Cadmus Reports Q2: Double-digit top-line growth in specialty packaging
Press release from the issuing company
RICHMOND, Va., Jan. 29 -- Cadmus Communications Corporation today announced net sales of $115.3 million for the second quarter of its fiscal year 2004, an increase of 1% from $113.7 million in last year's second quarter. Operating income was $8.8 million and net income was $3.1 million, or $0.33 per share, for the second quarter of fiscal 2004, compared with an operating loss of $0.6 million and a net loss of $3.2 million, or a loss of $0.35 per share, in the second quarter of fiscal 2003.
Adjusted as described below(1), operating income for the second quarter of fiscal 2004 was $8.8 million, an increase from $8.3 million in the prior year period, and income was $3.1 million, or $0.33 per share, for the second quarter of fiscal 2004, an increase from $2.7 million(2), or $0.30 per share, in last year's second quarter.
Bruce V. Thomas, president and chief executive officer, remarked, "We are pleased with the sequential and year-over-year improvement in net sales and operating income for the quarter, which we achieved despite continued pricing pressures in the special interest magazine market. The improvement was broad- based. We experienced a solid increase in page counts in our scholarly publishing business, which positively impacted both STM content services and journal print volume. In addition, our specialty packaging business had another very strong quarter, posting double-digit top-line growth and improving margins. In this business, we are continuing our shift toward longer-term relationships and into the attractive health care and pharmaceutical markets. At the same time, our special interest magazine business continues to face challenging market conditions, and we remain focused on managing costs and rationalizing volume between our two plants to improve the overall profitability of this business."
Thomas continued, "We are very pleased with the progress we are making in leveraging our offshore capabilities. These capabilities are helping us enter new markets, grow our revenues, and improve our overall returns. This past quarter, we used our India-based content processing capabilities to help us secure "core vendor" status for a major educational publisher. This is an exciting new market for Cadmus. We also leveraged our Global Packaging Solutions facilities in the Dominican Republic and Costa Rica to win new business and to drive growth particularly in the consumer products segment of our packaging business."
Finally, Thomas stated, "We also are pleased to announce the very successful completion of the refinancing of our bank credit facility, which was to mature March 31, 2004. The senior secured bank credit facility provides for a $100 million revolving credit facility that will mature in January, 2008. With this new facility, Cadmus is well positioned to sustain the momentum we have achieved over the past eight quarters and to support accelerated growth and more aggressive expansion into other content-rich markets as we move forward."
Second Quarter and Year-to-Date Operating Results Review
Net sales for the fiscal second quarter totaled $115.3 million compared with $113.7 million last year, an increase of 1%. Publisher Services segment sales were $97.3 million, a decrease of less than 1% from $98.2 million last year. This decrease was a result of continued pricing pressures in the special interest magazine business offset by continued growth in STM services. Specialty Packaging segment sales were $18.0 million, an increase of 16% from $15.5 million, as this division continued to gain new projects from existing customers and to win new accounts.
Operating income, adjusted as described below, was $8.8 million or 7.6% of net sales in the second quarter, compared to $8.3 million or 7.3% of net sales last year(3). Cash generated from operations resulted in a decrease in total debt (including $29.3 million related to securitization) of $2.1 million for the quarter. Income, adjusted as described below, totaled $3.1 million, or $0.33 per share, for the fiscal second quarter compared with $2.7 million, or $0.30 per share, in last year's second quarter.
Net sales for the first six months of fiscal 2004 totaled $222.2 million compared with $219.1 million last year, an increase of 1%. Publisher Services segment sales were $189.6 million, down less than 1% from $191.3 million last year. Specialty Packaging segment sales were $32.6 million, an increase of 17% from $27.8 million last year. For the six months ended December 31, 2003, operating income, adjusted as described below, was $16.0 million, or 7.2% of net sales, compared to $15.5 million, or $7.1% of net sales last year(4). Income for the first six months, adjusted as described below, totaled $5.2 million, or $0.57 per share, compared to $4.7 million, or $0.51 per share, last year(5). Cash flows generated from operations, offset by the $7.8 million cash contribution to the frozen defined benefit pension plan in the first quarter of fiscal 2004, were used to reduce total debt (including securitization) by $0.5 million during the first six months of fiscal 2004.
Outlook for Fiscal 2004
Commenting on the Company's outlook for the remainder of fiscal 2004, Mr. Thomas stated, "We believe that we are in a position to sustain our track record of year-over-year improved earnings throughout fiscal 2004 and, assuming that industry and economic conditions do not deteriorate further and we obtain the expected benefits from our key initiatives, our target for fiscal 2004 remains unchanged. We expect total debt reduction for the fiscal year to be in the $4-8 million range, giving effect to the first quarter pension contribution."
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