Cenveo Announces Fourth Quarter and Full Year 2011 Results Company completes divestitures of certain non-core operations

Company pays down over $41 million in total debt during 4th Quarter

4th Quarter Non-GAAP Income from Continuing Operations of $18.2 million, or $0.29 per share

4th Quarter Non-GAAP Operating Margins of 9.6%

4th Quarter Adjusted EBITDA with discontinued operations of $64.8 million, up 7.6% from 2010

STAMFORD, Conn., Feb. 29, 2012 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three months and full year ended December 31, 2011.

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

During the first quarter of 2012, the Company completed the previously announced sales of its Forms and Business Documents Group ("Documents Group") and its wide format paper business (collectively the "Discontinued Operations"). For its fiscal year 2011 and prior periods, the Company will be reporting these businesses as discontinued operations in the consolidated financial statements resulting in the reclassification of the Company's consolidated balance sheets, statements of operations and statements of cash flows to reflect these discontinued operations separately from the Company's continuing operations. All results discussed below exclude the results of the Discontinued Operations unless otherwise indicated.

For the three months ended December 31, 2011, net sales were $486.5 million, as compared to $435.0 million for the same period in the previous year, an increase of 11.8%. For the year ended December 31, 2011, net sales were $1.9 billion, compared to $1.7 billion for the prior year, an increase of 11.7%. The increase in net sales was primarily due to the acquisition of MeadWestvaco Corporation's Envelope Product Group ("EPG"), and growth from direct envelope, custom label, content management, and specialty packaging product lines.

Operating income was $39.0 million for the three months ended December 31, 2011, compared to $17.5 million for the same period last year. This increase was a result of lower restructuring, impairment and other charges, a lower operating cost structure and contributions from the EPG acquisition. Non-GAAP operating income increased 13.1% to $46.7 million for the three months ended December 31, 2011, compared to $41.3 million for the same period last year. For the year ended December 31, 2011, operating income was $117.8 million, compared to an operating loss of $117.9 million for the prior year. This increase was a result of lower restructuring, impairment and other charges, a lower operating cost structure, and contributions from the EPG acquisition. For the year ended December 31, 2011, non-GAAP operating income increased 14.7% to $157.2 million, compared to $137.1 million for the prior year. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges and divested operations or assets held for sale. A reconciliation of operating income (loss) to non-GAAP operating income is presented in the attached tables.

For the three months ended December 31, 2011, net loss was $14.5 million, or $0.23 per share, compared to a net loss of $9.8 million, or $0.16 per share, for the same period last year. Net loss for three months ended December 31, 2011 includes income from continuing operations before income taxes, offset by income tax expense and a loss from the Discontinued Operations, primarily due to the write-down of allocated goodwill of $13.5 million related to the Discontinued Operations. The net loss in the same period last year includes a loss from continuing operations before income taxes, offset by an income tax benefit and income from Discontinued Operations. For the year ended December 31, 2011, net loss was $8.6 million, or $0.14 per share, compared to $186.4 million, or $2.99 per share, for the prior year. The net loss for the year ended December 31, 2011 includes income from continuing operations before income taxes, offset by income tax expense and a loss from Discontinued Operations, primarily due to the write-down of allocated goodwill of $13.5 million related to the Discontinued Operations. The net loss in the prior year includes a loss from continuing operations before income taxes, partially offset by an income tax benefit and income from discontinued operations.

On a non-GAAP basis, income from continuing operations increased 68.8% to $18.2 million, or $0.29 per share, for the three months ended December, 31 2011, compared to $10.8 million, or $0.17 per share, for the three months ended January 1, 2011. For the year ended December 31, 2011, non-GAAP income from continuing operations increased 203.8% to $40.5 million, or $0.64 per share, compared to $13.3 million, or $0.21 per share, for the same period last year. These increases are primarily attributable to stronger performance across the majority of the Company's product lines combined with contributions from the EPG acquisition. Non-GAAP income from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, divested operations or assets held for sale, gain on bargain purchase, (gain) loss on early extinguishment of debt and adjusts income taxes to reflect an estimated cash tax rate. A reconciliation of loss from continuing operations to non-GAAP income from continuing operations is presented in the attached tables.

