SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
Form 10-Q
------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________to_________
Commission File Number 0-12954
----------------
CADMUS COMMUNICATIONS CORPORATION
---------------------------------
(Exact name of registrant as specified in its charter)
Virginia 54-1274108
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6620 West Broad Street, Suite 240
Richmond, Virginia 23230
(Address of principal executive offices including zip code)
----------------
Registrant's telephone number, including area code:
(804) 287-5680
----------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of April 30, 1997.
Class Outstanding at April 30, 1997
----- -----------------------------
Common Stock, $.50 Par Value 7,917,556
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
<S> <C>
Page Number
-----------
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
March 31, 1997 and June 30, 1996
Consolidated Statements of Income -- 4
Three and Nine Month Periods Ended
March 31, 1997 and 1996
Consolidated Statements of Cash Flows -- 5
Nine Months Ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K 12
</TABLE>
2
<PAGE>
<TABLE>
PART I. Financial Information
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
<S> <C>
March 31, June 30,
1997 1996
----------------- --------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,083 $ 1,141
Accounts receivable, net 68,674 76,889
Inventories 23,031 23,486
Deferred income taxes 1,958 2,150
Prepaid expenses and other 3,848 6,062
----------------- --------------
Total current assets 100,594 109,728
Property, plant, and equipment (net of accumulated depreciation
of $95,919 at March 31, 1997 and $87,474 at June 30, 1996) 118,534 116,365
Other assets 3,999 3,824
Goodwill and other intangibles, net 50,508 52,846
----------------- --------------
Total Assets $ 273,635 $ 282,763
================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 4,945 $ 3,323
Current maturities of long-term debt 178 136
Accounts payable 30,531 26,361
Accrued expenses and other liabilities 15,138 20,351
----------------- --------------
Total current liabilities 50,792 50,171
Long-term debt 94,319 106,665
Other long-term liabilities 7,269 9,555
Deferred income taxes 8,985 8,804
Shareholders' equity:
Common stock ($.50 par value; authorized shares-16,000,000 shares; issued and
outstanding shares-7,908,000 at March 31, 1997 and June 30, 1996) 3,954 3,954
Capital in excess of par value 52,971 52,971
Retained earnings 55,345 50,643
----------------- --------------
Total shareholders' equity 112,270 107,568
----------------- --------------
Total Liabilities and Shareholders' Equity $ 273,635 $ 282,763
================= ==============
See accompanying Notes to Consolidated Financial Statements.
3
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
----------------------------- ----------------------------
1997 1996 1997 1996
---------- --------- ---------- -----------
Net sales $ 97,018 $ 84,361 $ 288,172 $ 244,870
Operating expenses:
Cost of sales 75,350 66,576 224,224 188,469
Selling and administrative 15,928 15,505 47,204 44,411
Restructuring gain
--- --- (250) ---
---------- --------- ---------- -----------
91,278 82,081 271,178 232,880
Operating income 5,740 2,280 16,994 11,990
Interest and other expenses:
Interest 1,822 955 5,991 3,772
Other, net
644 106 1,427 141
---------- --------- ---------- -----------
2,466 1,061 7,418 3,913
Income before income taxes and
extraordinary item 3,274 1,219 9,576 8,077
Income taxes
1,260 465 3,686 3,071
---------- --------- ---------- -----------
Income before extraordinary item 2,014 754 5,890 5,006
Extraordinary loss on early extinguishment of
debt (net of income tax benefit of $487)
--- --- --- (795)
---------- --------- ---------- -----------
Net income $ 2,014 $ 754 $ 5,890 $ 4,211
========== ========== ========== ===========
Earnings per share:
Income before extraordinary item $ .25 $ .09 $ .73 $ .69
Extraordinary loss on early
extinguishment of debt
--- --- --- (.11)
---------- --------- ---------- -----------
Net income per share $ .25 $ .09 $ .73 $ .58
========== ========== ========== ===========
Weighted average common shares
outstanding 8,050 8,169 8,045 7,299
========== ========== ========== ===========
Cash dividends per common share $ .05 $ .05 $ .15 $ .15
========== ========== ========== ===========
See accompanying Notes to Consolidated Financial Statements.
