UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
AMENDMENT NO. 1
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 28, 2009
Commission file number 1-12551
CENVEO, INC.
(Exact name of Registrant as specified in its charter.)
COLORADO | 84-1250533 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
ONE CANTERBURY GREEN 201 BROAD STREET | |
STAMFORD, CT | 06901 |
(Address of principal executive offices) | (Zip Code) |
203-595-3000 | |
(Registrant’s telephone number, including area code) |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer o Accelerated filer x Non-accelerated filer o Smaller reporting company o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of May 4, 2009 the registrant had 54,606,238 shares of common stock outstanding.
CENVEO, INC.
FORM 10-Q/A
AMENDMENT NO. 1
FOR THE QUARTERLY ENDED MARCH 28, 2009
EXPLANATORY NOTE
This Form 10-Q/A is being filed in response to a request in a Securities and Exchange Commission (“SEC”) staff comment letter that we enhance certain disclosures, as outlined below, in our Annual Report on Form 10-Q for the three months ended March 28, 2009, which was originally filed by Cenveo with the SEC on May 6, 2009 (the “Original 10-Q”). This Amendment amends Item 1 -- Financial Statements in order to provide additional disclosure within Footnote 6 – Long-Term Debt regarding the cross-acceleration and cross-default provisions of the Cenveo’s 8⅜% senior subordinated notes due 2014, 10½% senior notes due 2016 and 7⅞% senior subordinated notes due 2013, collectively (the “Notes”) subsequent to the amendment of our Amended Credit Facilities on April 24, 2009. The amendment had no impact on the cross acceleration and cross-default provisions of the Notes.
As required by Rule 12b-15 under the Securities Exchange Act of 1934, as amended, new certifications by our Principal Executive Officer and Principal Financial Officer are being filed as exhibits to this Amendment under Item 6 - Exhibits.
Except for the changes contained in this Amendment that are noted above, this Amendment continues to speak as of the date of the Original 10-Q, does not reflect any subsequent information or events, and does not modify, amend or update in any way any other item or disclosure in the Original 10-Q. All references in this Amendment to “this Quarterly Report on Form 10-Q” or words of similar import refer to the Original 10-Q, as amended by this Amendment.
PART I. FINANCIAL INFORMATION
Item 1 of the Original 10-Q is amended to read in its entirety as follows:
Item 1. Financial Statements |
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
(unaudited)
March 28, 2009 | January 3, 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 10,207 | $ | 10,444 | ||||
Accounts receivable, net | 249,998 | 270,145 | ||||||
Inventories | 149,653 | 159,569 | ||||||
Prepaid and other current assets | 68,544 | 74,890 | ||||||
Total current assets | 478,402 | 515,048 | ||||||
Property, plant and equipment, net | 409,831 | 420,457 | ||||||
Goodwill | 311,183 | 311,183 | ||||||
Other intangible assets, net | 274,628 | 276,944 | ||||||
Other assets, net | 27,401 | 28,482 | ||||||
Total assets | $ | 1,501,445 | $ | 1,552,114 | ||||
Liabilities and Shareholders’ Deficit | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 16,481 | $ | 24,314 | ||||
Accounts payable | 181,422 | 174,435 | ||||||
Accrued compensation and related liabilities | 32,953 | 37,319 | ||||||
Other current liabilities | 83,553 | 88,870 | ||||||
Total current liabilities | 314,409 | 324,938 | ||||||
Long-term debt | 1,244,741 | 1,282,041 | ||||||
Deferred income taxes | 25,955 | 26,772 | ||||||
Other liabilities | 137,717 | 139,318 | ||||||
Commitments and contingencies | ||||||||
Shareholders’ deficit: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 545 | 542 | ||||||
Paid-in capital | 274,852 | 271,821 | ||||||
Retained deficit | (451,277 | ) | (446,966 | ) | ||||
Accumulated other comprehensive loss | (45,497 | ) | (46,352 | ) | ||||
Total shareholders’ deficit | (221,377 | ) | (220,955 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,501,445 | $ | 1,552,114 |
See notes to condensed consolidated financial statements.
