Cadmus Communications Further Increases Focus on Core Businesses

Additional Capacity Rationalization and Cost Saving Actions Planned



Apr 03, 2001, 01:00 ET from Cadmus Communications Corporation

    RICHMOND, Va., April 3 /PRNewswire/ -- Cadmus Communications Corporation
 (Nasdaq: CDMS) ("Cadmus") today announced additional actions to intensify the
 Company's focus on its core businesses and further reduce its exposure to the
 cyclical, highly price competitive commercial print market.  Cadmus said that
 the actions announced today are prompted by the industry-wide impact of the
 slowing economy on commercial and magazine print demand.  These actions will
 align resources and capacity to support growth opportunities within its core
 scientific, technical and medical (STM) journal and books and directories
 businesses.
     In February, Cadmus announced the decision to consolidate its technology-
 related logistics operations.  The Company now plans additionally to
 consolidate its two Richmond-based commercial and magazine printing operations
 and reconfigure equipment to better service these markets.  Cadmus will also
 be taking other actions to further reduce operating costs to reflect changes
 in demand.  The Company said that these consolidations and cost saving
 initiatives will result in aggregate pre-tax charges of approximately $15.5 -
 $17.0 million, of which $11.0 million will be non-cash.  The majority of the
 charges will be recognized in the fiscal third quarter ended March 31, 2001,
 and the balance is expected in the fiscal fourth quarter.  The Company expects
 annualized cost savings of approximately $7.0 to $7.5 million before taxes as
 a result of these actions which, when completed, should generate approximately
 $13.0 million in net cash proceeds.
     Commenting on the announcement, Bruce V. Thomas, president and chief
 executive officer, noted, "Demand remains solid in our STM journal and books
 and directories businesses, which primarily serve the scientific, technical,
 and medical market.  The consolidation among publishers has led to some
 pricing pressures, and we are experiencing higher costs related to several
 projects that will enhance our content-management and other STM journal
 services.  Still, the fundamentals in these core businesses remain sound and
 offer us attractive growth potential.  Our other operating units, however,
 have not been immune from much lower demand and increased competitive
 pressures in the commercial and magazine printing markets resulting from the
 economic slowdown and reduced advertising spending.  These developments have
 affected the financial performance and prospects of both Cadmus and our
 industry peers."
     Thomas added, "We are responding aggressively to these changes in demand.
 For the business opportunities in our journal and books and directories
 businesses, we continue to invest in additional, enhanced STM content
 management systems and other new product/service offerings.  In those markets
 where we face more challenging market conditions, we are rationalizing
 capacity and reconfiguring plants and equipment to improve manufacturing
 productivity and to strengthen our competitive advantages.  In this more
 challenging environment, we must operate as efficiently as possible, maximize
 the return on our capital and position our resources where they will yield the
 highest return."
 
     Continuing, Thomas said, "For our fiscal third quarter, we achieved a $7.6
 million reduction in total debt.  This performance tracks with our target of
 reducing debt by about $20 million for the fiscal year as a whole.  We
 believe, however, that operating income for the fiscal third quarter will be
 about 30% below our target of approximately $10.0 million due to the economic
 slowdown, losses from operations that are being closed, and one-time expenses
 and incremental costs being incurred to pursue growth opportunities in the STM
 market.  We expect the shortfall in net income, before special charges, to be
 larger due to the fixed nature of interest expense and amortization of
 goodwill.  The actions we are taking should contribute to improved financial
 performance for the fiscal fourth quarter when compared to the fiscal third
 quarter.  We expect that positive trend to extend into fiscal 2002."
     Cadmus indicated that it will discuss the actions being taken and the
 revised forward-looking guidance at the Company's regularly scheduled
 quarterly conference call at 9:00 a.m. (EDT) on Tuesday, May 1, 2001.
     Cadmus Communications Corporation provides end-to-end, integrated graphic
 communications services to professional publishers, not-for-profit societies
 and corporations.  Cadmus is the largest provider of production services to
 scientific, technical and medical journal publishers in the world, the fourth
 largest publications printer in North America, and a leading national provider
 of specialty packaging products and services.
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  Information in this release relating to Cadmus' future prospects and
 performance are "forward-looking statements" and, as such, are subject to
 risks and uncertainties that could cause actual results to differ materially.
 Potential risks and uncertainties include but are not limited to: (1) the
 length and severity of the current economic slowdown, (2) the ability of the
 Company to successfully retain customer relationships from its Atlanta and
 Richmond operations, (3) the ability of the Company to dispose of excess
 assets at values assumed in its reserves, (4) the success of the Company in
 retaining key employees during the transition period, (5) the ability of the
 Company to obtain cost savings and to lower overall logistics operating costs,
 and (6) the Company's ability to continue to win new business in an
 environment characterized by excess capacity and more aggressive pricing from
 competitors. The information included in this release is representative only
 on the date hereof, and the Company undertakes no obligation to update any
 forward-looking statements made.
 
