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Cadmus Communications Reports Second Quarter Earnings of $0.32 Per Share Before Special Charge

Press release from the issuing company

RICHMOND, Va., Jan. 31 -- Cadmus Communications Corporation (Nasdaq: CDMS) today announced results for the second quarter of its fiscal year 2001. Financial highlights for the three months ended December 31, 2000, were as follows: STM journal services sales rose 4%; Specialty packaging sales declined 33%, due to December order cancellations and softness in overall demand; Operating margins, before special charges, were 8.4% of sales; Excluding goodwill amortization, income before special charges totaled $0.46 per share; EBITDA before special charges totaled $17.1 million; and Debt, before securitization, was reduced to $235.4 million. Commenting on the quarter, Bruce V. Thomas, president and chief executive officer, remarked "Our publication services businesses produced another good quarter, led by a strong performance from our STM journal services business. These businesses operate to a large extent under long-term contracts and thus have been less sensitive to the overall economy. We have benefited from growth in the total number of STM (scientific, technical, and medical) journal pages produced. We also are positioned to capitalize on the opportunities presented by changes occurring in the STM publishing process - most notably a movement toward more article-based publishing. Those changes should play directly to our core content management strengths. We have the advantage of being the largest manager of content in the STM market and have been moving aggressively to capitalize on this position by introducing new capabilities and services to facilitate on-line and article-based delivery." Thomas added, "As we capitalize on these evolving content management opportunities, we continue to focus on increasing our productivity and efficiency. To that end, during the second quarter we commenced operations at our new content management facility in Mumbai, India. This facility increases our capacity and replicates, in a global environment, our industry-leading content management work flows, helping to ensure the fast turnaround times and accuracy levels that are our trademarks. We expect its positive contribution to become more evident in our results during the latter part of this fiscal year." "By contrast," Thomas continued, "our specialty packaging operations did not meet our expectations for the second quarter. Although we started the period with strong backlogs, we experienced delays and cancellations in orders later in the second quarter as the economy slowed. We have reduced our costs and have been successful in securing new accounts, but we have been unable to offset the impact of this industry-wide softness in demand. We are continuing to look at opportunities to reduce costs and to shift the focus of this business toward less cyclical markets. Although it appears that, absent a meaningful strengthening of the economy, we will not see much improvement over the short term from our specialty packaging unit, we remain positive about the longer term growth potential for this portion of our business." David E. Bosher, senior vice president and chief financial officer, added, "We recognized a special charge for the second quarter of $1.7 million, or $0.11 per share after taxes, related to post-closing contingencies and other facility closure costs associated with the sale of our Dynamic Diagrams subsidiary, which we announced in September 2000. Although this charge reduced our reported net income, we remained solidly profitable and continued to generate positive cash flow. Through the first six months of fiscal 2001, we generated $34.3 million in EBITDA and reduced our debt, before securitization, to $235.4 million at December 31, 2000. We remain on track to achieve a reduction in total debt of at least $20 million for the full year."

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