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Cenveo’s Sales Increase, Robert G. Burton, Jr. Appointed President

August 10, 2011
STAMFORD, CT—August 10, 2011—Cenveo Inc. announced results for the three and six months ended July 2, 2011. For the three months ended July 2, 2011, net sales increased approximately 11.2 percent to $495.2 million, compared to $445.3 million for the three months ended July 3, 2010, primarily due to the acquisition of MeadWestvaco Corp.’s Envelope Product Group (EPG), which closed in February, and growth from the company’s direct envelope group, which benefited from strong direct mail volumes.

For the six months ended July 2, 2011, net sales increased approximately 11.0 percent to $998.3 million, compared to $899.2 million for the six months ended July 3, 2010. This increase was driven by the acquisition of EPG and organic growth in the company’s direct envelope, custom label, content, commercial print and specialty packaging product lines.

The company generated operating income of $29.4 million for the quarter, compared to $19.4 million for the three months ended July 3, 2010. This increase was a result of lower restructuring and impairment charges, a lower operating cost structure than prior year and contributions from the EPG acquisition. Non-GAAP operating income increased 7.5 percent to $40.6 million for the three months ended July 2, 2011, compared to $37.8 million for the three months ended July 3, 2010.

For the six months ended July 2, 2011, the company generated operating income of $51.5 million, compared to $31.6 million for the same period of the previous year. This increase was a result of lower restructuring and impairment charges, a lower operating cost structure than prior year and contributions from the EPG acquisition.

Non-GAAP operating income increased 11.2 percent to $75.1 million, compared to $67.6 million for the six months ended July 3, 2010. 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. A reconciliation of operating income to non-GAAP operating income is presented in the attached tables.

For the three months ended July 2, 2011, Cenveo recorded net income of $0.4 million, compared to a net loss of $8.3 million for the three months ended July 3, 2010. The improvement in net income is primarily due to lower restructuring and impairment charges and lower interest expense in the second quarter of 2011, compared to the second quarter of 2010, partially offset by a lower income tax benefit in the second quarter of 2011, compared to the second quarter of 2010.

For the six months ended July 2, 2011, the company recorded net income of $3.2 million, compared to a net loss of $19.4 million for the six months ended July 3, 2010. The improvement in net income is primarily due to a preliminary bargain purchase gain of $11.1 million related to the EPG acquisition, lower restructuring and impairment charges and lower interest expense in the first six months of 2011, compared to the first six months of 2010, partially offset by a lower income tax benefit in the first six months of 2011, compared to the first six months of 2010 and a loss on early extinguishment of debt of $2.6 million in the first six months of 2010.

Adjusted EBITDA for the three months ended July 2, 2011 was $57.6 million, compared to $54.0 million for the three months ended July 3, 2010, an increase of approximately 6.7 percent. Adjusted EBITDA for the six months ended July 2, 2011, was $108.7 million, compared to $99.5 million for the six months ended July 3, 2010, an increase of approximately 9.2 percent. These increases are primarily attributable to stronger performance across the majority of the Company’s product lines combined with contributions from the EPG acquisition.

The results for the second quarter and the first six months of 2011 include a preliminary bargain purchase gain related to the EPG acquisition. The purchase price allocation of acquired assets and liabilities assumed in the EPG acquisition and the related bargain purchase gain recognized in the company’s statement of operations are preliminary. Differences between the preliminary and final purchase price allocations could have a material impact on the company’s financial statements, including the bargain purchase gain. The company will finalize the purchase price allocation as soon as practicable within the EPG acquisition’s measurement period, but in no event later than one year after the acquisition date.

Robert G. Burton, Sr., chairman and CEO, stated, “Cenveo had another strong quarter with continued operational and financial improvement, meaningful net debt pay down of $20 million and significant progress integrating EPG into our operations. Once again we saw organic revenue growth in our direct envelope and custom label businesses which, combined with our continued focus on costs, led to improvements in our revenues, operating income, and Adjusted EBITDA.

“Despite uncertainty in the economy, the positive trends which we have seen across most of our businesses since the end of 2010 continued through the second quarter of 2011. Our direct envelope group posted another quarter of strong organic sales growth of over 6 percent, benefiting from strong direct mail volumes, favorable product mix and the consolidation efforts related to the EPG integration. To date, we have announced the consolidation of three EPG facilities into our existing envelope operations and have made significant progress in aligning equipment across our leading envelope manufacturing platform.

“Our custom label and packaging products once again delivered another solid performance as our customers spending in those end markets grew in line with expectations. While our publisher services group continues to be challenged by weakness in the publishing industry, our content management offering continues to grow as our global platform benefits from the outsourcing of project management and composition services.

“Despite weaker seasonality this quarter, our commercial print businesses delivered strong year over year margin improvement benefiting from our consolidation plans executed in prior years and continued improvements in the automotive, financial services, travel and leisure markets,” Burton reported.

“We now have two strong quarters behind us, positioning us well to deliver our revenue, free cash flow and Adjusted EBITDA objectives in the back half of the year despite the challenging macro-environment,” he continued. “Our integration efforts in connection with EPG are well underway and will begin to deliver meaningful savings in the fourth quarter when we fully transition off EPG’s legacy systems and back office functions. We will continue our focus on driving free cash flow and deleveraging our balance sheet. In the short term we will look to improve our working capital position.

“We believe that by focusing our attention on working capital improvements, we can deliver upwards of $40 million of incremental cash flow by the end of 2012. Over the longer term, we remain committed to executing our game plan of operating niche growth businesses while using our free cash flow to invest in and grow our higher margin product lines or pay down debt.

“To further show our commitment to these goals, the board of directors has appointed Robert G. Burton, Jr. to the position of president. He will be responsible for overseeing this plan as we continue to position the company for the future. His 15 years of industry experience and current responsibilities make him the ideal person to see this initiative through to completion. He has my and the board’s full support as we continue to look to grow our higher margin product lines and free cash flow.”

About Cenveo
Cenveo (NYSE: CVO), headquartered in Stamford, CT, is a leading global provider of print and related resources, offering world-class solutions in the areas of envelopes, custom labels, specialty packaging, commercial print, publisher solutions and business documents. The company provides a one-stop offering through services ranging from design and content management to fulfillment and distribution. With approximately 10,000 employees worldwide, we pride ourselves on delivering quality solutions and service every day for our customers.

Source: Cenveo.
 
 

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