Cenveo Announces First Quarter 2014 Results Net Sales of $490.1 million, up 17.1% from Q1 2013 Adjusted EBITDA up 10% from Q1 2013 Accelerated Integration of National Envelope Assets PR Newswire STAMFORD, Conn., May 7, 2014 STAMFORD, Conn., May7, 2014 /PRNewswire/ -- Cenveo, Inc. (NYSE: CVO) today announced results for the three months ended March29, 2014. CENVEO, INC. Logo. Robert G. Burton, Sr., Chairman and Chief Executive Officer stated: "We are very pleased to report a positive start to the year and we remain on track to deliver our 2014 targets. We continue to see the positive operational trends that we experienced for the past couple of quarters.We are particularly pleased with our performance considering the severe weather that impacted our customers and our operations during the quarter. In particular, our label operations experienced disruption in customer ordering patterns and several of our envelope and label plants experienced greater than normal energy costs and reduced productivity during the quarter. During the first quarter, we had organic revenue growth from our envelope operations driven by increased pricing along with continued positive direct mail trends. Our print and packaging operations had organic revenue growth primarily driven by incremental volumes. The integration of National Envelope is now progressing at a rapid pace, as several of the planned consolidations are underway. During the quarter we increased our inventories to support this consolidation effort and ahead of announced commodity price increases. We expect to see the benefits of these strategies as we progress into the back half of the year." The Company generated net sales of $490.1 million for the three months ended March29, 2014, compared to $418.6 million for the same period last year, an increase of 17.1%. The increase in net sales is primarily due to sales generated from the integration of National Envelope into our envelope operations, as National Envelope was not included in our results in the first quarter of 2013, as well as increases in our average selling price across our direct and office product envelope businesses. These increases were partially offset by sales declines in our label operations. Operating income was $10.1 million for the three months ended March29, 2014, compared to $11.7 million for the same period last year. The decrease was primarily due to increased selling, general and administrative expenses related to higher commission expense from increased sales and incremental expenses of National Envelope. The decrease in operating income was also the result of higher restructuring and integration charges from the closure and consolidation of two envelope plants and one print plant. Non-GAAP operating income was $20.2 million for the three months ended March29, 2014, compared to $18.1 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 March29, 2014, the Company had a loss from continuing operations of $16.8 million, or $0.25 per diluted share, compared to a loss of $20.5 million, or $0.32 per diluted share for the same period last year. Non-GAAP loss from continuing operations was $7.7 million, or $0.12 per diluted share, for the three months ended March29, 2014, as compared to non-GAAP loss from continuing operations of $12.0 million, or $0.19 per diluted share, for the same period last year. A reconciliation of loss from continuing operations to non-GAAP loss from continuing operations is presented in the attached tables. Cash flow used in operating activities for the three months ended March29, 2014, was $5.1 million, compared to cash flow provided by operating activities of $3.3 million for the same period last year. The use of cash was primarily due to an increase of inventory to ensure minimal disruption as we integrate and consolidate our envelope platform and the procurement of specific paper grades in advance of announced price increases. We also experienced meaningful cash outflows related to a vendor arrangement in connection with the National Envelope acquisition. Adjusted EBITDA for the three months ended March29, 2014, was $36.8 million, compared to Adjusted EBITDA of $33.5 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 concluded: "We are pleased with the momentum that we are seeing as we enter the second quarter. The integration of the National Envelope plants and efforts to improve margins across the organization will continue to be our daily focus until the integration plan is completed. We expect to continue to see operational improvement in our business each quarter and the benefits of our strategic initiatives to reposition the Company in higher growth areas." Conference Call: Cenveo will host a conference call tomorrow, Thursday, May 8, 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 Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) (in thousands, except per share