4
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
March 31,
-----------------------------
1997 1996
----------- -----------
Operating Activities
Net income $ 5,890 $ 4,211
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring gain (250) ---
Extraordinary loss on debt prepayment --- 795
Depreciation and amortization 13,762 10,040
Other, net 2,940 1,163
----------- -----------
22,342 16,209
----------- -----------
Changes in assets and liabilities, excluding debt and effects of acquisitions
and dispositions:
Accounts receivable, net 6,464 (8,584)
Inventories 536 (2,645)
Accounts payable and accrued expenses (2,635) 7,153
Payment to fund pension plan (2,837) ---
Other, net 763 (3,827)
----------- -----------
2,291 (7,903)
----------- -----------
Net cash provided by operating activities 24,633 8,306
----------- -----------
Investing Activities
Proceeds from sale of consumer publishing division 6,500 ---
Capital expenditures (18,022) (17,884)
Proceeds from sales of property, plant, and equipment 2,227 355
Cash paid for businesses acquired --- (15,393)
Other, net (670) (682)
----------- -----------
Net cash used in investing activities (9,965) (33,604)
----------- -----------
Financing Activities
Net proceeds of short-term borrowings 1,622 3,225
Proceeds from long-term borrowings 59,000 ---
Repayment of long-term borrowings (71,707) (12,456)
Penalty on early extinguishment of debt --- (1,282)
Proceeds from stock offering, net --- 38,684
Dividends paid (1,188) (1,090)
Proceeds from exercise of stock options --- 631
Other, net (453) (180)
----------- -----------
Net cash provided (used) by financing activities (12,726) 27,532
----------- -----------
Increase in cash and cash equivalents 1,942 2,234
Cash and cash equivalents at beginning of period 1,141 226
=========== ===========
Cash and cash equivalents at end of period $ 3,083 $ 2,460
=========== ===========
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
5
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial reporting, and with applicable quarterly reporting
regulations of the Securities and Exchange Commission. They do not include
all of the information and footnotes required by generally accepted
accounting principles for complete financial statements and, accordingly,
should be read in conjunction with the consolidated financial statements
and related footnotes included in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1996. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered
necessary for a fair presentation of interim financial information have
been included.
2. Net income per common share is computed based upon the weighted average
number of shares outstanding during the periods presented. Shares issuable
upon exercise of currently exercisable stock options are treated as common
stock equivalents for purposes of computing primary and fully diluted net
income per share. Weighted average shares outstanding reflects shares
issued in connection with the Company's equity offering completed in the
second quarter of fiscal 1996.
3. Inventories are valued at the lower of cost or market. Inventory costs have
been determined by the first-in, first-out method for approximately 70% of
inventories at March 31, 1997 and at June 30, 1996. Costs for the remaining
inventories have been determined by the last-in, first-out (LIFO) method.
Because the inventory determination under the LIFO method can only be made
at year-end based on the current inventory levels and costs, interim LIFO
determination, including that at March 31, 1997, must necessarily be based
on management's estimates of expected year-end inventory levels and costs.
Since future estimates of inventory levels and costs are subject to many
forces beyond the control of management, interim financial results are
subject to final year-end LIFO inventory adjustments. Components of net
inventories at March 31, 1997 and June 30, 1996 were as follows (in
thousands):
March 31, June 30,
1997 1996
------ ------
Raw materials and supplies $ 6,873 $ 8,055
Work in process 14,874 14,482
Finished goods 2,914 2,848
LIFO reserve (1,630) (1,899)
------ ------
Inventories $23,031 $23,486
====== ======
4. April 23, 1997, the Company announced that it will take a pre-tax
restructuring charge in the range of $17.5 million to $19.5 million ($1.35
to $1.50 per share after tax) in its fourth quarter ending June 30, 1997,
for actions directed toward improving the Company's overall financial
performance and enhancing the development and delivery of the Company's
marketing and graphic communications solutions. The Company will
restructure its marketing and magazine businesses, close certain
facilities, and write-down certain equipment, investments in non-core
businesses, and intangible assets. As part of this action, the Company will
close its Baltimore promotional printing facility, close its Long
Beach-based direct marketing agency, consolidate its Atlanta and
Richmond-based interactive divisions, consolidate certain journal
fulfillment and distribution operations, and substantially reduce personnel
through the consolidation of the journal and magazine product lines. The
Company also announced that it will combine its former Graphic
Communications and Marketing Groups into a new group, Cadmus Marketing and
Communications Solutions.
