By Trevor Shackelford November 2, 2005 -- Cadmus Communications Corporation (NASDAQ: CDMS) announced their first quarter results today. The company’s revenue for the first quarter was $107.2 million, 4% higher than the $103 million reported for the first quarter of fiscal 2005. Operating income was $6.9 million and net income was $2.2 million, or $0.23 per share, compared to operating income of $8.2 million and net income of $3.2 million, or $0.34 per share, last year. These results include restructuring and other charges of $0.7 million, or $0.05 per share. Adjusted operating income was $7.7 million and adjusted net income was $2.7 million, or $0.28 per share, for the first quarter of fiscal 2006, compared to operating income of $7.2 million and net income of $2.6 million, or $0.27 per share, in the year ago quarter. Contents of this Summary • Quarter Highlights • Segment Performance • Guidance • Raine Radar • Q & A Quarter Highlights • Net sales and operating income and earnings per share, as adjusted, were all higher than any first quarter for Cadmus in the last four years. • Consolidated operating margins, as adjusted, increased to 7.2% of net sales compared to 7% in the prior year. • During the first quarter Cadmus introduced several new products. • Company recently launched a new business unit to provide content-related services to the security and defense industry. • EBITDA for the first quarter of fiscal 2006 was $12.32 millions, compared to $12.17 millions reported for the same period in the last year, excluding the insurance recovery of $1 million. • In third quarter, the overall debt increased by $2.5 million. In September, the company arranged German export financing that would permit the company to borrow, on an unsecured basis, up to 85% of the purchase price of the German-manufactured equipment at an all-in spread of approximately 75 basis points over LIBOR. • Capital expenditure for the quarter was $8.6 million, primarily related to their previously announced equipment upgrade plan. Segment Performance Publishing Services Segment Q1 revenue for the segment was $84.66 million, down from $86.58 million in the same period last year. Operating income for the first quarter was $6.6 million, compared to $9.5 million last year. Scientific, technical and medical (STM) revenues increased 1%; however this increase was offset by lower freight and postage revenues (down $0.9 million, or 12% from last year) and by a 6% decline in special interest magazine revenues. Specialty Packaging Segment Q1 revenue for the segment was $22.6 million, up 38% from $16.4 million in the same period last year. Operating income for the first quarter was $ $2.44 million, compared to $1.22 million reported for the same period in last year. Operating margins expanded to 10.8% from 7.4% last year. Cadmus’ special interest magazine plants did not perform as well as the company expected this quarter. Guidance Cadmus expects their momentum to build throughout the year. The company sees the specialty packaging business continuing to grow and in the publisher services segment, the company believes it has enough new business development activity and growth required for achieving their targets. The company intends to operate their sites as efficiently as possible and drive margin improvement throughout the year. 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, excluding the potential tax benefit of $32 million (for a cumulative total of up to $37 million). The company expects a 25% growth in EBITDA in the next 12 to 18 months. Raine Radar Cadmus has had a good start to their 2006 fiscal year. Specialty packaging continues to more than offset declines in publishing services. Reversing the downward trend in special interest magazines and generating some positive growth in STM revenues could lead to a record year for the company. Q & A 1. The company has the program and plans to mitigate the impact of price increase in paper freight, inks and shrink-wrap costs, either by contract or otherwise impact of increase to be passed on to the customer; however they did express concern about being able to pass on increased energy and gas costs. 2. Cadmus expects moderate growth in packaging business in fiscal 2006. Q1 is generally the weaker quarter and Q2 and Q3 have been the strongest quarters for the packaging business. 3. The company expects to have a 10% margin for the full fiscal year. 4. The company hopes that the second quarter will be particularly strong for specialty magazines. 5. Cadmus is expecting top line revenue growth from its core STM market and educational market. 6. The company expects cost saving of around $12-$15 million though improved productivity, lower maintenance costs and reduction in outside purchases. 7. Currently Cadmus is using the facilities in India for content; however, the company intends to concentrate on the print side