data) (Unaudited) For the Three Months Ended March 29, 2014 March 30, 2013 Net sales $ 490,119 $ 418,614 Cost of sales 415,157 351,902 Selling, general and administrative 55,494 48,345 expenses Amortization of intangible assets 3,449 2,507 Restructuring and other charges 5,947 4,182 Operating income 10,072 11,678 Interest expense, net 27,910 29,575 Loss on early extinguishment of debt, net 18 127 Other (income) expense, net (509) 296 Loss from continuing operations before (17,347) (18,320) income taxes Income tax (benefit) expense (560) 2,170 Loss from continuing operations (16,787) (20,490) Income from discontinued operations, net 953 1,345 of taxes Net loss (15,834) (19,145) Other comprehensive income (loss): Changes in pension and other employee 480 — benefit accounts, net of taxes Currency translation adjustment 88 (779) Comprehensive loss $ (15,266) $ (19,924) (Loss) income per share – basic: Continuing operations $ (0.25) $ (0.32) Discontinued operations 0.01 0.02 Net loss $ (0.24) $ (0.30) (Loss) income per share – diluted: Continuing operations $ (0.25) $ (0.32) Discontinued operations 0.01 0.02 Net loss $ (0.24) $ (0.30) Weighted average shares outstanding: Basic 66,336 63,840 Diluted 66,336 63,840 Cenveo, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (in thousands) (Unaudited) For the Three Months Ended March 29, 2014 March 30, 2013 Cash flows from operating activities: Net loss $ (15,834) $ (19,145) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Gain on sale of discontinued operations, net (845) — of taxes Income from discontinued operations, net of (108) (1,345) taxes Depreciation and amortization, excluding 16,061 15,636 non-cash interest expense Non-cash interest expense, net 2,418 2,493 Deferred income taxes (852) 1,857 (Gain) loss on sale of assets (2) 329 Non-cash restructuring and other charges, net 2,609 265 Loss on early extinguishment of debt 18 127 Stock-based compensation provision 836 953 Other non-cash charges 735 917 Changes in operating assets and liabilities, excluding theeffects of acquired businesses: Accounts receivable 7,382 5,768 Inventories (11,130) (5,486) Accounts payable and accrued compensation and 2,654 (1,966) related liabilities Other working capital changes (2,004) 4,789 Other, net (5,361) (3,393) Net cash (used in) provided by operating (3,423) 1,799 activities of continuing operations Net cash (used in) provided by operating (1,658) 1,519 activities of discontinued operations Net cash (used in) provided by operating (5,081) 3,318 activities Cash flows from investing activities: Cost of business acquisitions, net of cash — (5,145) acquired Capital expenditures (8,975) (10,061) Purchase of investment (2,000) (1,650) Proceeds from sale of property, plant and 162 5,850 equipment Net cash used in investingactivities of (10,813) (11,006) continuing operations Net cash provided by (used in) investingactivities of discontinued 1,018 (201) operations Net cash used in investingactivities (9,795) (11,207) Cash flows from financing activities: Repayment of 7.875% senior subordinated notes — (67,848) Repayment of Term Loan B due 2016 — (990) Payment of financing-related costs and (2,330) (5,054) expenses and debt issuance discounts Repayments of other long-term debt (1,569) (890) Purchase and retirement of common stock upon (252) (219) vesting of RSUs Borrowings under Revolving Credit Facility, — 42,300 net Proceeds from issuance of 15% Unsecured Term — 50,000 Loan due 2017 Repayment of 15% Unsecured Term Loan due 2017 (600) (7,000) Repayment of Term Loan Facility due 2017 (900) — Borrowings under ABL facility due 2017 156,400 — Repayments under ABL facility due 2017 (135,600) — Net cash provided by financing activities 15,149 10,299 Effect of exchange rate changes on cash and (64) 93 cashequivalents Net increase in cash and cash equivalents 209 2,503 Cash and cash equivalents at beginning of 11,329 8,110 period Cash and cash equivalents at end of period $ 11,538 $ 10,613 Cenveo, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (in thousands) March 29, 2014 December 28, 2013 (Unaudited) Assets Current assets: Cash and cash equivalents $ 11,538 $ 11,329 Accounts receivable, net 273,783 281,586 Inventories 172,209 161,565 Prepaid and other current assets 53,178 55,353 Assets of discontinued operations - current 88 132 Total current assets 510,796 509,965 Property, plant and equipment, net 299,915 304,907 Goodwill 186,426 186,436 Other intangible assets, net 165,356 168,749 Other assets, net 44,291 43,614 Assets of discontinued operations - — 33 long-term Total assets $ 1,206,784 $ 1,213,704 Liabilities and Shareholders' Deficit Current liabilities: Current maturities of long-term debt $ 8,762 $ 9,174 Accounts payable 241,184 244,228 Accrued compensation and related 37,479 32,139 liabilities Other current liabilities 78,253 81,198 Liabilities of discontinued operations - 104 2,013 