8-K, 1999-02-26
Previous: FIDELITY INVESTMENT TRUST, 497, 1999-02-26

                             WASHINGTON, D.C. 20549


                                    Form 8-K


                       THE SECURITIES EXCHANGE ACT OF 1934

  Date of Report (Date of earliest event reported)    February 26, 1999    

             (Exact name of registrant as specified in its charter)

          Virginia                        0-12954              54-1274108     
          --------                        -------              ----------     
(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   
- -----------------------------------------------------                 -----   
     (Address of principal executive offices)                       (Zip Code)

Registrant's telephone number, including area code              (804) 287-5680


Item 5.  Other Events.

On February 26, 1999, Cadmus  Communications  Corporation (the "Company") issued
the press release  attached  hereto as Exhibit 99.1 to announce that the Company
has reached  agreements  to sell its  Financial  Printing and Custom  Publishing
divisions.  The  consummations  of these  transactions  are  subject  to certain
conditions.  C.  Stephenson  Gillispie,  Jr.,  chairman,   president  and  chief
executive officer 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
ability of the Company to retain management and employees in light of lower than
planned  incentives,  (3)  the  gain or loss  of  significant  customers  or the
decrease in demand from  existing  customers,  (4) the ability of the Company to
continue to obtain improved efficiencies and lower overall production costs, (5)
changes in the Company's  product sales mix, (6) the  effective  integration  of
recent acquisitions,  (7) the performance of new management and leadership teams
in the Company and its divisions, (8) the impact of industry consolidation among
key  customers,  and (9) the ability of the Company to increase sales and reduce
manufacturing   costs  in  production   facilities   impacted  by  the  divested

Item 7.  Exhibits.

      Exhibit 99.1            Press Release
      Exhibit 99.2            Prepared Remarks from Conference Call



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 February 26, 1999.


                           By:     /s/ C. Stephenson Gillispie, Jr.  
                             C. Stephenson Gillispie, Jr.
                             Chairman,  President, and Chief Executive Officer


                                  Exhibit Index


99.1  Press Release
99.2  Prepared Remarks from Conference Call

                                                                    Exhibit 99.1

FOR IMMEDIATE RELEASE       Contact: Investor Contact:
                                     Dave Bosher 804-287-5685
                                     Vice President and Treasurer

                                     Media Contact:
                                     Teri Schrettenbrunner 804-287-6260
                                     Director of Public Relations

          To Sell Financial Printing and Custom Publishing Divisions

RICHMOND, VA -- February 25, 1999 -- Cadmus  Communications  Corporation (NASDAQ
NMS: CDMS) today announced that it has reached definitive agreements to sell its
Financial  Printing and Custom Publishing  divisions.  These  divestitures are a
part of the  Company's  ongoing  strategy to streamline  its business  units and
focus its  resources  in select niche  markets  that the company  believes to be
poised for aggressive growth.

Commenting on the divestitures,  C. Stephenson Gillispie, Jr., Cadmus' chairman,
president,  and chief executive officer, stated, "For Cadmus, these transactions
mark a new  milestone in our  strategy to create  leading  businesses  in select
niche markets. We are narrowing our focus and concentrating our resources on our
key  markets  --  professional  communications,  specialty  packaging,  point of
purchase,  and  marketing  services  -- in an  effort  to  achieve  more  rapid,
profitable and consistent growth."

Cadmus has entered a definitive agreement to sell its Charlotte-based  financial
communications  business to R.R. Donnelley & Sons. The transaction  includes all
of Cadmus Financial  Communications'  (CFC) assets and operations connected with
the marketing,  selling and  distributing of mutual fund,  shareholder and other
SEC-related  communication  services.  In fiscal 1998, revenues for the divested
business were approximately $43 million and net assets on December 31, 1998 were
approximately  $13  million.  The  transaction  does not include  Cadmus'  other
Charlotte-based  businesses,  Specialty  Packaging &  Promotional  Printing  and
Direct  Marketing.  The transaction is expected to be complete on March 1, 1999.
Terms of the transaction were not disclosed.

Gillispie  stated,  "After extensive  deliberation,  we concluded that financial
printing did not complement our core  competencies,  and our resources  could be
focused more profitably in other markets.  We particularly are pleased that this
agreement  creates a unique  alliance  between  Cadmus and  Donnelley  that will
strengthen and broaden the services both companies  provide to their  respective

Paul Masterton, president of Donnelley Financial, added, "We are pleased to have
the  opportunity  to acquire  established  operations in Maryland,  Virginia and
North Carolina,  and to obtain a seasoned and highly-respected sales force. This
acquisition  helps us move forward with our  strategic  initiative to expand our
Southeast presence."

In a related move,  Cadmus announced its intention to sell its Custom Publishing
business  to Pohly &  Partners,  Inc.,  a  Boston-based  relationship  marketing
company.  For the fiscal year ended June 30, 1998,  sales totaled  approximately
$11 million.  This  transaction  also is expected to be complete in early March.
Terms of the transaction were not disclosed.

                                   -- more --


Cadmus Communications Corporation
page 2

"In our continued  efforts to maximize  shareholder  value," Gillispie said, "we
concluded  that custom  publishing was not central to our strategy of developing
industry leading, end-to-end businesses in select markets. However, Diana Pohly,
the  chief   executive   officer  at  Pohly  &  Partners,   is  an  outstanding,
forward-thinking,  energetic  leader who will bring new  services to clients and
new opportunities to our former associates."

