SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
Form 10-Q
------------
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 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 January 31, 1998.
Class Outstanding at January 31, 1998
----- -------------------------------
Common Stock, $.50 Par Value 7,855,906
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page Number
<S> <C>
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets -- 3
December 31, 1997 and June 30, 1997
Consolidated Statements of Income -- 4
Three and Six Month Periods Ended
December 31, 1997 and 1996
Consolidated Statements of Cash Flows -- 5
Six Months Ended December 31, 1997 and 1996
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial 7
Condition and Results of Operations
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
</TABLE>
<PAGE>
PART I. Financial Information
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
----------------- --------------
(Unaudited)
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,210 $ 184
Accounts receivable, net 63,828 69,093
Inventories 22,758 19,427
Deferred income taxes 7,413 8,269
Prepaid expenses and other 3,290 3,969
----------------- --------------
Total current assets 98,499 100,942
Property, plant, and equipment (net of accumulated depreciation
of $104,284 at December 31, 1997 and $99,558 at June 30, 1997) 123,542 118,621
Goodwill and other intangibles, net 42,119 42,572
Other assets 3,606 4,015
----------------- --------------
Total Assets $ 267,766 $ 266,150
================= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 3,665 $ 1,650
Current maturities of long-term debt 6,081 5,017
Accounts payable 29,405 29,593
Accrued expenses 18,436 15,674
Restructuring reserve 4,089 7,612
----------------- --------------
Total current liabilities 61,676 59,546
Long-term debt 84,038 89,452
Other long-term liabilities 7,693 7,811
Deferred income taxes 10,201 9,464
Shareholders' equity:
Common stock ($.50 par value; authorized shares-16,000,000; issued and
outstanding shares- 7,845,000 at December 31, 1997 and 7,830,000
at June 30, 1997) 3,923 3,915
Capital in excess of par value 52,024 51,923
Retained earnings 48,211 44,039
----------------- --------------
Total shareholders' equity 104,158 99,877
----------------- --------------
Total Liabilities and Shareholders' Equity $ 267,766 $ 266,150
================= ==============
See accompanying Notes to Consolidated Financial Statements.
</TABLE>
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------ ----------------------------
<S> <C>
1997 1996 1997 1996
---------- --------- ---------- -----------
Net sales $ 96,048 $ 97,232 $ 188,410 $ 191,154
Operating expenses:
Cost of sales 74,381 76,167 146,195 148,874
Selling and administrative 14,867 15,175 29,725 31,276
Restructuring gain
--- --- --- (250)
------ ------ ------- ---------
89,248 91,342 175,920 179,900
Operating income 6,800 5,890 12,490 11,254
Interest and other expenses:
Interest 1,861 2,093 3,794 4,169
Other, net
248 272 640 783
----- ----- ----- ------
2,109 2,365 4,434 4,952
Income before income taxes 4,691 3,525 8,056 6,302
Income taxes 1,772 1,343 3,101 2,426
-------- -------- ------ -------
Net income $ 2,919 $ 2,182 $ 4,955 $3,876
========= ======= ====== =======
Net income per share $ .36 $ .27 $ .61 $ .48
======== ======== ====== =======
Weighted average common shares
outstanding 8,135 8,061 8,122 8,045
======== ======= ====== =====
Cash dividends per common share $ .05 $ .05 $ .10 $ .10
======== ======== ========== =====
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------------
1997 1996
----------- -----------
<S> <C>
Operating Activities
Net income $ 4,955 $ 3,876
Adjustments to reconcile net income to net cash
provided by operating activities:
Restructuring gain --- (250)
Depreciation and amortization 9,053 9,187
Other, net 2,624 1,316
----------- -----------
16,632 14,129
----------- -----------
Changes in assets and liabilities, excluding debt and effects of acquisitions
and dispositions:
Accounts receivable, net 5,149 4,326
Inventories (3,331) 1,369
Accounts payable and accrued expenses 2,576 (3,869)
Restructure reserve (due to cash payments) (3,207) ---
Other current assets and liabilities 679 991
Other long-term liabilities (due to pension plan payments) (1,148) (2,837)
Other, net (204) (80)
----------- -----------
514 (100)
----------- -----------
Net cash provided by operating activities 17,146 14,029
----------- -----------
Investing Activities
Proceeds from sale of consumer publishing division --- 6,500
Purchases of property, plant, and equipment (13,109) (11,959)
Proceeds from sales of property and equipment --- 1,241
Other, net --- (936)
----------- -----------
Net cash used in investing activities (13,109) (5,154)
----------- -----------
Financing Activities
Proceeds from (repayment of) short-term borrowings 2,015 (1,158)
Proceeds from (repayment of) long-term revolving credit facility (2,500) 24,000
Proceeds from long-term borrowings --- 40,415
Repayment of long-term borrowings (1,851) (70,622)
Dividends paid (783) (790)
Repurchase and retirement of common stock (118) 0
Proceeds from exercise of stock options 226 ---
Other, net ---
(296)
----------- ------------
Net cash used in financing activities (3,011) (8,451)
Increase in cash and cash equivalents 1,026 424
Cash and cash equivalents at beginning of period 184 1,141
----------- -----------
Cash and cash equivalents at end of period $ 1,210 $ 1,565
=========== ===========
</TABLE>
See accompanying Notes to Consolidated Financial Statements.
