By Trevor Shackelford December 7, 2006 -- Cenveo Incorporated (NYSE: CVO) announced their third quarter results recently. Revenues for the third quarter were $383.9 million, down 10.8%, compared with the $430.8 million in revenues for the same period a year ago. Net income for the quarter was $11.6 million, or $0.21 per diluted share, compared to a net loss of $64.1 million, or $(1.28) per diluted share, in the third quarter of 2005. Contents of this Summary • Quarter Highlights • Segment Performance • Guidance • Raine Radar • Q & A Quarter Highlights • Adjusted EBITDA in the third quarter of 2006 was $40.4 million compared to adjusted EBITDA of $22.1 million in the same period last year, an increase of 82%. • For the first nine months, the company reported net income of $90.7 million, or $1.68 per diluted share compared to a net loss of $97.2 million, or $(1.99) per diluted share in the same period in 2005. • SG&A expenses in the third quarter were $45.7 million, down 23.4%, compared to $59.7 million in the year ago quarter. • Cash and cash equivalents at the end of the third quarter were $842,000, down 4.6%, compared with $883,000 in the third quarter of 2005. • Income tax for the third quarter was $17.2 million, primarily due to the sale of Supremex. • Cenveo saw restructuring and impairment charges of $4.7 million in the third quarter, which is broken into three areas: $2.5 million was spent in employee separation; $1.5 million was spent on office relocation; and $1.8 million was spent in building cleanup. This was offset by a $1.9 million gain on sales to a facility that was closed. • Total debt in Q3 was $701.4 million, or an increase of $34.8 million. The company’s weighted average interest in the third quarter was 7.68% versus 8.64 in the second quarter of 2006. • CAPEX was $3.4 million for the quarter. Segment Performance Envelopes, Forms, and Label Segment The segment saw an increase of $10.7 million compared to the same quarter last year. This was primarily due to the acquisition of RX technologies in July and a sales increase of office products customers. Operating income was up $11.0 million for the third quarter and $32.3 million for the first nine months. Operating income margin for the quarter was 13% of sales. Commercial Print Segment The segment saw a decrease of $10.9 million compared to the same quarter last year. This was primarily due to loss of sales at seven plants that were closed down during the quarter. Sales of ongoing commercial print plants increased $5.6 million in the quarter. Operating income margin for the quarter was 6% of sales. Guidance Robert G. Burton, chairman and CEO, estimated that EPS for the fourth quarter should be $0.24 and EBITDA should be $41.0 million. Raine Radar Cenveo seems to be almost like a new company. “Right-sized,” the company is now profitable, though revenue is lower by over 10%. The newly appointed management team has only been with the company for a year and has managed to make great improvements. Burton has extended his original three-year service deal to five years and plans to make Cenveo a $3 billion company before his tenure is complete. Burton’s detractors will claim that he cuts too deep to attain short term profits, but so far things look good for Cenveo. Q & A 1. The company has strategically invested in higher-growth sectors of the business to position themselves for future growth. For example, in order to continue to properly service the customer's expanding envelope volumes in the fast growing direct mail market, the company has ordered a new F.L. Smithe machine for its Chicago envelope facility. The purchase of this machine will allow for continued growth in unit volume and will provide significant efficiency and productivity improvements. They have also recently ordered two Komori sheetfed offset presses to support the growth initiatives in the commercial print market. 2. Cenveo likes to invest in capital when it makes both strategic and financial sense. The recent strategic investments not only meet a high return on capital thresholds, but also allow Cenveo to grow with customers in higher-growth sectors of the business. 3. Burton stated that the ongoing deal to purchase Banta is no longer being pursued. Cenveo offered $50 per share which expired on October 31, 2006. Since then, RR Donnelley has agreed to purchase Banta. 4. Cenveo’s management staff has plans to turn Cenveo into a $3 billion company within the next two years. Burton has recently signed to stay on for two years longer than previously stated and will remain with Cenveo for five years.