2014

Cenveo Announces First Quarter 2012 Results 1st Quarter Sales of $455.6 million

1st Quarter Operating Income of $14.2 million

1st Quarter Non-GAAP Operating Income of $31.6 million

1st Quarter Non-GAAP Income from Continuing Operations of $0.04 per share

1st Quarter Adjusted EBITDA of $47.0 million

Company reaffirms 2012 guidance

STAMFORD, Conn., May 9, 2012 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three months ended March 31, 2012.

(Logo:  http://photos.prnewswire.com/prnh/20070618/CENVEOLOGO)

The Company generated net sales of $455.6 million for the first quarter of 2012, compared to $477.0 million in the first quarter of 2011. The decrease in net sales was primarily due to lower sales in our print and envelope product lines as a result of customer product launches in the first quarter of 2011 that did not repeat in the first quarter of 2012 and lower direct mail volumes from our financial services customers. The Company expects the direct mail market to strengthen in the second half of 2012. The Company's custom label and specialty packaging products both displayed strong growth relating to customer wins and sales channel expansion.

Operating income was $14.2 million in the first quarter of 2012, compared to $19.3 million in the first quarter of 2011. The decrease in operating income was primarily due to increased restructuring, impairment and other charges as a result of a print plant closure and other cost savings actions executed in the first quarter of 2012, offset in part by our lower cost structure due to the integration of our Envelope Product Group ("EPG") acquisition and lower compensation related expenses. Non-GAAP operating income was $31.6 million in the first quarter of 2012, compared to $31.5 million in the first quarter of 2011. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges.

In the first quarter of 2012, the Company had a net loss of $27.2 million, or $0.43 per share, compared to net income of $2.8 million, or $0.04 per share in the first quarter of 2011. The results in the first quarter of 2012 include a loss on early extinguishment of debt, net of $10.6 million related to our recent debt refinancing and restructuring, impairment and other charges of $14.0 million as a result of a print plant closure and other cost savings actions executed in the first quarter of 2012, while the results in the first quarter of 2011 included a preliminary bargain purchase gain of $10.5 million related to the EPG acquisition and restructuring, impairment and other charges of $3.8 million. On a Non-GAAP basis, income from continuing operations was $3.3 million, or $0.04 per share, in the first quarter of 2012 as compared to $1.1 million, or $0.02 per share, in the first quarter of 2012. Non-GAAP income (loss) from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, loss on early extinguishment of debt, net and adjusts income taxes to reflect an estimated cash tax rate. A reconciliation of (loss) income from continuing operations to Non-GAAP income from continuing operations is presented in the attached tables.

Adjusted EBITDA in the first quarter of 2012 was $47.0 million, compared to Adjusted EBITDA in the first quarter of 2011 of $47.4 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, loss on early extinguishment of debt, net and (loss) income from discontinued operations, net of taxes.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:

"We are satisfied with our first quarter results, as our operations performed in line with expectations. We also accomplished several key initiatives during the quarter. We completed the dispositions of two non-core businesses allowing us to focus on our core label, specialty packaging, envelope, print and content management operations. During the quarter, we also completed a refinancing, which extends the majority of our near term debt out to 2017."

"Operationally, our label and packaging products produced another solid performance led by strong revenue growth in our custom products driven by investments in our sales channels and increased product offerings.  Our envelope operations delivered expected revenue and operational results with the timing of customer revenues combined with seasonal trends offsetting gains in market share and operational improvements resulting from our integration of EPG. We expect the direct mail market to strengthen in the second half of 2012 with increased volume from our financial services customers. Our print products performed as expected as well with weakness in the publishing industry and in changes in the timing of customer purchases, offset by continued strength in our content management business."  

Mr. Burton concluded:

"As we exit the first quarter, 2012 is progressing in line with our full year expectations. We remain focused on continuing to win market share and maintaining our cost structure to drive free cash flow and to pay down debt. The debt markets remain open and we will opportunistically look to address the near term portion of our capital structure. Given recent sales momentum and our focus on costs, we remain on track to deliver the full year net sales, free cash flow, and adjusted EBITDA targets that are consistent with our previous guidance."

The Company also announced the promotion of Scott J. Goodwin to Chief Accounting Officer. Mr. Goodwin previously held the positions of Assistant Corporate Controller and Corporate Controller for the Company. Prior to joining Cenveo, Mr. Goodwin spent seven years in public accounting at Deloitte & Touche, LLP. He is a CPA and received his degree in accounting from The Citadel. He will continue to report to Mark S. Hiltwein, Chief Financial Officer.

