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Cenveo Posts Profit in Q3, Improves Over Previous Year's Loss

Thursday, November 09, 2006

Press release from the issuing company

STAMFORD, Conn., Nov. 8 -- Cenveo, Inc. today announced its results for the three and nine months ended September 30, 2006. For the third quarter, the Company reported net income of $11.6 million, or $0.21 per diluted share, compared to a net loss of $64.1 million, or $(1.28) per diluted share, in the third quarter of 2005. The third quarter 2006 results include restructuring, impairment and other charges of $4.7 million, as compared to $24.4 million in 2005. Net sales for the quarter decreased to $383.9 million from $430.8 million in 2005, primarily due to the Company's sale of Supremex. Non-GAAP net income totaled $14.9 million or $0.27 per diluted share in the third quarter of 2006. Non-GAAP net income excludes restructuring and impairment charges, and equity income from affiliate. A reconciliation of net income to Non-GAAP net income for these adjustments is presented in the attached tables. Adjusted EBITDA, as defined, (earnings before interest, taxes, depreciation and amortization, excluding restructuring, impairment, and other charges, gain (loss) on sale of non-strategic businesses, divested operations, additional stock compensation expense on the adoption of SFAS 123R, loss on early extinguishment of debt, and equity income in affiliate) in the third quarter of 2006, was $40.4 million compared to Adjusted EBITDA of $22.1 million in the same period last year, an increase of 82%. An explanation of the Company's use of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income is provided below. For the first nine months, the Company reported net income of $90.7 million, or $1.68 per diluted share compared to a net loss of $97.2 million, or $(1.99) per diluted share in the same period in 2005. The results for the first nine months of 2006 include restructuring and impairment charges of $35.4 million, the gain on sale of non-strategic businesses of $132.9 million, primarily relating to a sale of our 71.4% interest in Supremex, and the loss on early extinguishment of debt of $32.7 million. Net sales for the first nine months decreased to $1.17 billion from $1.30 billion in 2005, primarily due to the Company's decision to sell Supremex, close certain facilities, and sell several other non-strategic businesses. Non-GAAP net income totaled $33.7 million or $0.62 per diluted share in the first nine months of 2006. Non-GAAP net income excludes restructuring and impairment charges, gain on sale of non-strategic businesses, loss on early extinguishment of debt and equity income in affiliate. A reconciliation of net income to Non-GAAP net income for these adjustments is presented in the attached tables. Robert G. Burton, Chairman and Chief Executive Officer stated: "I am pleased to announce another quarter of strong operating performance with excellent growth in earnings and cash flows. We were once again able to exceed our financial targets and dramatically improve margins by executing the turnaround plan that we implemented last year. We continue to see strength across our envelopes, forms and label segment, due to strong backlog and solid operational improvement. Our commercial print segment has once again showed dramatic operational and financial improvement as our consolidation efforts and sales focus are resulting in solid margin expansion. Our cost containment efforts, combined with organic growth across our businesses allowed us to improve Adjusted EBITDA by 82% in the quarter from the same period last year. I would also point out the dramatic improvement we have made in regards to cash flow and working capital management. Since our arrival last September, we have been intensely focused on improving our DSO's, inventory turns, capital expenditure criteria, and cash management. As of September 30, 2006, we have reduced our DSO's by over 4 days in the year our management team has been on board. All of these efforts are resulting in a significant turnaround in cash flow. We will continue to put these funds to use by paying down debt, growing the business through acquisition and selected capital investments." Mr. Burton continued: "We have also strategically invested in higher growth sectors of our business to position us for future growth. For instance, in order to continue to properly service our customer's expanding envelope volumes in the fast growing direct mail market, the Company has ordered a new F.L. Smithe SW1 machine for its Chicago envelope facility. The purchase of this machine will allow for continued growth in unit volume and will provide significant efficiency and productivity improvements. We have also recently ordered two Komori sheet fed offset presses to support our growth initiatives in the commercial print market. These two presses will strengthen Cenveo's position in the high-end commercial print market across the Southwest. As I have stated all along, Cenveo will invest in capital when it makes both strategic and financial sense. These recent strategic investments not only meet our high return on capital thresholds, but also allow us to grow with our customers in higher growth sectors of our business. We will continue to make selected investments when advantageous, to position the Company for the future growth." Mr. Burton concluded: "I continue to be very pleased with the progress the Company has made in the year since our management team has arrived. We have executed on our turnaround plan and have consistently delivered on our financial commitments each quarter. We have continued to win in our markets by bringing great quality and service levels to our customers. We intend to continue to grow our business organically and through acquisition, as we did with Rx Technology, by adding high quality companies to our family. It is very clear to me that Cenveo is an outstanding platform to build the world's premiere printing company. I am 100% convinced that we have the opportunity not only to continue to enhance shareholder value, but to create a company that is the envy of the industry. My commitment to making this happen has never been stronger, so much so that I have agreed to extend my original three year contract with the Company for an additional two years, through 2010. As the Company's largest individual shareholder, I am confident that our team will be successful in achieving this goal."

 

 

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