                                 Facts In Brief
 
        Cadmus Communications Corporation 2001 Capacity Rationalization
                             And Cost Savings Plan
 
     Strategic Overview:
 
     *  This plan is intended to accelerate the focus of the Company's
        resources on its core Publications Services (STM journals, magazines,
        and book/directories services) and Specialty Packaging businesses and
        to effect meaningful cost savings.  The principal components of this
        plan include the previously announced consolidation of its Atlanta-
        based logistics operations and the subsequent decisions to consolidate
        certain magazine and commercial printing operations and to implement
        other cost-savings initiatives that, together with the plant
        consolidations, will effect an approximate 8% reduction in personnel.
 
     *  The increased emphasis on the Publications Services businesses reflects
        the significant growth opportunities apparent in these businesses.  The
        Company's intent is to capitalize on its world leadership position in
        the management of content for society, association, and commercial
        publishers.  As a result of these actions and previous restructuring
        moves, the Company's capital and personnel are more focused on the
        "content-centric" growth opportunities in our Publications Services
        businesses.
 
 
     *  The actions will significantly improve the Company's manufacturing base
        and its ability to compete in its core markets.  As a result of these
        actions, capacity will be rationalized and equipment will be
        reconfigured to provide greater manufacturing efficiency in key
        magazine and commercial printing plants and to provide customers
        increased flexibility and enhanced service.
 
     *  An important driver for the current changes is the reality of a slowing
        economy and the need to reduce costs.  The plant consolidations and
        workforce reductions are being planned to avoid any disruption in
        customer service and are largely based on excess capacity, redundant
        operations or efficiencies facilitated by the use of new technology.
 
     Financial Overview:
 
     *  Charges related to these actions are expected as follows:
 
    Total charge (est.):                 $15.5 - $17.0 million
                                         Non-cash items - $11.0 million
 
     *  Annual savings of approximately $7.0 to $7.5 million before taxes are
        expected from the implementation of these plans.
 
     *  The majority of the charges will be recognized in the third fiscal
        quarter that ended in March 2001.  This amount will include the charge
        associated with the previously announced consolidation of the Company's
        Atlanta-based logistics operations.  The remainder of the charges are
        expected to be recognized in the fiscal fourth quarter.
 
     *  Proceeds of more than $13.0 million are estimated from the sale of
        assets, tax benefits and reduced working capital requirements, net of
        cash charges.
 
     *  The Company expects the loss of approximately $20-25 million in annual
        net sales, principally related to sheet-fed commercial printing volume
        and smaller, less profitable logistics accounts.
 
     *  The Company does not expect a material impact on its balance sheet as a
        result of the restructuring charges.  The following summarizes the pro
        forma balance sheet assuming the charges have been fully recognized.
 
      ($ million, except book value per share)
 
                                                      Actual       Pro Forma
                                                      (12/00)        (12/00)
     Debt                                              $188.5         $175.5
     Shareholders' equity                               121.2          111.0
     Total capitalization                              $309.7         $286.5
 
     Book value/share                                  $13.56         $12.42
 
     Restructuring Summary:
 
     *  The restructuring plan encompasses the following major actions:
 
      *  Closure of the Atlanta logistics center and consolidation of those
         activities with the newer center in Charlotte, N.C.
 
      *  Consolidation of the two Richmond, Virginia based commercial and
         magazine printing facilities.
 
      *  Implementation of additional synergies associated with the continued
         integration of the Mack Printing company operations acquired in 1999.
 
