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Cenveo Announces Q3 '07 Results; Profits fall on charges

Thursday, November 08, 2007

Press release from the issuing company

STAMFORD, CT - (November 7, 2007) - Cenveo, Inc. today announced its results for the three and nine months ended September 30, 2007.
For the third quarter of 2007, the Company reported net income of $3.0 million, or $0.06 per diluted share, as compared to net income of $11.6 million, or $0.21 per diluted share, in 2006.  The third quarter 2007 results included a loss from discontinued operations of $0.8 million, as compared to income from discontinued operations of $2.3 million in the same period of 2006.  Third quarter 2007 results also included restructuring and impairment charges of $20.3 million, as compared to restructuring and impairment charges of $4.7 million in the same period of 2006.  The restructuring and impairment charges in the third quarter of 2007 primarily relate to the closure of certain businesses that were contemplated as a part of our recent acquisition activity.  Net sales for the quarter increased approximately 43% to $551 million from $384 million in the same period of 2006, primarily due to the acquisitions of Printegra, Cadmus, ColorGraphics, and Commercial Envelope that we completed in 2007. 
Non-GAAP income from continuing operations totaled $20.4 million, or $0.37 per diluted share, in the third quarter of 2007, as compared to $14.9 million, or $0.27 per diluted share, in the third quarter of 2006.  Non-GAAP income from continuing operations excludes integration costs, restructuring and impairment charges, (gain) loss on sale of non-strategic businesses, loss on early extinguishment of debt, and income tax (expense) benefit.  A reconciliation of income from continuing operations to non-GAAP income from continuing operations and the related per share data is presented in the attached tables.
Operating income totaled $30.0 million in the third quarter of 2007, as compared to $25.0 million in the third quarter of 2006.  Non-GAAP operating income in the third quarter of 2007 was $50.8 million, which produced a 9.2% margin, reflecting the continued benefits of our cost savings, restructuring and integration plans and productivity efforts.  Non-GAAP operating income excludes integration costs and restructuring and impairment charges.  A reconciliation of operating income to non-GAAP operating income is presented in the attached tables. 
Adjusted EBITDA in the third quarter of 2007 was $70.7 million, as compared to $41.0 million in the same period last year, an increase of approximately 72%.  Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration costs, restructuring and impairment charges, (gain) loss on sale of non-strategic businesses, divested operations EBITDA, loss on early extinguishment of debt, stock-based compensation provision, and income (loss) from discontinued operations.  An explanation of the Company's use of Adjusted EBITDA is detailed below, and a reconciliation of net income to Adjusted EBITDA is presented in the attached tables.
For the first nine months of 2007, the Company reported net income of $24.5 million, or $0.45 per diluted share, as compared to net income of $90.7 million, or $1.70 per diluted share, in the first nine months of 2006.  The results for the first nine months of 2007 included income from discontinued operations of $15.1 million, as compared to income from discontinued operations of $136.1 million in the same period of 2006, primarily relating to our sale of Supremex.  The first nine months of 2007 results included restructuring and impairment charges of $32.1 million, as compared to restructuring and impairment charges of $35.4 million in the same period of 2006.  Net sales for the first nine months of 2007 increased approximately 30% to $1.46 billion from $1.13 billion in 2006, primarily due to the acquisitions of Cadmus and Printegra, which both closed in the first quarter of 2007, and ColorGraphics and Commercial Envelope, which both closed in the third quarter of 2007.
Non-GAAP income from continuing operations for the first nine months of 2007 totaled $46.7 million, or $0.85 per diluted share, as compared to $28.3 million, or $0.52 per diluted share, in the first nine months of 2006.  Non-GAAP income from continuing operations excludes integration costs, restructuring and impairment charges, (gain) loss on sale of non-strategic businesses and loss on early extinguishment of debt.  A reconciliation of income (loss) from continuing operations to non-GAAP income from continuing operations and the related per share data is presented in the attached tables.
Operating income was $88.3 million for the first nine months of 2007, as compared to $40.6 million during the same period in 2006.  Non-GAAP operating income in the first nine months of 2007 was $121.4 million, which produced an 8.3% margin, reflecting the continued benefits of our cost savings, restructuring and integration plans.  Non-GAAP operating income excludes integration costs and restructuring and impairment charges.  A reconciliation of operating income to non-GAAP operating income is presented in the attached tables. 
Adjusted EBITDA for the first nine months of 2007 was $172.9 million, as compared to $111.2 million in the same period last year, an increase of 55%.  Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration costs, restructuring and impairment charges, (gain) loss on sale of non-strategic businesses, divested operations EBITDA, loss on early extinguishment of debt, stock-based compensation provision, and income (loss) from discontinued operations.  An explanation of the Company's use of Adjusted EBITDA is detailed below and a reconciliation of net income (loss) to Adjusted EBITDA is presented in the attached tables.
Robert G. Burton, Chairman and Chief Executive Officer stated:
"Cenveo delivered another outstanding performance during the third quarter.  These strong results were driven by a combination of solid performance across our business units, a strong focus on costs, and the benefits from the integration efforts for our recent acquisitions.  These efforts combined with a strengthened focus on productivity and efficiency efforts allowed us to increase our non-GAAP operating margin to 9.2% during the quarter, well ahead of last year's 7.7%, and deliver almost $71 million in adjusted EBITDA.  I am very pleased with our strong generation of cash from continuing operations of over $21.3 million during the quarter and $60.0 million during the first nine months, representing a $76.5 million year to date improvement compared to 2006.  I believe that these results demonstrate the Company's strategy is working by delivering strong financial performance, strong cash flow and giving Cenveo the ability to invest in growth opportunities to increase shareholder value."
Robert G. Burton, Chairman and Chief Executive Officer continued:
"We have worked hard in the third quarter integrating our two most recent acquisitions and focusing on improving our core operations.  The integration of the acquisitions has allowed us to take swift and aggressive actions designed to drive incremental improvements to our platform by focusing on consolidating overlapping facilities, and eliminating duplicate headcount and systems.  We have streamlined our operations and are now offering our customers the benefits of our expanded business platform.  We are doing this while improving our cost structure, expanding our sales initiatives, increasing productivity and reducing waste.  I am very pleased with the progress of the integration efforts to date for the four acquisitions we completed this year, and I am convinced that we are well positioned for the future."
Mr. Burton concluded: "As we enter the fourth quarter and look to finish 2007 on a positive note, I can assure you that we are extremely focused on delivering our fourth quarter and full year financial commitments.  We will continue to focus on delivering strong free cash flow and using these funds to service our debt and invest in the future growth of our business through capital expenditures and strategic acquisitions.  I am also pleased with the sales momentum that we are seeing in the marketplace.  We believe we are becoming the printer of choice in the markets we serve.  I am very pleased with our third quarter results, the fourth quarter looks promising, and I will communicate our revised guidance on the call tomorrow."

 

 

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