Conference Call:

Cenveo will host a conference call tomorrow, Thursday, May 10, 2012 at 10:00 a.m. Eastern Time.  The conference call will be available via webcast, which can be accessed via the Internet at www.cenveo.com.

 

Cenveo, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(Unaudited)

 


Three Months Ended


March 31, 2012

April 2, 2011




Net sales

$ 455,583

$ 476,971

Cost of sales

375,003

392,712

Selling, general and administrative expenses

49,696

58,583

Amortization of intangible assets

2,623

2,574

Restructuring, impairment and other charges

14,022

3,827

     Operating income

14,239

19,275

Gain on bargain purchase

(10,539)

Interest expense, net

27,852

30,217

Loss on early extinguishment of debt, net

10,629

Other expense, net

298

189

     Loss from continuing operations before income taxes

(24,540)

(592)

Income tax benefit

(1,956)

(1,605)

     (Loss) income from continuing operations

(22,584)

1,013

(Loss) income from discontinued operations, net of taxes

(4,634)

1,771

     Net (loss) income

(27,218)

2,784

     Other comprehensive income (loss):



Reclassifications of losses related to interest rate swaps into earnings, net of taxes

1,105

Currency translation adjustment

1,444

1,232

     Comprehensive (loss) income

$ (25,774)

$ 5,121




 Income (loss) per share – basic and diluted:



     Continuing operations

$   (0.36)

$    0.02

     Discontinued operations

(0.07)

0.02

     Net (loss) income

$   (0.43)

$    0.04

 Weighted average shares outstanding:



     Basic

63,407

62,742

     Diluted

63,407

63,044













 

Cenveo, Inc. and Subsidiaries

Reconciliation of (Loss) Income from Continuing Operations to Non-GAAP Income from Continuing
Operations and Related Per Share Data

(in thousands, except per share data)

(Unaudited)

 


Three  Months Ended


March 31, 2012

April 2, 2011




(Loss) income from continuing operations

$   (22,584)

$   1,013

Integration, acquisition and other charges

1,747

5,916

Stock-based compensation provision

1,587

2,508

Restructuring, impairment  and other charges

14,022

3,827

Gain on bargain purchase

(10,539)

Loss on early extinguishment of debt, net

10,629

Income tax benefit

(2,059)

(1,639)

    Non-GAAP income from continuing operations

$      3,342

$      1,086




    Income (loss) per share – diluted:



  Continuing operations

$     (0.27)

$     0.02

  Integration, acquisition and other charges

0.02

0.10

  Stock-based compensation provision

0.02

0.04

  Restructuring, impairment  and other charges

0.16

0.06

  Gain on bargain purchase

(0.17)

  Loss on early extinguishment of debt, net

0.13

  Income tax benefit (expense)

(0.02)

(0.03)

      Non-GAAP continuing operations income per share

$    0.04

$    0.02




      Weighted average shares—diluted

84,299

63,044

 

Cenveo, Inc. and Subsidiaries

Reconciliation of Net (Loss) Income to Adjusted EBITDA

(in thousands)

(Unaudited)


Three Months Ended


March 31, 2012

April 2, 2011




Net (loss) income

$  (27,218)

$  2,784

     Interest expense, net

27,852

30,217

     Income tax benefit

(1,956)

(1,605)

     Depreciation

13,125

13,445

     Amortization of intangible assets

2,623

2,574

     Integration, acquisition and other charges

1,747

5,916

     Stock-based compensation provision

1,587

2,508

     Restructuring, impairment  and other charges

14,022

3,827

     Gain on bargain purchase

(10,539)

     Loss on early extinguishment of debt, net

10,629

     Loss (income) from discontinued operations, net of taxes

4,634

(1,771)




Adjusted EBITDA, as defined

$   47,045

$   47,356

 

Cenveo, Inc. and Subsidiaries

Reconciliation of Operating Income to Non-GAAP Operating Income

(in thousands)

(Unaudited)

 


Three  Months Ended


March 31, 2012

April 2, 2011




Operating income

$  14,239

$  19,275

Integration, acquisition and other charges

1,747

5,916

Stock-based compensation provision

1,587

2,508

Restructuring, impairment  and other charges

14,022

3,827

    Non-GAAP operating income

$  31,595

$  31,526

 