      *  Additional personnel reductions, together with the two plant
         consolidations, resulting in a total reduction of approximately 8% of
         the 3,500 person associate base.
 
     *  The closure of the Atlanta operation reflects reduced demand from
        technology-oriented customers as well as a shift in customers' needs to
        services better provided from the newer center in Charlotte.  The
        incremental volume should lead to improved profitability and
        productivity.  The move will also serve as a catalyst to pursue several
        exciting, new marketing initiatives related to specialty packaging.
 
     *  The consolidation of the Richmond-based printing operations principally
        reflects the impact of the economic slowdown on commercial print demand
        as well as the excess capacity that exists industry-wide.  The Company
        will be consolidating its Richmond-based sheet-fed printing capacity
        and reconfiguring certain of its web presses to provide much needed 8-
        unit capacity to better serve the special interest magazine market.
 
     *  Other operational changes include additional phases of the planned
        consolidation envisioned when Mack Printing was acquired, especially in
        reprints, backcopy fulfillment, and pre-press, as well as some direct
        workforce reductions.  The timing of these actions follows the original
        plan set at the time of the acquisition to ensure a continuing high
        level of service to customers. Most of these actions are expected to be
        completed by the close of fiscal 2001.
 
     *  The plan will have no adverse impact on the Company's continuing drive
        to capitalize on its position as the leading content manager in the STM
        sector.  This initiative continues to encompass the increasing use of
        technology, expanded use of offshore composition services and strategic
        alliances with other companies.
 
     Business Profile:
 
     *  Following this capacity rationalization and cost savings plan, Cadmus
        will serve the publications services market with comprehensive content
        management services, as well as the production and distribution of
        journals, magazines, and books and directories. Essentially, the
        Company will be a specialized content manager that handles end-to-end
        distribution of that content in print.  Cadmus also will continue to
        serve the specialty packaging market through the design, production and
        distribution of packaging and related marketing materials.
 
     *  Cadmus ranks as the nation's largest content manager in the STM
        journals market.
 
     *  Cadmus ranks as one of North America's five largest printers of
        periodicals.
 
 

SOURCE Cadmus Communications Corporation
    RICHMOND, Va., April 3 /PRNewswire/ -- Cadmus Communications Corporation
 (Nasdaq: CDMS) ("Cadmus") today announced additional actions to intensify the
 Company's focus on its core businesses and further reduce its exposure to the
 cyclical, highly price competitive commercial print market.  Cadmus said that
 the actions announced today are prompted by the industry-wide impact of the
 slowing economy on commercial and magazine print demand.  These actions will
 align resources and capacity to support growth opportunities within its core
 scientific, technical and medical (STM) journal and books and directories
 businesses.
     In February, Cadmus announced the decision to consolidate its technology-
 related logistics operations.  The Company now plans additionally to
 consolidate its two Richmond-based commercial and magazine printing operations
 and reconfigure equipment to better service these markets.  Cadmus will also
 be taking other actions to further reduce operating costs to reflect changes
 in demand.  The Company said that these consolidations and cost saving
 initiatives will result in aggregate pre-tax charges of approximately $15.5 -
 $17.0 million, of which $11.0 million will be non-cash.  The majority of the
 charges will be recognized in the fiscal third quarter ended March 31, 2001,
 and the balance is expected in the fiscal fourth quarter.  The Company expects
 annualized cost savings of approximately $7.0 to $7.5 million before taxes as
 a result of these actions which, when completed, should generate approximately
 $13.0 million in net cash proceeds.
     Commenting on the announcement, Bruce V. Thomas, president and chief
 executive officer, noted, "Demand remains solid in our STM journal and books
 and directories businesses, which primarily serve the scientific, technical,
 and medical market.  The consolidation among publishers has led to some
 pricing pressures, and we are experiencing higher costs related to several
 projects that will enhance our content-management and other STM journal
 services.  Still, the fundamentals in these core businesses remain sound and
 offer us attractive growth potential.  Our other operating units, however,
 have not been immune from much lower demand and increased competitive
 pressures in the commercial and magazine printing markets resulting from the
 economic slowdown and reduced advertising spending.  These developments have
 affected the financial performance and prospects of both Cadmus and our
 industry peers."
     Thomas added, "We are responding aggressively to these changes in demand.
 For the business opportunities in our journal and books and directories
 businesses, we continue to invest in additional, enhanced STM content
 management systems and other new product/service offerings.  In those markets
 where we face more challenging market conditions, we are rationalizing
 capacity and reconfiguring plants and equipment to improve manufacturing
 productivity and to strengthen our competitive advantages.  In this more
 challenging environment, we must operate as efficiently as possible, maximize
 the return on our capital and position our resources where they will yield the
 highest return."
 
