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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



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Form 10-Q



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(Mark One)

|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2005



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the transition period from  to



Commission File Number: 000-12954



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CADMUS COMMUNICATIONS CORPORATION

(Exact name of registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Virginia                                                       |  | 54-1274108                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



1801 Bayberry Court,
Suite 200

Richmond, Virginia 23226

(Address of principal executive offices) (Zip code)



(804) 287-5680

(Registrants telephone number, including area code)



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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈No  x



Indicate the number of shares outstanding of each of the registrants classes of common
stock, as of the latest practicable date.



|                              |  |                              
|----------------------------- |  | -----------------------------
|Class                         |  | Outstanding at April 30, 2005
|Common Stock, $0.50 Par Value |  | 9,171,822                    



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##### Table of Contents

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

INDEX



|           |  |                                                                                                                   |  |                                                                                       |  |            
|---------- |  | ----------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------- |  | -----------
|           |  |                                                                                                                   |  |                                                                                       |  | Page Number
|Part I.    |  | Financial Information                                                                                             |  |                                                                                      
|           |  |                                                                                                                   | 
|           |  | Item 1.                                                                                                           |  | Financial Statements                                                                  |  |            
|           |  |                                                                                                                  
|           |  | Condensed Consolidated Balance Sheets  March 31, 2005 (unaudited) and June 30, 2004                              |  | 3                                                                                    
|           |  |                                                                                                                  
|           |  | Condensed Consolidated Statements of Operations (unaudited)  Three and Nine Months Ended March 31, 2005 and 2004 |  | 4                                                                                    
|           |  |                                                                                                                  
|           |  | Condensed Consolidated Statements of Cash Flows (unaudited)  Nine Months Ended March 31, 2005 and 2004           |  | 5                                                                                    
|           |  |                                                                                                                  
|           |  | Condensed Consolidated Statements of Shareholders Equity  March 31, 2005 (unaudited) and June 30, 2004          |  | 6                                                                                    
|           |  |                                                                                                                  
|           |  | Notes to Condensed Consolidated Financial Statements (unaudited)                                                  |  | 7                                                                                    
|           |  |                                                                                                                   | 
|           |  | Item 2.                                                                                                           |  | Managements Discussion and Analysis of Financial Condition and Results of Operations |  | 12         
|           |  |                                                                                                                   | 
|           |  | Item 3.                                                                                                           |  | Quantitative and Qualitative Disclosures About Market Risk                            |  | 18         
|           |  |                                                                                                                   | 
|           |  | Item 4.                                                                                                           |  | Controls and Procedures                                                               |  | 18         
|           |  |                                                                                                                  
|Part II.   |  | Other Information                                                                                                 |  |                                                                                      
|           |  |                                                                                                                   | 
|           |  | Item 1.                                                                                                           |  | Legal Proceedings                                                                     |  | 19         
|           |  |                                                                                                                   | 
|           |  | Item 2.                                                                                                           |  | Unregistered Sales of Equity Securities and Use of Proceeds                           |  | 19         
|           |  |                                                                                                                   | 
|           |  | Item 6.                                                                                                           |  | Exhibits                                                                              |  | 19         
|           |  |                                                                                                                   | 
|Signatures |  |                                                                                                                   |  |                                                                                       |  | 20         



2



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##### Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share data)



|                                                                                                                                                           |  |               |         |   |              |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------- | - | ------------ | - | ------- | -
|                                                                                                                                                           |  | March 31,2005 |         |   | June 30,2004 |  
|                                                                                                                                                           |  | (Unaudited)   |         |   |              |  
|ASSETS                                                                                                                                                     |  |               |         |   |              |   |         |  
|Current assets:                                                                                                                                            |  |               |         |   |              |   |         |  
|Cash and cash equivalents                                                                                                                                  |  | $             | 1,207   |   |              | $ | 1,899   |  
|Accounts receivable (net of allowance for doubtful accounts of $1,453 at March 31, 2005 and $1,712 at June 30, 2004)                                       |  |               | 58,750  |   |              |   | 52,687  |  
|Inventories                                                                                                                                                |  |               | 24,706  |   |              |   | 21,510  |  
|Deferred income taxes                                                                                                                                      |  |               | 7,577   |   |              |   | 2,303   |  
|Prepaid expenses and other                                                                                                                                 |  |               | 3,130   |   |              |   | 3,629   |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|Total current assets                                                                                                                                       |  |               | 95,370  |   |              |   | 82,028  |  
|                                                                                                                                                           |  |              
|Property, plant and equipment, net                                                                                                                         |  |               | 97,027  |   |              |   | 103,103 |  
|Goodwill                                                                                                                                                   |  |               | 109,884 |   |              |   | 109,884 |  
|Other intangibles, net                                                                                                                                     |  |               | 3,734   |   |              |   | 3,943   |  
|Other assets                                                                                                                                               |  |               | 18,243  |   |              |   | 16,792  |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|TOTAL ASSETS                                                                                                                                               |  | $             | 324,258 |   |              | $ | 315,750 |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                       |  |               |         |   |              |   |         |  
|Current liabilities:                                                                                                                                       |  |               |         |   |              |   |         |  
|Accounts payable                                                                                                                                           |  | $             | 34,113  |   |              | $ | 30,631  |  
|Accrued expenses and other current liabilities                                                                                                             |  |               | 27,367  |   |              |   | 23,090  |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|Total current liabilities                                                                                                                                  |  |               | 61,480  |   |              |   | 53,721  |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|Long-term debt                                                                                                                                             |  |               | 155,642 |   |              |   | 167,561 |  
|Long-term pension liability                                                                                                                                |  |               | 20,639  |   |              |   | 21,183  |  
|Other long-term liabilities                                                                                                                                |  |               | 23,806  |   |              |   | 22,024  |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|Total liabilities                                                                                                                                          |  |               | 261,567 |   |              |   | 264,489 |  
|                                                                                                                                                           |  |              
|Shareholders equity:                                                                                                                                      |  |               |         |   |              |   |         |  
|Common stock ($0.50 par value; authorized shares - 16,000,000; issued and outstanding shares - 9,174,822 at March 31, 2005 and 9,154,374 at
June 30, 2004) |  |               | 4,587   |   |              |   | 4,577   |  
|Capital in excess of par value                                                                                                                             |  |               | 68,585  |   |              |   | 69,362  |  
|Unearned compensation                                                                                                                                      |  |               | (153    | ) |              |   | (306    | )
|Accumulated earnings (deficit)                                                                                                                             |  |               | 1,737   |   |              |   | (10,325 | )
|Accumulated other comprehensive loss                                                                                                                       |  |               | (12,065 | ) |              |   | (12,047 | )
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|Total shareholders equity                                                                                                                                 |  |               | 62,691  |   |              |   | 51,261  |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                                 |  | $             | 324,258 |   |              | $ | 315,750 |  
|                                                                                                                                                           |  |               |         |   |              |   |         |  



See accompanying Notes to Condensed
Consolidated Financial Statements.



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##### Table of Contents

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands, except per share data)

(Unaudited)



