Cadmus Reports 2002 Results: Continued Progress on its Content Strategy
Wednesday, July 31, 2002
RICHMOND, Va., July 30 -- Cadmus Communications Corporation today reported net sales of $109.0 million and net income of $1.7 million, or $0.19 per share, for the fourth quarter of its fiscal year 2002 versus net sales of $119.2 million and net income of $1.0 million, or $0.11 per share, in last year's fourth quarter from continuing operations (excluding special items). Special items include the write-off of deferred loan costs previously announced in connection with an amendment of its bank credit facility in current year results and restructuring and other charges in the prior year results (see Selected Highlights). Including these special items, reported income from continuing operations for the fourth quarter of fiscal 2002 was $1.6 million, or $0.17 per share, versus a loss of $1.0 million, or ($0.11) per share, last year. All further comparisons in this release relate to continuing operations and exclude these special items. Highlights were as follows: * Sequential increases in earnings per share were achieved throughout fiscal 2002; * Excluding the impact of changes in paper prices and the pass-through costs of freight and postage, net sales from recurring operations declined 3% for the quarter and the full year, as revenues from new products and services offset demand and pricing pressures; * Total debt (including securitization) was reduced by $1.2 million in the fourth quarter for a total of $34.7 million for the fiscal year; * Cash earnings per share (excluding goodwill amortization) were $0.31 in the fourth quarter compared to $0.24 in last year's fourth quarter; * EBITDA for the fourth quarter of fiscal 2002 was $13.4 million, or 12.3% of net sales, compared to $13.3 million, or 11.1% of net sales, in last year's fourth quarter; * The Company's Rapid Review(R) peer review system achieved a leadership position in the scientific, technical and medical ("STM") market, serving 20 publishers producing 46 journals, with more than 53,000 submissions per year; and, * The Company introduced Rapid Inspector(TM), the digital file inspection module of Cadmus KnowledgeWorks(TM) System, its fully integrated electronic publishing system. Bruce V. Thomas, president and chief executive officer, remarked, "We are pleased with our performance this fiscal year despite difficult economic conditions. We achieved three of our four primary goals set at the beginning of the year and made significant progress on the fourth. First, we reported sequentially higher EPS and improved operating margins in the second, third and fourth quarters. Second, we reduced debt each quarter and by a total of $34.7 million over the year. Third, as evidenced most recently by our Rapid Review system achieving a world leadership position in the STM market, we have continued to make strategic progress in the scholarly publishing market with increased market acceptance of Cadmus KnowledgeWorks, our fully integrated electronic publishing system. Fourth, our packaging division made significant improvement in revenue and profitability during the year despite soft market conditions. However, our magazine operation had a difficult year as it continues to be impacted by the deep downturn in advertising spending." Mr. Thomas added, "Our aggressive cost controls have allowed us to manage the business well during this extended economic downturn. In addition, and perhaps more importantly, we have extended our revenue base with new products and services that are differentiating us from our competition and helping us offset the impact of demand and pricing pressures. All of these efforts position us to show better top line growth and overall improved results when the economy recovers. Our focus for fiscal year 2003 will be to increase revenues in all divisions. While we hope to benefit from a modest recovery in the economy, each of our operating units is focusing on using the differentiation we have achieved to further penetrate existing accounts and gain new customers. We have tackled the fundamentals -- cost control, plant consolidation, equipment upgrades, technological enhancements to our Cadmus KnowledgeWorks System, and financial flexibility in our credit agreement - and now we are turning our focus to revenue growth to leverage the differentiated products and services we have created." Fourth Quarter Operating Results Review Net sales for the fiscal fourth quarter totaled $109.0 million compared with $116.7 million last year, a decline of 7%. However, excluding the impact of changes in paper prices and the pass-through costs of freight and postage, net sales declined 3%. Publication Services Segment (STM journal services, special interest magazines, and professional books and directories) sales were $96.3 million, down 8% from $104.5 million (4% excluding paper, freight, and postage impact), primarily because of continued softness in advertising pages and volume and pricing pressures in these markets. Specialty Packaging sales were $12.7 million, an increase of 5% from $12.2 million (7% excluding paper, freight, and postage impact). All sales amount comparisons for the prior year exclude divested and closed operations. Operating income was $7.3 million in the fourth quarter compared to $7.0 million last year. Cash flow from operations was used to reduce total debt (including securitization) by $1.2 million for the quarter. Income for the fourth quarter from continuing operations totaled $1.7 million, or $0.19 per share, compared with $1.0 million, or $0.11 per share, last year. If theCompany had adopted Statement of Financial Accounting Standards No.142 ("SFAS 142"), which requires that goodwill be tested for impairment annually instead of amortized, fourth quarter earnings for fiscal 2002 would have been $0.31 per share compared to $0.24 per share last year as a result of the elimination of goodwill amortization. Fiscal Year Operating Results Review Net sales for the fiscal year ended June 30, 2002, totaled $447.3 million compared with $476.0 million last year, a decline of 6%. However, excluding the impact of changes in paper prices and the pass-through costs of freight and postage, net sales declined 3%. Publication Services Segment sales were $395.4 million, down 7% from $426.3 million (4% excluding paper, freight, and postage impact), primarily because of lower special interest magazine sales and pricing pressures in these markets. Specialty Packaging sales were $51.9 million, an increase of 5% from $49.7 million (6% excluding paper, freight, and postage impact). All sales amount comparisons for the prior year exclude divested and closed operations. For the twelve months ended June 30, 2002, operating income was $27.4 million compared to $34.2 million last year. Cash flow from operations and the proceeds from asset sales were used to reduce total debt (including securitization) by $34.7 million for this fiscal year. Income for the fiscal year from continuing operations totaled $5.1 million, or $0.57 per share, compared to $6.6 million, or $0.74 per share, last year. If the Company had adopted SFAS 142, earnings for fiscal 2002 would have been $1.09 per share compared to $1.29 per share last year as a result of the elimination of goodwill amortization. As previously announced, the Company sold its Atlanta-based Cadmus Creative Marketing operations, a catalog design and photography business, in the third quarter of fiscal 2002. An after-tax book loss on the sale of discontinued operations of $1.2 million, or $0.14 per share, was recorded at that time. All historical results have been reclassified to report the results of this operation as discontinued. Also, as previously announced, the Company amended its senior bank credit facility in the fourth quarter of fiscal 2002 and recorded a pre-tax write-off of deferred loan costs of $0.3 million.