     Continuing, Thomas said, "For our fiscal third quarter, we achieved a $7.6
 million reduction in total debt.  This performance tracks with our target of
 reducing debt by about $20 million for the fiscal year as a whole.  We
 believe, however, that operating income for the fiscal third quarter will be
 about 30% below our target of approximately $10.0 million due to the economic
 slowdown, losses from operations that are being closed, and one-time expenses
 and incremental costs being incurred to pursue growth opportunities in the STM
 market.  We expect the shortfall in net income, before special charges, to be
 larger due to the fixed nature of interest expense and amortization of
 goodwill.  The actions we are taking should contribute to improved financial
 performance for the fiscal fourth quarter when compared to the fiscal third
 quarter.  We expect that positive trend to extend into fiscal 2002."
     Cadmus indicated that it will discuss the actions being taken and the
 revised forward-looking guidance at the Company's regularly scheduled
 quarterly conference call at 9:00 a.m. (EDT) on Tuesday, May 1, 2001.
     Cadmus Communications Corporation provides end-to-end, integrated graphic
 communications services to professional publishers, not-for-profit societies
 and corporations.  Cadmus is the largest provider of production services to
 scientific, technical and medical journal publishers in the world, the fourth
 largest publications printer in North America, and a leading national provider
 of specialty packaging products and services.
 
     "Safe Harbor" Statement under the Private Securities Litigation Reform Act
 of 1995:  Information in this release relating to Cadmus' future prospects and
 performance are "forward-looking statements" and, as such, are subject to
 risks and uncertainties that could cause actual results to differ materially.
 Potential risks and uncertainties include but are not limited to: (1) the
 length and severity of the current economic slowdown, (2) the ability of the
 Company to successfully retain customer relationships from its Atlanta and
 Richmond operations, (3) the ability of the Company to dispose of excess
 assets at values assumed in its reserves, (4) the success of the Company in
 retaining key employees during the transition period, (5) the ability of the
 Company to obtain cost savings and to lower overall logistics operating costs,
 and (6) the Company's ability to continue to win new business in an
 environment characterized by excess capacity and more aggressive pricing from
 competitors. The information included in this release is representative only
 on the date hereof, and the Company undertakes no obligation to update any
 forward-looking statements made.
 
                                 Facts In Brief
 
        Cadmus Communications Corporation 2001 Capacity Rationalization
                             And Cost Savings Plan
 
     Strategic Overview:
 
     *  This plan is intended to accelerate the focus of the Company's
        resources on its core Publications Services (STM journals, magazines,
        and book/directories services) and Specialty Packaging businesses and
        to effect meaningful cost savings.  The principal components of this
        plan include the previously announced consolidation of its Atlanta-
        based logistics operations and the subsequent decisions to consolidate
        certain magazine and commercial printing operations and to implement
        other cost-savings initiatives that, together with the plant
        consolidations, will effect an approximate 8% reduction in personnel.
 
     *  The increased emphasis on the Publications Services businesses reflects
        the significant growth opportunities apparent in these businesses.  The
        Company's intent is to capitalize on its world leadership position in
        the management of content for society, association, and commercial
        publishers.  As a result of these actions and previous restructuring
        moves, the Company's capital and personnel are more focused on the
        "content-centric" growth opportunities in our Publications Services
        businesses.
 
 
     *  The actions will significantly improve the Company's manufacturing base
        and its ability to compete in its core markets.  As a result of these
        actions, capacity will be rationalized and equipment will be
        reconfigured to provide greater manufacturing efficiency in key
        magazine and commercial printing plants and to provide customers
        increased flexibility and enhanced service.
 