|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|-------------------------------------------------------------------- |  | --------------------------- | ------- | - | -------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                     |  | Three Months EndedMarch 31, |         |   | Nine Months EndedMarch 31, |  
|                                                                     |  | 2005                        |         |   | 2004                       |   |         | 2005 |  |   | 2004    |  
|Net sales                                                            |  | $                           | 113,234 |   |                            | $ | 113,619 |      |  | $ | 325,292 |   |  | $ | 335,847 |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Cost of sales                                                        |  |                             | 93,309  |   |                            |   | 92,322  |      |  |   | 267,210 |   |  |   | 274,577 |  
|Selling and administrative expenses                                  |  |                             | 10,721  |   |                            |   | 12,105  |      |  |   | 33,050  |   |  |   | 36,089  |  
|Restructuring and other charges                                      |  |                             | 321     |   |                            |   | 120     |      |  |   | 321     |   |  |   | 221     |  
|Other income                                                         |  |                             |        |   |                            |   |        |      |  |   | (1,000  | ) |  |   |        |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|                                                                     |  |                             | 104,351 |   |                            |   | 104,547 |      |  |   | 299,581 |   |  |   | 310,887 |  
|                                                                     |  |                             |         |  
|Operating income                                                     |  |                             | 8,883   |   |                            |   | 9,072   |      |  |   | 25,711  |   |  |   | 24,960  |  
|                                                                     |  |                             |         |  
|Interest and other expenses:                                         |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Interest                                                             |  |                             | 3,239   |   |                            |   | 3,649   |      |  |   | 9,616   |   |  |   | 10,700  |  
|Securitization costs                                                 |  |                             |        |   |                            |   | 41      |      |  |   |        |   |  |   | 296     |  
|Other, net                                                           |  |                             | 68      |   |                            |   | 142     |      |  |   | 65      |   |  |   | 293     |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|                                                                     |  |                             | 3,307   |   |                            |   | 3,832   |      |  |   | 9,681   |   |  |   | 11,289  |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Income from continuing operations before income taxes                |  |                             | 5,576   |   |                            |   | 5,240   |      |  |   | 16,030  |   |  |   | 13,671  |  
|                                                                     |  |                             |         |  
|Income tax benefit (expense)                                         |  |                             | 3,036   |   |                            |   | (1,704  | )    |  |   | (768    | ) |  |   | (4,965  | )
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Income from continuing operations                                    |  | $                           | 8,612   |   |                            |   | 3,536   |      |  | $ | 15,262  |   |  | $ | 8,706   |  
|                                                                     |  |                             |         |  
|Loss from discontinued operations, net of $761 in federal income tax |  |                             | 1,478   |   |                            |   |        |      |  |   | 1,478   |   |  |   |        |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                           |  | $                           | 7,134   |   |                            | $ | 3,536   |      |  | $ | 13,784  |   |  | $ | 8,706   |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Earnings per common share - basic:                                   |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Income from continuing operations                                    |  | $                           | 0.94    |   |                            | $ | 0.39    |      |  | $ | 1.66    |   |  | $ | 0.96    |  
|Loss from discontinued operations                                    |  |                             | (0.16   | ) |                            |   |        |      |  |   | (0.16   | ) |  |   |        |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                           |  | $                           | 0.78    |   |                            | $ | 0.39    |      |  | $ | 1.50    |   |  | $ | 0.96    |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Weighted-average common shares outstanding                           |  |                             | 9,174   |   |                            |   | 9,103   |      |  |   | 9,177   |   |  |   | 9,077   |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Earnings per common share - diluted:                                 |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Income from continuing operations                                    |  | $                           | 0.93    |   |                            | $ | 0.38    |      |  | $ | 1.63    |   |  | $ | 0.94    |  
|Loss from discontinued operations                                    |  |                             | (0.16   | ) |                            |   |        |      |  |   | (0.16   | ) |  |   |        |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Net income                                                           |  | $                           | 0.77    |   |                            | $ | 0.38    |      |  | $ | 1.47    |   |  | $ | 0.94    |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Weighted-average common shares outstanding                           |  |                             | 9,306   |   |                            |   | 9,289   |      |  |   | 9,348   |   |  |   | 9,210   |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  
|Cash dividends per common share                                      |  | $                           | 0.0625  |   |                            | $ | 0.0500  |      |  | $ | 0.1875  |   |  | $ | 0.1500  |  
|                                                                     |  |                             |         |   |                            |   |         |      |  |   |         |   |  |   |         |  



See accompanying Notes to Condensed
Consolidated Financial Statements.



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##### Table of Contents

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



|                                                                                  |  |                            |         |   |      |   |         |  
|--------------------------------------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                  |  | Nine Months EndedMarch 31, |        
|                                                                                  |  | 2005                       |         |   | 2004 |  
|Operating Activities                                                              |  |                            |         |   |      |   |         |  
|Net income                                                                        |  | $                          | 13,784  |   |      | $ | 8,706   |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                            |         |   |      |   |         |  
|Depreciation and amortization                                                     |  |                            | 14,864  |   |      |   | 14,936  |  
|Income tax benefit                                                                |  |                            | (5,018  | ) |      |   |        |  
|Loss from discontinued operations, net of tax                                     |  |                            | 1,478   |   |      |   |        |  
|Restructuring and other charges                                                   |  |                            | 321     |   |      |   | 221     |  
|Other, net                                                                        |  |                            | 637     |   |      |   | (669    | )
|                                                                                  |  |                            |         |   |      |   |         |  
|                                                                                  |  |                            | 26,066  |   |      |   | 23,194  |  
|                                                                                  |  |                            |         |   |      |   |         |  
|Changes in assets and liabilities:                                                |  |                            |         |   |      |   |         |  
|Accounts receivable                                                               |  |                            | (6,063  | ) |      |   | 1,580   |  
|Inventories                                                                       |  |                            | (3,196  | ) |      |   | 1,664   |  
|Accounts payable and accrued expenses                                             |  |                            | 6,686   |   |      |   | 1,782   |  
|Payments on discontinued operations                                               |  |                            | (52     | ) |      |   |        |  
|Restructuring payments                                                            |  |                            |        |   |      |   | (1,145  | )
|Contributions to retirement plans                                                 |  |                            | (948    | ) |      |   | (8,748  | )
|Other, net                                                                        |  |                            | 350     |   |      |   | 2,402   |  
|                                                                                  |  |                            |         |   |      |   |         |  
|                                                                                  |  |                            | (3,223  | ) |      |   | (2,465  | )
|                                                                                  |  |                            |         |   |      |   |         |  
|Net cash provided by operating activities                                         |  |                            | 22,843  |   |      |   | 20,729  |  
|                                                                                  |  |                            |         |   |      |   |         |  
|Investing Activities                                                              |  |                            |         |   |      |   |         |  
|Purchases of property, plant and equipment                                        |  |                            | (8,516  | ) |      |   | (9,996  | )
|Proceeds from sales of property, plant and equipment                              |  |                            | 56      |   |      |   | 844     |  
|Acquisitions, net of cash acquired                                                |  |                            | (286    | ) |      |   |        |  
|                                                                                  |  |                            |         |   |      |   |         |  
|Net cash used in investing activities                                             |  |                            | (8,746  | ) |      |   | (9,152  | )
|                                                                                  |  |                            |         |   |      |   |         |  
|Financing Activities                                                              |  |                            |         |   |      |   |         |  
|(Repayment of) proceeds from long-term revolving credit facility                  |  |                            | (12,300 | ) |      |   | 16,700  |  
|Net payments on receivables securitization program                                |  |                            |        |   |      |   | (26,657 | )
|Dividends paid                                                                    |  |                            | (1,722  | ) |      |   | (1,364  | )
|Retirement of common and restricted stock                                         |  |                            | (3,116  | ) |      |   |        |  
|Proceeds from exercise of stock options                                           |  |                            | 2,349   |   |      |   | 735     |  
|                                                                                  |  |                            |         |   |      |   |         |  
|Net cash used in financing activities                                             |  |                            | (14,789 | ) |      |   | (10,586 | )
|                                                                                  |  |                            |         |   |      |   |         |  
|(Decrease) increase in cash and cash equivalents                                  |  |                            | (692    | ) |      |   | 991     |  
|                                                                                  |  |                           
|Cash and cash equivalents at beginning of period                                  |  |                            | 1,899   |   |      |   | 566     |  
|                                                                                  |  |                            |         |   |      |   |         |  
|Cash and cash equivalents at end of period                                        |  | $                          | 1,207   |   |      | $ | 1,557   |  
|                                                                                  |  |                            |         |   |      |   |         |  



See accompanying Notes to Condensed
Consolidated Financial Statements.



5



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##### Table of Contents

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS
EQUITY

(In thousands, except per share data)