1
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Three Months Ended | ||||||||
March 28, 2009 | March 29, 2008 | |||||||
Net sales | $ | 412,100 | $ | 534,328 | ||||
Cost of sales | 348,316 | 436,298 | ||||||
Selling, general and administrative | 52,515 | 63,126 | ||||||
Amortization of intangible assets | 2,316 | 2,175 | ||||||
Restructuring, impairment and other charges | 8,732 | 9,749 | ||||||
Operating income | 221 | 22,980 | ||||||
Interest expense, net | 22,545 | 26,978 | ||||||
Gain on early extinguishment of debt | (17,642 | ) | — | |||||
Other expense, net | 35 | 461 | ||||||
Loss from continuing operations before income taxes | (4,717 | ) | (4,459 | ) | ||||
Income tax benefit | (530 | ) | (1,716 | ) | ||||
Loss from continuing operations | (4,187 | ) | (2,743 | ) | ||||
Loss from discontinued operations, net of taxes | (124 | ) | (656 | ) | ||||
Net loss | $ | (4,311 | ) | $ | (3,399 | ) | ||
Loss per share – basic and diluted: | ||||||||
Continuing operations | $ | (0.08 | ) | $ | (0.05 | ) | ||
Discontinued operations | — | (0.01 | ) | |||||
Net loss | $ | (0.08 | ) | $ | (0.06 | ) | ||
Weighted average shares: | ||||||||
Basic and diluted | 54,352 | 53,715 |
See notes to condensed consolidated financial statements.
2
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended | ||||||||
March 28, 2009 | March 29, 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (4,311 | ) | $ | (3,399 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Loss from discontinued operations, net of taxes | 124 | 656 | ||||||
Depreciation and amortization, excluding non-cash interest expense | 17,450 | 18,013 | ||||||
Non-cash interest expense, net | 485 | 390 | ||||||
Gain on early extinguishment of debt | (17,642 | ) | — | |||||
Stock-based compensation provision | 3,462 | 2,692 | ||||||
Non-cash restructuring, impairment and other charges | 3,334 | 3,456 | ||||||
Deferred income taxes | (1,154 | ) | (1,775 | ) | ||||
Gain on sale of assets | (47 | ) | (294 | ) | ||||
Other non-cash charges, net | 1,556 | 3,140 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 19,329 | 35,195 | ||||||
Inventories | 9,040 | (10,106 | ) | |||||
Accounts payable and accrued compensation and related liabilities | 4,051 | (3,442 | ) | |||||
Other working capital changes | 2,268 | 12,955 | ||||||
Other, net | (1,527 | ) | (3,050 | ) | ||||
Net cash provided by operating activities | 36,418 | 54,431 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (9,150 | ) | (9,097 | ) | ||||
Proceeds from sale of property, plant and equipment | 363 | 348 | ||||||
Net cash used in investing activities | (8,787 | ) | (8,749 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of term loans | (19,328 | ) | (1,800 | ) | ||||
Repayment of 8⅜% senior subordinated notes | (18,959 | ) | — | |||||
Repayment of 10½% senior notes | (3,250 | ) | — | |||||
Repayment of 7⅞% senior subordinated notes | (3,125 | ) | — | |||||
Repayments of other long-term debt | (2,242 | ) | (1,806 | ) | ||||
Purchase and retirement of common stock upon vesting of RSUs | (431 | ) | — | |||||
Payment of fees on early extinguishment of debt | (94 | ) | — | |||||
(Repayments) borrowings under revolving credit facility, net | 19,750 | (45,200 | ) | |||||
Proceeds from exercise of stock options | — | 288 | ||||||
Net cash used in financing activities | (27,679 | ) | (48,518 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (189 | ) | 9 | |||||
Net decrease in cash and cash equivalents | (237 | ) | (2,827 | ) | ||||
Cash and cash equivalents at beginning of year | 10,444 | 15,882 | ||||||
Cash and cash equivalents at end of quarter | $ | 10,207 | $ | 13,055 |
See notes to condensed consolidated financial statements.