     *  An important driver for the current changes is the reality of a slowing
        economy and the need to reduce costs.  The plant consolidations and
        workforce reductions are being planned to avoid any disruption in
        customer service and are largely based on excess capacity, redundant
        operations or efficiencies facilitated by the use of new technology.
 
     Financial Overview:
 
     *  Charges related to these actions are expected as follows:
 
    Total charge (est.):                 $15.5 - $17.0 million
                                         Non-cash items - $11.0 million
 
     *  Annual savings of approximately $7.0 to $7.5 million before taxes are
        expected from the implementation of these plans.
 
     *  The majority of the charges will be recognized in the third fiscal
        quarter that ended in March 2001.  This amount will include the charge
        associated with the previously announced consolidation of the Company's
        Atlanta-based logistics operations.  The remainder of the charges are
        expected to be recognized in the fiscal fourth quarter.
 
     *  Proceeds of more than $13.0 million are estimated from the sale of
        assets, tax benefits and reduced working capital requirements, net of
        cash charges.
 
     *  The Company expects the loss of approximately $20-25 million in annual
        net sales, principally related to sheet-fed commercial printing volume
        and smaller, less profitable logistics accounts.
 
     *  The Company does not expect a material impact on its balance sheet as a
        result of the restructuring charges.  The following summarizes the pro
        forma balance sheet assuming the charges have been fully recognized.
 
      ($ million, except book value per share)
 
                                                      Actual       Pro Forma
                                                      (12/00)        (12/00)
     Debt                                              $188.5         $175.5
     Shareholders' equity                               121.2          111.0
     Total capitalization                              $309.7         $286.5
 
     Book value/share                                  $13.56         $12.42
 
     Restructuring Summary:
 
     *  The restructuring plan encompasses the following major actions:
 
      *  Closure of the Atlanta logistics center and consolidation of those
         activities with the newer center in Charlotte, N.C.
 
      *  Consolidation of the two Richmond, Virginia based commercial and
         magazine printing facilities.
 
      *  Implementation of additional synergies associated with the continued
         integration of the Mack Printing company operations acquired in 1999.
 
      *  Additional personnel reductions, together with the two plant
         consolidations, resulting in a total reduction of approximately 8% of
         the 3,500 person associate base.
 
     *  The closure of the Atlanta operation reflects reduced demand from
        technology-oriented customers as well as a shift in customers' needs to
        services better provided from the newer center in Charlotte.  The
        incremental volume should lead to improved profitability and
        productivity.  The move will also serve as a catalyst to pursue several
        exciting, new marketing initiatives related to specialty packaging.
 
     *  The consolidation of the Richmond-based printing operations principally
        reflects the impact of the economic slowdown on commercial print demand
        as well as the excess capacity that exists industry-wide.  The Company
        will be consolidating its Richmond-based sheet-fed printing capacity
        and reconfiguring certain of its web presses to provide much needed 8-
        unit capacity to better serve the special interest magazine market.
 
     *  Other operational changes include additional phases of the planned
        consolidation envisioned when Mack Printing was acquired, especially in
        reprints, backcopy fulfillment, and pre-press, as well as some direct
        workforce reductions.  The timing of these actions follows the original
        plan set at the time of the acquisition to ensure a continuing high
        level of service to customers. Most of these actions are expected to be
        completed by the close of fiscal 2001.
 
     *  The plan will have no adverse impact on the Company's continuing drive
        to capitalize on its position as the leading content manager in the STM
        sector.  This initiative continues to encompass the increasing use of
        technology, expanded use of offshore composition services and strategic
        alliances with other companies.
 
     Business Profile:
 
     *  Following this capacity rationalization and cost savings plan, Cadmus
        will serve the publications services market with comprehensive content
        management services, as well as the production and distribution of
        journals, magazines, and books and directories. Essentially, the
        Company will be a specialized content manager that handles end-to-end
        distribution of that content in print.  Cadmus also will continue to
        serve the specialty packaging market through the design, production and
        distribution of packaging and related marketing materials.
 
     *  Cadmus ranks as the nation's largest content manager in the STM
        journals market.
 
     *  Cadmus ranks as one of North America's five largest printers of
        periodicals.
 
 SOURCE  Cadmus Communications Corporation

RELATED LINKS

http://www.cadmus.com