|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  
|----------------------------------------------------------------- | ------------ | ----- | - | -------- | - | ----- | - | ---------------------------- | - | ------ | -------------------- |  | - | ---------------------------- | - |  | ---------------------------------- | ------- | - | ----- | - | ------- | - |  | - | ------ | -
|                                                                  |              |       |   |          |   |       |   | Capital inExcess ofPar Value |   |        | UnearnedCompensation |  |   | Accumulated(Deficit)Earnings |   |  | Accumulated OtherComprehensiveLoss |         |   | Total |  
|                                                                  | Common Stock |       |   |          |   |       |  
|                                                                  | Shares       |       |   | ParValue |   |       |   |                              |   |       
|Balance at June 30, 2003                                          |              | 9,050 |   |          | $ | 4,525 |   |                              | $ | 68,342 |                      |  | $ | (514                         | ) |  | $                                  | (15,157 | ) |       | $ | (24,788 | ) |  | $ | 32,408 |  
|Net income                                                        |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    | 6,652   |   |       |   |        |   |  |   | 6,652  |  
|Change in minimum pension liability, net of $6,614 deferred taxes |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    |        |   |       |   | 12,741  |   |  |   | 12,741 |  
|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  
|Comprehensive income                                              |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   | 19,393 |  
|Cash dividends - $0.20 per share                                  |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    | (1,820  | ) |       |   |        |   |  |   | (1,820 | )
|Shares issued upon exercise of stock options                      |              | 104   |   |          |   | 52    |   |                              |   | 1,020  |                      |  |   |                             |   |  |                                    |        |   |       |   |        |   |  |   | 1,072  |  
|Amortization of unearned compensation                             |              |      |   |          |   |      |   |                              |   |       |                      |  |   | 208                          |   |  |                                    |        |   |       |   |        |   |  |   | 208    |  
|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  
|Balance at June 30, 2004 (the following data is unaudited)        |              | 9,154 |   |          |   | 4,577 |   |                              |   | 69,362 |                      |  |   | (306                         | ) |  |                                    | (10,325 | ) |       |   | (12,047 | ) |  |   | 51,261 |  
|Net income                                                        |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    | 13,784  |   |       |   |        |   |  |   | 13,784 |  
|Foreign currency translation                                      |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    |        |   |       |   | (18     | ) |  |   | (18    | )
|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  
|Comprehensive income                                              |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   | 13,766 |  
|Cash dividends - $0.1875 per share                                |              |      |   |          |   |      |   |                              |   |       |                      |  |   |                             |   |  |                                    | (1,722  | ) |       |   |        |   |  |   | (1,722 | )
|Shares issued upon exercise of stock options                      |              | 238   |   |          |   | 120   |   |                              |   | 2,229  |                      |  |   |                             |   |  |                                    |        |   |       |   |        |   |  |   | 2,349  |  
|Retirement of common stock                                        |              | (215  | ) |          |   | (108  | ) |                              |   | (2,957 | )                    |  |   |                             |   |  |                                    |        |   |       |   |        |   |  |   | (3,065 | )
|Retirement of restricted stock                                    |              | (3    | ) |          |   | (2    | ) |                              |   | (49    | )                    |  |   |                             |   |  |                                    |        |   |       |   |        |   |  |   | (51    | )
|Amortization of unearned compensation                             |              |      |   |          |   |      |   |                              |   |       |                      |  |   | 153                          |   |  |                                    |        |   |       |   |        |   |  |   | 153    |  
|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  
|Balance at March 31, 2005                                         |              | 9,174 |   |          | $ | 4,587 |   |                              | $ | 68,585 |                      |  | $ | (153                         | ) |  | $                                  | 1,737   |   |       | $ | (12,065 | ) |  | $ | 62,691 |  
|                                                                  |              |       |   |          |   |       |   |                              |   |        |                      |  |   |                              |   |  |                                    |         |   |       |   |         |   |  |   |        |  



See accompanying Notes to Condensed
Consolidated Financial Statements.



6



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##### Table of Contents

CADMUS COMMUNICATIONS CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)



|1. | The accompanying unaudited condensed consolidated financial statements of Cadmus Communications Corporation and Subsidiaries (the Company) have been prepared in
accordance with generally accepted accounting principles for interim financial reporting and with applicable quarterly reporting regulations of the Securities and Exchange Commission. They do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements and, accordingly, should be read in conjunction with the consolidated financial statements and related footnotes included in the Companys annual report on Form 10-K
for the fiscal year ended June 30, 2004.
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



In the
opinion of management, all normal recurring adjustments considered necessary for a fair presentation of interim financial information have been included. The results of operations for the period ended March 31, 2005 are not necessarily indicative of
results for the entire fiscal year.



Certain previously
reported amounts have been reclassified to conform to the current-year presentation.



|2. | During the third quarter, the Company executed a transaction related to one of its subsidiaries, Mack Printing Company. The transaction was an internal restructuring that
effectively caused the Mack subsidiary to be liquidated for tax purposes. As a result, the Company recognized a tax benefit of approximately $5.0 million in the third quarter. Although the Company believes the actual benefit realized could be
significantly larger, it has recorded this amount based on applying reasonable assumptions to the range of possible outcomes in accordance with accounting requirements. In connection with expenses associated with this transaction, the Company
recorded approximately $0.3 million in restructuring and other charges for the three months ended March 31, 2005.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|3. | In January 2002, the Company sold its Atlanta-based Cadmus Creative Marketing division and reported at $1.2 million loss from discontinued operations in the third quarter of fiscal
2002. In connection with this sale, the Company entered into a lease guaranty and other agreements. In March 2005, the purchaser/tenant under the lease filed for bankruptcy and defaulted on its lease obligations. As a result, the Company has
recorded an estimate of its potential obligations under the guaranty and other costs totaling approximately $1.5 million, net of $0.8 million in federal income taxes, for the three and nine-month periods ended March 31, 2005. The Company is pursuing
several options to minimize the ultimate financial impact associated with this event.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|4. | The Company entered into a joint venture agreement with Datamatics Technologies Limited (Datamatics) on June 30, 2003, resulting in intangible assets of $3.3 million at
June 30, 2003. The intangible assets are amortized using the straight-line method over a five-year period. Accumulated amortization was $1.1 million at March 31, 2005. Annual amortization expense for these assets is expected to be approximately $0.7
million per year. Other intangibles totaling $1.3 million as of March 31, 2005 and June 30, 2004 relate to assets recognized in connection with the Companys adjustment of its minimum pension liability.
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|5. | Basic earnings per share is computed on the basis of weighted-average common shares outstanding from the date of issue. Diluted earnings per share is computed on the basis of
weighted-average common shares outstanding plus common shares contingently issuable upon the exercise of dilutive stock options. Incremental shares for dilutive stock options (computed under the treasury stock method) were 132,000 and 171,000 for
the three and nine months ended March 31, 2005, respectively, and 186,000 and 133,000 for the three and nine months ended March 31, 2004, respectively.
|-- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|6. | Components of net inventories at March 31, 2005 and June 30, 2004 were as follows (in thousands):
|-- | -------------------------------------------------------------------------------------------------



|                           |  |               |        |              |   |       
|-------------------------- |  | ------------- | ------ | ------------ | - | ------
|                           |  | March 31,2005 |        | June 30,2004
|                           |  | (unaudited)   |        |             
|Raw materials and supplies |  | $             | 10,963 |              | $ | 8,641 
|Work in process            |  |               | 11,594 |              |   | 10,568
|Finished goods             |  |               | 2,149  |              |   | 2,301 
|                           |  |               |        |              |   |       
|                           |  | $             | 24,706 |              | $ | 21,510
|                           |  |               |        |              |   |       



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##### Table of Contents

|7. | Long-term debt at March 31, 2005 and June 30, 2004 consisted of the following (in thousands):
|-- | ---------------------------------------------------------------------------------------------



|                                                   |  |               |         |              |   |         |  
|-------------------------------------------------- |  | ------------- | ------- | ------------ | - | ------- | -
|                                                   |  | March 31,2005 |         | June 30,2004 |  
|                                                   |  | (unaudited)   |         |              |  
|Senior bank credit facility                        |  | $             | 30,500  |              | $ | 42,800  |  
|8.375% Senior subordinated notes, due 2014         |  |               | 125,000 |              |   | 125,000 |  
|Fair market value of interest rate swap agreements |  |               | 142     |              |   | (239    | )
|                                                   |  |               |         |              |   |         |  
|                                                   |  | $             | 155,642 |              | $ | 167,561 |  
|                                                   |  |               |         |              |   |         |  



On October 18, 2004,
the Company completed an exchange offering in which it exchanged $125 million of its 8.375% senior subordinated notes due 2014, which were registered effective August 30, 2004 under the Securities Act of 1933, as amended, for $125 million aggregate
of its 8.375% senior subordinated notes due 2014, which were issued in a private placement on June 15, 2004.



The interest rate spreads for the Companys $100.0 million revolving senior bank credit facility range from 2.25% to 3.00% for LIBOR loans and from
1.00% to 1.75% for prime rate loans. The commitment fee rate ranges from 0.375% to 0.625%. Applicable interest rate spreads and commitment fees paid by the Company will fluctuate, within the ranges above, based upon the Companys performance as
measured by the total leverage ratio. At March 31, 2005, the interest rates on the Companys borrowings under its senior bank credit facility ranged from 5.55% to 7.25%. These interest rates are based on spreads of 2.75% for LIBOR loans and
1.50% for prime rate loans. The senior bank credit facility requires the Company to pay unused commitment fees with respect to the revolving credit facility based on the total leverage ratio; such fee was 0.50% at March 31, 2005.



