Cenveo Announces Net Sales of $479M in Q4 2015; Adjusted EBITDA Rise of 32.5%
STAMFORD, Conn. — February 18, 2016 — Cenveo Inc. (NYSE: CVO) has announced results for the three and 12 months ended Jan. 2, 2016. The reported results exclude the operating results of its Packaging operating segment, as well as its one top-sheet lithographic print operation, collectively referred to as the Packaging Business, as it has been classified in consolidated financial statements as discontinued operations. During the first quarter of 2016, Cenveo completed the sale of its Packaging Business.
Robert Burton Sr., chairman and CEO, stated, "We are very pleased with our fourth quarter operating results, in which we experienced solid revenue performance, increased our operating income and improved Adjusted EBITDA as expected. We also completed one of our strategic alternatives with the sale of our Packaging Business, which officially closed in January. Our envelope business continued to deliver margin expansion driven by strong direct mail volumes and the benefits of the cost actions that we completed in 2014. This performance allowed the company to deliver Adjusted EBITDA growth of over 32% for the fourth quarter compared with the same period in 2014."
Results of Operations Overview
The company generated net sales of $479.0 million for the three months ended Jan. 2, 2016, compared with $453.5 million for the same period last year, an increase of 5.6%. The fourth quarter of 2015 included an extra week versus the fourth quarter of 2014. The company estimates the impact of this week was approximately $20 million to its consolidated net sales. Cenveo experienced strong sales performance in all three of its operating segments during the fourth quarter, particularly in its print business, driven by new account wins. The company generated net sales of $1.74 billion for the year ended Jan. 2, 2016, compared with $1.76 billion for the prior year, a decline of 1.1%. The decline in net sales for the year is primarily attributable to decreased capacity in its envelope business due to the closure and consolidation related to the National Envelope integration during 2014, partially offset by one extra week in the full year 2015 versus the full year 2014, price increases and product mix changes with certain envelope customers.
Operating income was $24.8 million for the three months ended Jan. 2, 2016, compared to operating income of $11.2 million for the same period last year, an improvement of 121.0%. Operating income was $83.8 million for the year ended Jan. 2, 2016, compared to operating income of $42.8 million for the prior year, an improvement of 95.9%. Operating income in 2014 was impacted by expenses associated with the closure and consolidation of several envelope facilities related to the integration of the National Envelope assets, which along with the price increases realized from certain customers, primarily resulted in significant operating margin improvement and manufacturing efficiencies in 2015. Non-GAAP operating income was $27.6 million for the three months ended Jan. 2, 2016, compared to income of $21.1 million for the same period last year, and income of $105.1 million for the year ended Jan. 2, 2016, compared to income of $86.0 million for the prior year.
For the three months ended Jan. 2, 2016, the company had a loss from continuing operations of $4.4 million, or $0.06 per diluted share, compared to a loss of $23.4 million, or $0.34 per diluted share, for the same period last year. For the year ended Jan. 2, 2016, the company had a loss from continuing operations of $19.5 million, or $0.29 per diluted share, compared to a loss of $95.1 million, or $1.42 per diluted share, for the prior year. The improvement was primarily due to significant operating margin improvement and efficiencies resulting from the National Envelope asset integration, as well as lower restructuring charges. Additionally in 2014, Cenveo incurred a $27.4 million debt extinguishment charge in connection with the debt refinancing that was completed in June 2014. Non-GAAP income from continuing operations was $5.7 million, or $0.06 per diluted share, for the three months ended Jan. 2, 2016, compared to non-GAAP loss from continuing operations of $5.4 million, or $0.08 per diluted share, for the same period last year. For the year ended Jan. 2, 2016, non-GAAP income from continuing operations was $10.7 million, or $0.12 per diluted share, compared to a loss of $21.8 million, or $0.33 per diluted share, for the prior year.
Adjusted EBITDA was $44.1 million and $33.3 million for the three months ended Jan. 2, 2016 and Dec. 27, 2014, respectively, an improvement of 32.5%. The increase over the prior year quarter is primarily attributable to the improvement of its envelope operations subsequent to the prior year consolidation efforts and operating improvements from its print operations. For the year ended Jan. 2, 2016, Adjusted EBITDA was $158.0 million, compared to $139.4 million for the prior year, an improvement of 13.3%. The increase is primarily attributable to the improvement of Cenveo's envelope operations subsequent to the prior year consolidation efforts and continued operating improvements in its label product lines, partially offset by a decline in its print operations due to product mix and continued price pressure.
Cash flow provided by operating activities for the year ended Jan. 2, 2016 was $32.2 million, compared to $23.9 million for the prior year. This improvement was primarily driven by the improvement in Cenveo's operating results, lower contributions to post-retirement plans, partially offset by a net use of cash from working capital as compared to the prior year.
On Feb. 11, 2016, Cenveo received a notice from the NYSE that it do not presently satisfy the NYSE's continued listing standard requiring its average market capitalization to not be less than $50 million over a 30 trading-day period while stockholders' equity is less than $50 million. The notice has no immediate impact on the listing of its common stock. It also does not affect the firm's ongoing business operations or its Securities and Exchange Commission reporting requirements. In accordance with the NYSE rules, Cenveo intends to submit to the NYSE a business plan demonstrating how it intends to return to compliance with the market capitalization standards within 18 months of receipt of the notice. The NYSE will review that plan and determine whether Cenveo has made a reasonable demonstration of an ability to achieve compliance on the market capitalization standard. If the NYSE accepts the company's plan, the common stock will continue to be listed and traded on the NYSE during that 18-month period, subject to compliance with other continued listing standards.
Robert Burton Sr., chairman and CEO, concluded, "As we turn our focus to 2016, we are looking forward to building upon the operating momentum that we built in 2015. We will look to continue to improve our margins and drive stronger cash flow. We are currently working to address and improve our capital structure, and we look forward to sharing our plans with our investors at the appropriate time. We have high expectations for 2016 and we believe that we are on the right path for continued improvement. I look forward to discussing our 2016 financial guidance on our conference call tomorrow."
Cenveo (NYSE: CVO), world headquartered in Stamford, Conn., is a leading global provider of print and related resources, offering world-class solutions in the areas of custom 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, Cenveo prides itself on delivering quality solutions and service every day for its more than 100,000 customers.