Cenveo announced their first quarter results today. The company reported a net loss of $22.6 million, or $0.47 per share, compared to a net loss of $16.5 million, or $0.35 per share, during the first quarter of 2004. Results included a charge of $8 million related to the closing of one of its facilities. Sales were up 6.1% to $450 million from $424 million in the same quarter last year. EBITDA for the first quarter was $24.9 million compared to $31.4 million last year. The company blamed increasing paper and raw material prices, as well as the cost of the CEO transition, for the decrease in EBITDA.

Topics of this summary:

  • Quarter Highlights
  • Segment Performance
  • Guidance
  • Raine Radar
  • Q & A

Quarter Highlights

  • The board accepts CEO Paul Reilly’s resignation, effective April 30, 2005. Michel Salbaing, Senior VP and CFO, has been appointed acting CEO until the Board can locate a replacement.
  • Robert Burton, formally of Moore, initiated a hostile take-over of Cenveo. Burton’s investment company now owns close to 10% of Cenveo stock. Cenveo has hired investment bank Rothschild to assist in evaluating its “strategic alternatives.”
  • Total debt increased by $32 million, or approximately 4%, during the quarter to $801.8 million.

Segment Performance


Net sales for the segment during the first quarter were $346.4 million, up $22.6 million from the first quarter of 2004. Sales to strategic accounts grew 14%. Local sales grew 2.5%. The company is working to recover the cost of increased paper prices, but this is being delayed by contractual agreements. EBITDA decreased $1.3 million to $20.9 million, or 6.1% of sales, down from 6.9% of sales last year.


Net sales for the segment during the first quarter were $103.2 million, up $3.3 million from the first quarter of 2004. Sales of office products were up 22% from the Q1 of 2004 however lower net pricing limited overall revenue growth. EBITDA for the segment was $11 million, down from $13.8 million last year.


Cenveo largely reiterated the guidance for 2005 it gave last quarter. The company is expecting free cash flows of $35 million in 2005. They also anticipate 4-5% revenue increases each quarter over quarter, gross profit margins around 20-21%, and SG&A expenses of about 15-16%. This should result in a low single-digit improvement in EBITDA for 2005.

Raine Radar:

Before the question and answer session, Board chairman Susan Rheney stated that the Board takes its fiduciary duties seriously and that they are doing everything possible to ensure that Cenveo is on a path that will increase shareholder value. She also said that the first quarter went to plan and emphasized the revenue growth as a sign of the company’s improving performance. These statements seemed designed to answer the claims by Robert Burton that Cenveo has failed its shareholders. Cenveo has gone to great lengths to invest in a new brand, a new name, and in a new sales model with little-to-no time to prove to the market any resulting momentum. Regardless of the outcome of this takeover attempt, the new CEO will have to prove him or herself capable of reducing costs and generating some positive buzz around Cenveo in short order to revive share price and market confidence.

Q & A

  1. Assuming paper price increases stop, Cenveo should have completed its own price increases by the end of the Q2.
  2. Auto brochure work used to be concentrated in the Q3, but seems to be spreading out.
  3. The ability to pass on paper prices is the most significant contributor to increase margins moving forward.
  4. Local sales in the commercial segment were systematically down during 2004.
  5. Paul is helping with the transition, but has stepped down from his CEO position.
  6. Cenveo plans to use its FCF to reduce debt.
  7. As plants stop becoming “core” they will consider selling them. The company is committed to improving operations of facilities which are “core” but underperforming.
  8. Cenveo is trying to move towards offering solutions, where margins are higher because they are based on savings that can be offered to a customer’s overall procurement, instead of the cheapest print available.
  9. Cenveo has invested in an IT infrastructure which gives their customers a portal to streamline the ordering process.