SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 31, 1997
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CADMUS COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia 0-12954 54-1274108
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
6620 West Broad Street, Suite 240, Richmond, Virginia 23230
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 287-5680
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Item 5. Other Events.
On July 31, 1997, Cadmus Communications Corporation (the "Company") issued the
press release attached hereto as Exhibit 99.1 with respect to first quarter
financial results and David E. Bosher, Vice President and Treasurer of the
Company read the prepared remarks attached hereto as Exhibit 99.2 on a
conference call with analysts, shareholders, prospective investors, and other
interested parties. Information in these documents relating to Cadmus' future
prospects and performance are "forward-looking statements," as defined by the
Private Securities Litigation Reform Act of 1995, and, as such, are subject to
certain risks and uncertainties that could cause actual results to differ
materially. Potential risks and uncertainties include but are not limited to:
(1) continuing competitive pricing in the markets in which the Company competes,
(2) the gain or loss of significant customers or the decrease in demand from
existing customers, (3) the timing of significant orders received from
customers, (4) a successful relocation of the Company's Charlotte manufacturing
facilities, (5) seasonal changes in the demand for the Company's products, (6)
continued success in the implementation of the restructuring and re-alignment,
and (7) changes in the Company's product sales mix.
Item 7. Exhibits.
Exhibit 99.1 Press Release
Exhibit 99.2 Prepared Remarks from Conference Call
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on July 31, 1997.
CADMUS COMMUNICATIONS CORPORATION
By: /s/ C. Stephenson Gillispie, Jr.
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C. Stephenson Gillispie, Jr.
Chairman, President, and Chief Executive Officer
<PAGE>
Exhibit Index
Exhibit
99.1 Press Release
99.2 Prepared Remarks from Conference Call
Exhibit 99.1
NEWS RELEASE
CONTACT
David E. Bosher
Vice President & Treasurer
(804) 287-5685
CADMUS COMMUNICATIONS CORPORATION ANNOUNCES FISCAL 1997
FOURTH QUARTER AND YEAR-END RESULTS
RICHMOND, VA, July 31, 1997 -- Cadmus Communications Corporation (NASDAQ NMS:
CDMS) today reported net sales of $96.8 million for the quarter ended June 30,
1997, an increase of 5% over net sales of $91.8 million for the quarter ended
June 30, 1996. As expected, fourth quarter operating results were adversely
impacted by a one-time restructuring charge, previously announced on April 23,
1997, of $12.9 million ($19.9 million pre-tax) or $1.61 per share. Fourth
quarter profits before the restructuring charge were $2.0 million, or $.25 per
share, up 33% from last year's fourth quarter net income of $1.5 million, or
$.19 per share. After the restructuring charge, the Company experienced a net
loss of $10.9 million, or $1.36 per share. There were 8,027,000 average
outstanding shares for the fourth quarters of fiscal 1997 and fiscal 1996.
For the fourth quarter, the Company's two business groups performed as follows:
Periodicals Group sales rose 15% due to the inclusion of Lancaster Press, Inc.,
acquired in May, 1996, and continued growth in base journal services revenues.
Periodicals Group operating margins improved significantly due to the successful
integration of Lancaster, continued margin expansion from other journal
facilities, and continued operating margin improvement from magazine operations.
In the Marketing Communications Group, sales were flat compared to the fourth
quarter of fiscal 1996. Financial communications, packaging and promotional, and
direct marketing operations each registered strong gains in sales along with
improvement in operating income. However, these gains were offset by weak
results from the Company's point-of-purchase, technology solutions, and custom
publishing operations, along with continued losses from the recently closed Long
Beach-based direct marketing and Atlanta-based interactive businesses.
Cash flow (before debt activities) continued its strong trend in the fourth
quarter as the Company generated positive cash flow of $3.1 million excluding
cash payments related to the restructuring and share repurchases. As a result,
the Company reduced its total debt to $96.1 million from $99.4 million at March
31, 1997. For the year, cash flow totaled $14.5 million and total debt declined
$14.0 million from $110.1 million at June 30, 1996.
C. Stephenson Gillispie, Jr., chairman, president and chief executive officer,
stated, "We are pleased with our fourth quarter results, which were in-line with
our expectations. In addition, we are pleased with the progress we have made
effecting our restructuring. These restructuring actions have substantially
reduced our cost structure and have eliminated under-performing businesses which
have adversely affected our financial results. The superb performance from our
journal services, financial communications, and packaging and promotional
businesses, combined with an improved cost structure, position Cadmus for
improvement in profitability throughout fiscal 1998."
