SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Form 8-K
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CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 26, 1999
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CADMUS COMMUNICATIONS CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia 0-12954 54-1274108
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification Number)
6620 West Broad Street, Suite 240, Richmond, Virginia 23230
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (804) 287-5680
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Item 5. Other Events.
On 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
operations.
Item 7. Exhibits.
Exhibit 99.1 Press Release
Exhibit 99.2 Prepared Remarks from Conference Call
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on February 26, 1999.
CADMUS COMMUNICATIONS CORPORATION
By: /s/ C. Stephenson Gillispie, Jr.
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C. Stephenson Gillispie, Jr.
Chairman, President, and Chief Executive Officer
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Exhibit Index
Exhibit
99.1 Press Release
99.2 Prepared Remarks from Conference Call
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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
CADMUS COMMUNICATIONS CORPORATION
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
customers."
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.
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Cadmus Communications Corporation
Divestitures
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.
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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
purchase.
This concludes my comments. I would like now to give you the opportunity to
address any questions you may have.
