Cenveo Announces Third Quarter 2013 Results

                 Cenveo Announces Third Quarter 2013 Results

Net Sales of $442.8 million, up 1.3% from Q3 of 2012

Direct mail volumes up over 15% year-to-date

Began integration of National Envelope Assets

Completed sale of Custom Envelope Division

PR Newswire

STAMFORD, Conn., Nov. 6, 2013

STAMFORD, Conn., Nov. 6, 2013 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today
announced results for the three and nine months ended September28, 2013. The
reported results include the effect of the acquisition of certain assets of
National Envelope on September 16, 2013 while the custom envelope division is
reported as a discontinued operation.

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

"Our third quarter results were in line with our expectations. We continued to
see similar trends during the third quarter that we experienced in the first
half of the year with negative pricing pressures in our envelope and
commercial print businesses impacting our results. However, several
developments late in the third quarter began to change the operating landscape
for us, including the acquisition of certain assets of National Envelope,
which closed in mid-September, and the divestiture of our custom envelope
division, which occurred at the end of the quarter," said Robert G. Burton,
Sr., Chairman & Chief Executive Officer. "Despite the short period of
operating the National Envelope assets, we are pleased with our progress to
date and the fact that these assets operated profitably in a short period of
time. These immediate results give us early confidence that our integration
plan is on track, and our target to achieve $30 million in annual run rate
EBITDA by the end of next year is attainable. Our packaging facility, which
experienced the press fire earlier this year, finally achieved similar
pre-fire throughput levels during September as well. Given these strategic
transactions, signs of continued positive results within our label and
packaging operations, pricing normalization in the envelope market and
improving trends within our print business, we are optimistic that the fourth
quarter and, more importantly, 2014 will be much stronger for Cenveo than what
we have experienced to date in 2013."

The Company generated net sales of $442.8 million for the three months ended
September28, 2013, compared to $437.2 million for the same period last year,
an increase of 1.3%. The increase in net sales is attributable to higher sales
volumes in our direct envelope business due to our market share initiatives as
well as National Envelope's sales for the stub period post acquisition. These
increases were offset substantially by sales declines in our commercial print
operations due to lower customer demand and continued pricing pressures. The
Company generated net sales of $1.27 billion in the nine months ended
September28, 2013 versus $1.30 billion in the nine months ended September 29,
2012. This decrease primarily relates to our commercial printing operations
due to lower customer demand and continued pricing pressures, partially offset
by an increase in sales from our envelope operations due to our market share
initiatives and higher direct mail volumes as well as National Envelope's
sales for the stub period post acquisition.

Operating income was $16.5 million for the three months ended September28,
2013, compared to $32.3 million for the same period last year. Non-GAAP
operating income was $28.8 million for the three months ended September28,
2013, compared to $39.6 million for the same period last year. Operating
income was $45.0 million for the nine months ended September28, 2013,
compared to $69.5 million for the same period last year. Non-GAAP operating
income was $69.5 million for the nine months ended September28, 2013,
compared to $101.5 million for the same period last year. The decrease in
operating income in both periods was primarily due to lower average selling
prices and higher input costs within our envelope and commercial printing
operations, and acquisition costs related to National Envelope. A
reconciliation of operating income to non-GAAP operating income is presented
in the attached tables.

For the three months ended September28, 2013, the Company had income from
continuing operations of $10.5 million, or $0.13 per diluted share, compared
to income of $3.0 million, or $0.04 per diluted share for the same period last
year. Non-GAAP income from continuing operations was $1.2 million, or $0.01
per share, for the three months ended September28, 2013, as compared to
non-GAAP income from continuing operations of $10.9 million, or $0.13 per
diluted share, for the same period last year. For the nine months ended
September28, 2013, the Company had a loss from continuing operations of $29.0
million, or $0.45 per share, compared to a loss of $23.1 million, or $0.36 per
share for the same period last year. Non-GAAP loss from continuing operations
was $14.5 million, or $0.23 per share, for the nine months ended September28,
2013, as compared to non-GAAP income from continuing operations of $17.8
million, or $0.23 per share, for the same period last year. A reconciliation
of income/(loss) from continuing operations to non-GAAP (loss)/income from
continuing operations is presented in the attached tables.

Cash flow provided by operating activities for the nine months ended
September28, 2013 was $17.8 million, compared to cash flow provided by
operating activities of $18.7 million for the same period last year. Our
operating cash flows remained relatively consistent through the first nine
months despite inventory build-up in anticipation of supply constraints and
the integration of certain assets of National Envelope, as we did not acquire
working capital assets or liabilities in connection with the transaction.