3
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements (the “Financial Statements”) of Cenveo, Inc. and subsidiaries (collectively, “Cenveo” or the “Company”) have been prepared in accordance with Rule 10-01 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) and, therefore, do not include all information and footnotes necessary for a fair presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“GAAP”). In the opinion of the Company, however, the Financial Statements contain all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position, results of operations and cash flows as of and for the three month period ended March 28, 2009. The results of operations for the three month period ended March 28, 2009 are generally not indicative of the results to be expected for the full year. These Financial Statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended January 3, 2009 (the “Form 10-K”).
It is the Company’s practice to close its quarters on the Saturday closest to the last day of the calendar quarter. The reporting periods ending on March 28, 2009 and March 29, 2008 consist of 12 and 13 weeks, respectively.
New Accounting Pronouncements
Effective January 4, 2009, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 141R, Business Combinations (“SFAS 141R”). SFAS 141R establishes revised principles and requirements for how the Company will recognize and measure assets and liabilities acquired in a business combination. SFAS 141R is effective for business combinations completed on or after January 4, 2009 for the Company. In accordance with the transition guidance in SFAS 141R, the Company recorded a charge in the fourth quarter of 2008 to write-off acquisition-related costs. Acquisition-related costs are included in selling, general and administrative expenses in its condensed consolidated statement of operations. SFAS 141R did not have a material impact on the Company’s condensed consolidated statement of operations for the three months ended March 28, 2009.
Effective January 4, 2009, the Company adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of ARB No. 51” (“SFAS 160”). SFAS 160 establishes accounting and reporting standards for the noncontrolling interests in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 had no impact on the Company’s condensed consolidated financial statements at January 4, 2009.
Effective January 4, 2009, the Company adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities: an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161 changes the disclosure requirements for derivative instruments and hedging activities. SFAS 161 had no impact on the Company’s condensed consolidated financial statements at January 4, 2009.
2. Stock-Based Compensation
The Company did not issue any form of stock-based compensation in the first quarter of 2009. The only changes to the Company’s stock-based compensation awards from the amounts presented as of January 3, 2009 were the vesting of 445,063 restricted stock units for shares of the Company’s common stock and the cancellation or forfeiture of 20,000 stock options and 13,098 restricted share units.
Total stock-based compensation expense recognized in selling, general and administrative expenses in the Company’s condensed consolidated statements of operations was $3.5 million and $2.7 million for the three months ended March 28, 2009 and March 29, 2008, respectively.
4
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Inventories
Inventories by major category are as follows (in thousands):
March 28, 2009 | January 3, 2009 | |||||||
Raw materials | $ | 63,166 | $ | 67,236 | ||||
Work in process | 22,734 | 27,011 | ||||||
Finished goods | 63,753 | 65,322 | ||||||
$ | 149,653 | $ | 159,569 |
4. Property, Plant and Equipment
Property, plant and equipment are as follows (in thousands): |
March 28, 2009 | January 3, 2009 | |||||||
Land and land improvements | $ | 21,412 | $ | 21,421 | ||||
Buildings and building improvements | 111,142 | 111,208 | ||||||
Machinery and equipment | 618,256 | 622,929 | ||||||
Furniture and fixtures | 12,772 | 12,589 | ||||||
Construction in progress | 16,229 | 14,558 | ||||||
779,811 | 782,705 | |||||||
Accumulated depreciation | (369,980 | ) | (362,248 | ) | ||||
$ | 409,831 | $ | 420,457 |
5. Other Intangible Assets
Other intangible assets are as follows (in thousands):
March 28, 2009 | January 3, 2009 | |||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||
Intangible assets with determinable lives: | ||||||||||||||||||||||||
Customer relationships | $ | 159,206 | $ | (31,825 | ) | $ | 127,381 | $ | 159,206 | $ | (29,875 | ) | $ | 129,331 | ||||||||||
Trademarks and tradenames | 21,011 | (4,307 | ) | 16,704 | 21,011 | (4,089 | ) | 16,922 | ||||||||||||||||
Patents | 3,028 | (1,817 | ) | 1,211 | 3,028 | (1,755 | ) | 1,273 | ||||||||||||||||
Non-compete agreements | 2,456 | (1,712 | ) | 744 | 2,456 | (1,634 | ) | 822 | ||||||||||||||||
Other | 768 | (400 | ) | 368 | 768 | (392 | ) | 376 | ||||||||||||||||
186,469 | (40,061 | ) | 146,408 | 186,469 | (37,745 | ) | 148,724 | |||||||||||||||||
Intangible assets with indefinite lives: | ||||||||||||||||||||||||
Trademarks | 127,500 | — | 127,500 | 127,500 | — | 127,500 | ||||||||||||||||||
Pollution credits | 720 | — | 720 | 720 | — | 720 | ||||||||||||||||||
Total | $ | 314,689 | $ | (40,061 | ) | $ | 274,628 | $ | 314,689 | $ | (37,745 | ) | $ | 276,944 |
As of March 28, 2009, the weighted average remaining amortization period for customer relationships was 17 years, trademarks and tradenames was 24 years, patents was five years, non-compete agreements was three years and other was 27 years.