The Company estimates that cash outlays associated with the restructuring
and realignment charge will total approximately $6 million, which will be
incurred in calendar 1997. The remainder of the restructuring charge
relates to non-cash items, including the write-down of certain operating
assets, goodwill, and other intangibles.
In anticipation of the previously mentioned restructuring charge to be
taken in the quarter ending 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, contained
in the Company's $160,000,000 Revolving Credit/Term Loan Facility
Agreement.
6
<PAGE>
5. On April 23, 1997, the Company announced that its Board of Directors has
authorized the repurchase of up to 750,000 shares of the Company's common
stock, or about 9% of shares outstanding. Shares will be repurchased from
time to time in open market or privately negotiated transactions over the
next year.
6. Results of operations for the nine months ended March 31, 1997, include
recognition of a $0.3 million gain resulting from a restructuring of the
Company's publishing operations. The restructuring gain included income of
$0.7 million related to the September 30, 1996, sale of its consumer
publishing division, for total consideration of $6.5 million, which was
offset by charges of $0.4 million related to the restructuring and
repositioning of its custom publishing division into the Company's
Marketing Group.
7. In October 1996, the Company entered into an agreement for a revolving
credit/term loan facility of $160 million with its banks, replacing the
former $115 million revolving credit/term loan facility. The $160 million
agreement is composed of a $120 million revolving credit facility, expiring
in October 2001, and a $40 million, seven-year term loan expiring in
October 2003. The interest rate options and commitment fees are essentially
the same as under the former $115 million facility. Also in October 1996,
the Company entered into an interest rate swap agreement with a notional
amount of $40 million. This swap, which expires in September 2001,
effectively converts $40 million of variable-rate debt to fixed-rate debt.
Under the terms of this agreement, the Company makes payments at a fixed
rate of 6.7% and receives payments based on 30-day LIBOR.
Also in October 1996, using the additional capacity available under the new
$160 million facility referred to above, the Company repaid $40 million of
6.74% senior unsecured notes which were borrowed in fiscal 1994 to fund the
Company's fiscal 1994 acquisition of the net assets of the Waverly Press
division of Waverly, Inc. There was no prepayment penalty associated with
this debt retirement.
7
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Cadmus Communications Corporation ("Cadmus" or the "Company") 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.
The Company's business is somewhat seasonal, with the months October through
June typically stronger than the months July through September. As a result, the
Company's performance in any quarterly period is not necessarily indicative of
full-year results.
Effective April 23, 1997, the Company announced a major restructuring plan
designed to exit or reshape those businesses which were underperforming or were
non-core to Cadmus' strategy and to create a more efficient and less costly
organizational structure. Coincidental with the restructuring, the Company
reorganized its operational structure into Cadmus Marketing and Communications
Solutions and Cadmus Periodicals. Cadmus Marketing and Communications Solutions,
formed by merging the former Graphics Communications and Marketing groups,
includes financial communications, specialty packaging, promotional printing,
point of purchase, technology solutions, direct marketing, catalogs, custom
publishing, and interactive product lines. Cadmus Periodicals includes journal
and magazine services for scientific, technical, and medical publishers, trade
associations, and commercial publishers.
