Waverly to sell printing business, focus on publishing Company will get up to $20 million

October 01, 1993|By Ross Hetrick | Ross Hetrick,Staff Writer

After 103 years in the printing business, Waverly Inc. announced yesterday that it will sell its printing operation for as much as $20 million to focus attention on its faster-growing medical and scientific publishing business.

"This permits us to concentrate 100 percent on publishing and service our authors and our customers in the best way we know possible," said Edward B. Hutton Jr., the president and chief executive of the Baltimore-based Waverly.

Waverly's printing business, which includes 650 workers in Baltimore and Easton, is being sold to Cadmus Communications Corp., the 26th-largest printing company in the nation. Waverly will retain its publishing business, which accounted for about 80 percent of its $162.5 million in revenues last year.

Printing involves the physical production of journals and books, while publishing is the collection and editing of articles and manuscripts, the selling of advertising and the marketing of publications.

Cadmus, based in Richmond, Va., said it plans to retain all employees and management at the two printing facilities. "This represents an expansion and enhancement of what we are doing," said C. Stephenson Gillispie Jr., president and chief executive of Cadmus. "We have no intention of reducing or downsizing either operation."

350 workers in Baltimore

Waverly's Baltimore printing operation at Guilford and Mount Royal avenues, which includes sales, administration, composition and editing services, has 350 workers. The company's 200,000-square-foot printing plant in Easton has 300 employees.

The Waverly printing business will be merged into a new subsidiary devoted to scientific and medical journal printing called Cadmus Journal Services. That operation will also include the journal division of Cadmus' William Byrd subsidiary.

The new Cadmus subsidiary will print about 350 medical and scientific journals, about 14 percent of the 2,500 journals in those fields printed worldwide, Mr. Gillispie said.

The sale must still be approved by government regulators, including an antitrust review by the U.S. Justice Department.

Waverly and Cadmus also signed a 10-year agreement that calls for Cadmus to continue printing Waverly-published journals by the new subsidiary. Waverly prints about 90 percent of the medical and scientific journals it publishes, which accounts for about 25 percent of the printing operation's revenues.

Cadmus had sales of $198.1 million during the fiscal year that ended June 30. Printing accounted for 74.5 percent of its revenue, with the remainder generated by marketing and publishing.

$14.5 million in cash

The sale, which is expected to be completed by Nov. 1, calls for Waverly to receive $14.5 million in cash at the closing. An additional $5.5 million would be paid to Waverly during the next 12 months contingent on the division's financial performance and other conditions.

The sale is expected to result in a one-time charge of $880,000, or 22 cents a share, to Waverly's third-quarter earnings because of costs associated with the sale and because the value of the printing operations on the company's books is greater than the sale price. However, the charge could be offset later, depending on how much of the contingent $5.5 million payment is received by the company, said Mr. Hutton.

'What we do best'

"It's a small price to pay to concentrate on our publishing -- to focus on what we do best," he said.

Waverly recorded net sales of $78.8 million in the first six months that ended June 30. Net income was $1.7 million, or 39 cents a share, during the period, a 22.5 percent drop from earnings a year ago, when a special charge for accounting changes is excluded.

Despite the current expense, the sale should help the company, according to one analyst. "It allows them to work in more publishing-related areas," said Liam D. Burke, who follows the company for Ferris, Baker Watts Inc., a Washington-based investment banking company.

"I have a lot of confidence in their ability to be where they need to be," though, he said, there could be some initial negative reaction because of the quarterly charges.

The company's stock reacted yesterday by dropping 75 cents, to $18 a share.

Waverly's publishing operation, which has 400 workers in Baltimore and an additional 150 worldwide, has grown in importance to the company in recent decades. The company changed its name in 1987 from Waverly Press to Waverly to de-emphasis its printing operation.

More than half of its publishing revenues come from books, with 40 percent from journals and a small percentage from electronic media, Mr. Hutton said.

He also said Waverly would decide where to move its Baltimore operations around the end of the year. The move was to include its headquarters on East Preston Street and its printing offices at Guilford and Mount Royal avenues. Cadmus has the final say on the location of the printing operation, he said.

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