Both the senior bank credit facility and the senior subordinated notes
contain a covenant that places restrictions on the ability of the Company to pay dividends. The Companys ability to pay dividends under the senior bank credit facility is governed by the fixed charge coverage ratio. At March 31, 2005, the
Companys fixed charge coverage ratio was 2.25 to 1.0, compared to a covenant that the ratio must exceed 1.15 to 1.0; therefore, the Company had sufficient coverage to pay expected dividends. The senior subordinated notes permit dividends of up
to $3.0 million per fiscal year and a computation for a restricted payments pool out of which additional dividends may be paid. The balance of the restricted payments pool is increased based on net income, cash proceeds from the issuance of stock
and cash proceeds from the receipt of equity contributions, and is reduced based on payment of dividends or other restricted payments. The Company may continue to pay dividends up to $3.0 million per fiscal year or to the extent there is a positive
balance in the restricted payments pool in excess of the scheduled dividend. At March 31, 2005, the Companys $3.0 million limit per year and the restricted payments pool were sufficient to cover expected dividends and, therefore, the Company
was not impacted by the limitation of this covenant.



|8. | At March 31, 2005, the Company had three fixed-to-floating fair value interest rate swap agreements outstanding with a total notional amount of $40.0 million. These swaps were
entered into to convert $40.0 million of the Companys 8.375% senior subordinated notes due in 2014 to floating rate debt. The initial term of these swap agreements expires in 2014, and the counterparties have an option to terminate the
agreements beginning in June 2009. Under the swap agreements, the Company receives interest payments at a fixed rate of 8.375% and pays interest at a variable rate that is based on six month LIBOR plus a spread. The six month LIBOR rate is reset
each December 15 and June 15. These swap agreements are an effective hedge. The fair value of the Companys interest rate swap agreements, based on a mark-to-market basis, was a $0.1 million asset and a $0.2 million liability at March 31, 2005
and June 30, 2004, respectively, which is recorded in the Condensed Consolidated Balance Sheets in other long term assets with an offset in long-term debt in accordance with Statement of Financial Accounting Standards (SFAS) No. 133,
Accounting for Derivative Instruments and Hedging Activities. The Companys strategy to effectively convert fixed rate financing to variable rate financing through the swap agreement resulted in a reduction of interest expense of
$0.3 million and $0.4 million for the three-month periods ended March 31, 2005 and 2004, respectively, and a reduction of $0.9 million and $1.1 million for the nine month periods ended March 31, 2005 and 2004, respectively.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|9. | The Company is focused on two segments. The Publisher Services segment provides products and services to both not-for-profit and commercial publishers in three primary product
lines: scientific, technical and medical (STM) journals, special interest and trade magazines, and books and directories. Publisher Services provides a full range of content management, editorial, prepress, printing, reprinting,
warehousing and distribution services under the division names of Cadmus Professional Communications and Cadmus Specialty Publications. In addition, certain shared services and other expenses have been allocated to the Publisher Services segment.
The Specialty Packaging segment provides high quality specialty packaging and promotional printing, assembly, fulfillment and distribution services to consumer product and other customers.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



8



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##### Table of Contents

The accounting policies for the segments conform to those described in Note 1 Significant
Accounting Policies to the Consolidated Financial Statements in the Companys annual report on Form 10-K for the fiscal year ended June 30, 2004. The Company primarily evaluates the performance of its operating segments based on operating
income, excluding restructuring charges. Intergroup sales are not significant. The Company manages income taxes on a consolidated basis.



Summarized segment data is as follows (in thousands):



|                                   |  |                   |         |                    |   |        |  |   |        
|---------------------------------- |  | ----------------- | ------- | ------------------ | - | ------ |  | - | -------
|                                   |  | PublisherServices |         | SpecialtyPackaging |   | Total 
|Three Months Ended March 31, 2005: |  |                   |         |                    |   |        |  |   |        
|Net sales                          |  | $                 | 91,614  |                    | $ | 21,620 |  | $ | 113,234
|Operating income                   |  |                   | 8,793   |                    |   | 2,650  |  |   | 11,443 
|                                   |  |                   |        
|Three Months Ended March 31, 2004: |  |                   |         |                    |   |        |  |   |        
|Net sales                          |  | $                 | 97,266  |                    | $ | 16,353 |  | $ | 113,619
|Operating income                   |  |                   | 10,115  |                    |   | 1,700  |  |   | 11,815 
|                                   |  |                   |        
|Nine Months Ended March 31, 2005:  |  |                   |         |                    |   |        |  |   |        
|Net sales                          |  | $                 | 266,891 |                    | $ | 58,401 |  | $ | 325,292
|Operating income                   |  |                   | 26,951  |                    |   | 5,789  |  |   | 32,740 
|                                   |  |                   |        
|Nine Months Ended March 31, 2004:  |  |                   |         |                    |   |        |  |   |        
|Net sales                          |  | $                 | 286,895 |                    | $ | 48,952 |  | $ | 335,847
|Operating income                   |  |                   | 28,561  |                    |   | 3,049  |  |   | 31,610 



A reconciliation of
segment data to consolidated data is as follows (in thousands):



|                                               |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |         |  
|---------------------------------------------- |  | --------------------------- | ------ | - | -------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                               |  | Three Months EndedMarch 31, |        |   | Nine Months EndedMarch 31, |  
|                                               |  | 2005                        |        |   | 2004                       |   |        | 2005 |  |   | 2004   |  
|Reportable segment operating income            |  | $                           | 11,443 |   |                            | $ | 11,815 |      |  | $ | 32,740 |   |  | $ | 31,610  |  
|Unallocated shared services and other expenses |  |                             | (2,239 | ) |                            |   | (2,623 | )    |  |   | (6,708 | ) |  |   | (6,405  | )
|Loss on sale of fixed assets                   |  |                             |       |   |                            |   |       |      |  |   |       |   |  |   | (24     | )
|Restructuring and other charges                |  |                             | (321   | ) |                            |   | (120   | )    |  |   | (321   | ) |  |   | (221    | )
|                                               |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |         |  
|Total operating income                         |  |                             | 8,883  |   |                            |   | 9,072  |      |  |   | 25,711 |   |  |   | 24,960  |  
|Interest expense                               |  |                             | (3,239 | ) |                            |   | (3,649 | )    |  |   | (9,616 | ) |  |   | (10,700 | )
|Securitization costs                           |  |                             |       |   |                            |   | (41    | )    |  |   |       |   |  |   | (296    | )
|Other expenses                                 |  |                             | (68    | ) |                            |   | (142   | )    |  |   | (65    | ) |  |   | (293    | )
|                                               |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |         |  
|Income before income taxes                     |  | $                           | 5,576  |   |                            | $ | 5,240  |      |  | $ | 16,030 |   |  | $ | 13,671  |  
|                                               |  |                             |        |   |                            |   |        |      |  |   |        |   |  |   |         |  



|10. | During the fourth quarter of fiscal 2004, the Company adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation under the
prospective method described in SFAS No. 148, Accounting for Stock-Based Compensation  Transition and Disclosure. This transition method requires recognition of compensation expense based on the fair value at the date of grant for
awards issued after the date of adoption. Prior to fiscal 2004, the Company accounted for stock compensation expense under the recognition and measurement provisions of APB No. 25, Accounting for Stock Issued to Employees and related
interpretations.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The Company did not grant or
modify any stock awards in fiscal 2004. As a result, no stock-based compensation expense was recognized in fiscal 2004 pursuant to the prospective method under SFAS No. 148. In addition, all issued and outstanding stock options were vested as of
July 1, 2004.



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##### Table of Contents

On November 10, 2004, the Companys shareholders approved a Key Employee Stock Compensation Plan
replacing the 1990 Stock Compensation Plan which expired on June 30, 2003. Under this new plan, on November 10, 2004, the Human Resources and Compensation Committee of the Companys Board of Directors authorized the grant of restricted stock
and performance units, which vest over the period from the plans inception date of October 1, 2004 to June 30, 2007, if certain earnings per share and share price targets are met. No compensation expense for the three and nine months ended
March 31, 2005 was recognized because fiscal 2005 earnings per share targets established under the plan are not expected to be met at this time.