CENVEO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 


March 31, 2012

December 31, 2011

Assets

(Unaudited)


Current assets:



Cash and cash equivalents

$         9,278

$         17,753

Accounts receivable, net

274,637

288,483

Inventories

145,932

133,796

Prepaid and other current assets

69,607

72,742

Assets of discontinued operations - current

22,956

Total current assets

499,454

535,730

Property, plant and equipment, net

313,001

328,567

Goodwill

191,817

190,822

Other intangible assets, net

221,075

223,563

Other assets, net

84,821

79,490

Assets of discontinued operations – long-term

27,416

Total assets

$  1,310,168

$  1,385,588




Liabilities and Shareholders' Deficit



Current liabilities:



Current maturities of long-term debt

$          12,130

$          8,809

Accounts payable

175,161

186,648

Accrued compensation and related liabilities

35,498

39,155

Other current liabilities

76,795

95,907

Liabilities of discontinued operations - current

5,346

Total current liabilities

299,584

335,865

Long-term debt

1,229,636

1,237,534

Other liabilities

187,167

185,419

Liabilities of discontinued operations – long-term

8,474

Commitments and contingencies



Shareholders' deficit:



Preferred stock

Common stock

634

633

Paid-in capital

351,648

350,390

Retained deficit

(700,065)

(672,847)

Accumulated other comprehensive loss

(58,436)

(59,880)

Total shareholders' deficit

(406,219)

(381,704)

      Total liabilities and shareholders' deficit

$  1,310,168

$  1,385,588

 

CENVEO, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(Unaudited)

 


Three Months Ended


March 31, 2012

April 2, 2011




Cash flows from operating activities:



  Net (loss) income

$  (27,218)

$  2,784

  Adjustments to reconcile net (loss) income to net cash used in operating activities:



Loss on sale of discontinued operations, net of taxes

5,015

Income from discontinued operations, net of taxes

(381)

(1,771)

Depreciation and amortization, excluding non-cash interest expense

15,748

16,021

Non-cash interest expense, net

1,637

1,228

Deferred income taxes

(2,757)

(1,665)

Non-cash restructuring, impairment and other charges, net

10,729

258

Gain on bargain purchase

(10,539)

Loss on early extinguishment of debt, net

10,629

Stock-based compensation provision

1,587

2,508

(Gain) loss on sale of assets

(22)

Other non-cash charges

1,535

2,381

Changes in operating assets and liabilities, excluding the effects of acquired businesses:



Accounts receivable

13,247

2,118

Inventories

(12,631)

(4,950)

Accounts payable and accrued compensation and related liabilities

(12,490)

6,098

Other working capital changes

(18,857)

(18,374)

Other, net                       

(2,657)

(3,130)

Net cash used in operating activities of continuing operations

(16,864)

(7,055)

Net cash (used in) provided by operating activities of discontinued operations

(4,111)

1,530

Net cash used in operating activities

(20,975)

(5,525)

Cash flows from investing activities:



Cost of business acquisitions, net of cash acquired

(598)

(55,261)

Capital expenditures

(5,319)

(3,909)

Proceeds from sale of property, plant and equipment

234

2,918

Net cash used in investing activities of continuing operations

(5,683)

(56,252)

Net cash provided by (used in) investing activities of discontinued operations

39,921

(154)

Net cash provided by (used in) investing activities

34,238

(56,406)




Cash flows from financing activities:



Repayment of 10½% senior notes

(170,000)

Repayment of 7⅞% senior subordinated notes

(132,257)

Repayment of Term Loan B due 2016

(45,100)

(950)

Repayment of 8% senior subordinated notes

(25,202)

Payment of financing related costs and expenses and debt issuance discounts

(22,955)

Repayments of other long-term debt

(1,158)

(1,511)

Retirement of common stock upon vesting of RSUs

(329)

Proceeds from issuance of 11½% senior notes

225,000

Proceeds from issuance of 7% senior exchangeable notes

86,250

Borrowing under revolving credit facility, net

65,600

24,000

Proceeds from exercise of stock options

168

Net cash (used in) provided by financing activities of continuing operations

(20,151)

21,707

                Net cash used in financing activities of discontinued operations

(1,652)

                Net cash (used in) provided by financing activities

(21,803)

21,707

Effect of exchange rate changes on cash and cash equivalents

65

(7)