Effective July 1, 1996, the Company had organized its operational structure into
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 percentage of net sales for the three and nine months
ended March 31, 1997 and 1996:
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
-----------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 77.7 78.9 77.8 77.0
----- ----- ----- -----
Gross profit 22.3 21.1 22.2 23.0
Selling and administrative expenses 16.4 18.4 16.4 18.1
Restructuring gain --- --- (0.1) ---
----- ----- ----- -----
Operating income 5.9 2.7 5.9 4.9
Interest expense 1.9 1.1 2.1 1.5
Other expenses, net 0.6 0.1 0.5 0.1
----- ----- ----- -----
Income before income taxes and
extraordinary item 3.4 1.5 3.3 3.3
Income taxes 1.3 0.6 1.3 1.3
----- ----- ----- -----
Income before extraordinary item 2.1 0.9 2.0 2.0
Extraordinary loss on early 0.3
extinguishment of debt, net of tax ----- ----- ----- -----
Net income 2.1% 0.9% 2.0% 1.7%
===== ===== ===== =====
</TABLE>
8
<PAGE>
RESULTS OF OPERATIONS (continued)
Sales
Net sales for the third quarter of fiscal 1997 increased 15% to $97.0 million
compared to $84.4 million for the third quarter of fiscal 1996. Excluding the
impact of acquisitions and divestitures, net sales declined by 2%. Lower paper
prices had a negative impact on net sales in the third quarter compared to the
prior year period. Adjusted for acquisitions, divestitures, and lower paper
prices, net sales increased 3% for the third quarter of fiscal 1997.
Net sales for the first nine months of fiscal 1997 increased 18% to $288.2
million from $244.9 million in the same period of fiscal 1996 primarily due to
the acquisitions of Lancaster Press, Inc. ("Lancaster") in the fourth quarter of
fiscal 1996 and certain assets of The Software Factory, Inc. (subsequently
renamed "Cadmus Technology Solutions") in the second quarter of fiscal 1996.
Excluding the impact of acquisitions, divestitures, and lower paper prices, net
sales increased 2% during the first nine months of fiscal 1997 over the same
period of fiscal 1996.
The table below displays net sales for each of these groups expressed as a
percentage of net sales:
<TABLE>
<CAPTION>
<S> <C>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------------------------------------
1997 1996 1997 1996
---- ---- ---- ----
Periodicals 51.5% 45.7% 52.4% 46.4%
Graphic Communications 35.7 37.9 35.1 36.0
Marketing 12.8 13.5 11.7 14.5
Publishing --- 2.9 0 .8 3.1
------- ------- ------ ------
100.0% 100.0% 100.0% 100.0%
===== ===== ===== =====
</TABLE>
Periodicals Group sales rose 28% and 33% in the third quarter and first nine
months of fiscal 1997, respectively, due to the acquisition of Lancaster and
continued growth in research journals. Excluding Lancaster sales and the impact
of lower paper prices, research journal sales increased 6% for the third quarter
of fiscal 1997 and 9% for the first nine months of fiscal 1997. Magazine sales
declined 27% for both the third quarter and the first nine months of fiscal
1997 as a result of the Company's decision to discontinue relationships with
non-strategic customers and due to lower paper prices. As a result of the
restructuring and realignment described above, the magazine product line has
been integrated with research journals.
Graphic Communications Group sales increased 8% and 15% for the third quarter
and first nine months of fiscal 1997, respectively. The growth in sales was due
to continued improvement from the Company's promotional printing, specialty
packaging, and financial communications product lines. In addition, the
acquisition of certain assets of Cadmus Technology Solutions in the second
quarter of fiscal 1996 contributed to the growth in sales for the nine month
period. Promotional printing sales increased 17% and 19% for the two periods due
to growth from both new and existing clients. Specialty packaging sales rose 56%
and 49% for the two periods due primarily to growth from existing clients.
Financial communications sales rose by 23% and 16% for the two periods primarily
due to continued strength in financial markets, an increase in shareholder
communication sales, and growth in full-service contracts with financial
institutions. Offsetting these gains was a decline in point of purchase sales of
13% and 7% for the two periods due to lower sales to quick service restaurant
and beverage customers, the loss of a significant account in the first quarter
of fiscal 1997, and a longer than anticipated selling cycle for new business.
9
<PAGE>
RESULTS OF OPERATIONS (continued)
Marketing Group sales increased 10% for the third quarter while sales for the
first nine months of fiscal 1997 declined 5%. Excluding the impact of
acquisitions, sales increased 3% for the third quarter but decreased 9% for the
first nine months of fiscal 1997. Custom publishing sales declined 24% and 26%
for the two periods due to large one-time projects in fiscal 1996 which did not
repeat in fiscal 1997. Direct marketing sales declined 16% and 14% for the two
periods due primarily to a change in sales mix. Catalog sales rose 128% in the
third quarter and 13% for the first nine months of fiscal 1997 due to higher
volume from existing customers.
