for Cause or Disability, the Date of Termination shall be
the date on which the Corporation notifies you of such termination, and (iii) if
your employment is terminated by reason of death or Disability, the Date of
Termination shall be the date of your death or the Disability Effective Date, as
the case may be.
5. Compensation upon Termination. Following a Change in
Control, you shall be entitled to the following benefits upon termination of
your employment provided that such termination occurs during the Employment
Period:
(a) If your employment is terminated by reason of your death
during the Employment Period, this Agreement shall terminate without further
obligations to your legal representatives under this Agreement, other than for
(i) payment of your Base Salary (as defined in Section 5(g) hereof) through the
Date of Termination at the same rate in effect at such date, and (ii) all other
amounts to which you are entitled under any compensation plan or any other plan,
policy, or arrangement of the Corporation, at the time such payments are due.
(b) During any period that you fail to perform your full-time
duties with the Corporation as a result of incapacity due to physical or mental
illness, you shall continue to receive, until this Agreement is terminated
pursuant to Section 4(b) hereof, your Base Salary (as defined in Section 5(g))
at the rate in effect at the commencement of any such period, together with all
compensation payable to you under any long-term disability plan maintained by
the Corporation in your name or for your benefit or other similar plan during
such period. Thereafter, your benefits shall be determined under the
Corporation's retirement, insurance and other compensation programs then in
effect in accordance with the terms of such program; however, your receipt of
benefits under any long-term disability plan maintained by the Corporation in
your name or for your benefit will not be affected by your termination under
this Agreement.
(c) If, during the Employment Period, your employment with the
Corporation shall be terminated by the Corporation for Cause or by you other
than for Good Reason, the Corporation shall pay you your full Base Salary (as
defined in Section 5(g)) through the Date of Termination at the rate in effect
at the time Notice of Termination is given, plus all other amounts to which you
are entitled under any compensation plan of the Corporation at the time such
payments are due, and the Corporation shall have no further obligations to you
under this Agreement.
(d) If, during the Employment Period, your employment with the
Corporation shall be terminated by you for Good Reason or by the Corporation
other than for Cause, death, or Disability, then you shall be entitled to the
benefits provided below:
(i) the Corporation shall pay to you your full Base
Salary (as defined in Section 5(g) hereof) through the Date of
Termination at the rate in effect at the time Notice of
Termination is given, no later than the fifth day following
the Date of Termination, plus all other amounts to which you
are entitled under any compensation plan of the Corporation,
at the time such payments are due;
(ii) in lieu of any further salary or bonus payments to
you for periods subsequent to the Date of Termination, the
Corporation shall pay as severance pay to you, at the time and
in the manner specified in subsection (e), a severance payment
(the "Severance Payment") equal to the product of (A) your
Base Salary (as defined in Section 5(g) hereof), and (B) a
number (the "Payment/Benefit Factor") determined by dividing
by 52 the sum of (I) three times the number of full years that
you have been employed by the Corporation, and (II) three
times each $10,000 of your annual salary (that is, excluding
bonus) as in effect at the Date of Termination; provided,
however, that in no event shall such Payment/ Benefit Factor
be less than .5 nor greater than 2, and provided, further,
that in no event shall such amount exceed the amount of your
Base Salary (as defined in Section 5(g)), on an undiscounted
basis, which you would have received had you remained in the
employ of the Corporation until your "Normal Retirement Date"
(as defined in Cadmus' Pension Plan (or any successor thereto)
(the "Pension Plan");
(iii) A separate lump-sum supplemental retirement
benefit (the amount of such benefit shall be hereinafter
referred to as the "Supplemental Retirement Amount") equal to
the difference between (A) the actuarial equivalent
<PAGE>
(utilizing for this purpose the actuarial assumptions
utilized in determining benefit cash-outs with respect to
Cadmus' Pension Plan during the 90-day period immediately
preceding the Effective Date) of the benefit payable under
the Pension Plan and any supplemental and/or excess benefit
plan of the Corporation and/or Cadmus providing benefits for
you (the "SERP") which you would receive if your employment
continued at the compensation level in effect at the Date of
Termination for the remainder of the Employment Period,
assuming for this purpose that all accrued benefits are fully
vested and that benefit accrual formulas are no less
advantageous to you than those in effect during the 90-day
period immediately proceeding the Effective Date, and (B) the
actuarial equivalent (utilizing for this purpose the
actuarial assumptions utilized in determining benefit cash
outs with respect to the Pension Plan during the 90-day
period immediately preceding the Effective Date) of your
actual vested benefit (paid or payable), if any, under the
Pension Plan and the SERP;
(iv) Except as provided in (iii) above, your
participation in, and terminating distribution and vested
rights under, Cadmus' Pension Plan and other plans of deferred
compensation shall be governed by the terms of those
respective plans;
(v) the Corporation shall pay to you all legal fees and
expenses incurred by you as a result of such termination,
including all such fees and expenses, if any, incurred in
seeking to obtain or enforce any right or benefit provided by
this Agreement or in connection with any tax audit or
proceeding to the extent attributable to the application of
Section 4999 of the Internal Revenue Code of 1986, as amended
(the "Code") to any payment or benefit provided hereunder;
(vi) for a period of years (or portion thereof) (the
"Payment Period") equal to the Payment/Benefit Factor after
such termination or until your "Normal Retirement Date,"
whichever first occurs, the Corporation shall arrange to
provide you with life, disability, accident and group health
insurance benefits substantially similar to those which you
were receiving immediately prior to the Notice of Termination.
Benefits otherwise receivable by you pursuant to this clause
(vi) shall be reduced to the extent comparable benefits are
actually received by you from any source (including a
subsequent employer) during such period following your
termination, and any such benefits actually received by you
shall be reported to the Corporation;
(vii) you shall not be entitled to payments or benefits
under this Agreement to the extent (but only to the extent)
that the sum of all payments and benefits received or to be
received by you in connection with a Change in Control or the
termination of your employment (whether pursuant to the terms
of this Agreement ("Contract Payments") or any other plan,
arrangement or agreement with the Corporation, any person
whose actions result in a Change in Control, or any person
affiliated with the Corporation or such person (collectively
with the Contract Payments, "Total Payments")) would, as
determined by tax counsel selected by the Corporation, result
in "Excess Parachute Payments" as defined in Section 280G of
the Code. Furthermore, such payments or benefits provided to
you under this Agreement shall be reduced to the extent
necessary so that no portion thereof shall be subject to the
excise tax imposed by Section 4999 of the Code, but only if,
by reason of such reduction, your net after tax benefit shall
exceed your net after tax benefit if such reduction were not
made. "Net after tax benefit" shall mean the sum of (A) all
payments and benefits which you receive or are then entitled
to receive from the Corporation that would constitute a
"parachute payment" within the meaning of Section 280G of the
Code, less (B) the amount of federal income taxes payable
with respect to the payments and benefits described in (A)
above calculated at the maximum marginal federal income tax
rate for each year in which such payments and benefits shall
be paid to you (based upon the rate in effect for such year
as set forth in the Code at the time of the first payment of
the foregoing), less (C) the amount of excise taxes imposed
with respect to the payments and benefits described in (A)
above by Section 4999 of the Code; and
(viii) for a period of twelve (12) months following such
termination, the Corporation shall pay the expenses of such
outplacement services as you may require, with such services
to be performed by such agency as the Corporation shall
designate.
(e) The payment provided for in subsection (d)(ii), shall be
made in a lump-sum not later than the 30th day following the Date of
Termination. Notwithstanding anything contained in this Subsection (e) or in
subsection (d)(ii), you may elect to receive, in lieu of a lump-sum Severance
Payment, the benefits described in subsection (d)(ii) in equal monthly
installments commencing on the first day of the month following the Date of
Termination and ending on the first to occur of (A) the first day of the last
month within the Payment Period, or (B) the first day of the month in which
occurs your "Normal Retirement Date";
<PAGE>
(f) Except as provided in subsection (d)(vi) hereof you shall
not be required to mitigate the amount of any payment provided for in this
Section 5 by seeking other employment or otherwise, nor shall the amount of any
payment or benefit provided for in this Section 5 be reduced by any compensation
earned by you as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by you to the
Corporation, or otherwise.
(g) For purposes of this Agreement, your "Base Salary" shall
mean the greater of (i) the annual salary and bonus paid to you by the
Corporation during the fiscal year ended June 30, 1992, or (ii) the annual
salary and bonus payable to you by the Corporation during the fiscal year in
which a Change in Control occurs.
6. Successors: Binding Agreement.
(a) This Agreement is personal to you and without the prior
written consent of the Corporation shall not be assignable by you otherwise than
by will or the laws of descent and distribution. This Agreement shall inure to
the benefit of, and be enforceable by, your legal representatives.
(b) This Agreement shall inure to the benefit of, and be
binding upon, the Corporation and its successors and assigns.
7. Resolution of Disputes. If there shall be any dispute
between the Corporation and you (i) in the event of any termination of your
employment by the Corporation, whether such termination was for Cause, or (ii)
in the event of any termination of employment by you, whether Good Reason
existed, then, unless and until there is a final, nonappealable judgment by a
court of competent jurisdiction declaring that such termination was for Cause or
that the determination by you of the existence of Good Reason was not made in
good faith, the Corporation shall pay all amounts, and provide all benefits, to
you and/or your family or other beneficiaries, as the case may be, that the
Corporation would be required to pay or provide pursuant to Section 5(d) as
though such termination were by the Corporation without Cause or by you with
Good Reason; provided, however, that the Corporation shall not be required to
pay any disputed amounts pursuant to this Section 7 except upon receipt of an
undertaking by or on behalf of you to repay all such amounts to which you are
ultimately adjudged by such court not to be entitled.