Stock-based compensation expense for options that were issued prior to the Companys adoption of SFAS No. 123 is included in the pro forma income for
the three and nine months ended March 31, 2004 in the table below (in thousands):



|                                                                                                                                   |  |                                   |       |   |                                 |   |       |  
|---------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------- | ----- | - | ------------------------------- | - | ----- | -
|                                                                                                                                   |  | Three Months Ended March 31, 2004 |       |   | Nine Months EndedMarch 31, 2004 |  
|Net income as reported                                                                                                             |  | $                                 | 3,536 |   |                                 | $ | 8,706 |  
|                                                                                                                                   |  |                                  
|Less: Total stock-based employee compensation expense determined under fair value method of all awards, net of related tax
effects |  |                                   | (69   | ) |                                 |   | (318  | )
|                                                                                                                                   |  |                                   |       |   |                                 |   |       |  
|Pro forma net income                                                                                                               |  | $                                 | 3,467 |   |                                 | $ | 8,388 |  
|                                                                                                                                   |  |                                   |       |   |                                 |   |       |  
|Earnings per common share - basic                                                                                                  |  |                                   |       |   |                                 |   |       |  
|As reported                                                                                                                        |  | $                                 | 0.39  |   |                                 | $ | 0.96  |  
|Pro forma                                                                                                                          |  | $                                 | 0.38  |   |                                 | $ | 0.92  |  
|                                                                                                                                   |  |                                  
|Earnings per common share - diluted                                                                                                |  |                                   |       |   |                                 |   |       |  
|As reported                                                                                                                        |  | $                                 | 0.38  |   |                                 | $ | 0.94  |  
|Pro forma                                                                                                                          |  | $                                 | 0.37  |   |                                 | $ | 0.91  |  



|11. | The following information is provided in connection with the disclosure requirements of SFAS No. 132 (revised 2003), Employers Disclosures about Pensions and Other
Postretirement Benefits (in thousands):
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                                               |  |                                             |        |   |                                                    |   |        |      |  |   |      |   |  |   |      |  
|---------------------------------------------- |  | ------------------------------------------- | ------ | - | -------------------------------------------------- | - | ------ | ---- |  | - | ---- | - |  | - | ---- | -
|                                               |  | Pension BenefitsThree Months EndedMarch 31, |        |   | Postretirement BenefitsThree Months EndedMarch 31, |  
|                                               |  | 2005                                        |        |   | 2004                                               |   |        | 2005 |  |   | 2004 |  
|Service cost                                   |  | $                                           | 92     |   |                                                    | $ | 89     |      |  | $ | 1    |   |  | $ | 1    |  
|Interest cost                                  |  |                                             | 2,007  |   |                                                    |   | 2,089  |      |  |   | 166  |   |  |   | 61   |  
|Expected return on plan assets                 |  |                                             | (2,104 | ) |                                                    |   | (1,926 | )    |  |   |     |   |  |   |     |  
|Amortization of unrecognized transition amount |  |                                             | (25    | ) |                                                    |   | (20    | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost             |  |                                             | 25     |   |                                                    |   | 25     |      |  |   | (74  | ) |  |   | (176 | )
|Amortization of unrecognized net losses        |  |                                             | 17     |   |                                                    |   | 19     |      |  |   |     |   |  |   | 76   |  
|Recognized losses                              |  |                                             | 102    |   |                                                    |   | 501    |      |  |   | 257  |   |  |   |     |  
|                                               |  |                                             |        |   |                                                    |   |        |      |  |   |      |   |  |   |      |  
|Net periodic benefit cost (income)             |  | $                                           | 114    |   |                                                    | $ | 777    |      |  | $ | 350  |   |  | $ | (38  | )
|                                               |  |                                             |        |   |                                                    |   |        |      |  |   |      |   |  |   |      |  



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##### Table of Contents

|                                               |  |                                            |        |   |                                                   |   |        |      |  |   |      |   |  |   |      |  
|---------------------------------------------- |  | ------------------------------------------ | ------ | - | ------------------------------------------------- | - | ------ | ---- |  | - | ---- | - |  | - | ---- | -
|                                               |  | Pension BenefitsNine Months EndedMarch 31, |        |   | Postretirement Benefits NineMonths EndedMarch 31, |  
|                                               |  | 2005                                       |        |   | 2004                                              |   |        | 2005 |  |   | 2004 |  
|Service cost                                   |  | $                                          | 276    |   |                                                   | $ | 267    |      |  | $ | 1    |   |  | $ | 3    |  
|Interest cost                                  |  |                                            | 6,021  |   |                                                   |   | 6,266  |      |  |   | 166  |   |  |   | 183  |  
|Expected return on plan assets                 |  |                                            | (6,312 | ) |                                                   |   | (5,779 | )    |  |   |     |   |  |   |     |  
|Amortization of unrecognized transition amount |  |                                            | (75    | ) |                                                   |   | (60    | )    |  |   |     |   |  |   |     |  
|Amortization of prior service cost             |  |                                            | 75     |   |                                                   |   | 76     |      |  |   | (74  | ) |  |   | (528 | )
|Amortization of unrecognized net losses        |  |                                            | 51     |   |                                                   |   | 59     |      |  |   |     |   |  |   | 227  |  
|Recognized losses                              |  |                                            | 306    |   |                                                   |   | 1,503  |      |  |   | 57   |   |  |   |     |  
|                                               |  |                                            |        |   |                                                   |   |        |      |  |   |      |   |  |   |      |  
|Net periodic benefit cost (income)             |  | $                                          | 342    |   |                                                   | $ | 2,332  |      |  | $ | 150  |   |  | $ | (115 | )
|                                               |  |                                            |        |   |                                                   |   |        |      |  |   |      |   |  |   |      |  



The Company made
contributions of $136 thousand and $431 thousand for the three and nine-month periods ended March 31, 2005 and $154 thousand and $364 thousand for the three and nine-month periods ended March 31, 2004, respectively, to its multi-employer retirement
plan.



In December of 2003 Congress passed the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act). The Act reformed Medicare in such a way that the Company expected to receive subsidy payments beginning in 2006 for continuing retiree prescription drug
benefits. In the first quarter of fiscal 2005, based on currently available guidance, the Company adopted FASB Staff Position 106-2, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and
Modernization Act of 2003. Upon adoption of the Act, the accumulated postretirement benefit obligation was reduced by $2.6 million, which resulted in a reduction in net periodic postretirement benefit cost of approximately $100 thousand in
each of the first and second quarters of fiscal 2005.



Recently issued guidance from the Centers for Medicare and Medicaid Services contains additional criteria pertaining to how plan sponsors qualify for federal subsidy payments for their Medicare-eligible plan participants. Pursuant to this
new guidance, the Company will not be eligible for these payments in connection with the Medicare Part D program. As a result, the Company has adjusted its benefit cost estimate and reversed previously recorded income in the first and second
quarters in fiscal 2005 with a combined impact of $350 thousand for the three months ended March 31, 2005.



11



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##### Table of Contents

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



GENERAL



Headquartered in Richmond, Virginia, Cadmus Communications Corporation and Subsidiaries (Cadmus or the Company) is a leading provider of end-to-end, integrated graphic communications and
content processing services to professional publishers, not-for-profit societies and corporations. Cadmus provides a wide range of technology-enabled content management, composition, editorial, prepress, printing, article reprints, digital rights
management, and fulfillment and distribution services. Cadmus is the worlds largest provider of content processing and production services to scientific, technical and medical (STM) journal publishers, the fifth largest periodicals
printer in North America, and a leading provider of specialty packaging and promotional printing services.



The Company is focused on two segments. The Publisher Services segment provides products and services to both not-for-profit and commercial publishers in three primary product lines: STM journals, special interest and
trade magazines, and books and directories. Publisher Services provides a full range of content management, editorial, prepress, printing, reprinting, warehousing and distribution services under the division names of Cadmus Professional
Communications and Cadmus Specialty Publications. In addition, certain shared services and other expenses have been allocated to the Publisher Services segment. The Specialty Packaging segment provides high quality specialty packaging and
promotional printing, assembly, fulfillment and distribution services to consumer product and other customers.



EXECUTIVE SUMMARY



The Company
focuses primarily on niche markets where it sees underlying demand strength, a willingness on the part of customers to outsource non-core activities, and relatively few large and well-positioned competitors. More specifically, the Company has
focused on growing content processing services for the scholarly publishing and STM, educational and other markets. The Company has a leading position in the STM business, represented by the Cadmus Professional Communications division within the
Publisher Services segment, and delivers customized content processing services using state-of-the-art technologies, in addition to traditional print services. The Company has continued to invest in opportunities in the educational market and in the
proprietary technology products known as Emerging Solutions, which include ArticleWorks, KnowledgeWorks, MediaWorks,
3Path, and dPub.



Within the special interest magazine portion of the Companys business, represented by the Cadmus Specialty Publications division
within the Publisher Services segment, the Company focuses on the management of capacity, improvement of business mix and improvement in margins, rather than focusing on top-line growth. This strategy is designed to improve the financial performance
of this business in spite of continuing pricing pressures and industry capacity issues.



The Companys Specialty Packaging segment has achieved greatly improved financial performance as a result of focusing on growth markets that benefit from the customized package design services the Company offers, particularly in the
healthcare, consumer products and telecommunications markets. The Companys U.S. packaging facility is both ISO-9001:2000 registered and has passed customer cGMP compliance audits as evidence of the high level of quality delivered to our
customers. The Specialty Packaging segment has also differentiated itself by developing a proprietary network of offshore production affiliates, known as Global Packaging Solutions, and by linking those operations and its customers via a proprietary
inventory management and fulfillment system.