<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, 1997.
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. During the second quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share," which establishes
new standards for computing and presenting earnings per share. The effect of
this adoption was immaterial.
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 basic and diluted net income per share.
3. Inventories are valued at the lower of cost or market. Inventory costs have
been determined by the first-in, first-out method for 85% of inventories at
December 31, 1997 and at June 30, 1997. 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 December 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 amounts. Components of net inventories at December 31, 1997 and June
30, 1997 were as follows (in thousands):
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
------------ ---------
<S> <C>
Raw materials and supplies $5,794 $5,341
Work in process:
Materials 5,608 2,838
Other manufacturing costs 9,416 9,451
Finished goods 3,186 3,043
LIFO reserve (1,246) (1,246)
---------- ---------
Inventories $22,758 $19,427
=========== =========
</TABLE>
<PAGE>
CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
The Company is an integrated communications company offering products and
services in two broad areas: professional communications and marketing
communications. Cadmus Professional Communications, previously known as the
Periodicals group, includes the journal services product line which specializes
in journals, magazines and related communications targeted to trade and
professional organizations. Cadmus Marketing Communications was formed in 1997
by merging the former Graphics Communications and Marketing groups. Cadmus
Marketing Communications consists of the financial communications, specialty
packaging and promotional printing, point of purchase, print outsourcing and
tactical marketing communications product lines. All discussions and analyses in
this report will include reference only to the Professional Communications and
Marketing Communications sectors.
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.
RESULTS OF OPERATIONS
The following table presents the major components from the Consolidated
Statements of Income as a percent of net sales for the three and six months
ended December 31, 1997 and 1996:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- ------------------
<S> <C>
1997 1996 1997 1996
---- ---- ---- ------
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of sales 77.4 78.3 77.6 77.9
------ ------ ------ ------
Gross profit 22.6 21.7 22.4 22.1
Selling and administrative expenses 15.5 15.6 15.8 16.3
Restructuring gain --- --- --- (0.1)
------- ------ -------- ------
Operating income 7.1 6.1 6.6 5.9
Interest expense 1.9 2.2 2.0 2.2
Other expenses, net 0.3 0.3 0.3 0.4
------- ------ ------ ------
Income before income taxes 4.9 3.6 4.3 3.3
Income taxes 1.9 1.4 1.7 1.3
------- ------ ------ ------
Net Income 3.0% 2.2% 2.6% 2.0%
======= ====== ====== ======
</TABLE>
<PAGE>
Sales
Sales for the second quarter of fiscal 1998 were $96.0 million, compared to
$97.2 million recorded in the second quarter of fiscal 1997. The decline in
sales for fiscal 1998 resulted from the closure of several operations in
connection with restructuring actions taken by the Company in the fourth quarter
of fiscal 1997. Adjusted for the closed operations, sales rose 4%. Lower
year-over-year paper prices also had a negative impact on reported sales.
Adjusted for discontinued businesses and lower paper prices, second quarter 1998
sales increased over 5%.
Sales for the first six months of fiscal 1998 were $188.4 million, compared to
sales of $191.2 million recorded in the first six months of fiscal 1997.
Excluding the effect of fiscal 1997 divestitures and plant closings, sales
actually increased 4% for the first six months of fiscal 1998 compared to the
same period in fiscal 1997. Excluding the effect of divestitures, plant
closings, and lower paper prices, sales increased 7%.
The Professional Communications sector recorded a sales decline of just under 4%
in the second quarter of fiscal 1998, compared to the second quarter of fiscal
1997. The decline in sales was primarily attributable to lower paper prices,
which accounted for approximately half of the 4% decline, and to the continued
downsizing of the magazine product line. Adjusting for the impact of lower paper
prices, magazine sales declined 5% in the second quarter while research journal
sales remained flat with the same quarter of last year. Professional
Communications sector sales for the first six months of fiscal 1998 decreased
marginally compared to the first six months of fiscal 1997. However, adjusted
for the effect of lower paper prices, Professional Communications sector sales
increased 2% over the same periods.
