By Trevor Shackelford March 9, 2006 -- Cenveo, Inc., (NYSE: CVO) announced their fourth quarter and fiscal 2005 results last week. Total revenue for Cenveo’s fourth quarter was $447.2 million, compared to $481.7 million reported in the fourth quarter of fiscal 2004, due in part to the 2005 having one less week of operations compared to 2004. For the fourth quarter, the company incurred a net loss of $37.8 million, or $0.71 per share, compared to a net loss of $3.6 million, or $0.08 per share reported in the fourth quarter of 2004. The fourth quarter 2005 results included restructuring, impairment and other charges of $37.8 million, and the loss on sale of non-strategic businesses of $2.5 million, totaling $40.3 million. Total revenue for Cenveo’s fiscal year 2005 was $1.75 billion, compared to $1.74 billion reported in 2004. This slight increase in sales reflects improvement in the envelopes, forms, and labels segment, partially offset by a decline in its commercial printing business. For the fiscal year 2005, the company reported a net loss of $135.1 million, or $2.70 per share, compared to a net loss of $19.7 million, or $0.41 per share reported in the fiscal 2004. The results for the year 2005 include restructuring, impairment, and other charges of $77.3 million, the loss on sale of non-strategic businesses of $4.5 million, and an income tax expense of $62.3 million, which included a valuation allowance of $35.3 million against the company’s remaining U.S. deferred tax asset. Contents of this Summary * Quarter Highlights * Segment Performance * Guidance * Raine Radar * Q & A Quarter Highlights • On February 16th, the company filed a preliminary prospectus in Canada to spin off the Canadian envelope business as Supremex. Sources put the value of the deal between $300 and $350 million. • Adjusted EBITDA (excluding restructuring and other charges) for the fourth quarter was $46.4 million, 26.4% higher than the $36.7 million reported for the same period last year. • Adjusted EBITDA for the fiscal 2005 was $136.1 million, compared to $127.5 million reported in the fiscal 2004, an 11% increase year-over-year. • During the fourth quarter, domestic operations posted a 50% improvement in adjusted EBITDA. • During the fourth quarter, the company implemented a $100 million cost savings plan. The company realized $13 million of savings during the quarter. • Total debt as at the end of the fourth quarter was $812.1 million, an increase of $19.7 million during the fourth quarter. • Total CAPEX for the year was $30.8 million, of which $11.1 million were in the fourth quarter as a result of commitments made by prior management. • The company closed down the 13 small non-profit operations; one of those was an advertising business. Segment Performance In September 2005, the company changed its management structure and realigned its manufacturing operations into two operating segments: the envelope, forms, and labels segment and the commercial printing segment. Cenveo did not provide any segment performance in its conference call, however it was included in the 10-K filed by the company. Envelope, Forms, and Labels Segment The envelope, forms, and labels segment is in the business of manufacturing customized envelopes and packaging products, stock envelopes, traditional and specialty business forms, and labels used for such applications as mailing, messaging and bar coding. Cenveo reported 2005 revenues for the segment of $922 million, compared to $899 million reported for the fiscal 2004. Operating income for the segment during 2005 was $84.7 million, compared to $89.4 million reported for the fiscal 2004. Restructuring and other charges for the year was $12.54 million. Commercial Printing Segment The commercial printing segment is in the business of designing, manufacturing and distributing printed products including advertising literature, corporate identity materials, financial printing, calendars, greeting cards, brand marketing materials, catalogs, maps, CD packaging and direct mail. Cenveo reported 2005 revenues for the segment of $827.3 million, compared to $843 million reported for the previous year. Operating loss for the segment was $33.8 million, compared to operating income of $4.18 million reported for 2004. Restructuring and other charges for the year were $36.37 million. Guidance The new management concentrated their comments on cost reduction plans. Cenveo announced that they identified at least $75 million of cost reductions by the end of 2006. In addition, the company targeted $25 million in additional savings by the end of 2006 by bringing its cost structure in line with the competitors. Other expectations of the company are as follows; • The company expects for the full year 2006, EPS would be around $0.50 per diluted share and EPS for the first quarter of fiscal 2006 would be around $0.04 • The company expects EBITDA for the first quarter to be around $36 million and EBITDA of approximately 8.4% • The company expects EBITDA for the full year 2006 to be around $146 million and EBITDA margin of approximately 9.5% Raine Radar CEO Robert Burton has his detractors, but his decisive actions appear to be making positive changes at the company. Cenveo’s stock has been on the rise since Burton has become involved with the company. He has targeted $100 million in potential cost savings to be achieved during 2006, and will be generating cash from the IPO of Supremex. The next step for him appears to be using that cash to acquire businesses that will bolster and improve the sales and profitability of the company. The company appears to have a clear plan for success for the first time in several years, and the market is responding to that. Q & A 1. The company estimates it will spend approximately $15 million in CAPEX for operating the business as usual. It also intendeds to sell some capital by closing down non-strategic operations. 2. Cenveo estimates that it will spend approximately $46 million in general and administrative expenses. 3. The company is anticipating major cost reductions in corporate expenses. 4. Cenveo expects that the effective tax rate for the full year will be around 20%. However, the company expects a higher tax rate in the first quarter of 2006. 5. The company is looking for acquisitions of a couple of businesses that would fit within its platform and improve sales. 6. Cenveo stated that its new management team has committed to deliver its numbers in comparison to 2004 when no one was accountable for delivering results. 7. In the company’s 401(k) plan, employees own approximately 2.5 million shares. 8. Cenveo is hoping to become the low cost provider in the market. 9. The management believes that Cenveo will be more competitive going forward now that the company is focused on getting the right people around the right equipment.