Cadmus Reports Third Quarter Results, Book & Directory Sales up 19%
Press release from the issuing company
RICHMOND, VA (May 1, 2001) -- Cadmus Communications Corporation (Nasdaq: CDMS) today announced earnings for its fiscal third quarter of $.06 per share, before restructuring and other charges. The earnings were in line with revised forecasts announced in early April. Financial highlights for the three months ended March 31, 2001 were as follows:
* STM journal services registered a 3% sales gain, led by an 8% growth in pages and a corresponding 5% increase in content management revenues;
* Professional books and directories sales rose 19%;
* Continued softness in the U. S. economy and lower advertising spending led to declines in special interest magazines and specialty packaging sales of 2% and 11%, respectively;
* Operating income before restructuring and other charges totaled $7.0 million, which included operating losses from closed and consolidated operations and additional costs incurred in connection with certain strategic and operational initiatives;
* Cash earnings before restructuring and other charges totaled $1.8 million, or $.20 per share;
* Total cash flow of $9.7 million led to a $7.6 million reduction in total debt; and
* Restructuring and other charges of $15.5 million, pre-tax, were recorded to consolidate facilities, rationalize capacity and reduce costs.
Commenting on the announcement, Bruce V. Thomas, president and chief executive officer, noted, "The results for the third quarter were in line with our announcement last month about the broad trends in our business. The restructuring and other charges we recorded this quarter, most of which were non-cash, relate to actions taken to consolidate capacity and eliminate unprofitable operations in our specialty packaging and commercial printing businesses, which have been impacted significantly by the general slowdown in the economy.
Thomas added, "We are pleased with the continued revenue growth from our core STM journal services and books and directories businesses. Journal services sales rose 3%, reflecting higher content management revenues driven by ongoing growth in pages. Professional books and directories sales were up 19%, driven by continued solid demand and market share gains. Our focus this year has been to position these important businesses for sustained growth. We are implementing new content management software platforms, consolidating article reprint operations, consolidating STM journal fulfillment operations, and completely digitizing our pre-press operations. These initiatives, which will be completed in our fiscal fourth quarter, resulted in approximately $1.14 million of incremental costs during the third quarter and will also affect our fiscal fourth quarter to a somewhat lesser extent. We are now well positioned to grow our market-leading position in the professional and STM publications industry."
Commenting on these growth opportunities, Thomas said, "We have the opportunity to capitalize on the increasing stand-alone value of content management in teh STM and professional publishing market. Accelerating page growth is shifting the economics of our business toward content management services where we provide significant value in expediting the STM publishing process and assisting in the multi-channel delivery of STM information. Since most of our value-added sales to the STM market come from either content management or first-copy revenues, the aggressive growth of pages and content management-related services is integral to our business model. We have added sales, marketing and technological resources to this higher-margin component of our business, which we intend to grow by increasing our volume with existing accounts and broadening our customer base."
David E. Bosher, senior vice president and chief financial officer, added, "We recognized restructuring and other charges in the third quarter of $15.5 million, or $1.13 per share after taxes. Although these charges led to a net loss for the third quarter and the first nine months of $1.07 per share and $0.61 per share, respectively, we continued to generate substantial positive cash flow. Total cash flow in the third quarter was $9.7 million, allowing us to reduce total debt by $7.6 million to $227.7 million. Through the first nine months of fiscal 2001, total cash flow has totaled $14.7 million and we have reduced total debt, before securitization, by $18.3 million. We remain on track to achieve a reduction in total debt of at least $20 million for the full year."
Bosher added, "The actions we have taken to eliminate the operating losses from the closed and consolidated operations should be completed by the end of our fourth fiscal quarter. Lower costs associated with the completion of our various strategic and operational initiatives, and reduced interest costs due to debt reduction and lower interest rates will be additional positive factors as we move into fiscal 2002."
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