Sales for the Marketing Communications sector, excluding the effect of closed
operations, increased 14% for both the second quarter and the first six months
of fiscal 1998 from the comparable periods of fiscal 1997. Financial
communications sales increased 50% and 48% for the second quarter and first six
months of fiscal 1998, respectively, driven by growth in mutual fund services,
full service banking relationships, and continued strong capital markets
activity. The packaging and promotional product line recorded a sales increase
of 10% for the second quarter of fiscal 1998 primarily due to growth from
existing customers. However, sales for this product line increased only 4% for
the first six months of fiscal 1998 as a result of the expected disruption in
first quarter production related to the relocation of these operations. Sales
for the point-of-purchase business declined 17% and 23% for the second quarter
and first six months, respectively, of fiscal 1998 due primarily to the loss of
a major customer in the second quarter of fiscal 1997. Print outsourcing sales
remained consistent with the prior year. Tactical marketing continued to show
strong growth reporting sales increases of 25% in the second quarter and 34 %
for the first six months of fiscal 1998. These increases were driven by a second
quarter increase of 47% in direct marketing agency fees due to new-account
development and growth from existing customers. In addition, custom publishing
operations reported increased agency fee income of 72% for the second quarter
primarily due to growth from existing customers.
Operating Expenses
Cost of sales decreased slightly to 77.4% and 77.6% of net sales for the second
quarter and first six months of fiscal 1998, respectively, compared to 78.3% and
77.9% for the same periods of fiscal 1997. The slight decline was primarily
attributable to the impact of lower paper prices and restructuring savings.
Selling and administrative expenses as a percent of sales, declined slightly to
15.5% and 15.8% in the second quarter and first six months of fiscal 1998,
respectively, from 15.6% and 16.3% for the same periods of fiscal 1997. This
improvement was driven by efficiencies resulting from restructuring actions
taken by the Company in the fourth quarter of fiscal 1997.
During fiscal 1997, the Company recognized a $0.3 million gain resulting from a
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 operations, offset
by a $0.4 million charge related to the strategic repositioning of the custom
publishing product line into the Marketing Communications Group.
Interest and Other Expenses and Income Taxes
Interest expense decreased $0.2 million and $0.4 million for the second quarter
and first six months of fiscal 1998 over the same periods last year. The
reduction in interest expense is primarily due to lower debt levels.
The effective tax rate was 38.5% for the first six months of both fiscal 1998
and fiscal 1997.
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 totaled $17.1 million for the first
six months of fiscal 1998, representing a $3.1 million increase from $14.0
million provided by operating activities in the first six months of the prior
year. The increase was primarily attributable to improved operating performance
and improved working capital efficiencies, which generated $4.6 million in cash,
and a lower contribution to the Company's pension plan in 1998, which
represented a $1.7 million improvement compared to fiscal 1997. Working capital
reductions in 1998 resulted principally from decreases in accounts receivable,
due to improvements in the Company's credit and collection efforts and
receivables mix, offset by increases to inventories and payables, due to higher
work-in-process levels and seasonal increases in paper inventories. These cash
inflows were partially offset by $3.2 million in cash outflows related to the
Company's restructure plan announced in the fourth quarter of fiscal 1997.
Net cash used in investing activities totaled $13.1 million for the first six
months of fiscal 1998, as compared to $5.1 million in the comparable prior year
period, and included investments in new presses, new business and manufacturing
systems, and the purchase of the Charlotte manufacturing facility. Cash used in
investing activities for the first six months of fiscal 1997 included the use of
$11.9 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.
Net cash used in financing activities was $3.0 million for the first six months
of fiscal 1998. During fiscal 1998, the Company repaid $2.3 million against
long-term borrowings. Dividend payments were $0.8 million, and remained
unchanged from the prior year. Net cash used in financing activities was $8.5
million for first six months of fiscal 1997. In October 1996, the Company
entered into a $160 million bank credit agreement with six major banks. 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 and $30 million in term loans under the former $115 million
bank credit agreement.
Total debt at December 31, 1997, was $94 million, which represented a decrease
of $2.3 million from June 30, 1997. The Company's debt-to-equity ratio improved
to 47.4% from 49.0% at June 30, 1997.
<PAGE>
PART II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders
(a) At the 1997 Annual Meeting of Shareholders of the Company ("Annual
Meeting") held on November 12, 1997, 6,964,538 shares of the Company's
outstanding common stock were present in person or by proxy and
entitled to vote.
