By Steven Schnoll August 12, 2004 -- Cadmus Communications Corporation (NASDAQ: CDMS) announced a 4% decrease in fourth quarter sales from last year with operating income of $8.9 million with a net loss of $2.1 million. For the full year net sales were flat at $445.4 million as compared to $446.9 million Full year operating income was $33.9 million compared to $20.7 million with net income of $6.7 million or $0.73 per share. Fiscal year 2003 experienced a net loss of $53.6 million or $5.94 per share. Topics of this summary: Fourth Quarter/Year End Performance Raine’s Radar Q & A Fourth Quarter/Year End Performance Cadmus continues to effectively manifest and manage its new content services business model. Fourth Quarter Highlights: Net sales of $109.6 million declined by 4% in Q4 as the company shifts from high volume low profit magazine work to higher profit specialty packaging and content services. Q4 operating income rose 6% from the same period last year to $9.1 million and operating margins increased from 8.3% from 7.5% EBITDA rose 5% from last year’s Q4 to $14.0 million as did EBITDA margins to 12.8% from 11.6% Significant margin improvement in special interest magazines to 4.5% reflected the companies focused move away from low to no profit customers in this market segment. Debt was reduced by $3.1 million during the quarter excluding the impact of $10 million in refinancing. Year End Results Flat year-end revenue was actually a positive for company as it moved to improve its product mix and be less dependent on magazines. Specialty packaging showed a 12% growth Double digit growth in content management services Year end operating income improved from $20.7 in 2003 to $33.9 million in 2004 impacting the net income from a $53.6 million loss in 2003 to a positive $6.7 million in 2004 Company introduced 2 new non-print products during past year – ArticleWorks™ and dPub™, both highly differentiating non-print products. Continued global content services expansion in India Raine’s Radar Cadmus continues to stay committed to its new business model and its effects have positively impacted the year-end results. It realizes that growth can come in many ways and much of it need not be print related as seen by its recent introductions of ArticleWorks and dPub. Its new foray into the educational market with the Thompson Learning account while early on may be seen as another promising development. Anything to get it away from the ongoing competitive slugfest with the other major magazine printers has to be good. The management of Cadmus should be commended on staying focused on their pioneering effort to reposition the company for the future as Content Service Providers. Q & A Earnings forecast for 2005 is not conservative but consistent, anticipate a 20% improvement over the last 2 years. The main growth will come from packaging educational and content offerings. Q1 is traditionally Cadmus’ softest quarter. Can not put an exact figure to Thompson Learning deal potential, but it is prestigious, prominent and will build over time. Magazine business was profitable over the past year. This is part of revised business strategy to weed out the poor performers. It is anticipated that as the company expands into more non-print areas the technology will generate print revenue. Leverage technology into more new markets. The company has conservative capital expenditure plans for coming year, $4-5 million in maintenance, $15 million investment in global content and new product development. No plans for massive purchases of new printing presses. Cadmus will buy presses to be more efficient and not to expand capacity. Port City plant has done book printing for many years as well as the Richmond facility, however it just was not aggressively sold in past. Short to medium runs are still sweet spots.