Cenveo Announces Fourth Quarter and Full Year 2013 Results

4th Quarter Net Sales of $509.9 million

4th Quarter Adjusted EBITDA of $52.1 million

4th Quarter Adjusted EBITDA Margin of 10.2%

Integration of National Envelope Assets on Schedule

Feb 26, 2014, 16:12 ET from Cenveo, Inc.

STAMFORD, Conn., Feb. 26, 2014 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three months and full year ended December 28, 2013.

The Company generated net sales of $509.9 million for the three months ended December 28, 2013, compared to $437.7 million for the same period last year, an increase of 16.5%. The Company generated net sales of $1.8 billion for the year ended December 28, 2013, compared to $1.7 billion for the prior year. The increase in net sales was primarily due to the acquisition of certain assets of National Envelope in the third quarter, as National Envelope was not included in our 2012 results, as well as organic growth within our envelope and label and packaging segments, partially offset by a decline in sales in our print operations as a result of lower demand and pricing pressures.

Operating loss was $15.7 million for the three months ended December 28, 2013, compared to operating income of $31.7 million for the same period last year. The decrease in operating income was primarily due to a $33.4 million impairment charge related to the retirement of certain trade names, lower sales from our print operations, and higher input costs within several of our segments. Non-GAAP operating income was $31.6 million for the three months ended December 28, 2013, compared to $39.3 million for the same period last year. For the year ended December 28, 2013, operating income was $29.4 million, compared to $101.2 million for the prior year. The decrease in operating income was primarily due to a $33.4 million impairment charge related to the retirement of certain trade names, lower sales from our print operations and acquisition-related costs due to the acquisition of certain assets of National Envelope. These decreases were offset in part by higher gross margins in our envelope operations from volume increases. For the year ended December 28, 2013, non-GAAP operating income was $101.1 million, compared to $140.8 million for the prior year. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and other charges and impairment of intangible assets. A reconciliation of operating (loss) income to non-GAAP operating income is presented in the attached tables.

For the three months ended December 28, 2013, the Company had a loss from continuing operations of $59.5 million, or $0.90 per share, compared to a loss of $57.4 million, or $0.90 per share for the same period last year. Non-GAAP income from continuing operations was $9.3 million, or $0.11 per share, for the three months ended December 28, 2013, as compared to $11.8 million, or $0.14 per share, for the same period last year. For the year ended December 28, 2013, the Company had a loss from continuing operations of $85.5 million, or $1.32 per share, compared to $80.5 million, or $1.27 per share for the same period last year. For the year ended December 28, 2013, non-GAAP loss from continuing operations was $6.2 million, or $0.10 per share, as compared to non-GAAP income of $29.1 million, or $0.37 per share, for the same period last year. Non-GAAP (loss) income from continuing operations excludes integration, acquisition and other related charges, stock-based compensation provision, restructuring and other charges, impairment of intangible assets, gain on bargain purchase, loss 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 (loss) from continuing operations is presented in the attached tables.

Adjusted EBITDA for the three months ended December 28, 2013 was $52.1 million, compared to Adjusted EBITDA of $55.3 million for the same period last year. Adjusted EBITDA for the year ended December 28, 2013, was $167.2 million, compared to $202.7 million, for the same period last year. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, integration, acquisition and other related charges, stock-based compensation provision, restructuring and other charges, impairment of intangible assets, gain on bargain purchase, loss (gain) on early extinguishment of debt, net and 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: "We are very pleased with our fourth quarter performance and the continuation of the positive operational trends we experienced for the past couple of quarters. In the fourth quarter, we delivered 3.5% organic revenue growth from both our envelope and label and packaging segments. Direct mail continued to perform well as we saw strong growth in credit card mailings during the quarter. Recent leadership changes and selected capital investments are showing results in our print and label and packaging operations. The integration of National Envelope continues to progress well and remains on track with our expectations, as many cost actions have been implemented to date and we are relatively complete with the anticipated working capital build associated with the transaction."

Mr. Burton concluded: "I am very excited about our prospects for 2014 given the momentum in our business and the strength of our current team. We spent the majority of last year re-focusing and building our operations for the future and in 2014 we expect to begin to see the positive results of our efforts. Between the continued investment in capital and technology across our platform, the acquisition of certain assets of National Envelope and related investment of working capital, we have a strong foundation for success in 2014 and beyond."