8. Notice. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States certified or registered mail, return receipt requested, postage prepaid,
addressed to the respective addresses set forth on the first page of this
Agreement, provided that all notice to the Corporation shall be directed to the
attention of the Secretary of the Corporation, or to such other address as
either party may have furnished to the other in writing in accordance herewith,
except that notice of change of address shall be effective only upon receipt.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
(b) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.
(c) The Corporation may withhold from any amounts payable under
this Agreement such Federal, state or local taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
(d) Your or the Corporation's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right you or the Corporation may have hereunder,
including, without limitation, your right to terminate your employment for Good
Reason pursuant to Section 4(d) or the Corporation's right to terminate your
employment for Cause pursuant to Section 4(c), shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.
(e) You and the Corporation acknowledge that, except as may
otherwise be provided under any other written agreement between you and the
Corporation, your employment by the Corporation is "at will" and if, prior to
the Effective Date, your employment with the Corporation terminates, then you
shall have no rights under this Agreement.
<PAGE>
(f) Prior to the Effective Date, this Agreement may be amended,
modified, or terminated by the Corporation, which amendment, modification, or
termination shall be binding and effective without any requirement for
notification of, or consent by, you. Notwithstanding the foregoing, on or after
the Effective Date, this Agreement may not be amended, modified, or terminated
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
10. Entire Agreement. This Agreement sets forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersedes all prior agreements, promises, covenants, arrangements,
communications, representations or warranties, whether oral or written, by any
officer, employee or representative of any party hereto; and any prior agreement
of the parties hereto in respect of the subject matter contained herein is
hereby terminated and cancelled.
If this letter sets forth our agreement on the subject matter
hereof, kindly sign and return to the Corporation the enclosed copy of this
letter, which will then constitute our agreement on this subject.
Sincerely,
THE WILLIAM BYRD PRESS, INCORPORATED
By _______________________________
Name:
Title:
Accepted and agreed to:
- --------------------------
Cadmus Communications Corporation unconditionally guarantees to the aforenamed
executive the performance by The William Byrd Press, Incorporated of all of the
payment obligations of The William Byrd Press, Incorporated under this
Agreement.
CADMUS COMMUNICATIONS CORPORATION
By_________________________
Name:
Title:
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF NET INCOME PER SHARE
(in thousands, except per share data)
<TABLE>
<CAPTION>
Years Ended June 30,
-------------------------------------
Net income per share was computed as follows: 1997 1996 1995
---- ---- ----
<S> <C>
Primary:
1) Income (loss) before extraordinary item and
cumulative effect of changes in accounting principles $(5,023) $ 6,504 $ 7,479
2) Extraordinary loss on early extinguishment of
debt (net of income tax benefit of $487) (795)
------- ----- -----
3) Net income $(5,023) $ 5,709 $ 7,479
======= ====== =====
4) Weighted average common shares outstanding 7,900 7,248 6,010
5) Incremental shares under stock options
computed under the treasury stock method
using the average market price of issuer's
common stock during the periods 129 247 185
--- ------ ------
6) Weighted average common and common equivalent
shares outstanding 8,029 7,495 6,195
===== ====== ======
7) Income per share before extraordinary item and
cumulative effect of changes in accounting principles (item 1
divided by item 6) $ (.63) $ .87 $ 1.21
8) Extraordinary loss on early extinguishment of debt (.11)
------- ----- -----
9) Net income per share (item 3 divided by item 6) $ (.63) $ .76 $ 1.21
======= ======== ======
Fully diluted:
1) Income (loss) before extraordinary item and
cumulative effect of changes in accounting principles $ (5,023) $ 6,504 $ 7,479
2) Extraordinary loss on early extinguishment of
debt (net of income tax benefit of $487) (795)
------- ------ ------
3) Net income $ (5,023) $ 5,709 $ 7,479
======= ====== ======
4) Weighted average common shares outstanding 7,900 7,248 6,010
5) Incremental shares under stock options
computed under the treasury stock method
using the market price of issuer's common
stock at the end of the periods if higher
than the average market price 135 247 253
------ ------ ------
6) Weighted average common and common equivalent
shares outstanding 8,035 7,495 6,263
===== ====== ======
7) Income per share before extraordinary item and
cumulative effect of changes in accounting principles (item 1
divided by item 6) $ (.63) $ .87 $ 1.19
8) Extraordinary loss on early extinguishment of debt (.11)
------ ------ ------
9) Net income per share (item 3 divided by item 6) $ (.63) $ .76 $ 1.19
======= ====== ======
</TABLE>
EXHIBIT 13
Cadmus Communications Corporation and Subsidiaries
SELECTED FINANCIAL DATA(1)(2)
The following data should be read in conjunction with the consolidated financial
statements of the Company and management's discussion and analysis that appear
elsewhere in this report.
<TABLE>
<CAPTION>
(In thousands, except per share data) Years Ended June 30,
- ----------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C>
OPERATIONS
Net sales $384,942 $336,655 $279,641 $247,730 $198,126
Cost of sales 299,525 259,086 209,415 184,088 146,031
Gross profit 85,417 77,569 70,226 63,642 52,095
Selling and administrative expenses 63,123 61,204 52,172 48,824 40,753
Operating income(2) 22,294 16,365 18,054 14,818 11,342
Income before income taxes, extraordinary item, and
cumulative effect of changes in accounting
principles(2) 12,578 10,408 12,682 9,833 7,480
Income before extraordinary item and cumulative
effect of changes in accounting principles(2) 7,750 6,504 7,479 5,907 4,533
Net income(2)(3) 7,750 5,709 7,479 6,308 4,533
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE DATA
Income before extraordinary item and cumulative
effect of changes in accounting principles(2) $ .96 $ .87 $ 1.21 $ .97 $ .76
Net income(2)(3) .96 .76 1.21 1.04 .76
Cash dividends .20 .20 .20 .20 .20
Shareholders' equity 12.76 13.60 10.26 9.18 8.52
- ----------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Current assets $100,942 $109,728 $ 76,319 $ 61,937 $ 48,766
Current liabilities(2) 51,934 50,171 43,906 38,581 32,227
Working capital 49,008 59,557 32,413 23,356 16,539
Property, plant and equipment 218,179 203,839 161,359 147,890 129,097
Accumulated depreciation 99,558 87,474 76,789 70,818 63,114
Goodwill, net 42,572 52,846 8,281 7,617 7,717
Total assets 266,150 282,763 171,570 160,129 134,189
Short-term borrowings 1,650 3,323 3,775 -- 4,000
Long-term debt, including current maturities 94,469 106,801 56,342 58,440 46,483
Shareholders' equity 99,877 107,568 61,882 54,929 50,693
Total capital 195,996 217,692 121,999 113,369 101,176
- ----------------------------------------------------------------------------------------------------------------------------
SELECTED RATIOS
Gross profit margin 22.2% 23.0% 25.1% 25.7% 26.3%
Operating income margin(2) 5.8% 4.9% 6.5% 6.0% 5.7%
Effective tax rate(2) 38.4% 37.5% 41.0% 39.9% 39.4%
Sales to average total capital 1.9 2.0 2.4 2.3 2.0
Current ratio(2) 1.9 2.2 1.7 1.6 1.5
Debt as a percent of total capital 49.0% 50.6% 49.3% 51.5% 49.9%
Operating income return on average total capital(2) 10.8% 9.6% 15.3% 13.8% 11.7%
Net income return on average shareholders'
equity(2)(3) 7.5% 6.7% 12.8% 11.9% 9.2%
- ----------------------------------------------------------------------------------------------------------------------------
OTHER DATA
Weighted average common shares outstanding 8,035 7,495 6,195 6,085 5,972
Shares outstanding at fiscal year end 7,830 7,908 6,030 5,984 5,948
Stock market price data:
High $ 17 3/4 $ 29 7/8 $ 24 3/4 $ 19 1/2 $ 11
Low 12 1/4 13 1/4 14 1/2 8 1/2 6 1/4
Close 15 1/2 15 3/8 23 5/8 17 3/4 8 3/4
Number of employees 3,000 3,200 2,400 2,400 1,800
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Certain reclassifications were made to prior years' amounts to conform with
current year presentation.
(2) This table excludes the effects of restructuring charges of $19.7 million
($12.7 million after tax) in fiscal 1997, and $1.9 million ($1.1 million
after tax) in fiscal 1994.
(3) After extraordinary loss on early extinguishment of debt in fiscal 1996 of
$0.8 million (net of tax) and income from cumulative effect of changes in
accounting principles in fiscal 1994 of $0.4 million (net of tax).
20
--
21
<PAGE>
Cadmus Communications Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS
INTRODUCTION
Cadmus Communications Corporation is an integrated communications company
offering products and services in two broad areas: marketing communications and
professional communications. Headquartered in Richmond, Virginia, Cadmus is one
of the largest graphic communications companies in North America.
ORGANIZATIONAL STRUCTURE
During the fourth quarter of fiscal 1997, the Company announced a major
restructuring plan designed to exit or reshape those businesses which were not
performing or were non-core to its strategy, and to create a more efficient and
cost effective organizational structure. Coincidental with the restructuring,
the Company reorganized its operational structure to form Cadmus Marketing
Communications and Cadmus Professional Communications. Cadmus Marketing
Communications, formed by merging the former Graphics Communications and
Marketing groups, includes the financial services, packaging and promotional
printing, point of purchase, direct marketing, catalogs, custom publishing and
interactive product lines. Cadmus Professional Communications includes journal
and magazine services for scientific, technical, and medical publishers, trade
associations, and commercial publishers.