Adjusted EBITDA for the three months ended December 31, 2011 was $62.6 million, compared to $56.0 million for the three months ended January 1, 2011, an increase of approximately 11.7%. Adjusted EBITDA for the year ended December 31, 2011, was $221.6 million, compared to $198.6 million for the year ended January 1, 2011, an increase of approximately 11.6%. For comparative purposes, Adjusted EBITDA, including the results of the Discontinued Operations, for the three months ended December 31, 2011 was $64.8 million, compared to $60.3 million for the same period last year, an increase of approximately 7.6%. Adjusted EBITDA, including the results of the Discontinued Operations, for the year ended December 31, 2011, was $235.1 million, compared to $216.3 million for the prior year, an increase of approximately 8.7%. On a go forward basis, the Company will report Adjusted EBITDA excluding the Discontinued Operations. These increases are primarily attributable to stronger performance across the majority of the Company's product lines combined with contributions from the EPG acquisition. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, (gain) loss on early extinguishment of debt, divested operations or assets held for sale and (income) loss from discontinued operations, net of taxes. An explanation of the Company's use of Adjusted EBITDA is detailed below and a reconciliation of net loss to Adjusted EBITDA is provided in the attached tables.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"I am very pleased with our fourth quarter operating results as we saw revenue increases, drove strong improvement in operating income and generated strong cash flows that we used to pay down debt. Combining these results with our recently completed dispositions of non-core businesses demonstrates that our game plan is working. When including the discontinued operations, we were able to achieve our financial projections for 2011 delivering adjusted EBITDA of $235.1 million for the year, highlighted by delivering non-GAAP operating income margin of 9.6% for the fourth quarter. We also continued to focus on our capital structure and leverage targets. During the fourth quarter we paid off more than $41 million of debt and amended our credit facility to allow the Company to purchase subordinated debt in the open market. Our focus on working capital has also begun to produce the desired results as we have lowered our inventory levels by over $25 million since the end of the second quarter."

"The positive trends, which we have seen across most of our businesses in 2011, continued into the fourth quarter of 2011. Our envelope business posted another quarter of strong organic sales growth of 10%, benefiting from direct mail volumes and favorable product mix. Both our custom and long-run label businesses showed growth driven by improving economic conditions and strong holiday shipments. Our packaging products grew in line with expectations highlighted by performance in our shrink sleeve end markets. Our print markets saw operational improvement as new sales wins in non-traditional end markets and a rebound in our customers marketing spend drove meaningful improvement. Our content management offering continues to grow as our unique global platform continues to benefit from the outsourcing of project management and composition services."

Mr. Burton concluded:
"As we look forward to 2012 and beyond, we believe that our future success will be based on our current operating plan: to invest in our market leading businesses in niche markets; to leverage our low-cost, highly efficient operating platform; and to make disciplined accretive strategic acquisitions. We will continue to focus on de-leveraging our balancing sheet by driving cash flow, improving working capital, and by continuing to push for operational improvement. Based on the current business climate and factoring in our recent divestitures, I expect $230 million to $240 million in Adjusted EBITDA, and approximately $100 million to $110 million free cash flow and expect to end the year with net leverage between 4.5 and 4.7x. I look forward to our conference call tomorrow to discuss in more depth our positive 2012 outlook for Cenveo."

Conference Call:
Cenveo will host a conference call tomorrow, Thursday, March 1, 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

Consolidated Statements of Operations

(in thousands, except per share data)



Three  Months Ended

Years Ended


December 31,
2011

January 1,
2011

December 31,
2011

January 1,
2011






Net sales

$      486,482

$      435,035

$     1,909,187

$     1,708,529

Cost of sales

389,019

347,897

1,546,173

1,385,702

Selling, general and administrative expenses

52,076

50,231

217,136

203,983

Amortization of intangible assets

2,554

2,458

10,306

10,638

Restructuring, impairment and other charges

3,835

16,932

17,812

226,150

    Operating income (loss)

38,998

17,517

117,760

(117,944)

Gain on bargain purchase

(11,720)

Interest expense, net

27,904

28,978

115,968

121,037

(Gain) loss on early extinguishment of debt

(4,011)

6,994

(4,011)

9,592

Other expense, net

9,641

1,212

9,074

2,327

   Income (loss) from continuing operations before income taxes

5,464

(19,667)

8,449

(250,900)

Income tax expense (benefit)

7,227

(7,992)

9,477

(53,202)

    Loss from continuing operations

(1,763)

(11,675)

(1,028)

(197,698)

(Loss) income from discontinued operations, net of taxes

(12,765)

1,922

(7,537)

11,321

    Net loss

$       (14,528)

$       (9,753)

$  (8,565)

$  (186,377)

Income (loss) per share – basic and diluted:





    Continuing operations

$         (0.03)

$         (0.19)

$         (0.02)