Conference Call: Cenveo will host a conference call tomorrow, Thursday, February 27, 2014 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)

For The Three Months Ended

For The Years Ended

December 28, 2013

December 29, 2012

December 28, 2013

December 29, 2012

Net sales

$

509,873

$

437,700

$

1,777,808

$

1,738,293

Cost of sales

429,539

354,028

1,485,931

1,417,147

Selling, general and administrative expenses

57,302

45,062

206,085

182,980

Amortization of intangible assets

2,489

2,426

9,962

9,881

Restructuring and other charges

2,857

4,534

13,100

27,100

Impairment of intangible assets

33,367

33,367

Operating (loss) income

(15,681)

31,650

29,363

101,185

Gain on bargain purchase

(17,262)

Interest expense, net

27,256

29,181

112,677

114,755

Loss on early extinguishment of debt, net

1,884

1,048

11,324

12,487

Other income, net

(4,202)

(922)

(5,602)

(1,249)

(Loss) income from continuing operations before income taxes

(40,619)

2,343

(71,774)

(24,808)

Income tax expense

18,849

59,732

13,753

55,720

Loss from continuing operations

(59,468)

(57,389)

(85,527)

(80,528)

Income from discontinued operations, net of taxes

1,791

646

16,741

641

Net loss

(57,677)

(56,743)

(68,786)

(79,887)

Other comprehensive income (loss):

Pension liability adjustment, net of taxes

31,430

(7,986)

31,430

(7,986)

Currency translation adjustment

(1,390)

(989)

(4,529)

665

Comprehensive loss

$

(27,637)

$

(65,718)

$

(41,885)

$

(87,208)

(Loss) income per share – basic:

Continuing operations

$

(0.90)

$

(0.90)

$

(1.32)

$

(1.27)

Discontinued operations

0.03

0.01

0.25

0.01

Net loss

$

(0.87)

$

(0.89)

$

(1.07)

$

(1.26)

(Loss) income per share – diluted:

Continuing operations

$

(0.90)

$

(0.90)

$

(1.32)

$

(1.27)

Discontinued operations

0.03

0.01

0.25

0.01

Net loss

$

(0.87)

$

(0.89)

$

(1.07)

$

(1.26)

Weighted average shares outstanding:

Basic

66,209

63,762

64,576

63,567

Diluted

66,209

63,762

64,576

63,567

              

Cenveo, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(in thousands)

For The Years Ended

2013

2012

Cash flows from operating activities:

Net loss

$

(68,786)

$

(79,887)

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

(Gain) loss on sale of discontinued operations, net of taxes

(14,933)

6,260

Income from discontinued operations, net of taxes

(1,808)

(6,901)

Depreciation

50,534

50,777

Amortization of intangible assets

9,962

9,881

Non-cash interest expense, net

10,289

8,263

Deferred income taxes

(28,672)

(1,948)

Non-cash taxes

40,562

56,500

Gain on bargain purchase

(17,262)

Gain on sale of assets

(120)

(2,782)

Non-cash restructuring and other charges, net

2,622

11,226

Impairment of intangible assets

33,367

Loss on early extinguishment of debt, net

11,324

12,487

Provisions for bad debts

4,392

2,024

Provisions for inventory obsolescence

6,523

3,588

Stock-based compensation provision

3,739

5,333

Gain on insurance claim

(2,670)

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

Accounts receivable

(31,686)

26,594

Inventories

(40,622)

(617)

Accounts payable and accrued compensation and related liabilities

69,848

(13,291)

Other working capital changes

4,047

(29,050)

Other, net

(18,335)

(15,613)

Net cash provided by operating activities of continuing operations

22,315

42,844

Net cash provided by operating activities of discontinued operations

5,878

9,221

Net cash provided by operating activities

28,193

52,065

Cash flows from investing activities:

Cost of business acquisitions, net of cash acquired

(33,166)

(644)

Capital expenditures

(29,235)

(20,563)

Purchase of investment

(1,650)

(350)

