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Cenveo Announces Third Quarter 2010 Results

November 11, 2010

STAMFORD, CT―Nov. 10, 2010―Cenveo Inc. today announced results for the three and nine months ended Oct. 2, 2010.

For the three months ended Oct. 2, 2010, net sales increased approximately 1.6 percent to $455.1 million, as compared to $448.0 million in the third quarter of 2009, primarily due to the Nashua acquisition, offset by having one less week in the third quarter of 2010 as compared to the same prior year period. On a comparative basis, the company estimates that net sales increased by approximately 9.4% over the same prior year period when adjusting for the extra week in 2009.

For the nine months ended Oct. 2, 2010, net sales increased approximately 7.7 percent to $1.4 billion, as compared to $1.3 billion in the nine months ended October 3, 2009, primarily due to the Nashua acquisition.

During the third quarter, the company recorded preliminary non-cash impairment charges of $181.4 million related to the Company’s Publisher Services Group reporting unit, primarily due to changes in discount rates and the effects that the current macro-economic environment is currently having on this reporting unit. As a result, the Company had an operating loss of $156.1 million in the third quarter of 2010, compared to operating income of $25.0 million in the third quarter of 2009. For the nine months ended October 2, 2010, the Company had an operating loss of $124.6 million, compared to operating income of $19.7 million in the nine months ended October 3, 2009. Excluding the impact of these preliminary non-cash impairment charges, the Company would have had operating income of $25.3 million and $56.8 million in the three and nine months ended October 2, 2010, respectively.

For the three months ended October 2, 2010, non-GAAP operating income was $39.5 million compared to $40.3 million in the same prior year period. For the nine months ended October 2, 2010, non-GAAP operating income increased 20.7% to $107.1 million compared to $88.7 million in the same prior year period. These increases were primarily due to our cost savings initiatives in 2009 and throughout 2010 combined with the impact of the Nashua acquisition. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges and divested operations or assets held for sale.

Adjusted EBITDA in the third quarter of 2010 was $56.6 million compared to $56.3 million in the third quarter of 2009, despite having one less week in this year’s third quarter. On a comparative basis, the Company estimates that Adjusted EBITDA increased by approximately 8.2% over the same prior year period when adjusting for the extra week in 2009. Adjusted EBITDA for the first nine months of 2010 was $156.1 million compared to $140.9 million in the same prior year period, an increase of 10.8%. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges, divested operations or assets held for sale, (gain) loss on early extinguishment of debt, and loss from discontinued operations, net of taxes.

For the third quarter of 2010, the Company recorded a net loss of $157.2 million, or $2.52 per share, compared to net income of $1.1 million, or $0.02 per share, for the third quarter of 2009. For the first nine months of 2010, the Company recorded a net loss of $176.6 million, or $2.84 per share, compared to a net loss of $21.5 million, or $0.39 per share, for the same prior year period. The 2010 three and nine month period net losses include $157.3 million of preliminary non-cash impairment charges, net of tax benefits of $24.1 million, related to the Company’s Publisher Services Group reporting unit. In addition, the results for the first nine months of 2010 include a loss of $2.6 million on early extinguishment of debt while the results for the first nine months of 2009 include a gain of $16.9 million on early extinguishment of debt.

On a non-GAAP basis, income from continuing operations was $8.3 million, or $0.13 per share, for the third quarter of 2010 as compared to non-GAAP income from continuing operations of $10.7 million, or $0.19 per share, in the same prior year period. Non-GAAP income from continuing operations was $13.5 million, or $0.21 per share, for the first nine months of 2010 as compared to non-GAAP income from continuing operations for the first nine months of 2009 of $11.3 million, or $0.20 per share, a 19.6% increase over the same prior year period. Non-GAAP income from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges, divested operations or assets held for sale, (gain) loss on early extinguishment of debt and adjusts income taxes to reflect an estimated cash tax rate.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"Our third quarter results, which were led by another solid performance from our commercial print and label products, once again demonstrate that Cenveo continues to execute well in the current economic environment. Despite the challenging market conditions and short term pricing pressures in the envelope marketplace caused by the bankruptcy of one of our larger competitors, combined with having one fewer week this quarter versus last year, we were able to grow our sales and Adjusted EBITDA for the third quarter. While we still have room for improvement, we are pleased to have delivered 12.4% Adjusted EBITDA margins for this quarter driven by our continued focus on costs and revenue growth in our niche product offerings. This strong performance would not have been possible without the continued strong performance from our dedicated group of employees, who continue to deliver everyday for our customers.”

Mr. Burton concluded:
“Despite the slow economic recovery, our business performed well this year by posting sales and Adjusted EBITDA growth for each of the first three quarters of 2010. As we enter the fourth quarter, I expect these trends to continue. The improvement in the commercial print market combined with the recent stabilization in the envelope industry that we are currently seeing should enable us to meaningfully improve our financial results as compared to this year’s third quarter. In this regard, we also believe that we will generate significant cash flow during the quarter as the improvement in our businesses along with favorable working capital trends, the timing of interest payments and the maturity of some fixed interest rate swaps work in our favor. We will continue to use these incremental funds to pay down debt or make highly strategic acquisitions that strengthen our product leadership positions and deleverage our balance sheet. We are also closely monitoring the credit markets, and will look to take advantage and re-finance our maturities if we see appropriate opportunities. We are continuing to do everything in our power to deliver the type of results that our customers, employees and shareholders expect.”


 

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