By Trevor Shackelford August 10, 2005 -- Cenveo (NYSE: CVO) held their second quarter earnings conference call today. The company reported a net loss of $10.6 million, or $0.22 per share, compared to a net loss of $2.1 million, or $0.04 per share, during the second quarter of 2004. Sales were up 3% year over year to $421.7 million from $409.4 million in the same quarter last year. EBITDA from ongoing operations for the second quarter was $30 million compared to $28 million last year. Jim Malone, Cenveo’s new President and CEO, spoke for about half an hour during the call outlining his initial plans and goals for the company. The company will be trimming $55 million in costs including at least 125 positions, although that is likely to increase. The cuts were designed to take out one to two levels of management in order to flatten and streamline the company. He recognizes that the current profitability levels are unacceptable, and believes that the company is energized and ready to “win”. His overall strategy is to take Cenveo from a high cost provider to a low cost, value-add company. To accomplish this, he is focusing his team on customer needs and operational excellence. By continually optimizing and “pruning” the cost structure, he hopes to turn the company into a more agile and responsive company. In addition, Malone indicated that with the amount of change and consolidation in the industry, he believes Cenveo will constantly be pursuing strategic options around alliances, partnerships, and M&A. Topics of this summary: Quarter Highlights Segment Performance Guidance Raine Radar Q & A Quarter Highlights James Malone announced as CEO of Cenveo on June 22, 2005. He comes from Qorval, LLC, a company which specialized in business and financial restructuring The company announced a restructuring program which will eliminate 125 positions and provide savings of $55 million per year, to be completed by January 1, 2006 Total debt decreased $18 million during the quarter to $784 million. Total debt is expected to be between $730 million and $740 million by the end of 2005 Segment Performance Commercial Net sales for the segment during the second quarter were $320.2 million, up $12.6 million from the second quarter of 2004. This growth was driven by sales to strategic accounts, which grew 34% during the second quarter. Local sales have been relatively flat for the first half of the year. EBITDA was essentially flat at $21.4 million, or 6.7% of total commercial sales, down from 7% last year. Price recovery has been hampered by an inability to fully recover paper price increases. Resale Net sales for the segment during the quarter were $101.5 million, down slightly from the second quarter of 2004. Office product sales have been up, but were offset by losses in the rest of the segment. EBITDA for the segment was down $900,000 to $13.5 million for the three months ended June 30. Guidance Cenveo did not provide much in the way of guidance this quarter, but Malone did state that the company’s goal is to double the 2004 EBITDA run-rate by the end of 2007. Raine Radar: Last quarter I said the new CEO would have to prove himself capable of stepping up to making some difficult cost cutting decisions as well as generating some positive buzz around the brand. Today, the new CEO, spoke at his first conference call to do exactly that. It is clear that he intends to implement lean principals to shave away activities that do not contribute to creating value for the customer. Right away, he has stripped away a layer of management, and it appears that he has a good plan in place for increasing margins going forward. On growing the business, Cenveo is seeing some small success from the recent rebuilding of the strategic sales team. The call seemed to indicate to me, however, that Malone sees the largest growth potential coming from future M&A or alliances. Q & A There will be $5 million - $8 million in additional charges related to the second part of the restructuring announced today ($35 million in restructuring). The company is still dealing with the Burton proxy battle around the ownership of the company. The company considers the debt levels to be too high, but does not see the debt level as a danger. Cenveo has did not cut much from the compliance side of the business, and does not think that the management positions which have been eliminated will negatively impact operations. Of the $55 million in cost reductions, $3-$5 million is coming out of the head office. When asked why shareholders should choose the current management team over the Burton proposal, Malone said that his background has been in fixing and selling companies, the board has endorsed him, and that they have already begun to make major changes in the company. The strategic review announced last quarter is still ongoing.