(b) At the Annual Meeting, the following matters were voted upon and
received the vote set forth below:
(1) Election of Directors. Each nominee for director was elected,
having received the following vote:
<TABLE>
<CAPTION>
Broker
Nominee For Withheld Non-vote
------- ----- ----------- ---------
<S> <C>
Frank Daniels III 6,688,072 276,466 ---
C. Stephenson Gillespie 6,955,788 8,751 ---
Bruce A. Walker 6,956,491 8,048 ---
G. Waddy Garrett 6,954,119 10,419 ---
Jerry I. Reitman 6,956,360 8,178 ---
</TABLE>
(2) Approval of Proposed 1997 Non-Employee Director Stock
Compensation Plan. The amendment was approved, having received
the following vote:
For: 6,778,108
Against: 102,977
Abstain: 53,638
Broker Non-vote: 29,815
(3) Ratification of designation of Arthur Andersen LLP as
independent public accountants for current fiscal year.
Designation of the auditors was ratified, having received the
following vote:
For: 6,955,605
Against: 6,250
Abstain: 2,683
Broker Non-vote: ---
Item 5. Other Information
On February 11, 1998, the Company issued a press release, a copy of which
is filled as Exhibit 99 hereto, announcing the election of Joseph J. Ward
to the Board of Directors of the Company as of February 1, 1998.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits:
Exhibit Description
Exhibit 3.2 Bylaws of Cadmus Communications
Corporation, as amended
Exhibit 27 Financial Data Schedule
Exhibit 99 Press Release announcing new
addition to the Company's Board
of Directors.
b. Reports on Form 8-K:
On October 23, 1997, the Company filed a Form 8-K, which included the press
release regarding fiscal 1998 first quarter financial results, as well as a copy
of the prepared remarks made on a conference call to analysts on same date.
On November 20, 1997 the Company filed a Form 8-K, which included the prepared
remarks of the Company given by C. Stephenson Gillispie, Jr., President,
Chairman and Chief Executive Officer and Bruce V. Thomas, Senior Vice President
and Chief Financial Officer, at the Company's 1997 Annual Meeting of
Shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
CADMUS COMMUNICATIONS CORPORATION
Date: February 12, 1998
/s/ C. Stephenson Gillispie, Jr.
--------------------------------------
C. Stephenson Gillispie, Jr.
Chairman, President, and Chief
Executive Officer
Date: February 12, 1998
/s/ Bruce V. Thomas
--------------------------------------
Bruce V. Thomas
Senior Vice President and Chief
Financial Officer
EXHIBIT 3.2
(November 12, 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 a 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
attorney; at all meetings, each stockholder shall have one vote, for each share
of stock registered in his name.
Section 8. List 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.
Section 9. Matters to be Brought Before Shareholders' Meetings. Except
as otherwise provided by law, at any annual or special meeting of shareholders
only such business shall be conducted as shall have been properly brought before
the meeting in accordance with this Section.
In order to be properly before the meeting, such business must either
have been: (i) specified in the written notice of the meeting (or any supplement
thereto) given to shareholders of record on the record date for such meeting by
or at the direction of the Board of Directors ("Meeting Notice"), (ii) brought
before the meeting at the direction of the Board of Directors or the officer
presiding over the meeting, or (iii) specified in a written notice given by or
on behalf of a shareholder of record on the record date for such meeting
entitled to vote thereat or a duly authorized proxy for such shareholder, in
accordance with all the following requirements ("Shareholder Notice").
A Shareholder Notice must be delivered personally to, or mailed to and
received at, the principal executive office of the Corporation, addressed to the
attention of the Corporate Secretary, (a) in the case of business to be brought
before a special meeting of shareholders, not more than ten (10) days after the
date of the initial Meeting Notice, and (b) in the case of business to be
brought before an annual meeting of shareholders, not less than sixty (60) days
prior to the first anniversary date of the initial Meeting Notice of the
previous year's annual meeting.
A Shareholder Notice shall set forth:
(1) a full description of each such item of business proposed to be
brought before the meeting;
(2) the name and address of the person proposing to bring such business
before the meeting;
(3) the class and number of shares held of record, held beneficially
and represented by proxy by such person as of the record date for the meeting
(if such date has been made publicly available) and as of the date of such
meeting;
(4) if any item of such business involves a nomination for director,
all information regarding each such nominee that would be required to be set
forth in a definitive proxy statement filed with the Securities and Exchange
Commission pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended, or any successor thereto (the "1934 Act") and the written consent of
each such nominee to serve if elected; and
(5) all other information that would be required to be filed with the
Securities and Exchange Commission if, with respect to the business proposed to
be brought before the meeting, the person proposing such business was a
participant in a solicitation subject to Section 14 of the 1934 Act.
