Cenveo Announces Second Quarter 2013 Results Direct Mail volumes up over 20% versus prior year

Evaluating distressed industry assets

Replacement packaging press operational end of 2nd quarter

Company provides update on strategic review

STAMFORD, Conn., Aug. 7, 2013 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three and six months ended June 29, 2013.

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

The Company generated net sales of $415.7 million for the three months ended June 29, 2013, compared to $433.2 million for the same period last year. The Company generated net sales of $844.0 million for the six months ended June 29, 2013, compared to $883.0 million for the same period last year. The decrease in net sales for both periods was primarily due to lower sales volumes in our commercial print operations mainly resulting from production timing and lower customer demand, lower sales of office product envelopes due to the transition of a low margin account out of our operating platform, lower average selling price from our direct envelopes due to our initiatives to gain market share as well as pricing pressures primarily from a competitor now in bankruptcy protection. These decreases were offset in part by higher sales volume from our direct envelopes due to our initiatives to increase market share and increased direct mail demand.

Operating income was $19.2 million for the three months ended June 29, 2013, compared to $28.6 million for the same period last year. The decrease in operating income was primarily due to lower sales volumes and higher input costs in ancillary raw material categories. Non-GAAP operating income was $24.9 million for the three months ended June 29, 2013, compared to $35.9 million for the same period last year. Operating income was $33.5 million for the six months ended June 29, 2013, compared to $42.7 million for the same period last year. The decrease in operating income was primarily due to lower sales volumes and higher input costs in ancillary raw material categories, offset in part by lower restructuring, impairment and other charges. Non-GAAP operating income was $45.6 million for the six months ended June 29, 2013, compared to $67.4 million for the same period last year. A reconciliation of operating income to non-GAAP operating income is presented in the attached tables.

For the three months ended June 29, 2013, the Company had a loss from continuing operations of $17.6 million, or $0.28 per share, compared to a loss of $0.2 million, or $0.01 per share for the same period last year. Non-GAAP loss from continuing operations was $0.5 million, or $0.01 per share, for the three months ended June 29, 2013, as compared to non-GAAP income from continuing operations of $8.0 million, or $0.13 per share, for the same period last year. For the six months ended June 29, 2013, the Company had a loss from continuing operations of $36.5 million, or $0.57 per share, compared to a loss of $22.8 million, or $0.36 per share for the same period last year. Non-GAAP loss from continuing operations was $9.8 million, or $0.15 per share, for the six months ended June 29, 2013, as compared to non-GAAP income from continuing operations of $11.2 million, or $0.18 per share, for the same period last year. A reconciliation of loss from continuing operations to non-GAAP (loss) income from continuing operations is presented in the attached tables.

Cash flow provided by operating activities of continuing operations for the six months ended June 29, 2013 was $9.6 million, compared to cash flow provided by operating activities of continuing operations of $15.9 million for the same period last year. The change in our cash flows year over year is due to an inventory build related to potential supply constraints and pending price increases for certain raw materials and the timing of interest and vendor payments in the first six months compared to prior year.

Adjusted EBITDA for the three months ended June 29, 2013 was $42.0 million, compared to Adjusted EBITDA of $52.6 million for the same period last year. Adjusted EBITDA for the six months ended June 29, 2013 was $78.3 million, compared to Adjusted EBITDA of $99.4 million for the same period last year. A reconciliation of net loss to Adjusted EBITDA is presented in the attached tables.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"Our second quarter performance was mixed. Our labels and packaging operations had a solid quarter with positive revenue growth up 2.5% despite continued disruption from the press fire that occurred earlier this year. I am very proud of our team's performance during this difficult period of time and I remain optimistic about our future prospects in our packaging business as the replacement press became fully operational in late June.  We continue to expect that the performance of our print operations will begin to stabilize as we enter the back-half of the year as important industry verticals, such as managed care and travel and leisure enter seasonally stronger periods. In the meantime, we continue to remain vigilant on costs and increasing sales within this segment. Our envelope operations have continued to see significant improvement in direct mail as credit card mailing volumes have increased over 20% in the first half of the year, the strongest performance we have experienced since 2011. Despite this improvement in volume, we have experienced pricing pressures due to industry competitive dynamics."

Strategic Update:
As discussed on our last conference call, we initiated reviews of all strategic options for some of our operating assets. Our recent focus has narrowed on divesting certain underperforming assets or assets that do not fit our future strategic plans. We continue to be in discussions with multiple parties for certain assets and expect to conclude any present opportunities over the coming months. More importantly, since our last conference call, we began evaluating distressed assets within certain industries that we operate and may look to potentially integrate them into our existing platform. While no assurances can be made that any transaction will be consummated, we expect that any potential transaction currently being contemplated regarding these distressed assets would be in the best interests of our customers and shareholders as it must be deleveraging to our capital structure and must be accretive to earnings and cash flow per share. 

