Cenveo, Inc. today announced results for the three and six months ended June 30, 2012.

The Company generated net sales of $438.9 million for the second quarter of 2012, compared to $469.9 million for the second quarter of 2011. The decrease in net sales was primarily due to lower sales in our print and envelope product lines as a result of lower direct mail volumes from our financial services customers, the closure and consolidation of a print plant and our decision to exit certain low margin businesses. The Company generated net sales of $894.5 million for the first six months of 2012, compared to $946.9 million for the first six months of 2011. The decrease in net sales was primarily due to lower sales in our print and envelope product lines as a result of lower direct mail volumes from our financial services customers, customer product launches in the first six months of 2011 that did not repeat in the first six months of 2012, the closure and consolidation of a print plant and our decision to exit certain low margin businesses. The Company expects the direct mail market to strengthen in the second half of 2012. Net sales from our label and packaging business lines remained relatively flat for the second quarter of 2012 and for the six months of 2012 despite our decision to exit low margin businesses within those platforms, which has been offset in part by our e-commerce initiatives and new account wins in our packaging business.

Operating income was $29.0 million for the second quarter of 2012, compared to $26.3 million for the second quarter of 2011. The increase in operating income was primarily due to our lower cost structure as a result of the integration of our Envelope Product Group ("EPG") acquisition and lower compensation related expenses, offset by increased pension expense and lower byproduct recoveries. Non-GAAP operating income was $36.3 million for the second quarter of 2012, compared to $37.3 million for the second quarter of 2011. Operating income was $43.2 million for the first six months of 2012, compared to $45.5 million for the first six months of 2011. The decrease in operating income was primarily due to increased restructuring, impairment and other charges as a result of the closure and consolidation of a print plant and other cost savings actions executed in the first quarter of 2012, increased pension expense and lower recoveries, offset in part by our lower cost structure due to the integration of our EPG acquisition and lower compensation related expenses. Non-GAAP operating income was $67.9 million for the first six months of 2012, compared to $68.8 million for the first six months of 2011. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges.

For the second quarter of 2012, the Company had income from continuing operations of less than $0.1 million, or less than $0.01 per share, compared to loss from continuing operations of $1.6 million, or $0.02 per share for the second quarter of 2011. On a Non-GAAP basis, income from continuing operations was $8.4 million, or $0.13 per share, for the second quarter of 2012 as compared to $7.5 million, or $0.12 per share, for the second quarter of 2011. For the first six months of 2012, the Company had a loss from continuing operations of $22.5 million, or $0.36 per share, compared to loss from continuing operations of $0.5 million, or $0.01 per share for the first six months of 2011. On a Non-GAAP basis, income from continuing operations was $11.7 million, or $0.18 per share, for the first six months of 2012 as compared to $8.6 million, or $0.14 per share, for the first six months of 2011. Non-GAAP income (loss) from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, loss on early extinguishment of debt, net and adjusts income taxes to reflect an estimated cash tax rate. A reconciliation of income (loss) from continuing operations to Non-GAAP income from continuing operations is presented in the attached tables.

Adjusted EBITDA for the second quarter of 2012 was $53.1 million, compared to Adjusted EBITDA for the second quarter of 2011 of $53.5 million. Adjusted EBITDA for the first six months of 2012 was $100.1 million, compared to Adjusted EBITDA for the first six months of 2011 of $100.9 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation, amortization, integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, gain on bargain purchase, loss on early extinguishment of debt, net and (loss) income from discontinued operations, net of taxes.

Financing and 2013 Maturity update:

During the second quarter of 2012, the Company successfully raised $65 million of additional term loan and amended its credit agreement to allow the Company to repurchase its remaining 7.875% notes that mature in December 2013. Given this increased flexibility to repurchase these notes, the Company repurchased and retired $50.0 million of these notes during the second quarter of 2012. At present, $98.5 million of these notes remain outstanding. The Company will continue to use its free cash flow and available borrowing capacity to aggressively repurchase these notes for the foreseeable future. The Company fully expects to redeem the entire maturity by early 2013.

Pension relief:

With passage of pension relief in July of 2012 in connection with the Moving Ahead for Progress in the 21st Century Act ("MAP-21"), the Company estimates it will reduce its pension contributions in excess of $10.5 million through 2013, of which approximately $3.0 million is expected to reduce its 2012 contributions and the remainder will reduce its 2013 contributions.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:

"Our second quarter results were in line with our expectations as we continued to execute well despite a challenging economic back drop. We were able to generate over $33 million in cash flow from operating activities of continuing operations, pay down debt and materially address our notes maturing in December 2013 by retiring $50.0 million of these notes. I feel highly confident in our plan to quickly address the remaining $98.5 million by continuing to generate strong cash flow and continuing to drive working capital improvements. Also, the passage of MAP-21 with its pension plan interest rate stabilization is very positive for Cenveo.  We currently estimate this legislation will reduce our planned pension contributions in excess of $10.5 million through 2013 and provides us additional cash to reduce our notes maturing in 2013, repay other outstanding debt or invest in our growing businesses."

"Operationally, our label and packaging products continue to deliver solid performances in 2012, with strong e-commerce revenue and production expansion offsetting our planned decision to walk away from unprofitable business. Despite being challenged by some cyclical and customer specific issues, our envelope operations delivered expected revenue and operational results met our expectations. As we stated earlier this year, we expect the direct mail market to firm in the second half of 2012 as our customers return to a more normalized ordering pattern. Our print products were led by improving performance out of our print group. Our publisher services operations continue to be affected by macro trends and in changes in the timing of customer purchases offset by continued improvement in our content management business." 

Mr. Burton concluded:

"As we enter the back half of the year, 2012 is generally progressing in line with our expectations. Despite a challenging macro environment, we have been able to drive cash flow, pay down debt and increase our operating margins. We are intensely focused at addressing our capital structure, particularly our 7.875% notes that mature at the end 2013, and fully expect to address the remaining $98.5 million by early 2013. Lastly, based on our current outlook, recent sales momentum and our focus on our cost structure, we remain on track to deliver the full year targets that are consistent with our previous guidance."

Management Appointments:

The Company also announced the following promotions: Scott J. Goodwin has been promoted to the position of Chief Financial Officer. Mr. Goodwin previously held the position of Chief Accounting Officer. He replaces Mark S. Hiltwein who has been promoted to President of the Envelope Group.

Mr. Burton stated:

"Given our desire to continue to look to improve our operations and focus our best resources on driving value, these promotions make perfect sense. Both Mark and Scott have had long successful tenures at Cenveo and have been key contributors to our success. Their promotions are well deserved and will set us up well for the future."     

Conference Call:

Cenveo will host a conference call tomorrow, Thursday, August 9, 2012 at 10:00 a.m. Eastern Time.  The conference call will be available via webcast, which can be accessed via the Internet at www.cenveo.com.