The focus on the more stable and
profitable services within Cadmus Professional Communications and on the Specialty Packaging segment has permitted the Company to achieve more stable operating results and reduce leverage in a challenging economic and industry environment.



APPLICATION OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES



As of March 31, 2005, there have been no significant changes with regard
to the application of critical accounting policies and estimates disclosed in Managements Discussion and Analysis in the Companys annual report on Form 10-K for the fiscal year ended June 30, 2004. The policies disclosed
included the accounting for the allowance for doubtful accounts, valuation of intangible assets and goodwill, pension and other post retirement benefits, income taxes, discontinued operations and self-insurance reserves.



12



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##### Table of Contents

RESULTS OF OPERATIONS



The following table presents the major components from the Condensed Consolidated Statements of Operations as a percent of net sales for the
three and nine-month periods ended March 31, 2005 and 2004.



|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  
|----------------------------------------------------- |  | --------------------------- | - |  | -------------------------- | - |  | ----- | - |  | ----- | -
|                                                      |  | Three Months EndedMarch 31, |   |  | Nine Months EndedMarch 31, |  
|                                                      |  | 2005                        |   |  | 2004                       |   |  | 2005  |   |  | 2004  |  
|Net sales                                             |  | 100.0                       | % |  | 100.0                      | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                         |  | 82.4                        |   |  | 81.3                       |   |  | 82.1  |   |  | 81.8  |  
|Selling and administrative                            |  | 9.5                         |   |  | 10.6                       |   |  | 10.2  |   |  | 10.7  |  
|Restructuring and other charges                       |  | 0.3                         |   |  | 0.1                        |   |  | 0.1   |   |  | 0.1   |  
|Other income                                          |  |                            |   |  |                           |   |  | (0.3  | ) |  |      |  
|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  
|Operating income                                      |  | 7.8                         |   |  | 8.0                        |   |  | 7.9   |   |  | 7.4   |  
|Interest expense                                      |  | 2.9                         |   |  | 3.2                        |   |  | 3.0   |   |  | 3.2   |  
|Securitization costs                                  |  |                            |   |  |                           |   |  |      |   |  | 0.1   |  
|Other, net                                            |  |                            |   |  | 0.2                        |   |  |      |   |  |      |  
|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  
|Income from continuing operations before income taxes |  | 4.9                         |   |  | 4.6                        |   |  | 4.9   |   |  | 4.1   |  
|Income tax benefit (expense)                          |  | 2.7                         |   |  | (1.5                       | ) |  | (0.2  | ) |  | (1.5  | )
|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  
|Income from continuing operations                     |  | 7.6                         |   |  | 3.1                        |   |  | 4.7   |   |  | 2.6   |  
|Loss from discontinued operations                     |  | 1.3                         |   |  |                           |   |  | 0.5   |   |  |      |  
|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  
|Net income                                            |  | 6.3                         | % |  | 3.1                        | % |  | 4.2   | % |  | 2.6   | %
|                                                      |  |                             |   |  |                            |   |  |       |   |  |       |  



Net Sales



Net sales for the third quarter of fiscal 2005 were $113.2 million compared to $113.6
million in the same period last year. Net sales for the first nine months of fiscal 2005 totaled $325.3 million compared to $335.8 million for the same period of fiscal 2004. Net sales for the quarter declined by 0.3% as compared to last years
third quarter, as continued growth in the Specialty Packaging segment was more than offset by lower sales in the Publisher Services segment and lower revenues from postage and freight.



Net sales in the Publisher Services segment were $91.6 million in the third quarter of fiscal 2005 compared to $97.3 million in the
comparable period of the prior year. For the nine months ended March 31, 2005, net sales in the Publisher Services segment were $266.9 million compared to $286.9 million in the corresponding period of the prior year. The decline was a result of (i)
slower than expected growth in the education market, (ii) lower freight and postage (which are pass through costs for the Company), (iii) continuing pricing pressures from customers going out for bid, and (iv) managements plan to manage
capacity, improve business mix, and generally drive for higher margins in the special interest magazine market.



Net sales in the Specialty Packaging segment totaled $21.6 million in the third quarter of fiscal 2005 compared to $16.4 million in the same period of the prior year, an
increase of 32.2%. For the nine-month period ended March 31, 2005, net sales grew to $58.4 million from $49.0 million, an increase of 19.3%, as compared to the corresponding period of the prior year. The increase in net sales for this segment was
attributable to the continued benefit from higher overall volume, improved business mix and efficiencies derived from new and more efficient technology and workflows.



Cost of Sales



Cost of sales increased to 82.4% of net sales for the third quarter of fiscal 2005, compared to 81.3% of net sales in fiscal 2004, and was 82.1% and 81.8% of net sales
for the nine-month periods ended March 31, 2005 and 2004, respectively. The increase was attributable to declining net sales and increased severance costs, partially off-set by certain cost reduction initiatives.



Selling and Administrative Expenses



Selling and administrative expenses totaled $10.7 million, or 9.5% of net sales, for the
third quarter of fiscal 2005, compared to $12.1 million, or 10.6% of net sales, for the same period of fiscal 2004. For the first nine months of fiscal 2005, selling and administrative expenses totaled $33.1 million, or 10.2% of net sales, compared
to $36.1 million, or 10.7% of net sales, in the corresponding period of the prior year. The decrease in selling and administrative expenses was primarily attributable to managements continued focus on cost reduction efforts.



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##### Table of Contents

Operating Income



The Company had operating income of $8.9 million and $25.7 million for the three and nine-month periods ended March 31, 2005, respectively, compared to operating
income of $9.1 million and $25.0 million in the comparable periods of fiscal 2004. In connection with expenses associated with the Mack Printing Company transaction that occurred this quarter, the Company recorded approximately $0.3 million, or
$0.02 per share net of taxes, in restructuring and other charges for the three months ended March 31, 2005. Adjusted for restructuring and other charges of $0.3 million and $0.1 million recorded in the three months ended March 31, 2005 and 2004,
respectively, operating income was $9.2 million for each of the three-month periods ended March 31, 2005 and 2004. Specialty Packaging operating income improved due to higher overall volume, improved business mix, and efficiencies derived from new
and more efficient technology and workflows. Publisher Services operating income declined due to continued pricing pressures, increased severance costs, and investments made to support educational and Emerging Solutions initiatives. The results for
the first nine months of fiscal 2005 include a $1.0 million, or $0.07 per share net of taxes, insurance recovery related to a previously disclosed employee fraud in the Publisher Services segment recorded in the first quarter.



Interest and Other Expenses



Interest expense and securitization costs in the third quarter of fiscal 2005 declined to
$3.2 million from $3.7 million in the prior year. For the first nine months of fiscal 2004, interest expense and securitization costs declined to $9.6 million from $11.0 million in the prior year. The decrease in interest expense was due primarily
to lower debt levels during fiscal 2005 and lower year over year interest rates on the Companys senior subordinated notes, which were refinanced in June 2004. The Company terminated its accounts receivable securitization program in January
2004.



Income from Continuing Operations before Income Taxes



Income from continuing operations before income taxes totaled $5.6
million for the third quarter of fiscal 2005 compared to $5.2 million for the same period of fiscal 2004. Income from continuing operations before income taxes totaled $16.0 million for the nine months ended March 31, 2005 compared to $13.7 million
in the same period in fiscal 2004. The results for the first nine months of fiscal 2005 include a $1.0 million, or $0.07 per share net of taxes, insurance recovery related to a previously disclosed employee fraud in the Publisher Services segment
recorded in the first quarter. In connection with expenses associated with the Mack Printing Company transaction that occurred this quarter, the Company recorded approximately $0.3 million, or $0.02 per share net of taxes, in restructuring and other
charges for the three months ended March 31, 2005.



Income Taxes



During the third quarter of fiscal 2005, the Company executed a
transaction related to one of its subsidiaries, Mack Printing Company. The transaction was an internal restructuring that effectively caused the Mack subsidiary to be liquidated for tax purposes. As a result, the Company recognized a tax benefit of
approximately $5.0 million in the third quarter. Although the Company believes the actual benefit realized could be significantly larger, it has recorded this amount based on applying reasonable assumptions to the range of possible outcomes in
accordance with accounting requirements.