The Company's previous organizational structure consisted of the Periodicals,
Graphic Communications, Marketing, and Publishing groups. Effective with the
sale of the Company's consumer publishing division in September 1996, the
Publishing Group ceased to exist and custom publishing was realigned into the
Marketing Group.
RESULTS OF OPERATIONS
The following table presents the major components from the Consolidated
Statements of Income as a percent of sales for the three fiscal years discussed
herein:
<TABLE>
<CAPTION>
Years Ended June 30,
- --------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales 100.0% 100.0% 100.0%
Cost of sales 77.8 77.0 74.9
----- ----- -----
Gross profit 22.2 23.0 25.1
Selling and administrative expenses 16.4 18.2 18.6
Restructuring charge 5.1 -- --
----- ----- -----
Operating income 0.7 4.8 6.5
Interest expense 2.0 1.5 1.9
Other expenses, net 0.5 0.2 --
----- ----- -----
Income (loss) before income taxes and
extraordinary item (1.8) 3.1 4.6
Income tax expense (benefit) (0.5) 1.2 1.9
----- ----- -----
Income (loss) before extraordinary item (1.3) 1.9 2.7
----- ----- -----
Extraordinary loss on early extinguishment of
debt, net of tax -- 0.2 --
----- ----- -----
Net income (loss) (1.3)% 1.7% 2.7%
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Each of these major components is discussed in additional detail in the
subsections below.
Comparison of Fiscal 1997 with Fiscal 1996
In the fourth quarter of fiscal 1997, the Company adopted a restructuring plan
which impacted a number of its operations. In connection with this plan, a
restructuring charge of $19.9 million ($12.9 million net of taxes) was recorded.
As a result of the restructuring, the Company's Baltimore promotional printing
facility and Long Beach direct marketing agency were closed, the Atlanta and
Richmond-based interactive divisions were consolidated, certain tangible and
intangible assets were written down, certain management, production, and
administrative personnel were realigned or terminated, and certain non-strategic
customer relationships and product lines were discontinued. Sales for all
discontinued operations were $16.4 million and $15.9 million for fiscal 1997 and
fiscal 1996, respectively. The Company also recognized a net restructuring gain
of $0.3 million in the first quarter resulting from a restructuring of the
Company's publishing operations.
Fiscal 1997 net sales increased 14.3% to $384.9 million from $336.7 million in
fiscal 1996. Professional Communications sales increased by 26.4% and Marketing
Communications sales rose by 7.2%. Offsetting these increases were lower
publishing sales resulting from the sale of the consumer publishing business
during the first quarter of fiscal 1997. Fiscal 1997 net sales were flat with
fiscal 1996 when adjusted for the impact of acquisitions, divestitures, and
lower paper prices.
The 26.4% increase in Professional Communications sales was primarily due to the
acquisition of Lancaster in the fourth quarter of fiscal 1996, and continued
growth in other research journal operations. Excluding Lancaster sales and the
impact of lower paper prices, other research journal revenues increased by 3.0%.
Magazine sales declined by 27.3% as a result of the Company's decision to
refocus its sales mix and discontinue relationships with non-strategic customers
and also as a result of lower paper prices. In connection with the restructuring
described above, the magazine product line has been integrated with research
journals.
Marketing Communications sales rose 7.2%, driven by a full year's inclusion of
sales from Cadmus Technology Solutions (formerly, The Software Factory) which
was purchased during the second quarter of fiscal 1996, and internal growth.
Packaging and promotional printing sales rose by 22.9% in fiscal 1997 as
compared to 1996 due to the inclusion of Cadmus Technology Solutions and
continued growth from existing clients. Financial sales increased 22.8%
primarily due to continued strength in financial markets, an increase in
shareholder communication sales, and growth in full-service contracts with
financial institutions. These increases were partially offset by a 16.5% decline
in point of purchase revenues due to lower sales to quick service restaurant and
beverage customers, the loss of a significant account during fiscal 1997, and a
longer than anticipated selling cycle for new business. Tactical communications
sales were flat as the inclusion of sales from Cadmus O'Keefe was more than
offset by lower sales from the Company's custom publishing, direct marketing and
interactive operations. The decline in direct marketing sales was the result of
the Company's decision to change the sales mix to higher margin, lower volume
creative services revenues from lower margin, higher volume production revenues.
Gross profit margin was 22.2% of sales in fiscal 1997 compared to 23.0% in
fiscal 1996. The margin decline was due to erosion in the Company's point of
purchase, interactive, and custom publishing operations, which resulted from the
combination of lower sales and higher production costs. Cost of sales was also
negatively impacted by excess capacity at certain Marketing Communications
printing facilities. These factors were partially offset by significant gross
margin improvement in Professional Communications resulting from improved sales
mix, continued efficiency improvements from the Byrd manufacturing facility
and the successful integration of Lancaster operations.
22
--
23
<PAGE>
Cadmus Communications Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Selling and administrative expenses declined to 16.4% of sales compared to 18.2%
in fiscal 1996. The decrease in the selling and administrative expense ratio in
1997 was primarily attributable to the full-year impact of the acquisition of
Lancaster, which had a lower selling and administrative expense ratio than the
Company in the aggregate, and to cost control measures implemented in fiscal
1997.
Interest expense increased by $2.6 million, or 51.4% in fiscal 1997, due to
additional debt incurred to fund the acquisition of Lancaster during the fourth
quarter of fiscal 1996.
Other expenses increased by $1.1 million in fiscal 1997 due to additional
amortization of goodwill related to fiscal 1996 acquisitions.
The effective tax rate was 29.5% in fiscal 1997 compared to 37.5% in fiscal
1996. The decrease in the effective tax rate is due primarily to the income tax
benefit recognized as a result of the net restructuring charge.
Comparison of Fiscal 1996 with Fiscal 1995
During fiscal 1996 and 1995, the Company was organized into three groups --
Printing, Marketing, and Publishing. The discussion of fiscal 1996 compared to
fiscal 1995 is based on the Company's organizational structure that was in place
at that time.
Net sales in fiscal 1996 were $336.7 million, an increase of 20.4% over fiscal
1995 sales of $279.6 million. Adjusted for acquisitions, net sales rose 12.1%.
The 13.5% growth in printing sales was driven primarily by a 59.4% increase in
financial communications, a 17.7% increase in packaging, a 16.7% increase in
magazines, and an 8.5% increase in journal services sales. Financial
communications revenues increased as a result of continued growth in the mutual
fund business, along with the addition of several full-service contracts for
financial communications customers. The increase in pack- aging sales was due to
both the expansion of services for existing customers, as well as the addition
of new customers. Sales growth in the magazine product line was also a result of
the addition of several new customers. The increase in journal services revenues
was primarily attributable to the acquisition of Lancaster in May 1996. Adjusted
for this acquisition, journal services sales increased slightly, up 1.2% from
fiscal 1995.
The 31.0% increase in marketing revenues for fiscal 1996 was attributable to
both internal growth and to the acquisition of Cadmus Technology Solutions and
two direct marketing agencies. Point-of-purchase sales rose 6.8% for fiscal
1996 due to increased activity with quick-service restaurant customers as well
as the addition of new customers. These increases were offset somewhat by
decreased demand from beverage customers, decreased volume resulting from the
merger of customer accounts, and the cessation of operations of two marketing
services programs, Kids Link and Sports Marketing. Direct marketing revenues
increased 41.3% due to the acquisition of Ronald James Direct, Inc., in the
fourth quarter of fiscal 1995 and the acquisition of certain assets of The Mowry
Company in the first quarter of fiscal 1996. Adjusted for these acquisitions,
direct marketing revenues declined 9.9% in fiscal 1996. This decrease was due
to the loss of certain customers combined with the slowdown in new customer
account development. Interactive sales increased 88.7%, or $1.2 million, during
fiscal 1996. Catalogs also posted an increase in revenues of 15.7%, or $1.5
million, for fiscal 1996.
Publishing sales growth of 11.4% resulted from increases in the custom
publishing product line offset with slight declines in consumer publishing.
Custom publishing revenues increased 33.7% in fiscal 1996 as a result of the
addition of new titles and new customer accounts. Sales in the consumer
publishing product line declined by 3.3% due to the continued softness in the
hobby and trading card collectible markets.
<PAGE>
Gross profit in fiscal 1996 was 23.0% of sales compared with 25.1% of sales in
fiscal 1995. The decline in gross profit margins is attributable to
manufacturing inefficiencies and excess production capacity, along with a change
in product sales mix. Manufacturing inefficiencies resulted from external
factors, including severe winter weather experienced at all facilities and a
fire in the Charlotte facility in March 1996, as well as overall poor production
performance at certain manufacturing facilities. These inefficiencies were
partially offset by savings from procurement activities, reduction in
depreciation expense due to the assignment of salvage values to certain
equipment, and from reductions in the workforce related to the fiscal 1995
restructuring of the Company's composition and prepress operations. The change
in product sales mix was a result of a shift from high-margin creative projects
to lower value projects with higher material costs in the direct marketing and
point-of-purchase product lines.
The Company's selling and administrative expenses as a percent of sales improved
from 18.6% in fiscal 1995 to 18.2% in fiscal 1996. However, total selling and
administrative expenses for fiscal 1996 increased by $9.0 million. This increase
resulted primarily from expenses associated with reorganizing and unifying
Cadmus, establishing and operating a New York office for the financial
communications product line, expanding the capacity and capabilities of the
Company's fulfillment operations and hiring executives and staff to support the
Company's full-service offerings. Acquired companies accounted for the remainder
of this increase. The decline in the selling and administrative expense ratio is
due to these increased costs offset by a combination of increased sales volume
along with management efforts within each product line to limit overhead costs
through discretionary spending control measures.