Proceeds from insurance claim

3,036

Proceeds from sale of property, plant and equipment

8,304

7,978

Proceeds from sale of intangible asset

5,700

Net cash used in investing activities of continuing operations

(52,711)

(7,879)

Net cash provided by investing activities of discontinued operations

45,214

39,533

Net cash (used in) provided by investing activities

(7,497)

31,654

Cash flows from financing activities:

Repayment of 10.5% senior notes

(169,875)

Repayment of 7.875% senior subordinated notes

(67,848)

(214,831)

(Repayment) borrowing of Term Loan B due 2016

(388,205)

31,844

Repayment of 8.375% senior subordinated notes

(24,787)

Payment of financing related costs and expenses and debt issuance discounts

(15,570)

(37,836)

Repayments of other long-term debt

(7,365)

(4,846)

Purchase and retirement of common stock upon vesting of RSUs

(660)

(735)

Proceeds from issuance of 11.5% senior notes

225,000

Proceeds from issuance of 7% senior exchangeable notes

86,250

(Repayment) borrowings under Revolving Credit Facility, net

(18,000)

18,000

Proceeds from issuance of 15% Unsecured Term Loan due 2017

50,000

Repayment of 15% Unsecured Term Loan due 2017

(40,000)

Proceeds from exercise of stock options

98

Repayment of Term Loan Facility due 2017

(30,900)

Proceeds from issuance of Term Loan Facility due 2017

360,000

Borrowings under ABL Facility due 2017

699,200

Repayments under ABL Facility due 2017

(577,800)

Proceeds from equipment loan

20,000

Repayments of equipment loan

(500)

Net cash used in financing activities of continuing operations

(17,550)

(91,816)

Net cash used in financing activities of discontinued operations

(1,652)

Net cash used in financing activities

(17,550)

(93,468)

Effect of exchange rate changes on cash and cash equivalents

73

106

Net increase (decrease) in cash and cash equivalents

3,219

(9,643)

Cash and cash equivalents at beginning of period

8,110

17,753

Cash and cash equivalents at end of period

$

11,329

$

8,110

         

 

Cenveo, Inc. and Subsidiaries

Consolidated Balance Sheets

(in thousands)

2013

2012

Assets

Current assets:

Cash and cash equivalents

$

11,329

$

8,110

Accounts receivable, net

281,586

254,389

Inventories

161,565

127,235

Prepaid and other current assets

55,353

67,964

Assets of discontinued operations - current

132

11,265

Total current assets

509,965

468,963

Property, plant and equipment, net

304,907

279,078

Goodwill

186,436

187,415

Other intangible assets, net

168,749

205,199

Other assets, net

43,614

44,632

Assets of discontinued operations - long-term

33

15,268

Total assets

$

1,213,704

$

1,200,555

Liabilities and Shareholders' Deficit

Current liabilities:

Current maturities of long-term debt

$

9,174

$

11,748

Accounts payable

244,228

179,850

Accrued compensation and related liabilities

32,139

24,678

Other current liabilities

81,198

77,367

Liabilities of discontinued operations - current

2,013

6,591

Total current liabilities

368,752

300,234

Long-term debt

1,176,351

1,171,870

Other liabilities

165,581

191,885

Liabilities of discontinued operations - long-term

880

Commitments and contingencies

Shareholders' deficit:

Preferred stock, $0.01 par value; 25 shares authorized, no shares issued

Common stock, $0.01 par value; 100,000 shares authorized, 66,265 and 63,762 shares issued and outstanding as of the years ended 2013 and 2012, respectively

663

638

Paid-in capital

364,177

354,983

Retained deficit

(821,520)

(752,734)

Accumulated other comprehensive loss

(40,300)

(67,201)

Total shareholders' deficit

(496,980)

(464,314)

Total liabilities and shareholders' deficit

$

1,213,704

$

1,200,555

              

Cenveo, Inc. and Subsidiaries

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

(in thousands)

(Unaudited)

For The Three Months Ended

For The Years Ended

December 28, 2013

December 29, 2012

December 28, 2013

December 29, 2012

Operating (loss) income

$

(15,681)

