- The Washington Times - Tuesday, November 12, 2002

Shares of Cadmus Communications Corp., rose sharply last week, as investors responded to the company's cost-cutting efforts.
The Richmond-based printer of scholarly journals said it would close a major printing facility in East Stroudsburg, Pa., and a reprint center in Easton, Pa., laying off 191 workers in the process.
Shares rose 89 cents, or 9.8 percent last week, before falling 5 cents yesterday to close at $9.94 on the New York Stock Exchange. They have fallen about 8.5 percent this year.
Management said there were heavy operating losses coming out of the East Stroudsburg printing facility, which makes niche magazines known as "special-interest publications." The work being produced at that plant will be shifted to offices in Easton and Richmond. Revenues from the special-interest publication sector have been on the decline, and have offset gains from the company's other businesses, such as packaging.
"The idea is to reduce their exposure to [the special-interest publication] business," said George Smith, an analyst with Davenport and Co. in Richmond, who rates Cadmus a "buy" and doesn't own shares.
Also, Cadmus said it would close its reprint center in Easton, and plans to sell its facility near the Richmond airport.
Cadmus, the fourth-largest publications printer in North America, said it wants to shift more of its business focus on the scientific, technical and medical journals, known as STMs. Analysts praised the move, and said it would help the company grow a larger presence in a relatively stable corner of the printing business.
"They've been doing quite well in that niche," Mr. Smith said.
Focusing on the STM business should stabilize earnings over time, said analysts, some of whom have grown frustrated with the often erratic nature of Cadmus' earnings.
Cadmus reported a net loss of $54.3 million ($6.06 per share) in the financial quarter ending Sept. 30, compared with a gain of $522,000 (6 cents) during the comparable quarter last year. Most of the loss came as a result of a change in accounting rules.
Cadmus, like many companies involved in publishing and printing, has been hurt over the last two years by an advertising slump. It has avoided the revenue declines seen by regular magazines that rely on advertising directly for revenue, but has lost money as advertising losses led to smaller publication sizes.
"When advertising slows down, the number of pages in the publication decreases," Mr. Smith said.
The smaller publication size has meant facilities are overstaffed and too large for the amount of work required, the company said. And in some cases, publishers have begun charging less for the smaller magazines, thus creating even smaller profit margins for Cadmus.
Revenue from the company's publishing businesses dropped 6.4 percent from $99.5 million to $93.2 million. Sales from its packaging business, which is not affected by advertising, rose 5 percent from $11.2 million to $12.3 million.
Cadmus executives said the cost-cutting moves would have an effect on earnings by the end of the year, but analysts said it was too soon to determine how much money would be saved. Cadmus will take a $5 million to $8 million charge, including about $1 million in severance pay to the laid-off workers.

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