2014

Cenveo Announces Fourth Quarter and Full Year 2012 Results 4th Quarter Net Sales of $451.8 million and Adjusted EBITDA of $58.0 million

4th Quarter Cash Flows from Operating Activities of Continuing Operations of $33.4 million

4th Quarter Adjusted EBITDA Margin of 12.8%

4th Quarter Non-GAAP Operating Income Margin of 9.2%

STAMFORD, Conn., Feb. 27, 2013 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three months and full year ended December 29, 2012.

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

The Company generated net sales of $451.8 million for the three months ended December 29, 2012, compared to $486.5 million for the same period last year. The Company generated net sales of $1.8 billion for the year ended December 29, 2012, compared to $1.9 billion for the prior year. The decrease in net sales was primarily due to lower sales in our print and envelope product lines as a result of lower direct mail volumes from our financial services customers, the closure and consolidations of a print plant and two envelope plants and our decision to exit certain low margin business. Net sales from our label and packaging business lines decreased slightly for the fourth quarter and full year of 2012 due to our decision to exit low margin business within those platforms, which has been offset largely by our e-commerce initiatives and new account wins in our packaging business.

Operating income was $34.0 million for the three months ended December 29, 2012, compared to $39.0 million for the same period last year. The decrease in operating income was primarily due to lower sales, lower byproduct recoveries and increased pension expense, offset in part by lower compensation-related expenses. Non-GAAP operating income was $41.6 million for the three months ended December 29, 2012, compared to $46.7 million for the same period last year. For the year ended December 29, 2012, operating income was $112.2 million, compared to $117.8 million for the prior year. The decrease in operating income was primarily due to increased restructuring, impairment and other charges as a result of the closure and consolidations of a print plant and two envelope plants along with other cost savings actions, lower sales, lower byproduct recoveries and increased pension expense, offset in part by our lower cost structure due to the integration of our Envelope Product Group acquisition and lower compensation-related expenses. For the year ended December 29, 2012, non-GAAP operating income was $151.9 million, compared to $157.2 million for the prior year. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, and restructuring, impairment and other charges. A reconciliation of operating income to non-GAAP operating income is presented in the attached tables.

Income tax expense was $60.1 million for the year ended December 29, 2012, compared to $9.5 million in the prior year. The increase in income tax expense is due to a non-cash charge of $56.5 million related to a valuation allowance applied to our net U.S. deferred tax assets, which primarily consists of a federal tax loss carryforward in the amount of $88.7 million that does not begin to expire until 2022. Our cash income taxes were $1.4 million for the year ended December 29, 2012, compared to $2.1 million in the prior year, and we do not expect to be a significant cash tax payer for at least the next four years.

For the three months ended December 29, 2012, the Company had a loss from continuing operations of $56.0 million, or $0.88 per share, primarily due to the valuation allowance discussed above, compared to $1.8 million, or $0.03 per share for the same period last year. Non-GAAP income from continuing operations was $14.2 million, or $0.17 per share, for the three months ended December 29, 2012, as compared to $18.2 million, or $0.29 per share, for the same period last year. For the year ended December 29, 2012, the Company had a loss from continuing operations of $73.9 million, or $1.16 per share, primarily due to the valuation allowance discussed above and a net loss on early extinguishment of debt related to refinancing our 2013 maturity, compared to $1.0 million, or $0.02 per share for the same period last year. For the year ended December 29, 2012, non-GAAP income from continuing operations was $40.2 million, or $0.51 per share, as compared to $40.5 million, or $0.64 per share, for the same period last year. Non-GAAP income from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, loss (gain) on early extinguishment of debt, net, an adjustment to income taxes to reflect an estimated cash tax rate, and an adjustment for interest expense related to the 7% convertible notes ("7% Notes"), net of taxes. 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 29, 2012 was $58.0 million, compared to Adjusted EBITDA of $62.6 million for the same period last year. Adjusted EBITDA for the year ended December 29, 2012, was $215.1 million, compared to $221.6 million, for the same period last year. 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 (gain) on early extinguishment of debt, net and (loss) income from discontinued operations, net of taxes. A reconciliation of net loss to Adjusted EBITDA is presented in the attached tables.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"Despite a challenging economic backdrop we were able to accomplish several key initiatives in 2012. We completed the refinancing of all our near-term debt maturities, divested a non-core asset, paid down $63 million of debt and invested in our core operations. Our fourth quarter results were similar to the trends that we experienced throughout the year driven by well-known and anticipated top line challenges stemming from continued softness in direct mail from our financial services customers and timing of transactional volumes in our print business. We do believe that we will see normalized volumes from our direct mail customers in 2013 compared to 2012. Despite the continuation of a challenging environment again in the fourth quarter, we were able to generate $33.4 million in cash flows from operating activities of continuing operations."