Excluding the tax benefit related to
the Mack Printing Company transaction and the tax effect of discontinued operations, the Companys effective income tax rate was 35.5% for the third quarter and 36.1% for the first nine months of fiscal 2005. For fiscal 2004, the effective
income tax rate was 32.5% and 36.3% for the third quarter and first nine months, respectively. The amount of adjusted tax expense differs from the amount obtained by application of the statutory United States rates primarily due to the impact of
state income taxes and operating results from foreign operations.



Discontinued Operations



In January 2002, the Company
sold its Atlanta-based Cadmus Creative Marketing division and reported at $1.2 million loss from discontinued operations in the third quarter of fiscal 2002. In connection with this sale, the Company entered into a lease guaranty and other
agreements. In March 2005, the purchaser/tenant under the lease filed for bankruptcy and defaulted on its lease obligations. As a result, the Company has recorded an estimate of its potential obligations under the guaranty and other costs totaling
approximately $1.5 million, net of $0.8 million in federal income taxes, for the three and nine-month periods ended March 31, 2005. The Company is pursuing several options to minimize the ultimate financial impact associated with this event.



Earnings Per Share



The Company reported net income of $0.77 per diluted share for the third quarter of fiscal
2005 compared to $0.38 per diluted share in the third quarter of fiscal 2004. For the nine months ended March 31, 2005, the Company reported net income of $1.47 per diluted share compared to a $0.94 for the nine months ended March 31, 2004. The
third quarter and year-to-date results include a federal tax benefit related to the Mack Printing Company transaction of approximately $5.0



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##### Table of Contents

million, or $0.54 and $0.53 per share for the three and nine months ended March 31, 2005, respectively; and a loss from discontinued operations of
approximately $1.5 million, or $0.16 per share for both the three and nine-month periods ended March 31, 2005. The results for the first nine months of fiscal 2005 include a $1.0 million, or $0.07 per share net of taxes, insurance recovery related
to a previously disclosed employee fraud in the Publisher Services segment recorded in the first quarter. In connection with expenses associated with the Mack Printing Company transaction that occurred this quarter, the Company recorded
approximately $0.3 million, or $0.02 per share net of taxes, in restructuring and other charges for the three months ended March 31, 2005.



EBITDA



EBITDA for the three-months ended March 31, 2005 was $14.2 million compared to $14.1 million in the comparable period of the prior year. For the nine months ended March 31, 2005, EBITDA was $40.8 million compared to
$39.8 million for the nine months ended March 31, 2004. The Company defines EBITDA as earnings before interest, taxes, depreciation, amortization, and securitization costs. The Company also excludes the cumulative effect of a change in accounting
principle, discontinued operations, debt refinancing expenses, and the impact of restructuring and other charges from the computation of EBITDA. The Company believes EBITDA is a useful measure of operating performance before the impact of investing
and financing transactions, making comparisons between companies earnings power more meaningful and providing consistent comparisons of the Companys performance. In order to provide consistent comparisons of year over year EBITDA, the
following reconciliation is provided:



|                                |  |                              |        |   |            |      |   |      |   |            |  |      |  
|------------------------------- |  | ---------------------------- | ------ | - | ---------- | ---- | - | ---- | - | ---------- |  | ---- | -
|                                |  | Three months ended March 31, |       
|(Dollars in thousands)          |  | 2005                         |        |   | % NetSales |      |   | 2004 |   | % NetSales | 
|Net income, as reported         |  | $                            | 7,134  |   |            | 6.3  | % |      | $ | 3,536      |  | 3.1  | %
|Discontinued operations         |  |                              | 1,478  |   |            | 1.3  |   |      |   |           |  |     |  
|Income tax (benefit) expense    |  |                              | (3,036 | ) |            | (2.7 | ) |      |   | 1,704      |  | 1.5  |  
|Interest                        |  |                              | 3,239  |   |            | 2.9  |   |      |   | 3,649      |  | 3.2  |  
|Securitization costs            |  |                              |       |   |            |     |   |      |   | 41         |  |     |  
|Depreciation                    |  |                              | 4,885  |   |            | 4.3  |   |      |   | 4,857      |  | 4.3  |  
|Amortization                    |  |                              | 168    |   |            | 0.1  |   |      |   | 163        |  | 0.2  |  
|Restructuring and other charges |  |                              | 321    |   |            | 0.3  |   |      |   | 120        |  | 0.1  |  
|                                |  |                              |        |   |            |      |   |      |   |            |  |      |  
|EBITDA                          |  | $                            | 14,189 |   |            | 12.5 | % |      | $ | 14,070     |  | 12.4 | %
|                                |  |                              |        |   |            |      |   |      |   |            |  |      |  
|                                | 
|                                |  | Nine months ended March 31,  |       
|(Dollars in thousands)          |  | 2005                         |        |   | % NetSales |      |   | 2004 |   | % NetSales | 
|Net income, as reported         |  | $                            | 13,784 |   |            | 4.2  | % |      | $ | 8,706      |  | 2.6  | %
|Discontinued operations         |  |                              | 1,478  |   |            | 0.5  |   |      |   |           |  |     |  
|Income tax expense              |  |                              | 768    |   |            | 0.2  |   |      |   | 4,965      |  | 1.5  |  
|Interest                        |  |                              | 9,616  |   |            | 3.0  |   |      |   | 10,700     |  | 3.2  |  
|Securitization costs            |  |                              |       |   |            |     |   |      |   | 296        |  | 0.1  |  
|Depreciation                    |  |                              | 14,369 |   |            | 4.4  |   |      |   | 14,446     |  | 4.3  |  
|Amortization                    |  |                              | 495    |   |            | 0.2  |   |      |   | 490        |  | 0.1  |  
|Restructuring and other charges |  |                              | 321    |   |            | 0.1  |   |      |   | 221        |  | 0.1  |  
|                                |  |                              |        |   |            |      |   |      |   |            |  |      |  
|EBITDA                          |  | $                            | 40,831 |   |            | 12.6 | % |      | $ | 39,824     |  | 11.9 | %
|                                |  |                              |        |   |            |      |   |      |   |            |  |      |  



USE OF GAAP AND NON-GAAP
MEASURES



In addition to results presented in accordance with
generally accepted accounting principles (GAAP), the Company has included in this report the following non-GAAP financial measures: (1) operating income adjusted to exclude restructuring and other charges of $0.3 million for
the three months ended March 31, 2005, and $0.1 million for the three months ended March 31, 2004, and (2) EBITDA and EBITDA as a percentage of net sales. The Company defines EBITDA as earnings before interest, taxes,
depreciation, amortization, and securitization costs. The Company also excludes the cumulative effect of a change in accounting principle, discontinued operations, debt refinancing expenses, and the impact of restructuring and other charges from the
computation of EBITDA. For these non-GAAP financial measures, the Company has presented the most directly comparable GAAP financial measure and has reconciled the non-GAAP financial measure with such comparable GAAP financial measure.



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##### Table of Contents

These non-GAAP financial measures provide useful information to investors to assist in understanding the underlying
operational performance of the Company. Specifically, (1) the exclusion of restructuring and other charges permits comparisons of results for on-going business operations under the current operating structure, and (2) EBITDA and EBITDA as a
percentage of net sales are useful measures of operating performance before the impact of investing and financing transactions, providing meaningful comparisons between companies earnings power and consistent period-over-period comparisons of
the Companys performance. In addition, the Company uses these non-GAAP financial measures internally to measure its on-going business performance and in reports to bankers to permit monitoring of the Companys ability to repay outstanding
liabilities.



LIQUIDITY AND CAPITAL RESOURCES



Operating Activities



Net cash provided by operating activities for the first nine months of fiscal 2005 totaled
$22.8 million compared to $20.7 million in fiscal 2004. This $2.1 million increase was primarily attributable to increased earnings, partially offset by certain working capital changes.



Investing Activities



Net cash used in investing activities was $8.7 million for the first nine months of fiscal 2005 compared to $9.2 million in the same period of the prior year. Capital
expenditures for the first nine months of fiscal 2005 totaled $8.5 million compared to $10.0 million for the corresponding period of the prior year, and included investments primarily in machinery for Specialty Publications and Specialty Packaging.
The prior year period included investments primarily in new business and manufacturing systems, digital prepress equipment and building and equipment improvements. The Company estimates that total capital expenditures for fiscal 2005 will be
approximately $12.0 to $14.0 million.



Financing Activities



Net cash used in financing activities was $14.8 million for the first
nine months of fiscal 2005. For the nine months ended March 31, 2005, a decrease in total debt by $12.3 million due to lower capital spending and continued focus on working capital initiatives, $1.7 million in dividend payments, and a $3.1 million
retirement of common and restricted stock, was partially offset by $2.3 million in proceeds from the exercise of stock options.