Conference Call:
Cenveo will host a conference call tomorrow, Thursday, August 8, 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

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(in thousands, except per share data)

(Unaudited)



For the Three Months Ended


For the Six Months Ended



June 29, 2013


June 30, 2012


June 29, 2013


June 30, 2012

Net sales


$

415,702



$

433,218



$

843,993



$

882,977


Cost of sales


343,611



352,800



702,246



722,847


Selling, general and administrative expenses


47,595



44,913



96,173



93,827


Amortization of intangible assets


2,607



2,586



5,214



5,209


Restructuring, impairment and other charges


2,724



4,354



6,906



18,376


Operating income


19,165



28,565



33,454



42,718


Interest expense, net


28,235



28,796



57,810



56,648


Loss on early extinguishment of debt, net


7,720



785



7,847



11,414


Other income, net


(2,291)



(1,116)



(1,995)



(818)


(Loss) income from continuing operations before income taxes


(14,499)



100



(30,208)



(24,526)


Income tax expense (benefit)


3,088



314



6,286



(1,678)


Loss from continuing operations


(17,587)



(214)



(36,494)



(22,848)


Loss from discontinued operations, net of taxes


(1,296)



(187)



(1,534)



(4,771)


Net loss


(18,883)



(401)



(38,028)



(27,619)


Other comprehensive income (loss):









  Currency translation adjustment


(2,329)



(2,202)



(3,108)



(758)


Comprehensive income (loss)


$

(21,212)



$

(2,603)



$

(41,136)



$

(28,377)











Loss per share – basic:









Continuing operations


$

(0.28)



$

(0.01)



$

(0.57)



$

(0.36)


Discontinued operations


(0.02)





(0.03)



(0.08)


Net loss


$

(0.30)



$

(0.01)



$

(0.60)



$

(0.44)











Loss per share – diluted:









Continuing operations


$

(0.28)



$

(0.01)



$

(0.57)



$

(0.36)


Discontinued operations


(0.02)





(0.03)



(0.08)


Net loss


$

(0.30)



$

(0.01)



$

(0.60)



$

(0.44)











Weighted average shares outstanding:









Basic


63,922



63,476



63,881



63,441


Diluted


63,922



63,476



63,881



63,441




Cenveo, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)


For the Six Months Ended


June 29, 2013


June 30, 2012

Cash flows from operating activities:




Net loss

$

(38,028)



$

(27,619)


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




Loss on sale of discontinued operations, net of taxes



5,319


Loss (income) from discontinued operations, net of taxes

1,534



(548)


Depreciation and amortization, excluding non-cash interest expense

30,686



31,180


Non-cash interest expense, net

5,143



3,786


Deferred income taxes

4,779



(3,381)


Gain on sale of assets

(226)



(1,118)


Non-cash restructuring, impairment and other charges, net

783



10,633


Loss on early extinguishment of debt, net

7,847



11,414


Stock-based compensation provision

1,977



2,993


Gain on insurance claim

(2,670)




Other non-cash charges

2,504



2,835


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




Accounts receivable

12,152



25,247


Inventories

(14,793)



806


Accounts payable and accrued compensation and related liabilities

5,487



(25,251)


Other working capital changes

2,904



(13,009)


Other, net

(10,518)



(7,341)


Net cash provided by operating activities of continuing operations

9,561



15,946


Net cash used in operating activities of discontinued operations

(215)



(3,959)


Net cash provided by operating activities

9,346



11,987


Cash flows from investing activities:




Cost of business acquisitions, net of cash acquired

(5,145)



(644)


Capital expenditures

(15,730)



(11,282)


Purchase of investment

(1,650)




Proceeds from insurance claim

3,036




Proceeds from sale of property, plant and equipment

7,561



1,948


Proceeds from sale of intangible asset



1,700


Net cash used in investing activities of continuing operations

(11,928)



(8,278)


Net cash provided by investing activities of discontinued operations



39,875


Net cash (used in) provided by investing activities

(11,928)



31,597


Cash flows from financing activities:




Repayment of 10.5% senior notes



(169,875)


Repayment of 7.875% senior subordinated notes

(67,848)



(180,139)


(Repayment) borrowing of Term Loan B due 2016

(389,105)



18,948


Repayment of 8.375% senior subordinated notes



(24,787)


Payment of financing related costs and expenses and debt issuance discounts

(13,884)



(32,335)


Repayments of other long-term debt

(2,413)



(2,639)


Purchase and retirement of common stock upon vesting of RSUs

(363)



(434)


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)



34,700


Proceeds from issuance of 15% unsecured term loan due 2017

50,000




Proceeds from issuance of term loan facility

360,000




Borrowings under ABL facility due 2017

266,700




Repayments under ABL facility due 2017

(163,900)




Repayment of 15% unsecured term loan due 2017

(15,000)




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

6,187



(45,311)


Net cash used in financing activities of discontinued operations



(1,652)


Net cash provided by (used in) financing activities

6,187



(46,963)


Effect of exchange rate changes on cash and cash equivalents

161



(307)


Net increase (decrease) in cash and cash equivalents

3,766



(3,686)


