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$309 Million Loss for Cenveo

Tuesday, March 17, 2009

Press release from the issuing company

STAMFORD, CT -- Cenveo, Inc. today announced results for the three months and full year ended January 3, 2009.
 
For the fourth quarter ended January 3, 2009, net sales were $517.2 million compared to $584.4 million for the same period in the previous year. For the quarter ended January 3, 2009, the Company recorded a net loss of $309.6 million, or ($5.71) per share, compared to net income of $18.8 million, or $0.34 per diluted share, in the quarter ended December 29, 2007. The fourth quarter 2008 results include non-cash goodwill impairment charges of $372.8 million resulting from reductions in the fair value of reporting units in connection with the Company’s annual impairment test. On a non-GAAP basis, income from continuing operation was $26.0 million, or $0.48 per diluted share. Non-GAAP income from continuing operations excludes restructuring, impairment and other charges, integration, acquisition and other charges, stock-based compensation provision, (gain) loss on early extinguishment of debt, (gain) loss on sale of non-strategic business and income tax expense (benefit). A reconciliation of income from continuing operations to non-GAAP income from continuing operations for these adjustments is presented in the attached tables. Adjusted EBITDA in the fourth quarter of 2008 was $75.1 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, (gain) loss on early extinguishment of debt, (gain) loss on sale of non-strategic business and income (loss) from discontinued operations, net of taxes.  An explanation of the Company’s use of Adjusted EBITDA is detailed below and a reconciliation of net income to Adjusted EBITDA is provided in the attached tables.
 
For the year ended January 3, 2009, net sales increased 2.5% to $2.1 billion compared to $2.0 billion in the previous year. For the year ended January 3, 2009, the Company recorded a net loss of $298.0 million, or ($5.53) per diluted share, compared to net income of $40.8 million, or $0.75 per diluted share, in the year ended December 29, 2007. The 2008 results include non-cash goodwill impairment charges of $372.8 million. On a non-GAAP basis, income from continuing operations was $88.1 million, or $1.63 per diluted share, for the year ended January 3, 2009. Adjusted EBITDA for the full year of 2008 was $280.3 million.
 
In 2008 the Company generated cash flows from continuing operations of $209.8 million compared to $86.2 million in 2007, representing a 143.4% increase. During the fourth quarter of 2008, the Company repurchased an aggregate $48.5 million principal amount of its outstanding 7 7/8% Senior Subordinated Notes due 2013 and its 8 3/8% Senior Subordinated Notes due 2014 (collectively the “Notes”). In connection with these repurchases of the Notes, the Company recognized a gain of approximately $18.5 million in the fourth quarter of 2008, representing the difference between the net carrying amount and the total repurchase price of the Notes.
 
Financial highlights:

- For the full year cash flow from continuing operations was $209.8 million, up $123.6 million from the full year of 2007
- Non-GAAP operating income margin was 9.8% for the full year
- Total debt decreased $138.3 million for 2008 and $69.6 million in the quarter to $1.3 billion 
- At the end of the quarter, approximately 90% of the Company’s debt was subject to fixed interest rates  resulting in a quarterly weighted interest rate of 7.3%

Robert G. Burton, Chairman and Chief Executive Officer stated:
“Despite the most challenging economic and market conditions that I have encountered in my entire business career, Cenveo was able to deliver strong operational performance highlighted by record financial results across a number of key metrics.  By matching our costs with our revenue stream, and focusing on our customers’ needs, we were able to grow our revenues 2.5%, deliver non-GAAP operating margin of 9.8%, and increased our Adjusted EBITDA to $280.3 million. We continue to generate strong cash flow from operations. For the full year of 2008, we generated $209.8 million of cash flows from continuing operations, up 143.4% from the same period last year.  In 2008, we were able to pay down almost $140 million in debt, while at the same time growing the Company through small strategic acquisitions and prudent investments of capital. These strong operating results and market share gains have shown that our operational game plan is working and demonstrates that our business can outperform the competition even in the most difficult of times.”
 
Capital Structure:
“We are in compliance with all of our debt covenants, as we ended 2008, with a reasonable level of debt-covenant cushion. Our management team is implementing a game plan to allow the Company to remain in compliance with our covenants going forward. However after much deliberation, and given the unprecedented uncertainty in the financial markets coupled with limited sales visibility, we have decided that exploring an amendment to our credit agreement is a prudent course of action. We are currently in discussions with our lead bank about modifying the terms of our credit facility to give the Company flexibility during this period of unprecedented economic uncertainty and volatility.”
 
Mr. Burton concluded:
“One of my primary responsibilities is to build an exceptional company — well-managed, well-equipped to thrive in any environment, regardless of economic or industry conditions. I believe we are well on our way to achieving that goal. With that being said and given the economic realities of today, we will use financial discipline to focus on rightsizing our cost and manufacturing platform. We continue to strive to be a low-cost provider of products and services, while at the same time delivering for our customers. We will also continue to invest in our diverse and specialized product offerings which focus on the custom and short-run end markets. Our goal for these markets remains the same: we want to be in the strongest competitive position in each of our niche markets and to grow and expand our diversified customer base. These factors combined with our seasoned management team that understands today’s industry dynamics will allow us to better weather this storm than the competition. In 2009, we are capitalizing on these strengths and look to grow in our markets when our competition is unable to do so. ”  
 

 

 

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