Net cash used in financing activities was $10.6 million for the first nine months of fiscal 2004. On January 28, 2004, the Company terminated its accounts receivable
securitization program concurrently with the refinancing of its senior bank credit facility, resulting in an increase in borrowing under the senior bank credit facility to repurchase receivables previously sold. The Company also funded $1.4 million
in dividend payments and received $0.7 million in proceeds from the exercise of stock options.



At March 31, 2005, there were $30.5 million in borrowings outstanding under the $100 million senior bank credit facility and $2.3 million of standby letters of credit outstanding against which no claims had been made.
Therefore, the Company had approximately $67.2 million in available borrowings at March 31, 2005. The senior bank credit facility expires on January 28, 2008. See Note 7 of Notes to Condensed Consolidated Financial Statements for further discussion.



The primary cash requirements of the Company are for debt service, capital
expenditures, working capital, taxes, pension funding and dividends. The primary sources of liquidity are cash flow provided by operations and unused capacity under the Companys senior bank credit facility. The Companys future operating
performance and ability to service its debt depends on the Companys ability to implement its business strategy and on general economic, financial, competitive, legislative, regulatory and other factors, many of which are beyond the control of
the Company. The Company believes that these sources will provide sufficient liquidity and capital resources to meet its operating requirements for capital expenditures and working capital.



Off Balance Sheet Items



As of March 31, 2005, there have been no material changes to the off balance sheet items
disclosed in Managements Discussion and Analysis in the Companys Report on Form 10-K for the fiscal year ended June 30, 2004, except for the lease guaranty on real estate obligations as disclosed in Note 3 of Notes to
Condensed Consolidated Financial Statements.



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##### Table of Contents

Obligations and Commitments



As of March 31, 2005, there have been no material changes outside the ordinary course of business to the contractual obligations disclosed
in Managements Discussion and Analysis in the Companys Report on Form 10-K for the fiscal year ended June 30, 2004.



Statements contained in this report relating to Cadmus future prospects and performance are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Factors that could cause actual results to differ materially from managements expectations include but are not limited to:
(1) the overall economic environment, (2) the equity market performance and interest rate environment, which can impact our pension liability, (3) our ability to develop and market new capabilities and services to take advantage of technology
changes in the publishing process, especially for scientific, technical and medical journals, (4) our ability to grow revenue and market share in the educational market, (5) significant price pressure in the markets in which we compete, (6) the loss
of significant customers or the decrease in demand from customers, (7) our ability to continue to obtain improved efficiencies and lower production costs, (8) the financial condition and ability to pay of certain customers, (9) our ability to
continue to negotiate new labor contracts at our U.S.-based manufacturing facilities, (10) our ability to operate effectively in markets outside of North America, and (11) our ability to realize the tax benefits associated with certain transactions.
Other risk factors are detailed from time to time in our other Securities and Exchange Commission filings. The information provided in this report is provided only as of the date of this report, and we undertake no obligation to update any
forward-looking statements made herein.



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##### Table of Contents

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



There have been no material changes to the information concerning the Companys Quantitative and Qualitative Disclosures about Market Risk as previously reported in the Companys Report on Form
10-K for the year ended June 30, 2004. Additional information concerning the Companys quantitative and qualitative disclosures about market risk is included in Note 8 of the Notes to Condensed Consolidated Financial Statements and under the
caption Managements Discussion and Analysis  Liquidity and Capital Resources in this Report on Form 10-Q for the quarterly period ended March 31, 2005, and is incorporated herein by reference.



ITEM 4. CONTROLS AND PROCEDURES



The Company
maintains a system of disclosure controls and procedures that is designed to ensure that material information is accumulated and communicated to management on a timely basis. As required, management, including the Companys chief executive
officer and chief financial officer, evaluated the effectiveness of the design and operation of the Companys disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the Companys
chief executive officer and chief financial officer concluded that the Companys disclosure controls and procedures were operating effectively to ensure that information required to be disclosed by the Company in reports that it files or
submits under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission.



Because of the inherent limitations in all control systems, no evaluation of controls can
provide absolute assurance that the Companys disclosure controls and procedures will detect or uncover every situation involving the failure of persons within the Company to disclose material information otherwise required to be set forth in
the Companys periodic reports.



The Companys management is also
responsible for establishing and maintaining adequate internal control over financial reporting to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles. No changes in the Companys internal control over financial reporting occurred during the Companys most recent fiscal quarter that have materially affected, or are reasonably
likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS



The Company is a party
to various legal actions that are ordinary and incidental to its business. While the outcome of legal actions cannot be predicted with certainty, management believes the outcome of any of these proceedings, or all of them combined, will not have a
materially adverse effect on its consolidated financial position or results of operations.



ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



The table below sets forth information with respect to the Companys repurchases of its common stock during the three months ended March 31, 2005.



|                    |  |                                |  |                             |       |                                                                       |        |                                                                              |        
|------------------- |  | ------------------------------ |  | --------------------------- | ----- | --------------------------------------------------------------------- | ------ | ---------------------------------------------------------------------------- | -------
|Period              |  | Total Numberof SharesPurchased |  | Average PricePaid Per Share |       | Total Number of SharesPurchased as Part ofPublicly AnnouncedPrograms1 |        | Maximum Number ofShares that May Yet BePurchased Under thePlans or Programs1
|January 1-31, 2005  |  | 7,500                          |  | $                           | 13.94 |                                                                       | 7,500  |                                                                              | 839,824
|February 1-28, 2005 |  | 1,200                          |  | $                           | 13.18 |                                                                       | 1,200  |                                                                              | 838,624
|March 1-31, 2005    |  | 54,077                         |  | $                           | 14.22 |                                                                       | 54,077 |                                                                              | 784,547
|                    |  |                                |  |                             |       |                                                                       |        |                                                                              |        
|Total               |  | 62,777                         |  |                             |       |                                                                       | 62,777 |                                                                              | 784,547

---

|(1) | On August 19, 2004, the Board of Directors authorized the Company to repurchase up to 1.0 million shares of its common stock on the open market or in privately negotiated
transactions. The repurchases are intended to reduce possible dilution in connection with the exercise of stock option grants. The share repurchase authorization has no stated expiration date and may be discontinued or suspended at any time or from
time to time by the Board of Directors without prior notice.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



ITEM 6. EXHIBITS



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1     |  | Restated Articles of Incorporation of Cadmus Communications Corporation (incorporated by reference to Exhibit 3.1 to the Companys Annual Report on Form 10-K for the fiscal year ended
June 30, 1993 (Commission File No. 0-12954)).                                                                                                                                                                              
|        | 
|3.2     |  | Bylaws of Cadmus Communications Corporation, as amended (incorporated by reference to Exhibit 3.2 to the Companys Current Report on Form 8-K dated July 23, 2001 (Commission File No.
0-12954)).                                                                                                                                                                                                                  
|        | 
|4.9.1   |  | First Supplemental Indenture dated March 1, 2005, to the Indenture dated as of June 15, 2004, among Cadmus Communications Corporation, each of the Guarantors (as defined therein) and Wachovia
Bank, National Association, as trustee.                                                                                                                                                                            
|        | 
|10.41.3 |  | Third Amendment dated February 28, 2005 to Second Amended and Restated Credit Agreement dated January 28, 2004, among Cadmus Communications Corporation, the lenders and guarantors party
thereto, and Wachovia Bank, National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent, and BNP Paribas, ING Capital LLC, and The Royal Bank of Scotland PLC, as Co-Documentation Agents.
|        | 
|31.1    |  | Certification of Chief Executive Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                               
|        | 
|31.2    |  | Certification of Chief Financial Officer Pursuant to Rule 13a-14(a).                                                                                                                                                                                                                                                                                                                                               
|        | 
|32      |  | Certification Pursuant to 18 U.S.C. Section 1350 of Chief Executive Officer and Chief Financial Officer.                                                                                                                                                                                                                                                                                                           



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SIGNATURES



Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|      |  |                                                  
|----- |  | -------------------------------------------------
|      |  | CADMUS COMMUNICATIONS CORPORATION                
|      |  | (Registrant)                                     
|      | 
|Date: |  | May 12, 2005                                     
|      | 
|      |  | /s/ Bruce V. Thomas                              
|      |  | Bruce V. Thomas                                  
|      |  | President and Chief Executive Officer            
|      |  | (principal executive officer)                    
|      | 
|Date: |  | May 12, 2005                                     
|      | 
|      |  | /s/ Paul K. Suijk                                
|      |  | Paul K. Suijk                                    
|      |  | Senior Vice President and Chief Financial Officer
|      |  | (principal financial and accounting officer)     



20