-more-
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Page 2
In connection with its previously announced restructuring, the Company has
closed its Baltimore promotional printing facility, closed its Long Beach-based
direct marketing agency, closed its Atlanta-based interactive division,
consolidated certain journal fulfillment and distribution operations, and
reduced personnel and costs in its magazine, point-of-sale, and technology
solutions businesses. Cash payments associated with the restructuring will total
approximately $6.4 million and will be incurred primarily in calendar 1997. The
remainder of the restructuring charge relates to non-cash items, including the
write-down of certain operating assets, investments in non-core businesses and
other intangible assets.
For the fiscal year ended June 30, 1997, sales rose 14% to $384.9 million from
$336.7 million in fiscal 1996. Cadmus profits before the restructuring charge
were $7.9 million, or $.98 per share, representing a 22% increase over 1996
income before extraordinary item of $6.5 million, or $.87 per share. After the
restructuring charge, the net loss for fiscal 1997 was $5.0 million, or $.63 per
share, compared to net income of $5.7 million, or $.76 for fiscal 1996. Average
outstanding shares were 8,035,000 and 7,495,000 for 1997 and 1996, respectively.
Cadmus Communications Corporation is an integrated communications company
offering a broad range of periodicals, marketing and graphic communications
solutions. Headquartered in Richmond, Virginia, Cadmus is one of the largest
graphic communications companies in North America.
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"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995:
Information in this release relating to Cadmus' future prospects and performance
are "forward-looking statements" and, as such, are subject to certain risks and
uncertainties that could cause actual results to differ materially. Potential
risks and uncertainties include but are not limited to: (1) continuing
competitive pricing in the markets in which the Company competes, (2) the gain
or loss of significant customers or the decrease in demand from existing
customers, (3) the timing of significant orders received from customers, (4) a
successful relocation of the Company's Charlotte manufacturing facilities, (5)
seasonal changes in the demand for the Company's products, (6) continued success
in the implementation of the restructuring and re-alignment, and (7) changes in
the Company's product sales mix.
**(See attached financial highlights)**
<TABLE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
<S> <C>
Three Months Ended Years Ended
June 30, June 30,
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1997 1996 1997 1996
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Net sales $ 96,770 $ 91,785 $ 384,942 $ 336,655
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Operating expenses:
Cost of sales 75,301 70,617 299,525 259,086
Selling and administrative 15,919 16,793 63,123 61,204
Restructuring charge 19,949 --- 19,699 ---
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111,169 87,410 382,347 320,290
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Operating income (loss) (14,399) 4,375 2,595 16,365
Interest and other expenses:
Interest 1,798 1,372 7,788 5,144
Other, net 501 672 1,928 813
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2,299 2,044 9,716 5,957
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Income (loss) before income taxes and
extraordinary item (16,698) 2,331 (7,121) 10,408
Income tax expense (benefit) (5,785) 833 (2,098) 3,904
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Income (loss) before extraordinary item (10,913) 1,498 (5,023) 6,504
Extraordinary loss on early extinguishment
of debt (net of income tax benefit of $487) --- --- --- (795)
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Net income (loss) $ (10,913) $ 1,498 $ (5,023) $ 5,709
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Earnings per share:
Income (loss) before extraordinary item $ (1.36) $ .19 $ (.63) $ .87
Extraordinary loss on early
extinguishment of debt, net of taxes --- --- --- (.11)
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Net income per share $ (1.36) $ .19 $ (.63) $ .76
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Weighted average common shares
outstanding 8,027 8,027 8,035 7,495
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Cash dividends per common share $ .05 $ .05 $ .20 $ .20
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</TABLE>
Exhibit 99.2
Prepared Remarks from Conference Call
This is Dave Bosher, Cadmus vice president and treasurer. I want to thank you
for joining us for this morning's conference call to review our results for the
fourth quarter of fiscal 1997, provide you with an update on the status of our
restructuring activities, and share with you our outlook for fiscal 1998. I am
joined in today's call by Bruce Thomas, Cadmus' senior vice president and chief
financial officer. I will make some summary remarks after which Bruce and I will
be pleased to answer any questions that you may have.
First, let's review our fourth quarter results.
Fourth Quarter Results
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Cadmus fourth quarter income, before the restructuring charge, rose 33% to $2.0
million or $.25 per share, compared to net income of $1.5 million, or $.19 per
share, in the same period last year. Sales increased 5% to $96.8 million from
$91.8 million last year. While gross margins declined to 22.2% from 23.1% last
year, SG&A expenses improved to 16.5% of sales in this year's fourth quarter,
down from 18.3% last year. As a result, our operating margin was 5.7% of sales
in the fourth quarter, up from last year's 4.8% rate. Interest expense declined
to just under $1.8 million this quarter as good cash flow performance allowed us
to continue to repay debt. Fourth quarter results were impacted by our
previously announced restructuring. The restructuring charge reduced fourth
quarter income by $12.9 million, or $1.61 per share, bringing the net loss for
the fourth quarter to $10.9 million, or $1.36 per share.