Operating Expenses
Cost of sales were 77.7% of net sales and 77.8% for the third quarter and first
nine months of fiscal 1997 compared to 78.9% and 77.0% of net sales,
respectively, for the same periods of fiscal 1996. The improvement in the cost
of sales ratio for the third quarter of fiscal 1997 was attributable to
continued margin improvement from the Periodicals Group as a result of a better
sales mix, improved manufacturing efficiencies, and the inclusion of
higher-margin Lancaster sales. These improvements in the Periodicals Group were
offset by margin erosion in the Company's point of purchase, interactive, and
custom publishing product lines, due to lower sales and higher production costs.
In addition, cost of sales was impacted by excess capacity at certain Graphic
Communications Group facilities.
Selling and administrative expenses declined to 16.4% of net sales for the third
quarter and first nine months of fiscal 1997, compared to 18.4% and 18.1%,
respectively, for the same periods of fiscal 1996. This decline as a percent-
age of net sales is primarily due to the inclusion of Lancaster, which has
a lower selling and administrative ratio than the Company in aggregate, and
to cost control measures implemented in fiscal 1997.
In the first quarter of fiscal 1997 the Company recorded a $0.3 million pretax
gain to restructure the Publishing Group operations as it was determined that
the consumer publishing division was no longer consistent with the Company's
strategy. Therefore, the consumer publishing division was sold and the Company
recorded a $0.7 million gain from this sale. The proceeds from the sale of this
division were used to pay down debt. In addition, as part of this restructuring,
the Company recorded a $0.4 million charge related to the strategic
repositioning of the custom publishing division into the Marketing Group. The
charge included costs of $0.2 million for termination benefits for five
associates and $0.2 million for costs related to repositioning the client base
to align with the Marketing Group strategies.
Interest and Other Expenses and Income Taxes
Interest expense increased $0.9 million, or 91%, for the third quarter of
fiscal 1997 and $2.2 million, or 59%, for the nine month period ended March
31, 1997. These increases were attributable to debt incurred related to the
Lancaster acquisition in May 1996.
The effective tax rate was 38.5% for the first nine months of fiscal 1997,
compared to 38.0% for the same period of fiscal 1996. The increase in the
effective tax rate is due primarily to the acquisition of Lancaster.
Other expenses, net increased $0.5 million and $1.3 million for the third
quarter and nine month period ended March 31, 1997 due to amortization of
goodwill associated with fiscal 1996 acquisitions.
10
<PAGE>
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 investments in property, plant, and equipment, working
capital, and acquisitions.
Net cash provided by operating activities totaled $24.6 million for the first
nine months of fiscal 1997, representing a $16.3 million increase from $8.3
million provided by operating activities in the comparable prior year period. A
portion of the increase was attributable to a $6.1 million increase in cash
generated from operations (net income plus depreciation and amortization and
other non-cash expenses). In addition, there was an $8.4 million improvement,
from the comparable prior year period, in net cash requirements to fund the
Company's working capital investment, offset by a $2.8 million cash contribution
in fiscal 1997, to the Company's pension plan. The lower level of cash required
to fund the Company's working capital investment was a result of improvement in
accounts receivable collection efforts and lower investment in inventories.
Net cash used in investing activities totaled $10.0 million for the first nine
months of fiscal 1997, as compared to $33.6 million used in the comparable prior
year period. This reduction was due primarily to proceeds of $6.5 million from
the sale of the Company's consumer publishing division in September 1996, the
absence of significant fiscal 1997 acquisitions compared to acquisition
expenditures of $15.4 million in fiscal 1996, and an increase of $1.9 million in
proceeds from the sale of certain property, plant, and equipment. Capital
expenditures totaled $18.0 million for the first nine months of fiscal 1997.