Other expenses increased $0.8 million in fiscal 1996 as compared to fiscal 1995.
The increase is due primarily to goodwill amortization associated with 1996
acquisitions.
The effective income tax rate of 37.5% in fiscal 1996 decreased from 41.0% in
fiscal 1995 due primarily to tax liabilities arising from the sale of the
Company's 50% joint venture interest in Central Florida Press, L.C. in the third
quarter of fiscal 1995. The fiscal 1995 effective tax rate, excluding this
transaction, was 38.7%.
LIQUIDITY AND CAPITAL RESOURCES
Management believes that the Company has the financial resources and access to
capital necessary to fund internal growth and acquisitions. The Company's major
demands on capital are for investments in property, plant, and equipment,
working capital, and acquisitions.
Net cash provided by operating activities in fiscal 1997 increased to $31.6
million, from $13.8 million in fiscal 1996. This increase was due primarily to
the continued reduction of cash requirements to fund the Company's working
capital investment. Working capital reductions generated $5.8 million in cash
during fiscal 1997, as compared to the use of $10.4 million during fiscal 1996
to fund the Company's working capital. Working capital reductions in 1997
resulted principally from decreases in accounts receivable, due to improvements
in the Company's credit and collection efforts and receivables mix, and in
inventory, due primarily to the Company's successful efforts to reduce the level
of paper inventory balances. Net cash provided by operating activities increased
in fiscal 1996 to $13.8 million from $5.4 million in fiscal 1995, due to reduced
cash requirements to fund the Company's working capital investment. As the rate
of growth in inventory and accounts receivable levels moderated in fiscal 1996,
the amount of funds required to finance these investments declined. Together,
funds used to finance the Company's investment in inventories and accounts
receivable declined from $16.9 million in fiscal 1995 to $9.7 million in fiscal
1996.
24
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25
<PAGE>
Cadmus Communications Corporation and Subsidiaries
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
Net cash used in investing activities totaled $15.5 million during 1997, as
compared to $98.3 million in fiscal 1996, and included the use of $22.9 million
to fund fiscal 1997 capital expenditures, offset by proceeds of $6.5 million
resulting from the sale of the Company's consumer publishing division in
September 1996. Major capital projects for fiscal 1997 included a CD press to
support the Company's packaging and promotional product line, a web press for
the financial services product line, the expansion of the Company's Charlotte
manufacturing and fulfillment facilities, new typesetting systems for certain
journal services and financial services locations, and investment in new
business and manufacturing systems. During fiscal 1996, net cash used for
investing activities included primarily $98.7 million to fund acquisitions and
capital expenditures. The Company anticipates that capital spending in fiscal
1998 will approximate $20 to $22 million.
Net cash used in financing activities was $17 million in fiscal 1997 compared to
net cash provided from financing activities of $85.4 million in fiscal 1996.
During fiscal 1997, utilizing cash provided by operations, the Company repaid
$14 million in debt and $1.6 million in cash dividends. Also in fiscal 1997, the
Board of Directors authorized the repurchase of up to 750,000 shares of the
Company's common stock. Pursuant to this plan, the Company repurchased 88,000
shares at a total cost of $1.2 million. Net cash provided by financing
activities in fiscal 1996 included $38.4 million in net proceeds received from
the issuance of 1.725 million shares of the Company's common stock, and $62.7
million of proceeds from long-term borrowings which were used primarily to
finance acquisitions, partially offset by the use of these funds to repay $11.2
million of 9.76% Senior Notes and the $1.3 million ($0.8 million after tax)
prepayment penalty, and to repay short-term borrowings which were used to
finance seasonal working capital needs.
Total indebtedness at June 30, 1997 was $94.5 million, down from $106.8 million
at June 30, 1996. As a result of these lower debt levels, debt as a percent of
total capital decreased to 49.0% at the end of fiscal 1997 from 50.6% at the end
of fiscal 1996.
In October 1996, the Company entered into a new $160 million bank credit
agreement with six major banks. The $160 million bank credit agreement consists
of a $40 million term loan facility, expiring in 2003, and a $120 million
revolving credit facility, expiring in 2001. This agreement replaced an existing
$115 million bank credit agreement entered into with four of the same banks in
January 1996. Using the additional capacity available under the new bank credit
agreement, the Company repaid $40 million of 6.74% senior unsecured notes which
were borrowed from two insurance companies during fiscal 1994 primarily to fund
1994 acquisitions. Bank borrowings under the new bank credit agreement at June
30, 1997, totaled $88 million, leaving $72 million available under the facility.
Total outstanding long-term debt at June 30, 1997, included approximately $91
million in variable rate obligations. As of June 30, 1997, the Company had
outstanding interest rate swap agreements that effectively convert $53.7 million
of the Company's variable rate obligations to fixed rate obligations. The effect
of the swaps was an increase in interest expense of $1.2 million in fiscal 1997.
These contracts expire between fiscal 1999 and fiscal 2003. As of June 30, 1997,
the interest rate swaps had a net fair value of negative $1.5 million.
Additional information on the interest rate swaps is provided in Note 7 of Notes
to Consolidated Financial Statements.
The Company's debt agreements contain covenants regarding fixed charge coverage
and net worth and contain other restrictions, including limitations of
additional borrowings, and the acquisition, disposition and securitization of
assets. In anticipation of the effect of the restructuring charge recorded in
the quarter ended June 30, 1997, the Company obtained waivers of compliance and
amendments to certain financial covenants, including covenants regarding fixed
charge coverage and minimum net worth. These waivers enabled the Company to
comply with the aforementioned covenants at June 30, 1997.
<PAGE>
Cadmus Communications Corporation and Subsidiaries
SELECTED QUARTERLY DATA (unaudited)
<TABLE>
<CAPTION>
(In thousands, except per share data)
- -------------------------------------------------------------------------------------------------------------------------------
1997 QUARTERS ENDED Sep. 30 Dec. 31 Mar. 31 Jun. 30
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $93,922 $97,232 $97,018 $96,770
Gross profit 21,215 21,065 21,668 21,469
Restructuring gain (charge) 250 -- -- (19,949)
Operating income (loss) 5,364 5,890 5,740 (14,399)
Net income (loss) 1,694 2,182 2,014 (10,913)
Net income (loss) per share $ .21 $ .27 $ .25 $ (1.36)
Cash dividends per share .05 .05 .05 .05
Stock market price data:
High $17 3/4 $17 3/4 $17 $15 7/8
Low 12 1/4 14 3/4 13 1/4 12 1/2
Close 16 3/4 15 1/2 14 1/8 15 1/2
- -------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 QUARTERS ENDED Sep. 30 Dec. 31 Mar. 31 Jun. 30
<S> <C>
- -------------------------------------------------------------------------------------------------------------------------------
Net sales $74,673 $85,835 $84,362 $91,785
Gross profit 17,870 20,745 17,786 21,168
Operating income 3,952 5,757 2,281 4,375
Income before extraordinary item 1,516 2,736 754 1,498
Net income 1,516 1,941 754 1,498
Earnings per share:
Income before extraordinary item $ .24 $ .38 $ .09 $ .19
Net income .24 .26 .09 .19
Cash dividends per share .05 .05 .05 .05
Stock market price data:
High $27 1/4 $29 7/8 $29 1/2 $18 7/8
Low 22 1/4 24 16 7/8 13 1/4
Close 25 27 17 1/8 15 3/8
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
26
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27
<PAGE>
Cadmus Communications Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(In thousands, except per share data) Years Ended June 30,
- ----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $384,942 $336,655 $279,641
- ----------------------------------------------------------------------------------------------------------------------
Operating expenses:
Cost of sales 299,525 259,086 209,415
Selling and administrative 63,123 61,204 52,172
Restructuring charge, net 19,699 -- --
- ----------------------------------------------------------------------------------------------------------------------
382,347 320,290 261,587
- ----------------------------------------------------------------------------------------------------------------------
Operating income 2,595 16,365 18,054
Interest and other expenses:
Interest 7,788 5,144 5,351
Other, net 1,928 813 21
- ----------------------------------------------------------------------------------------------------------------------
9,716 5,957 5,372
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before income taxes and
extraordinary item (7,121) 10,408 12,682
Income tax expense (benefit) (2,098) 3,904 5,203
- ----------------------------------------------------------------------------------------------------------------------
Income (loss) before extraordinary item (5,023) 6,504 7,479
Extraordinary loss on early extinguishment of debt
(net of income tax benefit of $487) -- (795) --
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (5,023) $ 5,709 $ 7,479
Earnings per share:
Income (loss) before extraordinary item $ (.63) $ .87 $ 1.21
Extraordinary loss on early extinguishment of debt -- (.11) --
- ----------------------------------------------------------------------------------------------------------------------
Net income (loss) $ (.63) $ .76 $ 1.21
- ----------------------------------------------------------------------------------------------------------------------
Weighted average common shares outstanding 8,035 7,495 6,195
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Cadmus Communications Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands, except share data) At June 30,
- -----------------------------------------------------------------------------------------------------------------------
ASSETS 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Current assets:
Cash and cash equivalents $ 184 $ 1,141
Accounts receivable, less allowance for doubtful accounts
($2,250 in 1997 and $2,310 in 1996) 69,093 76,889
Inventories 19,427 23,486
Deferred income taxes 8,269 2,150
Prepaid expenses and other 3,969 6,062
- -----------------------------------------------------------------------------------------------------------------------
Total current assets 100,942 109,728
- -----------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net 118,621 116,365
Goodwill and other intangibles, net 42,572 52,846
Other assets 4,015 3,824
- -----------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $266,150 $282,763
- -----------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------
Current liabilities:
Short-term borrowings $ 1,650 $ 3,323
Current maturities of long-term debt 5,017 136
Accounts payable 29,593 29,120
Accrued expenses 15,674 17,592
Restructuring reserve 7,612 --
- -----------------------------------------------------------------------------------------------------------------------
Total current liabilities 59,546 50,171
- -----------------------------------------------------------------------------------------------------------------------