current Total current liabilities 365,782 368,752 Long-term debt 1,193,765 1,176,351 Other liabilities 158,899 165,581 Commitments and contingencies Shareholders' deficit: Preferred stock — — Common stock 664 663 Paid-in capital 364,760 364,177 Retained deficit (837,354) (821,520) Accumulated other comprehensive loss (39,732) (40,300) Total shareholders' deficit (511,662) (496,980) Total liabilities and shareholders' deficit $ 1,206,784 $ 1,213,704 Cenveo, Inc. and Subsidiaries Reconciliation of Operating Income to Non-GAAP Operating Income (in thousands) (Unaudited) For the Three Months Ended March 29, 2014 March 30, 2013 Operating income $ 10,072 $ 11,678 Integration, acquisition and other charges 3,337 1,298 Stock-based compensation provision 836 953 Restructuring and other charges 5,947 4,182 Non-GAAP operating income $ 20,192 $ 18,111 Cenveo, Inc. and Subsidiaries Reconciliation of Loss from Continuing Operations to Non-GAAP Loss from Continuing Operations and Related Per Share Data (in thousands, except per share data) (Unaudited) For the Three Months Ended March 29, 2014 March 30, 2013 Loss from continuing operations $ (16,787) $ (20,490) Integration, acquisition and other charges 3,337 1,298 Stock-based compensation provision 836 953 Restructuring and other charges 5,947 4,182 Loss on early extinguishment of debt, net 18 127 Income tax (benefit) expense (1,089) 1,972 Non-GAAP loss from continuing operations $ (7,738) $ (11,958) (Loss) income per share – diluted: Continuing operations $ (0.25) $ (0.32) Integration, acquisition and other charges 0.05 0.02 Stock-based compensation provision 0.01 0.01 Restructuring and other charges 0.09 0.07 Loss on early extinguishment of debt, net — — Income tax (benefit) expense (0.02) 0.03 Non-GAAP loss from continuing operations $ (0.12) $ (0.19) Weighted average shares - diluted 66,336 63,840 Cenveo, Inc. and Subsidiaries Reconciliation of Net Loss to Adjusted EBITDA (in thousands) (Unaudited) For the Three Months Ended March 29, 2014 March 30, 2013 Net loss $ (15,834) $ (19,145) Interest expense, net 27,910 29,575 Income tax (benefit) expense (560) 2,170 Depreciation 12,612 13,129 Amortization of intangible assets 3,449 2,507 Integration, acquisition and other 3,337 1,298 charges Stock-based compensation provision 836 953 Restructuring and other charges 5,947 4,182 Loss on early extinguishment of debt, net 18 127 Income from discontinued operations, net (953) (1,345) of taxes Adjusted EBITDA, as defined $ 36,762 $ 33,451 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 loss from continuing operations, non-GAAP operating income, non-GAAP operating income margin, and adjusted free cash flow. Non-GAAP operating income is defined as operating income excluding integration, acquisition and other charges, stock-based compensation provision, and restructuring and other charges. Non-GAAP operating income margin is calculated by dividing non-GAAP operating income into net sales. Non-GAAP loss from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and other charges, loss on early extinguishment of debt, net, and an adjustment to income taxes to reflect an estimated cash tax rate. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, integration, acquisition and other charges, stock-based compensation provision, restructuring and other charges, loss on early extinguishment of debt, net, and income from discontinued operations, net of taxes. Adjusted free cash flow is defined as Adjusted EBITDA less cash interest, cash taxes, and capital expenditures, net of proceeds from the sale of 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 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 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), world 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 which could cause actual results to differ materially from management's expectations include, without limitation: (i) recent United States and global economic conditions have adversely affected us and could continue to do so; (ii) our substantial level of indebtedness 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 available to us which could further exacerbate our risk exposure from debt;(vi) our ability to successfully integrate acquired businesses with our business; (vii) a decline in 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) the industries in which we operate our business are highly competitive and extremely fragmented; (ix) a 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 adversely affecting 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) any failure, interruption or security lapse of our 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. Logo - http://photos.prnewswire.com/prnh/20070618/CENVEOLOGO SOURCE Cenveo, Inc. Website: http://www.cenveo.com
Cenveo Announces First Quarter 2014 Results
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