Mr. Burton concluded:
"As we have put our refinancing issues firmly behind us, we will focus our efforts back on operating the business by looking to grow revenues and cash flow and creating value in several ways in 2013. We will look to expand upon our efforts to transform our capital structure and increase cash flow by lowering our cost of capital by paying off our highest cost debt and potentially refinancing our revolver and term loan. We will continue to invest in our core operations with capital and technology that drive efficiencies and increase productivity. As we have previously discussed, we will strategically evaluate all our operations to determine which, if any, alternatives are in the best interests of our stakeholders. As we did in 2012 with the disposition of our forms and documents group, we will look to potentially dispose of businesses that we view as non-strategic to our future. Based on the current business climate, I expect Revenues and Adjusted EBITDA to be relatively consistent with last year's results and to generate at least $75 million of free cash flow in 2013. I look forward to our conference call tomorrow to discuss our outlook for 2013 and beyond."

Conference Call:
Cenveo will host a conference call tomorrow, Thursday, February 28, 2013 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 and Comprehensive Income (Loss)

(in thousands, except per share data)

 

 




Three Months Ended


Years Ended




December 29, 2012


December 31, 2011


December 29, 2012


December 31, 2011


Net sales


$

451,818



$

486,482



$

1,797,582



$

1,909,187



Cost of sales


364,738



389,019



1,461,214



1,546,173



Selling, general and administrative expenses


46,023



52,076



186,789



217,136



Amortization of intangible assets


2,527



2,554



10,283



10,306



Restructuring, impairment and other charges


4,534



3,835



27,100



17,812



Operating income


33,996



38,998



112,196



117,760



Gain on bargain purchase








(11,720)



Interest expense, net


29,181



27,904



114,755



115,968



Loss (gain) on early extinguishment of debt, net


1,048



(4,011)



12,487



(4,011)



Other (income) expense, net


(922)



9,641



(1,249)



9,074



Income (loss) from continuing operations before income taxes


4,689



5,464



(13,797)



8,449



Income tax expense


60,665



7,227



60,067



9,477



Loss from continuing operations


(55,976)



(1,763)



(73,864)



(1,028)



Loss from discontinued operations, net of taxes


(767)



(12,765)



(6,023)



(7,537)



Net loss


(56,743)



(14,528)



(79,887)



(8,565)



Other comprehensive income (loss):










Pension liability adjustment, net of taxes


(7,986)



(37,130)



(7,986)



(37,130)



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








1,793



Currency translation adjustment


(989)



(514)



665



(4,260)



Comprehensive loss


$

(65,718)



$

(52,172)



$

(87,208)



$

(48,162)













Income (loss) per share – basic:










Continuing operations


$

(0.88)



$

(0.03)



$

(1.16)



$

(0.02)



Discontinued operations


(0.01)



(0.20)



(0.10)



(0.12)



Net loss


$

(0.89)



$

(0.23)



$

(1.26)



$

(0.14)













Income (loss) per share – diluted:










Continuing operations


$

(0.88)



$

(0.03)



$

(1.16)



$

(0.02)



Discontinued operations


(0.01)



(0.20)



(0.10)



(0.12)



Net loss


$

(0.89)



$

(0.23)



$

(1.26)



$

(0.14)













Weighted average shares outstanding:










Basic


63,762



63,260



63,567



62,983



Diluted


63,762



63,260



63,567



62,983



 

