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Cenveo Reports Net Sales of $480.6 million in Q3

Friday, November 07, 2014

Press release from the issuing company

STAMFORD, Conn. - Cenveo, Inc. today announced results for the three and nine months ended September 27, 2014.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"During the third quarter we successfully completed several of our key initiatives, including the consolidation of five legacy National Envelope facilities into two brand new locations and into certain legacy Cenveo operations. Since the beginning of the year, our consolidation efforts have resulted in a total net reduction of six envelope facilities. Given the ramifications of the bankruptcy process, the short time frame to complete this monumental consolidation, and our desire to minimize customer disruption, we incurred significant one-time costs as a result of the integration efforts. In addition to integration, acquisition, restructuring and other charges reported in our non-GAAP results related to the National Envelope integration, we believe that year to date we have experienced approximately $15 million in other one-time costs and lost profits in connection with the integration. These items include, but are not limited to, lower production volumes during the relocation period, excess overtime at existing facilities to meet customer deadlines, and incremental freight expense for inventory relocation and expedited deliveries during the transition period. Despite this disruption, we were able to generate $20 million of cash flow from continuing operations during the third quarter. While we are substantially complete with the integration, we anticipate further manufacturing disruption during the fourth quarter, although to a lesser extent, as our production capacity at our new facilities continues to ramp up."

The Company generated net sales of $480.6 million for the three months ended September 27, 2014, compared to $442.8 million for the same period last year, an increase of 8.5%. The Company generated net sales of $1.5 billion for the nine months ended September 27, 2014, compared to $1.3 billion for the same period last year, an increase of 14.4%. The increase in net sales is primarily due to sales generated from the integration of National Envelope into our envelope operations, as National Envelope was only included in our 2013 results beginning on September 16, 2013, the date of acquisition, as well as our ability to pass along paper price increases to certain customers in our envelope operations.

Operating income was $9.3 million for the three months ended September 27, 2014, compared to $16.5 million for the same period last year. Operating income was $32.7 million for the nine months ended September 27, 2014, compared to $45.0 million for the same period last year. The decrease was primarily due to higher restructuring and integration charges from the closure of two print plants, the closure and consolidation of several envelope plants related to the integration of National Envelope, and the impact of the higher cost structure of National Envelope. Non-GAAP operating income was $21.4 million for the three months ended September 27, 2014, compared to $28.8 million for the same period last year, and $67.2 millionfor the nine months ended September 27, 2014, compared to $69.5 million for the same period last year.  A reconciliation of operating income to non-GAAP operating income is presented in the attached tables.

For the three months ended September 27, 2014, the Company had a loss from continuing operations of$10.8 million, or $0.16 per diluted share, compared to income of $13.4 million, or $0.16 per diluted share, for the same period last year. For the nine months ended September 27, 2014, the Company had a loss from continuing operations of $66.9 million, or $1.00 per diluted share, compared to a loss of $26.1 million, or$0.40 per diluted share, for the same period last year. Non-GAAP income from continuing operations was $3.0 million, or $0.03 per diluted share, for the three months ended September 27, 2014, as compared to non-GAAP income from continuing operations of $1.2 million, or $0.01 per diluted share, for the same period last year.  For the nine months ended September 27, 2014, non-GAAP loss from continuing operations was $7.6 million, or $0.11 per diluted share, compared to $14.5 million, or $0.23 per diluted share, for the same period last year. A reconciliation of income (loss) from continuing operations to non-GAAP income (loss) from continuing operations is presented in the attached tables.

Adjusted EBITDA for the three months ended September 27, 2014, was $44.1 million, compared to Adjusted EBITDA of $42.3 million for the same period last year. For the nine months ended September 27, 2014, Adjusted EBITDA was $123.0 million, compared to $115.2 million for the same period last year. These Adjusted EBITDA results do not include the approximately $15 million of one-time costs referenced previously, and include a one-time litigation settlement. A reconciliation of net (loss) income to Adjusted EBITDA is presented in the attached tables.

Cash flow provided by operating activities of continuing operations for the three months ended September 27, 2014, was $20.0 million, compared to $5.0 million for the same period last year. Cash flow used in operating activities of continuing operations for the nine months ended September 27, 2014, was $5.4 million, compared to cash flow provided by operating activities of continuing operations of $10.7 million for the same period last year. The use of cash was primarily due to changes in working capital, primarily due to certain vendor arrangements and a use of cash from accounts receivables due to the timing of collections from and sales to our customers.

Robert G. Burton, Sr., Chairman and Chief Executive Officer concluded:
"As we enter the fourth quarter and look towards 2015, we are pleased to have substantially completed the accelerated integration of National Envelope. We will continue to look to improve margins, drive stronger cash flow and pay down debt. Based on current operational trends and backlogs, and excluding the expected full year impact of one-time disruption costs related to the accelerated National Envelope integration of approximately $20 million, we expect to achieve 95-100% of our 2014 full year Adjusted EBITDA guidance. As we have addressed the majority of our capital structure earlier this year, we will now focus on using our cash flow to reduce our higher cost debt. We expect significant cash flow improvement in the fourth quarter and beyond as a result of: the interest savings realized in our June refinancing; the reduction of future contributions to our pension plans as a result of the Highway and Transportation Funding Act of 2014; and the completion of the majority of the restructuring and integration of National Envelope.  We continue to evaluate our options in regards to our strategic review and are currently in preliminary discussions with multiple parties for certain assets that do not fit our long-term strategic plan."

Full Release

 

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