Bruce V. Thomas,  Cadmus' senior vice president,  and chief  financial  officer,
added, "These transactions significantly de-lever our balance sheet and allow us
to focus on  delivering  integrated  product  offerings in our core  businesses.
Preliminary  calculations  indicate  that these  transactions  will  result in a
one-time net gain of  approximately  $.95 to $1.05 per share in our fiscal third
quarter.  We expect  that the  elimination  of  operating  earnings  from  these
divested  businesses  will not  materially  affect our net income on a pro forma
1999 basis.  However,  fiscal  1999 third  quarter net income will be reduced by
approximately  $.08 - $.12 per  share  due to the  absence  of  seasonally  high
financial communications revenues in March."

Cadmus Communications Corporation provides customers with integrated, end-to-end
communications  solutions.  The company is organized around two primary business
sectors:  Professional Communications serving customers who publish information,
and Marketing  Communications  serving customers who convey marketing  messages.
Cadmus' services include  advertising,  catalog services,  commercial  printing,
direct marketing, journal and magazine services, point of purchase,  promotional
printing,  specialty  packaging,  and  software  duplication.  Headquartered  in
Richmond, Virginia, Cadmus is the 25th largest graphic communications company in
North America.

                                     # # #


                                                                    Exhibit 99.2
Prepared Remarks from Conference Call

Sale of Cadmus  Financial  Communications  and Custom  Publishing  
Good morning,  ladies and gentlemen.  This is Steve Gillispie,  Cadmus chairman,
president  and chief  executive  officer.  I thank you for taking time from your
busy schedules to join us on short notice for this morning's  conference call. I
would  like to provide a brief  review of the  actions  we  announced  yesterday
evening.  Joining me on this morning's call are Bruce Thomas, Cadmus senior vice
president and chief financial officer,  and Dave Bosher,  Cadmus vice president.
Following my comments, I will turn the call over for any questions you may have.

First, I would like to discuss the strategic context that led us to effect these
divestitures.  As you know, the Cadmus strategy has been to provide  integrated,
end-to-end communications solutions in select niche markets where we have or can
develop a leading  position,  as we have done most  successfully with our Cadmus
Journal  Services  unit.  As you have seen,  this means that we are refining our
focus into markets and  businesses  1) which offer the highest  opportunity  for
growth, 2) in which we can achieve market leadership, and 3)
which value our integrated, end-to-end service model.

With our  announcement  yesterday  we are taking a bold step to narrow our focus
and  concentrate our resources more intensely on our key markets of professional
communications,  specialty packaging,  and point of purchase where we believe we
have the greatest  opportunities for growth. Each of these markets has extremely
attractive  attributes which are consistent with the criteria we just discussed.
Each offers opportunities for earnings growth and market leadership.

After an extensive  evaluation process, we concluded that the financial printing
business did not have the key characteristics and market attributes we outlined.
Accordingly,  we felt  that the  strong  franchise  and  excellent  value we had
created in the Cadmus  Financial  Communications  business was best enhanced for
our shareholders through a redeployment of that capital into other markets.

Let me share  with you more  details  of the  divested  business.  As the  press
release  stated,  we have sold the assets  and  operations  of Cadmus  Financial
Communications connected with the marketing, selling, and distribution of mutual
funds, shareholder,  and other SEC-related communications services. The divested
business  does not  include  our bank  "rack  brochure"  business  or our  other
Charlotte-based  businesses,  including  Cadmus  Specialty  Packaging and Cadmus
Direct Marketing. The sale also does not include any of the print-related assets
in our Charlotte or Richmond manufacturing facilities. The divested business had
fiscal 1998 sales of  approximately  $43 million and net assets of approximately
$13 million.  There were 170 associates in total in our CFC business and most of
those employees will go over with the Donnelley organization.

Details of the transaction  will be disclosed in an 8-K to be filed shortly.  We
can tell you,  however,  that proceeds from the transaction will be $35 million,
subject to final balance sheet  adjustments.  The sale will result in a one-time
gain in the third quarter of  approximately  $1.10 to $1.25 per share,  with the
range subject to final accounting.  The net after-tax  proceeds to Cadmus should
approximate  $24 to $26 million.  The proceeds will be used to pay down debt and
to provide  additional  capital through which we can more  aggressively grow our
key core businesses.

In terms of operations, the sale of CFC will reduce our fiscal third quarter EPS
by approximately  $.08-$.12 per share due to the loss of March revenues for CFC.
As you know March is by far the  single  largest  billing  month of the year for
this  business due to the  seasonality  of corporate  reporting.  However,  on a
projected pro forma basis for full year fiscal 1999, the transaction  should not
have a material impact on net income per share as a result of pro forma interest
savings on the net proceeds.

Finally with regard to the sale of CFC, we are also pleased that the transaction
will  result  in  an  ongoing  strategic  relationship  with  Donnelley  in  the
Southeast.  In that relationship we will continue to provide some  manufacturing
services to Donnelley  Financial and we have created a unique  mechanism to sell
certain products jointly.

We also  announced  yesterday our intent to sell our custom  publishing  unit to
Pohly and Partners.  As in the case of Financial,  we concluded  that the custom
publishing  business  was not  central to our  strategy of  developing  industry
leading,  end-to-end  businesses.  In connection with this transaction,  we will
take a one-time  loss in the third  quarter  of  approximately  $0.15-  $.20 per
share. Custom publishing revenues were approximately $11 million in fiscal 1998.
Again, on a projected pro forma basis for fiscal 1999, the transaction  does not
have a material impact on net income per share.

In conclusion,  I would like to reiterate our commitment to creating and growing
shareholder  value at an increasing pace. The excellent results we have achieved
from our highly successful Cadmus Journal Services operation are a validation of
the rewards of focus and economic scale in appropriate markets. We will continue
to refine our focus to more rapid growth in our most  attractive  niche markets,
including  professional   communications,   specialty  packaging  and  point  of

This  concludes my  comments.  I would like now to give you the  opportunity  to
address any questions you may have.

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