 

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 29, 2012


December 31, 2011


December 29, 2012


December 31, 2011










Loss from continuing operations


$

(55,976)



$

(1,763)



$

(73,864)



$

(1,028)


Integration, acquisition and other charges


2,224



11,895



7,307



22,463


Stock-based compensation provision


888



1,587



5,333



8,716


Restructuring, impairment and other charges


4,534



3,835



27,100



17,812


Gain on bargain purchase








(11,720)


Loss (gain) on early extinguishment of debt, net


1,048



(4,011)



12,487



(4,011)


Income tax benefit (expense)


60,420



6,664



58,700



8,226


Interest expense on 7% Notes, net of taxes


1,020





3,093




Non-GAAP income from continuing operations


$

14,158



$

18,207



$

40,156



$

40,458











Income (loss) per share – diluted:









Continuing operations


$

(0.66)



$

(0.03)



$

(0.93)



$

(0.02)


Integration, acquisition and other charges


0.03



0.19



0.09



0.36


Stock-based compensation provision


0.01



0.03



0.07



0.14


Restructuring, impairment  and other charges


0.05



0.06



0.34



0.28


Gain on bargain purchase








(0.19)


Loss (gain) on early extinguishment of debt, net


0.01



(0.06)



0.16



(0.06)


Income tax benefit (expense)


0.72



0.10



0.74



0.13


Interest expense on 7% Notes, net of taxes


0.01





0.04




Non-GAAP income from continuing operations


$

0.17



$

0.29



$

0.51



$

0.64











Weighted average shares—diluted


84,665



63,333



79,382



63,124


 

 

Cenveo, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(Unaudited)













Three Months Ended


Years Ended



December 29, 2012


December 31, 2011


December 29, 2012


December 31, 2011










Net loss


$

(56,743)



$

(14,528)



$

(79,887)



$

(8,565)


Interest expense, net


29,181



27,904



114,755



115,968


Income tax expense


60,665



7,227



60,067



9,477


Depreciation


12,939



13,348



51,644



53,648


Amortization of intangible assets


2,527



2,554



10,283



10,306


Integration, acquisition and other charges


2,224



11,895



7,307



22,463


Stock-based compensation provision


888



1,587



5,333



8,716


Restructuring, impairment and other charges


4,534



3,835



27,100



17,812


Gain on bargain purchase








(11,720)


Loss (gain) on early extinguishment of debt, net


1,048



(4,011)



12,487



(4,011)


Loss from discontinued operations, net of taxes


767



12,765



6,023



7,537


Adjusted EBITDA, as defined


$

58,030



$

62,576



$

215,112



$

221,631


 


Cenveo, Inc. and Subsidiaries
Reconciliation of Operating Income to Non-GAAP Operating Income
(in thousands)
(Unaudited)













Three Months Ended


Years Ended



December 29, 2012


December 31, 2011


December 29, 2012


December 31, 2011










Operating income


$

33,996



$

38,998



$

112,196



$

117,760


Integration, acquisition and other charges


2,224



2,320



7,307



12,888


Stock-based compensation provision


888



1,587



5,333



8,716


Restructuring, impairment and other charges


4,534



3,835



27,100



17,812


Non-GAAP operating income


$

41,642



$

46,740



$

151,936



$

157,176


 

 

Cenveo, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)




December 29, 2012


December 31, 2011





Assets




Current assets:




Cash and cash equivalents

$

8,110



$

17,753


Accounts receivable, net

261,611



288,483


Inventories

130,769



133,796


Prepaid and other current assets

68,473



72,742


Assets of discontinued operations - current



22,956


Total current assets

468,963



535,730






Property, plant and equipment, net

282,600



328,567


Goodwill

191,415



190,822


Other intangible assets, net

212,904



223,563


Other assets, net

44,673



79,490


Assets of discontinued operations - long-term



27,416


Total assets

$

1,200,555



$

1,385,588






Liabilities and Shareholders' Deficit




Current liabilities:




