By Susan Kelly November 10, 2004 -- Cenveo (NYSE: CVO) today announced their third quarter results for the period ended September 30, 2004. Net income was $2.5 million for the quarter or $0.05 per share as compared to $2.2 million, or $0.04 per share for the same period last year. For the nine months the net loss was $16.1 million, or $0.34 per share. Sales were $428 million for the quarter versus $412 million for the same period last year. Topics of this summary: Quarter Overview Segment Performance Guidance Q & A Quarter Overview EBITDA for the third quarter of 2004 was $33.9 million compared to EBITDA of $33.5 million achieved for the same period last year, a 1.2% improvement. For the nine months ended September 30, 2004, EBITDA was $94.4 million compared to $92.1 million for the same period last year, a 2.5% improvement. Net cash provided by operating activities in the quarter ended September 30, 2004 was $19 million compared to $14 million provided during the comparable period of 2003. Cenveo officials stated the third quarter saw a definite increase in volumes of work. Our Commercial segment had its best third quarter in sales and EBITDA since 2001. The Resale segment increased its market share in the office products channel. The Strategic Sales Team continues to create numerous new opportunities for sales growth. The acquisitions we completed in the Seattle and San Francisco markets will be good catalysts for growth in those vibrant markets. Cenveo’s Chairman, President and CEO, Paul Reilly stated that Q3 was the ninth consecutive quarter with year-over-year EBITDA growth. Cenveo continues to increase market share and expect Q4 to show continuous year-over-year improvement. Q4 is expected to see debt pay-down of $15 million. Cenveo’s main focus will be to accelerate their profit and growth over the coming quarters. Segment Performance Commercial – In the Commercial segment sales showed a 4% increase, or $12.3 million, including $4.7 million of acquired sales. Third quarter milestones relative to the Commercial segment are stated as being the best sales performance since 2001 while quarter-over-quarter sales for Commercials was the best since 2000. Cenveo’s National Print Business (business that supplies high-impact printing to national and regional customers) remains strong in Q3, as it has all year. On a year-to-date basis, their National Print Business is up 8% from a year ago. Sales to local print customers in the first half of 2004 are up over $2 million in Q3. Gross profit margins improved in Q3 and are up 90 basis points thus far in 2004. As previously reported, Cenveo’s selling expenses have increased in 2004 as a result of investment in strategic sales teams. Third quarter sales performance shows that these investments are proving beneficial. Manufacturing costs are being controlled by putting less concentration on selling unused capacity, while attempting to increase profitability by raising prices. Resale – Sales in this segment were up to $100.7 million for the quarter, compared to $97.2 million for the third quarter of 2003. This was due to continued strong organic growth in sales of Cenveo’s business label products and market share gain in the office products channel. Growth in sales of business labels for Q3 was 10.3%, or $2.5 million better than last year. Sales of office products increased $3.7 million, or 9%. Sales of traditional business forms, specifically continuous forms, declined $2.7 million. As a result, Q3 was the second quarter where the sales of the Resale segment grew quarter-over-quarter. It is expected that 2004 to be the first year of organic sales growth for the Resale segment since before 2001. Overall, EBITDA was down to $11.8 million, from $12.3 million in 2003. Results were negatively impacted by Cenveo’s inability to pass along all paper price increases as they occurred. This was mainly due to contractual obligations that allow a delay in changing prices. It is expected that all paper price increases incurred to-date will be fully passed-on by January 1, 2005. Guidance Cenveo once again affirmed its earlier guidance of EBITDA of $135-142 million for 2004. However, with the first three quarters behind them, and while looking forward at the fourth quarter, Cenveo expects to come in at bottom end of the range for 2004. Sales will continue to grow, but the pressure on Resale segment margins will have a negative impact on company expectations. Cenveo’s Chairman, President and CEO, Paul Reilly, states that although these numbers are below original expectations, “…we look upon 2004 positively and as being a sound foundation for continued growth in 2005.” Q & A Cenveo expects an increase of $10-12 million in working capital for 2004 from 2003. The debt level is expected to be flat year-over-year. Relative to the Commercial side of business, pricing increases are passed-on within a day or two from when they become effective. However, on the Resale side, where contracts are present (i.e. catalogs), the pricing delay can take from 60 to 180 days. All price increases will be passed on by January 1, 2005. It is hopeful that paper price increase issues will stabilize, but the weakening dollar may be problematic. Demand for envelopes and commercial print is higher in September to November. However the demand for envelopes from Q3 2003 compared to Q3 2004 is flat. Bob Hart will become assistant to the Chairman and focus on strategy initiatives relative to “Mobilization” (i.e. process of giving the tools to the people in Cenveo’s business needed to succeed to manage problems and solutions.) Mr. Hart will be handling this task for about one year. The expenditures for all announced acquisitions to date is $10 million. The strategies behind these acquisitions is to move from a B market (5%-20% market share) to an A market (above 20% market share). This is being done by taking out many fixed costs such as combining facilities. Incremental revenues related to “One Stop Shopping” are $60 million each for 2003 and 2004. These incremental revenues are generated from a combination of current and new customers. Based on the current Cenveo stock price, management’s focus is to increase earnings and pay-down debt.