Cenveo Reports Q3 Adjusted EBITDA Increase of 17.9 Percent; Packaging Business Discontinued
STAMFORD, Conn.—November 19, 2015—Cenveo Inc. (NYSE: CVO) has announced results for three and nine months ended Sept. 26, 2015. 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 its Packaging Business, as it has been classified in Cenveo's consolidated financial statements as discontinued operations.
Robert Burton Sr., chairman and CEO stated, "We are pleased with our results for the third quarter, as we had several key accomplishments, including strong growth in operating income and Adjusted EBITDA, and solid cash flow from operations. Our envelope operations delivered significant operational improvement as we continue to see the benefits of our consolidation efforts that were implemented last year. Combined with solid direct mail volumes and price increases, our envelope business delivered adjusted EBITDA margins of approximately 11 percent for the quarter. Our print and label businesses performed generally in line with our expectations, which allowed the Company to grow our adjusted EBITDA for the quarter by approximately 18 percent compared to last year."
Strategic Review Update—Packaging Business:
Over the course of the second and third quarters of 2015, Cenveo has been actively marketing the sale of its Packaging Business to multiple strategic parties. As of the end of the third quarter, management has been given the appropriate authority to move forward with these strategic parties on a potential sale of the Packaging Business; therefore, the assets, liabilities, operations and cash flows of the Packaging Business have been reclassified as discontinued operations for all periods presented. While there can be no assurance that Cenveo will ultimately reach an agreement with any of the strategic parties or as to the timing of reaching such agreement, the company believes that it will do so in the near term given its significant progress to date.
Results of Operations Overview:
The company generated net sales of $419.8 million for the three months ended Sept. 26, 2015, compared to $435.6 million for the same period last year, a decline of 3.6 percent. The company generated net sales of $1.26 billion for the nine months ended Sept. 26, 2015, compared to $1.31 billion for the same period last year, a decline of 3.4 percent. The decline in net sales is attributable to the consolidation of several envelope facilities during 2014 in connection with the accelerated integration of the National Envelope assets with its existing operations and two new envelope facilities, and continued pricing pressure in its print business. Excluding the impact of the integration, the company believes its envelope group net sales were up modestly on a year-to-date basis, which is primarily attributable to product mix and pricing improvements, offset by volume declines.
Operating income was $19.5 million for the three months ended Sept. 26, 2015, compared to operating income of $10.2 million for the same period last year, an improvement of 90.7 percent. Operating income was $59.0 million for the nine months ended Sept. 26, 2015, compared to operating income of $31.5 million for the same period last year, an improvement of 87.0 percent. 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, has resulted in significant operating margin improvement and efficiencies in 2015. Non-GAAP operating income was $29.0 million for the three months ended Sept. 26, 2015, compared to income of $22.1 million for the same period last year, and income of $77.5 million for the nine months ended Sept. 26, 2015, compared to income of $64.9 million for the same period last year.
For the three months ended Sept. 26, 2015, the company had a loss from continuing operations of $3.6 million, or $0.05 per diluted share, compared to a loss of $14.0 million, or $0.21 per diluted share, for the same period last year. For the nine months ended Sept. 26, 2015, the Company had a loss from continuing operations of $15.1 million, or $0.22 per diluted share, compared to a loss of $71.7 million, or $1.07 per diluted share, for the same period last year. On a year-to-date basis, the improvement was primarily due to a debt extinguishment charge in connection with the debt refinancing that was completed in June 2014, lower restructuring charges, as well as the significant operating margin improvement and efficiencies resulting from the National Envelope integration. Non-GAAP income from continuing operations was $6.5 million, or $0.07 per diluted share, for the three months ended Sept. 26, 2015, compared to non-GAAP loss from continuing operations of $3.6 million, or $0.05 per diluted share, for the same period last year. For the nine months ended Sept. 26, 2015, non-GAAP income from continuing operations was $5.0 million, or $0.06 per diluted share, compared to a loss of $16.4 million, or $0.25 per diluted share, for the same period last year.
Adjusted EBITDA was $42.0 million and $35.6 million for the three months ended Sept. 26, 2015 and Sept. 27, 2014, respectively. For the nine months ended Sept. 26, 2015, Adjusted EBITDA was $113.9 million, compared to $106.1 million for the same period last year. These increases over their prior year respective periods are primarily attributable to the improvement of its 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 nine months ended Sept. 26, 2015 was $14.8 million, compared to a use of cash of $7.3 million for the same period last year. This improvement was primarily driven by the improvement in its 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 due to seasonal working capital levels and the timing of interest payments on its long-term debt.
SEC and NYSE Compliance:
Effective today, the company has made all SEC filings for the first three quarters of 2015 and is now current in all of its SEC filing requirements. In light of these filings, Cenveo is now in full compliance with its NYSE listing requirements.
Burton concluded, "As we enter the fourth quarter, we believe we are well positioned to deliver on both our financial commitments and execute our long term strategy. We will look to continue to drive improved margins, increase cash flow and address our higher cost debt. A near term completion of our strategic review will allow us to focus our attention on our continuing operations where we enjoy a stronger position in the market. While the strategic review of our assets has been deliberate and has taken some time, we remain confident that we are significantly improving our strategic position in a way that will create value for investors. I am very excited about the significant progress that we have made so far this year on a number of fronts. Our continued focus on costs has allowed us to deliver on our commitments despite challenging conditions in certain end markets. I look forward to sharing further details about our results of operations, strategy, and full year outlook on our conference call tomorrow morning."
Cenveo, 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, it prides itself on delivering quality solutions and service every day for its more than 100,000 customers.