By Trevor Shackelford August 12, 2005 -- Cadmus Communications (NASDAQ: CDMS) reported their fourth quarter fiscal 2005 results today. The company’s revenues were $111.1 million, up 1% from $109.6 million in the same period last year. Operating income was $4.4 million compared $8.9 million last year. Cadmus posted net income of $1.2 million, or $0.13 per share for the fourth quarter compared to a net loss of $2.1 million, or $0.22 per share, during the Q4 2004. For the full fiscal 2005 year, the company had net income of $15.0 million, or $1.60 per share, on $445.4 million in sales. Topics of this summary: Quarter Highlights Segment Performance Guidance Raine Radar Q & A Quarter Highlights EBITDA for the Q4 was $14.2 million, up from $14.0 million last year. EBITDA margin was flat at 12.8% from last year Total debt increased $1.5 million related to down payments associated with their previously announced equipment upgrade plan. Debt for the year decreased by $10.8 million Non-recurring items included restructuring and impairment charges of $4.9 million and a gain from discontinued operations of $600,000 The company is planning on spending approximately $45 million during 2006 upgrading equipment across their platform, including three new Heidelberg sheetfed presses and two Goss 48 pages web presses, as well as new finishing equipment The company is expecting a significant tax benefit at the end of fiscal 2006 or the beginning of fiscal 2007 Segment Performance Publishing Services Q4 revenue for the segment was $91.5 million, down from $93.3 million last year. Operating margin for the quarter was 9.7%. The company noted that the core scientific, technical, and medical business saw better revenue and margins. Specialty Packaging Revenue for the quarter was $19.8 million, up from $16.2 million last year, a 22% increase. The company attributed the rise to a favorable sales mix, increased volume, and growth from global packaging solutions. Operating margin increased to 8% from 7.7% last year. The segment saw volume growth in the health care, technology, and educational verticals. Guidance The company is expecting strong growth in specialty packaging during 2006. Cadmus also expects the publisher services group to see growth in the educational market as well as its emerging solutions group. For fiscal 2006, the company expects EPS of approximately $1.62. With the full benefit of its equipment upgrade kicking in during fiscal 2007, the company anticipates 2007 EPS of $2.33. Raine Radar Cadmus’ decision to post two years of EPS guidance was interesting. Not only do most companies only provide one year of guidance (if that), but Cadmus is generally considered a pretty conservative company. Very little top-line growth was used in estimating the fiscal 2007 EPS, so the jump is substantial. The increase is likely coming from the tax benefit the company is expecting as well as increased efficiencies from the upgraded equipment. With the success the company is seeing in specialty packaging, if the downward trend can be reversed in publishing services, the company should have a very positive fiscal 2006. Q & A The EPS estimates include conservative top line growth of approximately 1%. Cadmus is comfortable with making a two year outlook because visibility has increased and due to the benefit anticipated with equipment replacement. Current expectations for specialty packaging going forward are strong growth with operating margins around 10%. The company’s next international expansion will be in Honduras. The fourth quarter was the strongest for the journal business in a revenue and gross profit perspective. The company believes this is as a result of adjustments that have been made and are looking forward to some stabilization and perhaps growth. Growth in the educational market is being helped by an increase in project management, offshore capabilities, and sales capabilities. For publishing services in 2006, the company is expecting the weak spot to be in magazine, with the rest of the segment more than offsetting the decline in magazine. The company decided to make the investment in new equipment because the technology was ready, as well as the sales and operations organizations.