Long-term debt 89,452 106,665
Other long-term liabilities 7,811 9,555
Deferred income taxes 9,464 8,804
Shareholders' equity:
Common stock ($.50 par value; authorized shares - 16,000,000; issued and
outstanding shares - 7,830,000 in 1997 and 7,908,000 in 1996) 3,915 3,954
Capital in excess of par value 51,923 52,971
Retained earnings 44,039 50,643
- -----------------------------------------------------------------------------------------------------------------------
Total shareholders' equity 99,877 107,568
- -----------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $266,150 $282,763
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
28
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29
<PAGE>
Cadmus Communications Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
(In thousands) Years Ended June 30,
- -----------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
OPERATING ACTIVITIES
Net income (loss) $ (5,023) $ 5,709 $ 7,479
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Extraordinary loss on early extinguishment of debt -- 795 --
Depreciation and amortization 18,188 14,563 12,132
Restructuring charge 19,699 -- --
Deferred income taxes (5,459) 1,784 2,080
Other, net 112 1,942 1,010
- -----------------------------------------------------------------------------------------------------------------------
27,517 24,793 22,701
- -----------------------------------------------------------------------------------------------------------------------
Changes in assets and liabilities, excluding debt and
effects of acquisitions:
Accounts receivable, net 5,544 (7,064) (11,999)
Inventories 4,140 (2,596) (4,897)
Accounts payable and accrued expenses (3,071) 1,680 624
Restructure reserve (due to cash payments) (2,850) -- --
Other current assets 2,018 (2,391) (414)
Other long-term liabilities (due to pension plan
payments) (3,400) (300) (1,600)
Other, net 1,742 (302) 945
- -----------------------------------------------------------------------------------------------------------------------
4,123 (10,973) (17,341)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 31,640 13,820 5,360
- -----------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from sale of consumer publishing division 6,500 -- --
Purchases of property, plant and equipment (22,883) (25,289) (20,959)
Proceeds from sales of property and equipment 2,860 651 3,610
Purchase of O'Keefe license agreement (482) -- --
Proceeds from sale of unconsolidated joint venture -- -- 6,800
Proceeds from life insurance loans 32 306 2,940
Payments for businesses acquired -- (73,372) (1,519)
Other, net (1,552) (609) (740)
- -----------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (15,525) (98,313) (9,868)
- -----------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Proceeds from stock offering, net -- 38,376 --
Penalty on early extinguishment of debt -- (1,282) --
Proceeds from (repayment of) short-term borrowings (1,673) (452) 3,775
Proceeds from long term revolving credit facility 18,000 30,000 --
Proceeds from long-term borrowings 40,415 32,724 111
Repayment of long-term borrowings (70,747) (12,502) (2,250)
Dividends paid (1,581) (1,485) (1,201)
Repurchase and retirement of common stock (1,185) -- --
Proceeds from exercise of stock options 98 631 449
Other, net (399) (602) (5)
- -----------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities (17,072) 85,408 879
- -----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents (957) 915 (3,629)
Cash and cash equivalents at beginning of year 1,141 226 3,855
- -----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 184 $ 1,141 $ 226
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
Cadmus Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation. The consolidated financial statements include the
accounts and operations of Cadmus Communications Corporation and Subsidiaries
(the "Company"), a Virginia corporation. All significant intercompany accounts
and transactions have been eliminated in consolidation.
Use of Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements. Estimates also affect the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Nature of Operations. The Company is an integrated communications company
offering products and services in the areas of marketing communications and
professional communications.
Revenue Recognition. Substantially all 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. Inventory
costs have been determined by the first-in, first-out (FIFO) method for 85.0%
(at June 30, 1997) and 69.8% (at June 30, 1996) of inventories. Costs for the
remaining inventories have been determined by the last-in, first-out (LIFO)
method.
Property, Plant and Equipment. Property, plant and equipment are stated at cost,
net of accumulated depreciation. Major renewals and improvements 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 by the straight-line method
based on useful lives of 30 years for buildings and three to ten years for
machinery, equipment, and fixtures.
Goodwill. The Company amortizes costs in excess of fair value of net assets of
businesses acquired using the straight-line method over a period not to exceed
40 years. Recoverability is reviewed annually or sooner if events or changes in
circumstances indicate that the carrying amount may exceed fair value.
Recoverability is then determined by comparing the undiscounted net cash flows
of the assets to which the goodwill applies to the net book value including
goodwill of those assets. Accumulated amortization at June 30, 1997 and 1996 was
$6.4 million and $5.0 million, respectively.
Income Taxes. The Company uses the asset and liability approach of Statement of
Financial Accounting Standards No. 109 (SFAS 109) to account for income taxes.
SFAS 109 requires the recognition of deferred tax liabilities and assets for the
expected future tax consequences of temporary differences between the financial
reporting basis and tax basis of assets and liabilities.
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. The Company plans to adopt the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share," during the second
quarter of fiscal 1998.
Reclassifications. Certain previously reported amounts have been reclassified to
conform to the current year presentation.
30
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31
<PAGE>
Cadmus Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
2. RESTRUCTURING CHARGE
During the fourth quarter of fiscal 1997, the Company adopted a restructuring
plan that impacted a number of its operations. The plan included the following
actions: closure of the Baltimore promotional printing facility and the Long
Beach-based direct marketing agency; consolidation of Atlanta and Richmond-based
interactive divisions and certain journal fulfillment and distribution
operations; realignment of certain management, production and administrative
personnel; write-down of certain tangible and intangible assets; and exiting
certain non-strategic customer relationships and product lines. In connection
with the restructuring plan, the Company recorded a restructuring charge of
$19.9 million ($12.9 million net of taxes) in the fourth quarter of fiscal 1997.
Most of these actions were taken by the end of fiscal 1997 and the remaining
actions are expected to be completed within one year. Management believes the
remaining restructuring reserve is adequate to complete the restructuring plan.
The restructuring charge consisted of tangible and intangible asset write-downs
of $11.5 million, severance and other employee costs of $4.5 million, facility
closure and consolidation costs of $2.9 million and exit costs of $1.0 million.
Severance and other employee costs relate to approximately 250 associates at
various operating and corporate facilities. In fiscal 1997, the Company made
severance payments totaling $1.7 million to approximately 200 associates.
Operations that were discontinued as a result of the restructuring reported
sales of $16.4 million and $15.9 million in fiscal 1997 and fiscal 1996,
respectively.
The restructuring charge discussed above was offset by a $0.3 million
restructure gain ($0.2 million net of taxes) recorded in the first quarter of
fiscal 1997 related to the restructuring of the former Publishing group. The
$0.3 million gain consisted of a $0.7 million gain from the sale of the consumer
publishing operation, offset by a $0.4 million charge related to the strategic
repositioning of the custom publishing product line into the Marketing
Communications Group.
3. ACQUISITIONS AND DISPOSITIONS
In September 1996, the Company sold the net assets of its consumer publishing
division for total consideration of $6.5 million. The sale resulted in a pretax
gain of $0.7 million (see Note 2). If this sale had occurred on July 1 of
fiscal 1997, the impact on the Company's consolidated revenues and earnings
would not have been significant.
In May 1996, the Company acquired all of the outstanding stock of Lancaster
Press, Inc. and Subsidiary, a Pennsylvania-based producer of scientific,
technical and medical journals, for total consideration, including assumed debt
and transaction costs, of approximately $58.7 million. Debt assumed included a
$2.7 million mortgage payable obligation. The acquisition was funded by
borrowings under the Company's revolving credit/term loan facility with its
banks (see Note 7).
In November 1995, the Company acquired substantially all of the assets and
assumed certain liabilities of The Software Factory, Inc., an Atlanta-based
provider of software packaging and media duplication services. The $14.1 million
purchase price consisted of 79,681 shares of the Company's common stock, at an
aggregate value of $2.0 million, and $12.1 million in cash payments, including
direct acquisition costs.
In fiscal 1996, the Company acquired certain assets of four other companies.
Total cash paid for these acquisitions was $3.4 million. These acquisitions were
not material, either individually or in the aggregate, to the Company's
consolidated financial statements taken as a whole.
The funds used to acquire fiscal 1996 acquisitions were primarily provided from
the proceeds of the issuance of 1.725 million shares of the Company's common
stock (see Note 11). All of the fiscal 1996 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. The results of operations of each of the acquired
companies have been included in the Company's consolidated results of operations
since each respective date of acquisition.
<PAGE>
The unaudited consolidated results of operations on a pro forma basis, as though
Lancaster Press, Inc. and The Software Factory had been acquired as of the
beginning of each of fiscal years 1996 and 1995, are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands, except per share data) 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Revenues $391,804 $343,302
Income before extraordinary item 8,372 10,398
Net income 7,577 9,018
Earnings per share:
Income before extraordinary item $ 1.12 $ 1.66
Net income 1.01 1.44
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
4. INVENTORIES
Inventories as of June 30, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Raw materials and supplies $ 4,818 $ 7,345
Work in process:
Materials 2,726 5,356
Other manufacturing costs 8,840 7,937
Finished goods 3,043 2,848
- ---------------------------------------------------------------------------------------------------------------------
Inventories $19,427 $23,486
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
If the FIFO inventory valuation method had been used exclusively, inventories
would have been $1.2 million and $1.9 million higher at June 30, 1997 and 1996,
respectively.
5. PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment as of June 30, 1997 and 1996 consist of the
following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Land and improvements $ 5,040 $ 5,479
Buildings and improvements 45,856 47,898
Machinery, equipment and fixtures 167,283 150,462
- ---------------------------------------------------------------------------------------------------------------------
Total property, plant and equipment 218,179 203,839
Less: Accumulated depreciation 99,558 87,474
- ---------------------------------------------------------------------------------------------------------------------
Property, plant and equipment, net $118,621 $116,365
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Commitments outstanding for capital expenditures at June 30, 1997 totaled $14.1
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
noncancelable lease terms in excess of one year as of June 30, 1997 are as
follows: 1998 - $6.6 million; 1999 - $6.3 million; 2000 - $4.2 million; 2001 -
$3.0 million; 2002 - $1.8 million and thereafter - $5.4 million.
Total rental expense charged to operations was $7.0 million, $5.7 million, and
$4.1 million in fiscal 1997, 1996 and 1995, respectively. Substantially all such
rental expense represented the minimum rental payments under operating leases.
Depreciation expense was $16.2 million, $13.4 million, and $11.4 million for
fiscal 1997, 1996, and 1995, respectively.
32
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33
<PAGE>
Cadmus Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
6. OTHER BALANCE SHEET INFORMATION
Accrued expenses at June 30, 1997 and 1996 consist of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Compensation $11,029 $10,181
Deferred revenue 1,576 3,839
Other 3,069 3,572
- ---------------------------------------------------------------------------------------------------------------------
Accrued expenses $15,674 $17,592
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
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 9 and 10).
7. DEBT
Long-term debt at June 30, 1997 and 1996 consists of the following:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Bank borrowings:
Term loan facility $40,000 $ 30,000
Revolving credit facility 48,000 30,000
Senior unsecured notes, 6.74%, due 2003 -- 40,000
Tax-exempt variable rate industrial development bonds,
weighted average interest rates of 3.6% to 4.4%, due 2016 3,315 3,315
Mortgage payable, 10%, due 2002 2,696 2,718
Other 458 768
- ---------------------------------------------------------------------------------------------------------------------
Total long-term debt 94,469 106,801
Less: current maturities of long-term debt 5,017 136
- ---------------------------------------------------------------------------------------------------------------------
Long-term debt $89,452 $106,665
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
In October 1996, the Company entered into a new $160 million bank credit
agreement with six major banks. The $160 million bank credit agreement consists
of a $40 million term loan facility, expiring in 2003, and a $120 million
revolving credit facility, expiring in 2001. This agreement replaced an existing
$115 million bank credit agreement, consisting of a $30 million term loan
facility and an $85 million revolving credit facility, entered into with four of
the same banks in January 1996. The term of the facility, interest rate spreads
and commitment fees were essentially the same under both the current and former
bank credit agreements.
The term loan facility requires the Company to make quarterly installment
payments beginning January 1998 through expiration. The revolving credit
facility requires the Company to pay commitment fees at an annual rate ranging
from 1/8 to 1/4 of 1% (based on the level of certain debt covenants) of the
total amount of the facility. The rate of interest payable under the bank credit
agreement is a function of (i) LIBOR, (ii) prime rate or (iii) money market
rate, each as defined under the agreement.
Using the additional capacity available under the new $160 million bank credit
agreement, the Company repaid $40 million of 6.74% senior unsecured notes. These
notes were originally due in 2003. There was no prepayment penalty associated
with this debt retirement.
In December 1995, the Company retired $11.2 million principal of 9.76% Senior
Notes originally 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 the Company's common stock (see Note 11).
The Company's debt agreements contain covenants regarding fixed charge coverage
and net worth and contain other restrictions, including limitations of
additional borrowings, and the acquisition, disposition and securitization of
assets. In anticipation of the effect of the restructuring charge recorded in
the quarter ended June 30, 1997 (see Note 2), the Company obtained waivers of
compliance and amendments to certain financial covenants, including covenants
regarding fixed charge coverage and minimum net worth. These waivers enabled the
Company to comply with the aforementioned covenants at June 30, 1997.
<PAGE>
The fair value of long-term debt as of June 30, 1997 approximated its recorded
values. The fair value of long-term debt as of June 30, 1996 was $105.8 million
based on the market value of debt with similar maturities and covenants.
Maturities of long-term debt are as follows: 1998 - $5.0 million; 1999 - $6.2
million; 2000 - $6.1 million; 2001 - $6.1 million; 2002 - $57.6 million;
thereafter - $13.4 million. The net book value of all encumbered properties as
of June 30, 1997 and 1996 totaled $4.4 million and $4.5 million, respectively.
The Company had uncommitted bank lines of credit which provide for unsecured
borrowings of up to $20 million, of which $1.65 million was outstanding at June
30, 1997.
The Company incurred interest expense of $8.5 million, $5.4 million, and $5.5
million for fiscal 1997, 1996 and 1995, respectively, of which $0.7 million for
1997, $0.3 million for 1996, and $0.1 million for 1995 were capitalized.
Interest paid, net of amounts capitalized, totaled $7.9 million, $5.0 million,
and $5.3 million for fiscal 1997, 1996 and 1995 respectively.
The Company has a strategy to optimize the ratio of the Company's fixed to
variable rate financing consistent with maintaining an acceptable level of
exposure to the risk of interest rate fluctuations. To achieve this mix, the
Company, from time to time, enters into interest rate swap agreements with
various banks to exchange fixed and variable rate interest payment obligations
without the exchange of the underlying principal amounts (the "Notional
Amounts"). These agreements are hedged against the Company's long-term
borrowings and have the effect of converting the Company's long-term borrowings
from variable rate to fixed rate, or fixed rate to variable rate, as required.
The differential to be paid or received is accrued as interest rates change and
recognized as an adjustment to interest expense related to the debt. The related
amount payable to or receivable from counterparties is included in other
liabilities or assets. The Company's strategy to effectively convert variable
rate financing to fixed rate financing through the use of the aforementioned
swap agreements resulted in additional interest cost of $1.2 million in fiscal
1997 and $.7 million in fiscal 1996 and 1995.
At June 30, 1997, the Company had one fixed-to-floating interest rate swap
agreement outstanding with a notional amount of $35 million. This swap was
entered into in fiscal 1994 to convert $35 million of the 6.74% Senior Notes due
in 2003 to floating-rate debt. Under the terms of this agreement, the Company
receives interest payments at a fixed rate of 5.265% and pays interest at a
variable rate which is based on six-month LIBOR. The initial term of this swap
agreement expires in fiscal 1998, and is renewable at the bank's option for an
additional two years. The fair value of this contract (which is not recognized
in the consolidated financial statements) at June 30, 1997 and 1996 was negative
$0.4 million, and negative $1.1 million, respectively. In fiscal 1997, the
Company repaid the fixed rate debt hedged by this swap with variable rate debt.
To adjust the ratio of the Company's fixed to variable rate financing, the
Company entered into additional floating-to-fixed rate swap agreements in fiscal
1997.
At June 30, 1997, the Company had various floating-to-fixed interest rate swap
agreements outstanding with notional amounts totaling $88.7 million. These swaps
effectively convert a portion of the Company's variable-rate debt and
aforementioned fixed-to-floating rate swap to a fixed-rate. The swap agreements
have individual notional amounts ranging from $6.5 million to $40 million. Under
the terms of each of the agreements, the Company receives interest payments at a
variable rate based on either 30-day or six-month LIBOR and pays interest at a
fixed rate ranging from 6.54% to 8.09%. The fair value of these contracts (which
is not recognized in the consolidated financial statements) at June 30, 1997 and
1996 totaled negative $1.1 million and negative $0.3 million, respectively.
These swap agreements are scheduled to expire as follows: 1999: $18.7 million;
2001: $40 million; 2003: $30 million.
34
--
35
<PAGE>
Cadmus Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
The Notional Amounts and applicable rates of the Company's interest rate swap
agreements are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Paid Fixed, Paid Floating,
Received Floating Received Fixed
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996 1995 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Notional amount:
Beginning balance $47,900 $17,375 $ 9,125 $35,000 $35,000 $35,000
New contracts 40,800 37,900 10,000 -- -- --
Expired contracts -- (7,375) (1,750) -- -- --
- ---------------------------------------------------------------------------------------------------------------------
Ending balance $88,700 $47,900 $17,375 $35,000 $35,000 $35,000
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Weighted Average
Interest Rates for 1997
- ---------------------------------------------------------------------------------------------------------------------
Type of swap: Paid Received
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Paid fixed, received floating 7.062% 5.653%
Paid floating, received fixed 5.633% 5.338%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The Notional Amount of each swap contract does not represent exposure to credit
loss. In the event of default by the counterparties, the risk, if any, 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.