Net decrease in cash and cash equivalents

(8,475)

(40,231)

Cash and cash equivalents at beginning of period

17,753

49,756

Cash and cash equivalents at end of period

$      9,278

$         9,525

 

In addition to results presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"), included in this release are certain non-GAAP financial measures, including Adjusted EBITDA, non-GAAP income from continuing operations, non-GAAP operating income, non-GAAP operating income margin, and free cash flow. Non-GAAP operating income is defined as operating income excluding integration, acquisition and other charges, stock-based compensation provision, and restructuring, impairment and other charges. Non-GAAP operating income margin is calculated by dividing non-GAAP operating income into net sales.  Free cash flow is defined as Adjusted EBITDA less cash interest, cash taxes, and net capital expenditures. These non-GAAP financial measures as defined herein, and should be read in conjunction with GAAP financial measures. A reconciliation of (loss) income from continuing operations to non-GAAP income from continuing operations and operating (loss) income to non-GAAP operating income is presented in the attached tables. These non-GAAP financial measures are not presented as an alternative to cash flows from continuing operations, as a measure of our liquidity or as an alternative to reported net loss as an indicator of our operating performance.  The non-GAAP financial measures as used herein may not be comparable to similarly titled measures reported by competitors. 

We believe the use of Adjusted EBITDA, non-GAAP income from continuing operations, non-GAAP operating income, non-GAAP operating income margin and free cash flow along with GAAP financial measures enhances the understanding of our operating results and may be useful to investors in comparing our operating performance with that of our competitors and estimating our enterprise value.  Adjusted EBITDA is also a useful tool in evaluating the core operating results of the Company given the significant variation that can result from, for example, the timing of capital expenditures, the amount of intangible assets recorded or the differences in assets' lives.  We also use Adjusted EBITDA internally to evaluate the operating performance of our segments, to allocate resources and capital to such segments, to measure performance for incentive compensation programs, and to evaluate future growth opportunities.  The non-GAAP financial measures included in this press release are reconciled to their most directly comparable GAAP financial measures in the tables included herein.

Cenveo (NYSE: CVO), headquartered in Stamford, Connecticut, is a leading global provider of print and related resources, offering world-class solutions in the areas of custom labels, specialty packaging, envelopes, commercial print, content management and publisher solutions. The company provides a one-stop offering through services ranging from design and content management to fulfillment and distribution. With approximately 8,400 employees worldwide, we pride ourselves on delivering quality solutions and service every day for our more than 100,000 customers. For more information please visit us at www.cenveo.com.

Statements made in this release, other than those concerning historical financial information, may be considered "forward-looking statements," which are based upon current expectations and involve a number of assumptions, risks and uncertainties that could cause actual results to differ materially from such forward-looking statements.  In view of such uncertainties, investors should not place undue reliance on our forward-looking statements.  Such statements speak only as of the date of this release, and we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Factors that could cause actual results to differ materially from management's expectations include, without limitation: (i) the recent United States and global economic conditions, which have adversely affected us and could continue to do so; (ii) our substantial level of indebtedness, which could impair our financial condition and prevent us from fulfilling our business obligations; (iii) our ability to service or refinance our debt; (iv) the terms of our indebtedness imposing significant restrictions on our operating and financial flexibility; (v) additional borrowings that are available to us could further exacerbate our risk exposure from debt; (vi) our ability to successfully integrate acquired businesses into our business; (vii) a decline of our consolidated profitability or profitability within one of our individual reporting units could result in the impairment of our assets, including goodwill, other long-lived assets and deferred tax assets; (viii) intense competition and fragmentation in our industry; (ix) the general absence of long-term customer agreements in our industry, subjecting our business to quarterly and cyclical fluctuations; (x) factors affecting the United States postal services impacting demand for our products; (xi) the availability of the internet and other electronic media may adversely affect our business; (xii) increases in paper costs and decreases in the availability of raw materials; (xiii) our labor relations; (xiv) our compliance with environmental laws; (xv) our dependence on key management personnel; (xvi) our dependence upon information technology systems; and (xvii) our international operations and the risks associated with operating outside of the United States. This list of factors is not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Additional information regarding these and other factors can be found in Cenveo, Inc.'s periodic filings with the SEC, which are available at http://www.cenveo.com

Inquiries from analysts and investors should be directed to Robert G. Burton, Jr. at (203) 595-3005.

SOURCE Cenveo, Inc.



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