$

31,650

$

29,363

$

101,185

Integration, acquisition and other charges

10,242

2,224

21,571

7,219

Stock-based compensation provision

860

888

3,739

5,333

Restructuring and other charges

2,857

4,534

13,100

27,100

Impairment of intangible assets

33,367

33,367

Non-GAAP operating income

$

31,645

$

39,296

$

101,140

$

140,837

              

Cenveo, Inc. and Subsidiaries

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

(in thousands, except per share data)

(Unaudited)

For The Three Months Ended

For The Years Ended

December 28, 2013

December 29, 2012

December 28, 2013

December 29, 2012

Loss from continuing operations

$

(59,468)

$

(57,389)

$

(85,527)

$

(80,528)

Integration, acquisition and other charges

10,242

2,224

21,571

7,219

Stock-based compensation provision

860

888

3,739

5,333

Restructuring and other charges

2,857

4,534

13,100

27,100

Impairment of intangible assets

33,367

33,367

Gain on bargain purchase

(17,262)

Loss on early extinguishment of debt, net

1,884

1,048

11,324

12,487

Income tax expense

18,550

59,487

13,439

54,353

Interest expense on 7% Notes, net of taxes

1,020

1,020

3,093

Non-GAAP income (loss) from continuing operations

$

9,312

$

11,812

$

(6,249)

$

29,057

Income (loss) per share – diluted:

Continuing operations

$

(0.67)

$

(0.67)

$

(1.32)

$

(1.01)

Integration, acquisition and other charges

0.12

0.03

0.33

0.09

Stock-based compensation provision

0.01

0.01

0.06

0.07

Restructuring and other charges

0.03

0.05

0.20

0.34

Impairment of intangible assets

0.38

0.52

Gain on bargain purchase

(0.27)

Loss on early extinguishment of debt, net

0.02

0.01

0.18

0.16

Income tax expense

0.21

0.70

0.20

0.68

Interest expense on 7% Notes, net of taxes

0.01

0.01

0.04

Non-GAAP income (loss) from continuing operations

$

0.11

$

0.14

$

(0.10)

$

0.37

Weighted average shares—diluted

88,320

84,665

64,576

79,382

              

Cenveo, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(Unaudited)

For The Three Months Ended

For The Years Ended

December 28, 2013

December 29, 2012

December 28, 2013

December 29, 2012

Net loss

$

(57,677)

$

(56,743)

$

(68,786)

$

(79,887)

Interest expense, net

27,256

29,181

112,677

114,755

Income tax expense

18,849

59,732

13,753

55,720

Depreciation

13,723

12,705

50,534

50,777

Amortization of intangible assets

2,489

2,426

9,962

9,881

Impairment of intangible assets

33,367

33,367

Integration, acquisition and other charges

10,242

2,224

21,571

7,219

Stock-based compensation provision

860

888

3,739

5,333

Restructuring and other charges

2,857

4,534

13,100

27,100

Gain on bargain purchase

(17,262)

Loss on early extinguishment of debt, net

1,884

1,048

11,324

12,487

Income from discontinued operations, net of taxes

(1,791)

(646)

(16,741)

(641)

Adjusted EBITDA, as defined

$

52,059

$

55,349

$

167,238

$

202,744

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 (loss) from continuing operations, non-GAAP operating income, non-GAAP operating income margin, and adjusted free cash flow. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, integration, acquisition and other charges, stock-based compensation provision, impairment of intangible assets, restructuring and other charges, gain on bargain purchase, loss on early extinguishment of debt, net and income from discontinued operations, net of taxes. Non-GAAP operating income is defined as operating (loss) income excluding integration, acquisition and other charges, stock-based compensation provision, impairment of intangible assets, and restructuring and other charges. Non-GAAP operating income margin is calculated by dividing non-GAAP operating income into net sales. Non-GAAP income (loss) from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, impairment of intangible assets, restructuring and other charges, gain on bargain purchase, loss on early extinguishment of debt, net, and adjustment to income taxes to reflect an estimated cash tax rate and an adjustment for interest expense related to the 7% Notes. Adjusted 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 are 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 (loss) 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 (loss) from continuing operations, non-GAAP operating income, non-GAAP operating income margin and adjusted 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 boxes, custom labels, shrink sleeve labels, 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 and other long-lived 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; and (xvi) our dependence upon information technology systems. 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.

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SOURCE Cenveo, Inc.



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