8. INCOME TAXES
Income taxes expense (benefit), for the years ended June 30, 1997, 1996, and
1995 consist of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Current:
Federal $ 2,878 $2,139 $3,052
State 483 418 297
- -----------------------------------------------------------------------------------------------------------------------
Total current 3,361 2,557 3,349
- -----------------------------------------------------------------------------------------------------------------------
Deferred:
Federal (4,047) 1,176 1,743
State (1,412) 171 111
- -----------------------------------------------------------------------------------------------------------------------
Total deferred (5,459) 1,347 1,854
- -----------------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) $(2,098) $3,904 $5,203
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
The amounts of income tax expense (benefit) differ from the amounts obtained by
application of the statutory U.S. rates to income (loss) before income taxes and
extraordinary item for the reasons shown in the following table:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Computed at statutory U.S. rate $(2,452) $3,539 $4,312
State income taxes, net of Federal tax benefit (613) 388 269
Goodwill amortization 924 251 221
Research tax credit (75) (217) --
Sale of joint venture -- -- 295
Other 118 (57) 106
- -----------------------------------------------------------------------------------------------------------------------
Income tax expense (benefit) $(2,098) $3,904 $5,203
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Cash paid for income taxes totaled $2.3 million, $2.4 million, and $3.3
million, for fiscal 1997, 1996, and 1995, respectively.
The Company has state net operating loss carryforwards aggregating approximately
$53.5 million, which expire during fiscal years 2004 to 2012. A valuation
allowance of $0.6 million has been established for state net
<PAGE>
operating loss benefits that are not expected to be realized. The valuation
allowance increased by $0.2 million in fiscal 1997 and 1996.
The tax effects of the significant temporary differences which comprise the
deferred tax assets and liabilities in the consolidated balance sheets at June
30, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Assets:
Allowance for doubtful accounts $ 857 $ 784
Inventories 374 274
Employee benefits 3,510 3,363
State net operating loss carryforwards 1,354 891
Debt discount 236 236
Accrued restructuring costs 5,894 --
Other 72 --
- ---------------------------------------------------------------------------------------------------------------------
Gross deferred tax assets 12,297 5,548
- ---------------------------------------------------------------------------------------------------------------------
Liabilities:
Property, plant, and equipment 12,450 11,603
Goodwill and other intangibles 356 152
Other 39 35
- ---------------------------------------------------------------------------------------------------------------------
Gross deferred tax liabilities 12,845 11,790
- ---------------------------------------------------------------------------------------------------------------------
Less: Valuation allowance 647 412
- ---------------------------------------------------------------------------------------------------------------------
Net liability $ 1,195 $ 6,654
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
9. RETIREMENT PLANS
Defined Benefit Plans
The Company sponsors noncontributory defined benefit pension plans which cover
substantially all employees. The Company also participates in a multi-employer
retirement plan which provides defined benefits to employees covered under a
collective bargaining agreement. The plans provide benefit payments using
formulas based on an employee's compensation and length of service, or stated
amounts for each year of service. The Company makes contributions to its plans
sufficient to meet the minimum funding requirements of applicable laws and
regulations. Contributions to the multi-employer plan are generally based on a
negotiated labor contract. The Company's contributions totaled $3.4 million,
$0.3 million, and $1.6 million in fiscal 1997, 1996 and 1995, respectively. Plan
assets consist primarily of equity and debt securities.
The components of net pension costs for fiscal 1997, 1996, and 1995 follow:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996 1995
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Present value of benefits earned $2,341 $2,010 $1,763
Interest cost on plan liabilities 2,783 2,305 1,946
Return on plan assets:
Actual (3,567) (4,522) (2,257)
Deferred 838 2,382 371
Net amortization (86) (104) (112)
Contributions to multi-employer plan 59 -- --
- -----------------------------------------------------------------------------------------------------------------------
Net pension costs $2,368 $2,071 $1,711
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
36
--
37
<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 were
as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C>
Discount rate 8.25% 8.25% 8.5%
Rate of increase in compensation 4.5% 4.5% 4.5%
Long-term rate of return on plan assets 9.0% 9.0% 9.0%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
A summary of the funded status of the pension plans at June 30, 1997 and 1996
follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Actuarial present value of benefit obligations:
Vested benefits $32,941 $25,698
Nonvested benefits 2,074 2,099
- -----------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 35,015 27,797
Effect of projected salary increases 5,843 4,878
- -----------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 40,858 32,675
- -----------------------------------------------------------------------------------------------------------------------
Plan assets at market value 35,057 27,771
- -----------------------------------------------------------------------------------------------------------------------
Excess of projected benefit obligation over plan assets 5,801 4,904
Unrecognized net asset at transition 1,226 1,397
Unrecognized prior service cost (40) 74
Unrecognized gains (losses) (1,341) 351
Additional minimum pension liability 493 17
- -----------------------------------------------------------------------------------------------------------------------
Accrued pension costs $ 6,139 $ 6,743
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
Defined Contribution Plan
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 $1.8 million in fiscal 1997 and 1996, and
$1.5 million for fiscal 1995.
10. 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 age 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 age 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. For those employees who
retired on or after April 1, 1988, but before January 1, 1994, coverage is
available until the earlier of retiree's death or attainment of age 65. The
retiree contributes the full active rate. Upon reaching age 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 age 65, coverage under the Company's
plan ceases, and the retiree becomes covered by Medicare. The Company has no
accumulated postretirement benefit obligation attributable to active employees.
<PAGE>
The following table sets forth the components of the accrued postretirement
benefit obligation as of June 30, 1997 and 1996:
<TABLE>
<S> <C>
- ----------------------------------------------------------------------------------------------------------------------
(In thousands) 1997 1996
- ----------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit obligation attributable to retirees $356 $248
Unrecognized net gain 274 461
- ----------------------------------------------------------------------------------------------------------------------
Accrued postretirement benefit cost $630 $709
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
Amounts recognized as net periodic postretirement benefit cost in fiscal 1997
and 1996 were not material.
The discount rate used in determining the accumulated postretirement benefit
obligation as of June 30, 1997 was 8.25%. The assumed healthcare cost trend rate
used in measuring the accumulated benefit obligation was 9% in fiscal 1997
gradually decreasing to 5.75% in the year 2003 and remaining level thereafter. A
one percentage-point increase in the assumed health care cost trend rates would
not change the accumulated postretirement benefit obligation.
11. SHAREHOLDERS' EQUITY
Shareholders' equity consists of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, Common Stock Capital in Excess Retained
except per share data) Shares Amount of Par Value Earnings
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Balance at June 30, 1994 5,984,000 $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 46,000 23 652 --
- -----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1995 6,030,000 3,015 12,448 46,419
Net income -- -- -- 5,709
Cash dividends - $.20 per share -- -- -- (1,485)
Issuances of stock 1,805,000 902 39,459 --
Net shares issued upon exercise of
stock options 73,000 37 1,064 --
- -----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1996 7,908,000 3,954 52,971 50,643
Net loss -- -- -- (5,023)
Cash dividends - $.20 per share -- -- -- (1,581)
Repurchase and retirement of common stock (88,000) (44) (1,141) --
Net shares issued upon exercise of
stock options 10,000 5 93 --
- -----------------------------------------------------------------------------------------------------------------------
Balance at June 30, 1997 7,830,000 $3,915 $51,923 $44,039
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
In fiscal 1997, the Board of Directors authorized the repurchase of up to
750,000 shares of the Company's common stock, or about 9% of shares outstanding.
Shares may be repurchased from time to time in the open market or privately
negotiated transactions over the next year. As of June 30, 1997, 88,000 shares
had been repurchased under this authorization.
In 1989 and 1990, the Board of Directors authorized the purchase of up to
200,000 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, 1997, 133,000 shares had been repurchased under this
authorization.
In November 1995, the Company completed the issuance of an additional 1.725
million shares of the Company common stock through a public offering, resulting
in net proceeds (after deducting issuance costs) of $38.4 million. The Company
used the net proceeds to (i) repay the $11.2 million of 9.76% Senior Notes due
in
38
--
39
<PAGE>
Cadmus Communications Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
June 2000, plus a $1.3 million ($0.8 million after tax) prepayment penalty, (ii)
fund the cash portion of certain acquisitions and (iii) repay short-term
borrowings used to fund seasonal working capital needs.
In February 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 (the "Purchase Price"), subject to adjustment.
The rights will become exercisable initially 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 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.
In addition to its common stock, the Company's authorized capital includes
1,000,000 shares of preferred stock ($1.00 par value), issuable in series, of
which 100,000 shares are designated as Series A Preferred.
12. STOCK OPTIONS
Under the Company's stock option plans, selected employees and non-employee
directors 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. In
fiscal 1997, the Company adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123 (SFAS 123), "Accounting for Stock-Based
Compensation." As permitted by the provisions of SFAS 123, the Company continues
to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for its
stock-based awards. Accordingly, since stock options are issued at fair market
value on the date of grant, the Company does not recognize charges to earnings
resulting from the plans.
The following information is provided solely in connection with the disclosure
requirements of SFAS 123. If the Company had elected to recognize compensation
cost related to its stock options granted in fiscal 1997 and 1996 in accordance
with the provisions of SFAS 123, the impact would not have been material.
Specifically, there would have been a pro forma net loss of $5,256,000 in fiscal
1997 ($0.65 per share) and pro forma net income of $5,604,000 during fiscal 1996
($0.75 per share). The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the following
weighted-average assumptions for fiscal 1997 and 1996, respectively: risk-free
interest rates of 6.61% and 6.64%; dividend yields of 1.42% and 1.12%;
volatility factors of .391 and .390; and an expected life of 8 years. The
weighted-average fair value of options was $6.71 and $9.12 per option during
fiscal 1997 and 1996, respectively.