Current maturities of long-term debt

$

11,748



$

8,809


Accounts payable

185,271



186,648


Accrued compensation and related liabilities

25,323



39,155


Other current liabilities

77,892



95,907


Liabilities of discontinued operations - current



5,346


Total current liabilities

300,234



335,865






Long-term debt

1,171,870



1,237,534


Other liabilities

192,765



185,419


Liabilities of discontinued operations - long-term



8,474


Commitments and contingencies




Shareholders' deficit:




Preferred stock




Common stock

638



633


Paid-in capital

354,983



350,390


Retained deficit

(752,734)



(672,847)


Accumulated other comprehensive loss

(67,201)



(59,880)


Total shareholders' deficit

(464,314)



(381,704)


Total liabilities and shareholders' deficit

$

1,200,555



$

1,385,588


 


Cenveo, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(in thousands)



For The Years Ended


December 29, 2012


December 31, 2011

Cash flows from operating activities:




Net loss

$

(79,887)



$

(8,565)


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




Loss on sale of discontinued operations, net of taxes

6,260




Loss (income) from discontinued operations, net of taxes

(237)



7,537


Impairment of goodwill related to discontinued operations



13,500


Depreciation

51,644



53,648


Amortization of intangible assets

10,283



10,306


Non-cash interest expense, net

8,263



5,277


Deferred income taxes

2,398



11,793


Non-cash taxes

56,500




(Gain) loss on sale of assets

(2,796)



376


Non-cash restructuring, impairment and other charges, net

11,226



3,853


Gain on bargain purchase



(11,720)


Loss (gain) on early extinguishment of debt, net

12,487



(4,011)


Provisions for bad debts

2,097



2,348


Provisions for inventory obsolescence

3,603



3,416


Stock-based compensation provision

5,333



8,716


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




Accounts receivable

27,035



(6,912)


Inventories

(507)



20,860


Accounts payable and accrued compensation and related liabilities

(12,209)



11,777


Other working capital changes

(29,100)



(14,796)


Other, net

(15,595)



(23,585)


Net cash provided by operating activities of continuing operations

56,798



83,818


Net cash used in operating activities of discontinued operations

(4,733)



(3,496)


Net cash provided by operating activities

52,065



80,322


Cash flows from investing activities:




Cost of business acquisitions, net of cash acquired

(644)



(59,719)


Capital expenditures

(20,951)



(15,671)


Purchase of investment

(350)




Proceeds from sale of property, plant and equipment

7,978



11,114


Proceeds from sale of assets

5,700




Net cash used in investing activities of continuing operations

(8,267)



(64,276)


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

39,921



(536)


Net cash provided by (used in) investing activities

31,654



(64,812)


Cash flows from financing activities:




Repayment of 10.5% senior notes

(169,875)




Repayment of 7.875% senior subordinated notes

(214,831)



(8,952)


Repayment of Term Loan B due 2016



(23,800)


Repayment of 8.375% senior subordinated notes

(24,787)



(5,363)


Payment of financing related costs and expenses and debt issuance discounts

(37,836)



(2,675)


Repayments of other long-term debt

(4,846)



(6,403)


Retirement of common stock upon vesting of RSUs

(735)



(1,283)


Proceeds from issuance of 11.5% senior notes

225,000




Proceeds from issuance of 7% senior exchangeable notes

86,250




Borrowings (repayments) under revolving credit facility, net

18,000




Proceeds from exercise of stock options



356


Proceeds from issuance of Term Loan B

31,844




Net cash used in financing activities of continuing operations

(91,816)



(48,120)


Net cash used in financing activities of discontinued operations

(1,652)




Net cash used in financing activities

(93,468)



(48,120)


Effect of exchange rate changes on cash and cash equivalents

106



614


Net decrease in cash and cash equivalents

(9,643)



(31,996)


Cash and cash equivalents at beginning of year

17,753



49,749


Cash and cash equivalents at end of year

$

8,110



$

17,753



In addition to results presented in accordance with accounting principles generally accepted in the U.S. ("GAAP"), we use 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 capital expenditures, net of proceeds from plant, property and equipment. 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 a worldwide distribution platform, 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 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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