This quarter's results benefited from the continuation of several positive
trends in our business.
First, our Periodicals Group had another great quarter. Fourth quarter sales
rose 15% and operating income increased by 89%. Operating margins in this group
continued their year-long improvement trend, rising over 500 basis points in the
fourth quarter as compared to last year's margin. The improvement was across the
board in this group. Lancaster continued to perform very well, and we are
continuing to obtain synergies from the integration of that business. Our base
journal services business showed solid growth and significant improvement in
operating margins. Adjusted for the impact of paper price changes, base journal
revenues grew at a 10% rate in the fourth quarter. In addition, operating
margins expanded further as we obtained continued improvement in manufacturing
performance and efficiency gains, especially at our Byrd periodical facility in
Richmond. Finally, our magazine product line recorded another quarter of higher
operating income and saw a continued improvement in margins.
In our Marketing Communications Group, fourth quarter operating results were
mixed. We continued to enjoy good growth and profitability in our packaging and
promotional, and financial communications operations. Packaging and promotional
sales rose 20% and financial communications sales increased 40%. In addition,
our Charlotte-based direct marketing operations continued their year long
improvement in profitability driven by a fourth quarter increase in agency fees
of 19%. However, several of our businesses continued to drag our consolidated
performance. Our point-of-purchase business, historically one of our better
performing businesses, continued to post disappointing results on a 37% decline
in revenues. Our technology services business also continued to experience soft
comparisons to prior year's results. And finally, we also continued to
experience losses in the quarter from our marketing businesses, partially due to
losses from the discontinued West Coast direct marketing and Atlanta-based
interactive businesses.
On a positive note, cash flow was $3.1 million in the fourth quarter, before the
negative impact of cash restructuring and share repurchases. We ended this year
with total debt of $96.1 million, representing a reduction of $3.3 million for
the quarter and over $14.0 million for the year. As a result, our
debt-to-capital ratio, before the effects of the restructuring, fell to 46.0% at
June 30, 1997, compared to 50.6% at June 30, 1996. Free cash flow amounted to
$14.5 million for the year. We achieved this significant improvement in cash
flow through better management of working capital - DSO's declined in 1997 and
paper inventories fell over $3 million - through the divestiture of
non-strategic assets, and through effective CAPEX control.
Restructuring Update
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Next, I would like to update you on the restructuring charge and the status of
our restructuring actions. As we mentioned earlier, the fourth quarter
restructuring charge totaled $19.9 million pre-tax, or $12.9 million after-tax.
This amounted to $1.61 per share. Importantly, we estimate that the annual cost
savings from the restructuring will exceed $.50 per share. The cash outlay
portion on the charge will amount to $6.4 million, which we expect will be
incurred and paid back within 12 months. We made good progress in the quarter
toward executing the restructuring actions. The businesses we designated for
closure have all been closed. All actions scheduled for completion by June 30
have been effected. The other actions, primarily reductions in work force, are
all on schedule.
With the restructuring announcement on April 23, we announced a stock repurchase
program for up to 750,000 shares of Cadmus common stock. To-date, we have
purchased 96,000 shares at an average price of $13.50 per share.
Fiscal 1998 Outlook
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Now, allow me to make a few comments regarding our FY98 expectations. Due to the
successful execution of our restructuring actions and the trends at several of
our key businesses, we are optimistic that Cadmus will achieve improved
financial performance throughout fiscal 1998. At this point, we are comfortable
with earnings estimates of up to $1.40 per share. While our strongest quarters
will be our third and fourth quarters, we expect to see continued improvement in
profitability through the year. Nearer term, we believe that our fiscal first
quarter, which should begin to show some benefit from the restructuring actions,
should show good year-over-year improvement. We are comfortable with published
estimates in the $.23 - $.25 per share range. This performance would represent
approximately a 25 percent increase over last year's $.19 per share first
quarter operating results.
Conclusion
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Before I conclude my remarks, please note that certain of my comments represent
"forward looking statements" and are subject to certain risks and uncertainties.
Those risks and uncertainties are set forth in our press release and included in
a Form 8-K which will be filed today with the SEC to which you should refer for
additional details.
I thank you again for joining us for this morning's call and for your continued
interest and support in Cadmus. I would now like to open up the session for any
questions you may have.