Major projects included new presses to support the Company's specialty packaging
and financial communications product lines, the expansion of the Company's
Charlotte manufacturing facility, and new business and manufacturing systems.
Net cash used in financing activities was $12.7 million during the first nine
months of fiscal 1997 compared with $27.5 million provided by financing
activities in the comparable prior year period. The excess of cash provided by
operating activities over cash used in investing activities and proceeds from
fiscal 1997 dispositions noted above were used to reduce debt by $11.1 million
in the first nine months of fiscal 1997.
Total debt at March 31, 1997, was $99.4 million, down from $110.1 million at
June 30, 1996. In addition, the Company's debt-to-capital ratio continued to
improve, down from 50.6% at June 30, 1996 to 47.0% at March 31, 1997, as a
result of these lower debt levels.
In October 1996, the Company entered into an agreement for a revolving
credit/term loan facility of $160 million with its banks, replacing the former
$115 million revolving credit/term loan facility. The $160 million agreement is
composed of a $120 million revolving credit facility expiring in October 2001
and a $40 million, seven-year term loan expiring in October 2003. The interest
rate options and commitment fees are essentially the same as under the former
$115 million facility. Also in October 1996, the Company entered into an
interest rate swap agreement with a notional amount of $40 million. This swap,
which expires in September 2001, effectively converts $40 million of
variable-rate debt to fixed-rate debt. Under the terms of this agreement, the
Company makes payments at a fixed rate of 6.7% and receives payments based on
30-day LIBOR.
Also in October 1996, using the additional capacity available under the new $160
million facility referred to above, the Company repaid $40 million of 6.74%
senior unsecured notes which were borrowed in fiscal 1994 to fund the Company's
fiscal 1994 acquisition of the net assets of the Waverly Press division of
Waverly, Inc. There was no prepayment penalty associated with this debt
retirement.
In anticipation of the previously mentioned restructuring charge to be taken in
the quarter ending 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, contained in the Company's $160,000,000
Revolving Credit/Term Loan Facility Agreement.
11
<PAGE>
** "Safe Harbor" Statement Under the Private Securities Litigation Reform Act
of 1995:
Statements in this Form 10-Q relating to the future impact of the restructuring
and realignment 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) success in integrating the marketing and graphic communications groups, (2)
successful completion of the restructuring, (3) ability to improve performance
of the point of purchase and custom publishing product lines, (4) more rapid
than expected adoption of digital technology, (5) ability to sustain margins in
the Periodicals Group, (6) continuing competitive pricing in the markets in
which the Company competes, (7) the gain or loss of significant customers or the
decrease in demand from existing customers, (8) the timing of significant orders
received from customers, (9) seasonal changes in the demand for the Company's
products, (10) changes in the Company's product sales mix, (11) continued
success in the integration of Lancaster, and (12) the performance of management
and leadership teams in the Company and its divisions.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit Description
------- -----------
Exhibit 27 Financial Data Schedule
b. Reports on Form 8-K:
On January 24, 1997, the Company filed a Form 8-K, which included the press
release regarding fiscal 1997 second quarter financial results, as well as a
copy of the prepared remarks made on a conference call to analysts on the
preceding day.
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.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CADMUS COMMUNICATIONS CORPORATION
Date: May 14, 1997
/s/ C. Stephenson Gillispie, Jr.
-------------------------------------------------
C. Stephenson Gillispie, Jr.
Chairman, President, and Chief Executive Officer
Date: May 14, 1997
/s/ Bruce V. Thomas
-------------------------------------------------
Bruce V. Thomas
Senior Vice President and Chief Financial Officer
13
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
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3,954
0
<COMMON> 0
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<TOTAL-LIABILITY-AND-EQUITY> 273,635
<SALES> 288,172
<TOTAL-REVENUES> 288,172
<CGS> 224,224
<TOTAL-COSTS> 224,224
<OTHER-EXPENSES> 1,427
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<INTEREST-EXPENSE> 5,991
<INCOME-PRETAX> 9,576
<INCOME-TAX> 3,686
<INCOME-CONTINUING> 5,890
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<NET-INCOME> 5,890
<EPS-PRIMARY> .73
<EPS-DILUTED> .73
</TABLE>