<PAGE>
A summary of the Company's stock option activity and related information for the
fiscal years ended June 30, 1997, 1996 and 1995 follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
Weighted
Number of Option Price Average
Shares Per Share Exercise Price(A)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C>
Outstanding at June 30, 1994 453,000 $ 6.38 to $28.00
Exercised (50,000) 9.00 to 10.63
Granted 204,000 16.75 to 19.19
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 1995 607,000 6.38 to 28.00
Exercised (71,000) 6.38 to 9.75
Granted 169,000 16.75 to 25.06
Lapsed or canceled (32,000) 16.75 to 25.06
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 1996 673,000 8.25 to 28.00 $ 14.12
Exercised (10,000) 9.81 9.81
Granted 258,000 13.18 to 16.13 14.06
Lapsed or canceled (24,000) 9.13 to 19.19 16.30
- -------------------------------------------------------------------------------------------------------------------------
Outstanding at June 30, 1997 897,000 $ 8.25 to 28.00 $ 14.08
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
Exercisable at June 30:
1995 478,000 $ 6.38 to $17.36
1996 436,000 8.25 to 24.05
1997 403,000 8.25 to 24.05 $ 11.44
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Disclosure of weighted average exercise price information is required by
SFAS 123 for fiscal years beginning after December 15, 1995.
The weighted-average remaining contractual life of options outstanding at June
30, 1997 is 7.2 years. At June 30, 1997, 1,427,000 shares of authorized but
unissued common stock were reserved for issuance upon exercise of options
granted or grantable under the plans. Options are generally exercisable under
the plans for periods of five to ten years from the date of grant.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Weighted
Number of Average Weighted Number of Weighted
Range of Options Remaining Average Options Average
Exercise Prices Outstanding Life (years) Exercise Price Exercisable Exercise Price
- -------------------------------------------------------------------------------------------------------------------
<S> <C>
$ 8.25 to $13.25 363,000 5.1 $ 9.76 317,000 $ 9.25
$14.25 to $19.19 509,000 8.8 16.59 65,000 17.46
$24.05 to $28.00 25,000 4.9 25.79 21,000 25.93
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
13. 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, 1997 and 1996, the
Company had no significant con-
centrations of credit risk.
14. 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.
40
<PAGE>
Cadmus Communications Corporation and Subsidiaries
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
Cadmus Communications Corporation:
We have audited the accompanying consolidated balance sheets of Cadmus
Communications Corporation (a Virginia corporation), and Subsidiaries as of June
30, 1997 and 1996, and the related consolidated statements of income and cash
flows for each of the three years in the period ended June 30, 1997. 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 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 audits provide 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, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended June 30, 1997, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Richmond, Virginia
July 31, 1997
41
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
American Graphics, Inc., incorporated under the laws of Georgia;
Cadmus Direct Marketing, Inc., incorporated under the laws of North Carolina;
Cadmus Financial Distribution, Inc., incorporated under the laws of Virginia;
Cadmus Interactive, Inc., incorporated under the laws of Georgia;
Cadmus Investment Corporation, incorporated under the laws of Delaware;
Cadmus Journal Services, Inc., incorporated under the laws of Virginia;
Cadmus Marketing Group, Inc., incorporated under the laws of Virginia;
Cadmus Marketing, Inc., incorporated under the laws of Virginia;
Cadmus O'Keefe Marketing, Inc., incorporated under the laws of Virginia
Cadmus Printing Group, Inc. incorporated under the laws of Virginia;
Cadmus Publishing Group, Inc., incorporated under the laws of Virginia;
Cadmus Publishing Holding Corporation, incorporated under the laws of Delaware;
Cadmus Technology Solutions, Inc., incorporated under the laws of Virginia;
E-DOCSM, Inc., incorporated under the laws of Pennsylvania;
Electronic Document Services, Inc., incorporated under the laws of Pennsylvania;
Expert Graphics, Inc., incorporated under the laws of Virginia;
Garamond/Pridemark Press, Inc., incorporated under the laws of Maryland;
Lancaster Information Group, Inc., incorporated under the laws of Delaware;
Lancaster Information Group, Inc., incorporated under the laws of Pennsylvania;
Lancaster Press, Inc., incorporated under the laws of Delaware;
Marblehead Communications, Inc., incorporated under the laws of Delaware;
Three Score, Inc., incorporated under the laws of Georgia;
Vaughan Printers, Incorporated, incorporated under the laws of Florida;
VSUB Holding Company, incorporated under the laws of Virginia;
Washburn Graphics, Inc., incorporated under the laws of North Carolina;
Washburn of New York, Inc., incorporated under the laws of New York; and
The William Byrd Press, Incorporated, incorporated under the laws of Virginia.
EXHIBIT 23
Consent of Independent Public Accountants
As independent public accountants, we hereby consent to the
incorporation of our reports incorporated by reference in this Form
10-K, into the Company's previously filed registration statements File
Nos. 333-23099, 033-56653, 33-10214, 33-87690 and 2-90742. It should be
noted that we have not audited any financial statements of Cadmus
Communications Corporation subsequent to June 30, 1997, or performed
any audit procedures subsequent to the date of our report.
Arthur Andersen LLP
Richmond, Virginia,
September 26, 1997
EXHIBIT 24
POWER OF ATTORNEY
I, Jeanne M. Liedtka, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 29th day of July, 1997.
/s/ Jeanne M. Liedtka
-------------------------
Jeanne M. Liedtka
<PAGE>
POWER OF ATTORNEY
I, John D. Munford, II, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 28th day of July, 1997.
/s/ John D. Munford, II
--------------------------
John D. Munford, II
<PAGE>
POWER OF ATTORNEY
I, Wallace Stettinius, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 25th day of July, 1997.
/s/ Wallace Stettinius
------------------------------
Wallace Stettinius
<PAGE>
POWER OF ATTORNEY
I, Frank Daniels, III, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 12th day of August, 1997.
/s/ Frank Daniels, III
-------------------------------
Frank Daniels, III
<PAGE>
POWER OF ATTORNEY
I, Bruce A. Walker, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 21st day of July, 1997.
/s/ Bruce A. Walker
---------------------------
Bruce A. Walker
<PAGE>
POWER OF ATTORNEY
I, Price H. Gwynn, III, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 24th day of July, 1997.
/s/ Price H. Gwynn, III
------------------------------
Price H. Gwynn, III
<PAGE>
POWER OF ATTORNEY
I, John C. Purnell, Jr., do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 24th day of July, 1997.
/s/ John C. Purnell, Jr.
------------------------------
John C. Purnell, Jr.
<PAGE>
POWER OF ATTORNEY
I, Russell M. Robinson, II, do hereby constitute and appoint C. Stephenson
Gillispie, Jr., David E. Bosher and Bruce V. Thomas, my true and lawful
attorneys-in-fact, any of whom acting singly is hereby authorized for me and in
my name and on my behalf as a director and/or officer of Cadmus Communications
Corporation ("Cadmus"), to act and to execute any and all instruments as such
attorneys or attorney deem necessary or advisable to enable Cadmus to comply
with the Securities Exchange Act of 1934, and any rules, regulations, policies
or requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 21st day of July, 1997.
/s/ Russell M. Robinson, II
-------------------------------
Russell M. Robinson, II
<PAGE>
POWER OF ATTORNEY
I, John W. Rosenblum, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 29th day of July, 1997.
/s/ John W. Rosenblum
---------------------------
John W. Rosenblum
<PAGE>
POWER OF ATTORNEY
I, Jerry I. Reitman, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 2nd day of August, 1997.
/s/ Jerry I. Reitman
---------------------------
Jerry I. Reitman
<PAGE>
POWER OF ATTORNEY
I, G. Waddy Garrett, do hereby constitute and appoint C. Stephenson Gillispie,
Jr., David E. Bosher and Bruce V. Thomas, my true and lawful attorneys-in-fact,
any of whom acting singly is hereby authorized for me and in my name and on my
behalf as a director and/or officer of Cadmus Communications Corporation
("Cadmus"), to act and to execute any and all instruments as such attorneys or
attorney deem necessary or advisable to enable Cadmus to comply with the
Securities Exchange Act of 1934, and any rules, regulations, policies or
requirements of the Securities and Exchange Commission (the "Commission") in
respect thereof, in connection with the preparation and filing with the
Commission of Cadmus' Annual Report on Form 10-K for the fiscal year ended June
30, 1997, and any and all amendments to such Report, together with such other
supplements, statements, instruments and documents as such attorneys or attorney
deem necessary or appropriate.
I do hereby ratify and confirm all my said attorneys or attorney shall do or
cause to be done by the virtue hereof.
WITNESS the execution hereof this 12th day of August, 1997.
/s/ G. Waddy Garrett
----------------------------
G. Waddy Garrett
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CADMUS COMMUNICATIONS CORPORATION'S CONSOLIDATED BALANCE SHEETS
AND CONSOLIDATED STATEMENTS OF INCOME AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> JUN-30-1997
<CASH> 184
<SECURITIES> 0
<RECEIVABLES> 71,343
<ALLOWANCES> 2,250
<INVENTORY> 19,427
<CURRENT-ASSETS> 100,942
<PP&E> 218,179
<DEPRECIATION> 99,558
<TOTAL-ASSETS> 266,150
<CURRENT-LIABILITIES> 59,546
<BONDS> 89,452
3,915
0
<COMMON> 0
<OTHER-SE> 95,962
<TOTAL-LIABILITY-AND-EQUITY> 266,150
<SALES> 384,942
<TOTAL-REVENUES> 384,942
<CGS> 299,525
<TOTAL-COSTS> 382,347
<OTHER-EXPENSES> 1,928
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,788
<INCOME-PRETAX> (7,121)
<INCOME-TAX> (2,098)
<INCOME-CONTINUING> (5,023)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,023)
<EPS-PRIMARY> (.63)
<EPS-DILUTED> (.63)
</TABLE>