Adjusted EBITDA for the three months ended September28, 2013 was $42.3
million, compared to Adjusted EBITDA of $54.0 million for the same period last
year. Adjusted EBITDA for the nine months ended September28, 2013 was $115.2
million, compared to Adjusted EBITDA of $147.4 million for the same period
last year. A reconciliation of net income/(loss) to Adjusted EBITDA is
presented in the attached tables.

Robert G. Burton, Sr., Chairman and Chief Executive Officer concluded:
"During the quarter we saw revenue growth across our envelope, labels and
packaging businesses. In our envelope operations we have continued to see
strong growth in direct mail volumes as credit card mailing volumes have
increased over 15% year to date. The envelope pricing pressures due to recent
industry dynamics, which continued in the third quarter, have recently begun
to reverse due to market normalization and as industry capacity continues to
be rationalized. As we discussed on our last conference call, we are currently
reviewing all strategic options for our operations as we look to re-position
the company for the future. During the third quarter we completed the
divestiture of our custom envelope division for approximately $50 million in
value and we are currently evaluating several options regarding other parts of
our businesses. As we look toward 2014, I am very pleased with the direction
the company is heading. I am optimistic the strategy we have put in place will
create value and deliver improved results our shareholders expect. I look
forward to updating our investors in more detail on our conference call
tomorrow."

Conference Call:
Cenveo will host a conference call tomorrow, Thursday, November 7, 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 Nine Months Ended
                   September28,  September29,  September28,  September29,

                   2013          2012          2013          2012
Net sales          $  442,781     $  437,168     $  1,267,935   $  1,300,593
Cost of sales      367,356        353,780        1,056,392      1,063,119
Selling, general
and                53,105         44,469         148,783        137,918
administrative
expenses
Amortization of    2,459          2,447          7,473          7,455
intangible assets
Restructuring,
impairment and     3,337          4,190          10,243         22,566
other charges
Operating income   16,524         32,282         45,044         69,535
Gain on bargain    (12,435)       —              (12,435)       —
purchase
Interest expense,  27,611         28,926         85,421         85,574
net
Loss on early
extinguishment of  1,593          25             9,440          11,439
debt, net
Other
expense/(income),  595            491            (1,400)        (327)
net
(Loss)/income
from continuing    (840)          2,840          (35,982)       (27,151)
operations before
income taxes
Income tax         (11,331)       (182)          (6,987)        (4,012)
benefit
Income/(loss)
from continuing    10,491         3,022          (28,995)       (23,139)
operations
Income/(loss)
from discontinued  13,492         1,453          14,950         (5)
operations, net
of taxes
Net income/(loss)  23,983         4,475          (14,045)       (23,144)
Other
comprehensive
income/(loss):
Currency
translation        (31)           2,412          (3,139)        1,654
adjustment
Comprehensive      $  23,952      $  6,887       $  (17,184)    $  (21,490)
income/(loss)
Income/(loss) per
share – basic:
Continuing         $  0.16        $  0.05        $  (0.45)      $  (0.36)
operations
Discontinued       0.21           0.02           0.23           —
operations
Net income/(loss)  $  0.37        $  0.07        $  (0.22)      $  (0.36)
Income/(loss) per
share – diluted:
Continuing         $  0.13        $  0.04        $  (0.45)      $  (0.36)
operations
Discontinued       0.16           0.02           0.23           —
operations
Net income/(loss)  $  0.29        $  0.06        $  (0.22)      $  (0.36)
Weighted average
shares
outstanding:
Basic              64,333         63,624         64,032         63,502
Diluted            86,032         84,544         64,032         63,502