$         (3.17)

    Discontinued operations

(0.20)

0.03

(0.12)

0.18

    Net loss

$         (0.23)

$         (0.16)

$         (0.14)

$         (2.99)

Weighted average shares:





    Basic and Diluted

63,260

62,725

62,983

62,382










Cenveo, Inc. and Subsidiaries

Reconciliation of Loss 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

Years Ended


December 31,
2011

January 1,
2011

December 31,
2011

January 1,
2011






Loss from continuing operations

$   (1,763)

$   (11,675)

$  (1,028)

$  (197,698)

Integration, acquisition and other charges

11,895

4,802

22,463

14,275

Stock-based compensation provision

1,587

2,062

8,716

10,853

Restructuring, impairment and other charges

3,835

16,932

17,812

226,150

Divested operations or asset held for sale

3,758

Gain on bargain purchase

(11,720)

(Gain) loss on early extinguishment of debt

(4,011)

6,994

(4,011)

9,592

Income tax benefit (expense)

6,664

(8,326)

8,226

(53,614)

   Non-GAAP income from continuing operations

$    18,207

$    10,789

$     40,458

$    13,316






   Income per share – diluted:





 Continuing operations

$     (0.03)

$        (0.19)

$      (0.02)

$     (3.15)

 Integration, acquisition and other charges

0.19

0.08

0.36

0.23

 Stock-based compensation provision

0.03

0.03

0.14

0.17

 Restructuring, impairment and other charges

0.06

0.27

0.28

3.60

 Divested operations or asset held for sale

0. 06

 Gain on bargain purchase

(0.19)

 (Gain) loss on early extinguishment of debt

(0.06)

0.11

(0.06)

0.15

 Income tax benefit (expense)

0.10

(0.13)

0.13

(0.85)

     Non-GAAP continuing operations

$       0.29

$        0.17

$        0.64

$       0.21






   Weighted average shares—diluted

63,333

62,931

63,124

62,845










Cenveo, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(unaudited)


Three Months Ended

Years Ended


December 31,
2011

January 1,
2011

December 31,
2011

January 1,
2011






Net loss

$     (14,528)

$     (9,753)

$   (8,565)

$        (186,377)

    Interest expense, net

27,904

28,978

115,968

121,037

    Income tax expense (benefit)

7,227

(7,992)

9,477

(53,202)

    Depreciation

13,348

13,475

53,648

53,214

    Amortization of intangible assets

2,554

2,458

10,306

10,638

    Integration, acquisition and other charges

11,895

4,802

22,463

14,275

    Stock-based compensation provision

1,587

2,062

8,716

10,853

    Restructuring, impairment and other charges

3,835

16,932

17,812

226,150

    Gain on bargain purchase

(11,720)

    (Gain) loss on early extinguishment of debt

(4,011)

6,994

(4,011)

9,592

    Divested operations or asset held for sale

3,758

    Loss (income) from discontinued operations, net of taxes

12,765

(1,922)

7,537

(11,321)






Adjusted EBITDA, as defined

$    62,576

$    56,034

$    221,631

$    198,617






Discontinued Operations Adjusted EBITDA

2,271

4,217

13,456

17,724






Adjusted EBITDA with Discontinued Operations

$    64,847

$    60,251

$    235,087

$   216,341





Cenveo, Inc. and Subsidiaries

Reconciliation of Operating Income (Loss) to Non-GAAP Operating Income

(in thousands)

(unaudited)



Three  Months Ended

Years Ended


December 31,
2011

January 1,
2011

December 31,
2011

January 1,
2011






Operating income (loss)

$    38,998

$    17,517

$    117,760

$    (117,944)

Integration, acquisition and other charges

2,320

4,802

12,888

14,275

Stock-based compensation provision

1,587

2,062

8,716

10,853

Divested operations or asset held for sale

3,758

Restructuring, impairment and other charges

3,835

16,932

17,812

226,150






   Non-GAAP operating income

$    46,740

$    41,313

$    157,176

$    137,092









Cenveo, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)



December 31, 2011

January 1, 2011

Assets



Current assets:



Cash and cash equivalents

$          17,753

$          49,749

Accounts receivable, net

288,483

254,453

Inventories

133,796

135,072

Prepaid and other current assets

72,742

65,615

Assets of discontinued operations - current

22,956

23,518

Total current assets

535,730

528,407

Property, plant and equipment, net

328,567

335,996

Goodwill

190,822

192,911

Other intangible assets, net

223,563

231,292

Other assets, net

79,490

74,720

Assets of discontinued operations – long - term

27,416

43,585

Total assets

$    1,385,588

$    1,406,911

Liabilities and Shareholders' Deficit



Current liabilities:



Current maturities of long-term debt

$          8,809

$          10,098

Accounts payable

186,648

163,340

Accrued compensation and related liabilities

39,155

30,261

Other current liabilities

95,907

97,796

Liabilities of discontinued operations - current

5,346

4,216

Total current liabilities

335,865

305,711

Long-term debt

1,237,534

1,283,905

Other liabilities

185,419

149,379

Liabilities of discontinued operations -  long - term

8,474

9,247

Commitments and contingencies

Shareholders' deficit:



Preferred stock

Common stock

633

627

Paid-in capital

350,390

342,607

Retained deficit

(672,847)

(664,282)

Accumulated other comprehensive loss

(59,880)

(20,283)

Total shareholders' deficit

(381,704)

(341,331)

     Total liabilities and shareholders' deficit

$    1,385,588

$    1,406,911




Cenveo, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)







Years Ended




December 31,

2011


January 1,

2011


Cash flows from operating activities:








Net loss                                                                                                 


$

(8,565)


$

(186,377)


Adjustments to reconcile net loss to net cash provided by operating activities:








(Income) loss from discontinued operations, net of taxes



7,537



(11,321)


Impairment of goodwill related to discontinued operations



13,500




Depreciation                                                                                           



53,648



53,214


Amortization of intangible assets



10,306



10,638


Non-cash interest expense, net                                                                             



5,277



4,716


Deferred income taxes                                                                                    



11,793



(48,815)


Non-cash taxes                                                                                         





(4,001)


Non-cash restructuring, impairment and other charges, net                                                       



3,853



201,781


Gain on bargain purchase                                                                                 



(11,720)




(Gain) loss on early extinguishment of debt                                                                   



(4,011)



9,592


Provisions for bad debts



2,348



5,000


Provisions for inventory obsolescence



3,416



3,681


Stock-based compensation provision                                                                         



8,716



10,853


Loss on sale of assets                                                                                   



376



81


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








Accounts receivable                                                                                     



(6,912)



3,267


Inventories                                                                                             



20,860



(2,084)


Accounts payable and accrued compensation and related liabilities                                                 



11,777



(18,171)


Other working capital changes                                                                             



(14,796)



15,385


Other, net                                                                                              



(23,585)



2,317


Net cash provided by continuing operating activities



83,818



49,756


Net cash (used in) provided by discontinuing operating activities



(3,496)



8,830


Net cash provided by operating activities



80,322



58,586


Cash flows from investing activities:








Cost of business acquisitions, net of cash acquired                                                             



(59,719)



(40,545)


Capital expenditures                                                                                      



(15,671)



(18,152)


Proceeds from sale of property, plant and equipment                                                            



11,114



3,539


  Net cash used in investing activities of continuing operations                                                    



(64,276)



(55,158)


  Net cash used in investing activities of discontinued operations                                                  



(536)



(879)


  Net cash used in investing activities                                                                        



(64,812)



(56,037)


Cash flows from financing activities:








      Repayments of Term Loan B due 2016                                                                       



(23,800)




      Repayment of 7 7/8% senior subordinated notes                                                               



(8,952)




      Repayment of 8 3/8% senior subordinated notes



(5,363)




      Repayments of other long-term debt



(6,403)



(7,635)


      Payment of financing related costs and expenses



(2,675)



(23,154)


      Purchase and retirement of common stock upon vesting of RSUs



(1,283)



(1,597)


      Proceeds from exercise of stock options                                                                      



356



1,030


      Proceeds from issuance of 8 7/8% senior second lien notes                                                       





397,204


      Proceeds from issuance of Term Loan B                                                                      





376,200


      Repayment of Term Loans                                                                                 





(683,306)


      (Repayment) borrowings under revolving credit facility, net





(22,500)


      Net cash (used in) provided by financing activities                                                               



(48,120)



36,242


Effect of exchange rate changes on cash and cash equivalents                                                       



614



169


         Net (decrease) increase in cash and cash equivalents                                                         



(31,996)



38,960


Cash and cash equivalents at beginning of year                                                                   



49,749



10,789


Cash and cash equivalents at end of year                                                                         


$

17,753


$

49,749





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 (loss) excluding integration, acquisition and other charges, stock-based compensation provision, divested operations or asset held for sale 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 from continuing operations to non-GAAP income from continuing operations and operating income (loss) 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 its availability; (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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