Any matter brought before a meeting of shareholders upon the
affirmative recommendation of the Board of Directors where such matter is
included in the Meeting Notice and accompanying proxy statement given to
shareholder of record on the record date for such meeting by or at the direction
of the Board of Directors is deemed to be properly before the shareholders for a
vote and does not need to be moved or seconded from the floor of such meeting.
No business shall be brought before any meeting of shareholders of the
Corporation otherwise than as provided in this Section.
ARTICLE II
Directors
Section 1. General Powers: The business and affairs of the Corporation
shall be managed by the Board of Directors, and except as 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 meetings 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 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 Executive Compensation and Organization 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 and 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
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) 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 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 plans; 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 consisting 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
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 or in the auditors of the Corporation and disclosing any acts or
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 or former or
potential 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 a 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.
Section 3. Duties: The Chairman of the Board presides 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 power and responsibility for
carrying out the 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 or 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 owners, 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 loss
or destruction accompanied by the deposit of a bond in 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.
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 purpose). 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 Year: 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 and to enact
Bylaws 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CADMUS COMMUNICATIONS CORPORATION'S DECEMBER 31, 1997 CONSOLIDATED
BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF INCOME INCLUDED IN THE
COMPANY'S FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 1,210
<SECURITIES> 0
<RECEIVABLES> 65,999
<ALLOWANCES> 2,171
<INVENTORY> 22,758
<CURRENT-ASSETS> 98,499
<PP&E> 227,826
<DEPRECIATION> 104,284
<TOTAL-ASSETS> 267,766
<CURRENT-LIABILITIES> 61,676
<BONDS> 84,038
0
0
<COMMON> 3,923
<OTHER-SE> 100,235
<TOTAL-LIABILITY-AND-EQUITY> 276,766
<SALES> 188,410
<TOTAL-REVENUES> 188,410
<CGS> 146,195
<TOTAL-COSTS> 175,920
<OTHER-EXPENSES> 640
<LOSS-PROVISION> 814
<INTEREST-EXPENSE> 3,794
<INCOME-PRETAX> 8,056
<INCOME-TAX> 3,101
<INCOME-CONTINUING> 4,955
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,955
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
EXHIBIT 99
NEWS RELEASE
Contact: David E. Bosher, Vice President and Treasurer (analysts)
(804) 287-5685
Teri Schrettenbrunner, Director of Public Relations (media)
(804) 287-6260
CADMUS ANNOUNCES NEW DIRECTOR
RICHMOND, VA, February 10, 1998 - Cadmus Communications Corporation (NASDAQ
NMS:CDMS) today announced that Joseph J. Ward has joined the Board of Directors
of the Company. Mr. Ward is the president of direct response for the book group
of Bertelsmann AG, a $14 billion diversified media company engaged in book
publishing, printing, entertainment and new media. He is an expert in corporate
finance, direct marketing, business development and negotiating major projects.
His career achievements include successfully launching new ventures in
publishing and new media products.
Prior to joining Bertelsmann AG, Mr. Ward served as a chief executive of several
publishing and media-oriented companies. He was president and chief executive
officer of JWard Consulting, an international management and direct marketing
company, whose clients included Multicom Publishing, EDS and Bertelsmann.
Previously, he was president of the Meredith Book Group of Meredith Corp., an
$900 million diversified media company, where he published various book programs
for Better Homes & Gardens, Ladies Home Journal and other Meredith magazines.
Mr. Ward was also responsible for the Better Homes & Gardens New Cookbook that
has sold over 40 million copies worldwide and started Meredith Corporation into
new media as chairman of that division. In addition, he was publisher and senior
vice president of Time-Life, Inc., where he handled all book operations and
launched the company into the CD-ROM and CD new media business.
Over the past three years, Cadmus has added five new directors to its 13 member
Board. "As several of our directors have retired, we have made an effort to
recruit individuals who's experience is complementary with our strategy to
reinvent how communications services are delivered," said C. Stephenson
Gillispie, Jr., Cadmus Communications chief executive officer. "We are delighted
to have a person of Joe's caliber on our team. His marketing and electronic
commerce acumen will add great value to our discussions about Cadmus' future."
"Cadmus is a leader in the vertical integration of marketing services with more
traditional print and publishing services," Mr. Ward said. "I am delighted to
join the company's board at the onset of this exciting transformation."
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.