Cenveo, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)
                                        For the Nine Months Ended
                                        September28, 2013  September29, 2012
Cash flows from operating activities:
Net loss                                $    (14,045)       $    (23,144)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
(Gain)/loss on sale of discontinued     (12,530)            5,411
operations, net of taxes
Income from discontinued operations,    (2,420)             (5,406)
net of taxes
Depreciation and amortization,          44,284              45,527
excluding non-cash interest expense
Non-cash interest expense, net          7,742               5,796
Deferred income taxes                   (8,960)             (6,211)
Gain on sale of assets                  (205)               (1,290)
Non-cash restructuring, impairment and  1,495               10,801
other charges, net
Gain on bargain purchase                (12,435)            —
Loss on early extinguishment of debt,   9,440               11,439
net
Stock-based compensation provision      2,879               4,445
Gain on insurance claim                 (2,670)             —
Other non-cash charges                  4,921               3,711
Changes in operating assets and
liabilities, excluding theeffects of
acquired businesses:
Accounts receivable                     (15,249)            9,601
Inventories                             (26,245)            (846)
Accounts payable and accrued            52,127              (15,495)
compensation and related liabilities
Other working capital changes           (2,506)             (19,211)
Other, net                              (14,925)            (12,662)
Net cash provided by operating          10,698              12,466
activities of continuing operations
Net cash provided by operating          7,055               6,212
activities of discontinued operations
Net cash provided by operating          17,753              18,678
activities
Cash flows from investing activities:
Cost of business acquisitions, net of   (33,166)            (644)
cash acquired
Capital expenditures                    (23,045)            (15,326)
Purchase of investment                  (1,650)             —
Proceeds from insurance claim           3,036               —
Proceeds from sale of property, plant   7,861               2,333
and equipment
Proceeds from sale of intangible asset  —                   1,700
Net cash used in investingactivities   (46,964)            (11,937)
of continuing operations
Net cash provided by
investingactivities of discontinued    42,714              39,610
operations
Net cash (used in)/provided by          (4,250)             27,673
investingactivities
Cash flows from financing activities:
Repayment of 10.5% senior notes         —                   (169,875)
Repayment of 7.875% senior subordinated (67,848)            (196,088)
notes
(Repayment)/borrowing of Term Loan B    (390,005)           17,987
due 2016
Repayment of 8.375% senior subordinated —                   (24,787)
notes
Payment of financing related costs and  (15,219)            (32,335)
expenses and debt issuance discounts
Repayments of other long-term debt      (3,323)             (3,499)
Purchase and retirement of common stock (509)               (734)
upon vesting of RSUs
Proceeds from issuance of 11.5% senior  —                   225,000
notes
Proceeds from issuance of 7% senior     —                   86,250
exchangeable notes
(Repayment)/borrowings under revolving  (18,000)            45,550
credit facility, net
Proceeds from issuance of 15% unsecured 50,000              —
term loan due 2017
Repayment of 15% unsecured term loan    (30,000)            —
due 2017
Proceeds from exercise of stock options 76                  —
Proceeds from issuance of Term Loan     360,000             —
facility
Borrowings under ABL facility due 2017  474,400             —
Repayments under ABL facility due 2017  (392,600)           —
Proceeds from equipment loan            20,000              —
Net cash used in financing activities   (13,028)            (52,531)
of continuing operations
Net cash used in financing activities   —                   (1,652)
of discontinued operations
Net cash used in financing activities   (13,028)            (54,183)
Effect of exchange rate changes on cash (47)                414
and cashequivalents
Net increase/(decrease) in cash and     428                 (7,418)
cash equivalents
Cash and cash equivalents at beginning  8,110               17,753
of period
Cash and cash equivalents at end of     $    8,538          $    10,335
period
Non-cash financing transactions
Fair value of common stock issued in    $    6,042          $    —
connection with business acquisitions







Cenveo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
                                         September28, 2013  December 29, 2012
                                         (unaudited)
Assets
Current assets:
Cash and cash equivalents                $   8,538           $   8,110
Accounts receivable, net                 266,932             254,389
Inventories                              151,697             127,235
Prepaid and other current assets         65,870              67,964
Assets of discontinued operations -      339                 11,265
current
Total current assets                     493,376             468,963
Property, plant and equipment, net       307,006             279,078
Goodwill                                 186,559             187,415
Other intangible assets, net             204,466             205,199
Other assets, net                        47,031              44,632
Assets of discontinued operations -      68                  15,268
long-term
Total assets                             $   1,238,506       $   1,200,555
Liabilities and Shareholders' Deficit
Current liabilities:
Current maturities of long-term debt     $   12,425          $   11,748
Accounts payable                         227,316             179,850
Accrued compensation and related         31,473              24,678
liabilities
Other current liabilities                76,467              77,367
Liabilities of discontinued operations - 2,572               6,591
current
Total current liabilities                350,253             300,234
Long-term debt                           1,175,657           1,171,870
Other liabilities                        185,534             191,885
Liabilities of discontinued operations - 72                  880
long-term
Commitments and contingencies            —                   —
Shareholders' deficit:
Preferred stock                          —                   —
Common stock                             662                 638
Paid-in capital                          363,447             354,983
Retained deficit                         (766,779)           (752,734)
Accumulated other comprehensive loss     (70,340)            (67,201)
Total shareholders' deficit              (473,010)           (464,314)
Total liabilities and shareholders'      $   1,238,506       $   1,200,555
deficit