Cash and cash equivalents at beginning of period

8,110



17,753


Cash and cash equivalents at end of period

$

11,876



$

14,067


 

 

 

Cenveo, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(in thousands)



June 29, 2013


December 29, 2012



(unaudited)




Assets





Current assets:





Cash and cash equivalents

$

11,876



$

8,110



Accounts receivable, net

244,670



258,199



Inventories

144,358



130,432



Prepaid and other current assets

64,989



68,299



Assets of discontinued operations - current

2,214



3,923



  Total current assets

468,107



468,963








Property, plant and equipment, net

266,720



281,798



Goodwill

190,742



191,415



Other intangible assets, net

210,808



212,904



Other assets, net

49,392



44,673



Assets of discontinued operations - long-term

481



1,456



Total assets

$

1,186,250



$

1,201,209








Liabilities and Shareholders' Deficit





Current liabilities:





Current maturities of long-term debt

$

7,483



$

11,748



Accounts payable

187,800



182,799



Accrued compensation and related liabilities

25,469



24,947



Other current liabilities

80,784



77,610



Liabilities of discontinued operations - current

2,511



3,130



  Total current liabilities

304,047



300,234








Long-term debt

1,194,422



1,171,870



Other liabilities

191,453



193,419



Liabilities of discontinued operations - long-term

164





Commitments and contingencies





Shareholders' deficit:





Preferred stock





Common stock

640



638



Paid-in capital

356,595



354,983



Retained deficit

(790,762)



(752,734)



Accumulated other comprehensive loss

(70,309)



(67,201)



  Total shareholders' deficit

(503,836)



(464,314)



Total liabilities and shareholders' deficit

$

1,186,250



$

1,201,209





Cenveo, Inc. and Subsidiaries

Reconciliation of Operating Income to Non-GAAP Operating Income

(in thousands)

(Unaudited)




For the Three Months Ended


For the Six Months Ended



June 29, 2013


June 30, 2012


June 29, 2013


June 30, 2012










Operating income


$

19,165



$

28,565



$

33,454



$

42,718


Integration, acquisition and other charges


1,980



1,574



3,305



3,321


Stock-based compensation provision


1,024



1,406



1,977



2,993


Restructuring, impairment and other charges


2,724



4,354



6,906



18,376


Non-GAAP operating income


$

24,893



$

35,899



$

45,642



$

67,408




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 Six Months Ended



June 29,  2013


June 30, 2012


June 29, 2013


June 30, 2012










Loss from continuing operations


$

(17,587)



$

(214)



$

(36,494)



$

(22,848)


Integration, acquisition and other charges


1,980



1,574



3,305



3,321


Stock-based compensation provision


1,024



1,406



1,977



2,993


Restructuring, impairment and other charges


2,724



4,354



6,906



18,376


Loss on early extinguishment of debt, net


7,720



785



7,847



11,414


Income tax benefit (expense)


3,657



67



6,657



(2,025)


Non-GAAP income (loss) from continuing operations


$

(482)



$

7,972



$

(9,802)



$

11,231











Income (loss) per share – diluted:









Continuing operations


$

(0.28)



$

(0.01)



$

(0.57)



$

(0.36)


Integration, acquisition and other charges


0.03



0.03



0.05



0.05


Stock-based compensation provision


0.02



0.02



0.03



0.05


Restructuring, impairment  and other charges


0.04



0.07



0.11



0.29


Loss on early extinguishment of debt, net


0.12



0.01



0.12



0.18


Income tax benefit (expense)


0.06



0.01



0.11



(0.03)


Non-GAAP income (loss) from continuing operations


$

(0.01)



$

0.13



$

(0.15)



$

0.18











Weighted average shares—diluted


63,922



63,476



63,881



63,474




Cenveo, Inc. and Subsidiaries

Reconciliation of Net Loss to Adjusted EBITDA

(in thousands)

(Unaudited)




For the Three Months Ended


For the Six Months Ended



June 29, 2013


June 30, 2012


June 29, 2013


June 30, 2012










Net loss


$

(18,883)



$

(401)



$

(38,028)



$

(27,619)


Interest expense, net


28,235



28,796



57,810



56,648


Income tax expense (benefit)


3,088



314



6,286



(1,678)


Depreciation


12,216



12,956



25,472



25,971


Amortization of intangible assets


2,607



2,586



5,214



5,209


Integration, acquisition and other charges


1,980



1,574



3,305



3,321


Stock-based compensation provision


1,024



1,406



1,977



2,993


Restructuring, impairment and other charges


2,724



4,354



6,906



18,376


Loss on early extinguishment of debt, net


7,720



785



7,847



11,414


Loss from discontinued operations, net of taxes


1,296



187



1,534



4,771


Adjusted EBITDA, as defined


$

42,007



$

52,557



$

78,323



$

99,406


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, 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. 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.  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 (gain) on early extinguishment of debt, net, and an adjustment to income taxes to reflect an estimated cash tax rate. 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 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 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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