Cenveo, Inc. and Subsidiaries

Reconciliation of Operating Income to Non-GAAP Operating Income

(in thousands)

(Unaudited)
                    For the Three Months Ended    For the Nine Months Ended
                    September28,  September29,  September28,  September29,

                    2013           2012           2013           2012
Operating income    $   16,524     $   32,282     $   45,044     $  69,535
Integration,
acquisition and     8,056          1,723          11,329         4,994
other charges
Stock-based
compensation        903            1,452          2,879          4,445
provision
Restructuring,
impairment and      3,337          4,190          10,243         22,566
other charges
Non-GAAP operating  $   28,820     $   39,647     $   69,495     $  101,540
income

Cenveo, Inc. and Subsidiaries

Reconciliation of Income/(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 Nine Months Ended
                    September28,  September29,  September28,  September29,

                    2013           2012           2013           2012
Income/(loss) from
continuing          $   10,491     $   3,022      $  (28,995)    $  (23,139)
operations
Integration,
acquisition and     8,056          1,723          11,329         4,994
other charges
Stock-based
compensation        903            1,452          2,879          4,445
provision
Restructuring,
impairment and      3,337          4,190          10,243         22,566
other charges
Gain on bargain     (12,435)       —              (12,435)       —
purchase
Loss on early
extinguishment of   1,593          25             9,440          11,439
debt, net
Income tax benefit  (11,717)       (489)          (7,002)        (4,501)
Interest expense
on 7% Notes, net    1,020          1,020          —              2,040
of taxes
Non-GAAP
income/(loss) from  $   1,248      $   10,943     $  (14,541)    $  17,844
continuing
operations
Income/(loss) per
share – diluted:
Continuing          $   0.12       $   0.03       $  (0.45)      $  (0.30)
operations
Integration,
acquisition and     0.09           0.03           0.17           0.06
other charges
Stock-based
compensation        0.01           0.02           0.04           0.06
provision
Restructuring,
impairment and     0.04           0.05           0.16           0.29
other charges
Gain on bargain     (0.14)         —              (0.19)         —
purchase
Loss on early
extinguishment of   0.02           —              0.15           0.15
debt, net
Income tax benefit  (0.14)         (0.01)         (0.11)         (0.06)
Interest expense
on 7% Notes, net    0.01           0.01           —              0.03
of taxes
Non-GAAP
income/(loss) from  $   0.01       $   0.13       $  (0.23)      $  0.23
continuing
operations
Weighted average    86,032         84,544         64,032         77,618
shares—diluted

Cenveo, Inc. and Subsidiaries

Reconciliation of Net Income/(Loss) to Adjusted EBITDA

(in thousands)

(Unaudited)
                    For the Three Months Ended    For the Nine Months Ended
                    September28,  September29,  September28,  September29,

                    2013           2012           2013           2012
Net income/(loss)   $   23,983     $   4,475      $  (14,045)    $  (23,144)
Interest expense,   27,611         28,926         85,421         85,574
net
Income tax benefit  (11,331)       (182)          (6,987)        (4,012)
Depreciation        11,591         12,352         36,811         38,072
Amortization of     2,459          2,447          7,473          7,455
intangible assets
Integration,
acquisition and     8,056          1,723          11,329         4,994
other charges
Stock-based
compensation        903            1,452          2,879          4,445
provision
Restructuring,
impairment and      3,337          4,190          10,243         22,566
other charges
Gain on bargain     (12,435)       —              (12,435)       —
purchase
Loss on early
extinguishment of   1,593          25             9,440          11,439
debt, net
(Income)/loss from
discontinued        (13,492)       (1,453)        (14,950)       5
operations, net of
taxes
Adjusted EBITDA,    $   42,275     $   53,955     $  115,179     $  147,394
as defined



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 income/(loss) 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 income/(loss)
from continuing operations to non-GAAP income/(loss) 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/(loss) from continuing
operations, non-GAAP operating income/(loss), 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 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.

Website: http://www.cenveo.com
 
Press spacebar to pause and continue. Press esc to stop.