Total pre-tax amortization expense for each of the five years in the period ending March 29, 2014 is estimated to be as follows: $9.5 million, $9.4 million, $9.3 million, $9.1 million and $8.9 million, respectively.
5
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Long-Term Debt
Long-term debt is as follows (in thousands):
March 28, 2009 | January 3, 2009 | |||||||
Term loan, due 2013 | $ | 688,572 | $ | 707,900 | ||||
7⅞% senior subordinated notes, due 2013 | 298,370 | 303,370 | ||||||
10½% senior notes, due 2016 | 170,000 | 175,000 | ||||||
8⅜% senior subordinated notes, due 2014 ($39.6 million and $72.3 million outstanding principal amount as of March 28, 2009 and January 3, 2009, respectively) | 40,268 | 73,581 | ||||||
Revolving credit facility, due 2012 | 27,750 | 8,000 | ||||||
Other | 36,262 | 38,504 | ||||||
1,261,222 | 1,306,355 | |||||||
Less current maturities | (16,481 | ) | (24,314 | ) | ||||
Long-term debt | $ | 1,244,741 | $ | 1,282,041 |
Extinguishments
During the first quarter of 2009, the Company purchased in the open market and retired principal amounts of approximately $32.7 million, $5.0 million and $5.0 million of its 8⅜% senior subordinated notes due 2014 (the “8⅜% Notes”), 10½% senior notes due 2016 (the “10½% Notes”) and 7⅞% senior subordinated notes due 2013 (the “7⅞% Notes”), respectively, for approximately $19.0 million, $3.3 million and $3.1 million, respectively, plus accrued and unpaid interest. In connection with these repurchases, the Company recorded gains on early extinguishment of debt of $17.6 million, which included the write-off of $0.6 million of fair value increase related to the 8⅜% Notes, $0.2 million of previously unamortized debt issuance costs and fees paid of $0.1 million. These open market purchases were made within permitted restricted payment limits under the Company’s debt agreements.
From March 29, 2009 through April 8, 2009, the Company purchased in the open market and retired principal amounts of approximately $7.4 million of its 8⅜% Notes and approximately $2.1 million of its 7⅞% Notes for approximately $4.1 million and $1.2 million, respectively, plus accrued and unpaid interest. In connection with these purchases, the Company will record gains on early extinguishment of debt of approximately $4.3 million during the second quarter of 2009. These open market purchases were made within permitted restricted payment limits under the Company’s debt agreements at the time of purchase.
Debt Compliance and Amendment of Amended Credit Facilities
The Company’s revolving credit facility due 2012 (the “Revolving Credit Facility”), and its term loans and delayed-draw term loans due 2013 (the “Term Loans” and collectively with the Revolving Credit Facility the “Amended Credit Facilities”), contain two financial covenants that must be complied with: a minimum consolidated interest coverage ratio (“Interest Coverage Covenant”) and a maximum consolidated leverage ratio (“Leverage Covenant”). The Company was in compliance with all debt agreement covenants as of March 28, 2009.
On April 24, 2009, the Company amended its Amended Credit Facilities with the consent of the lenders thereunder, which included, among other things, modifications to the Leverage Covenant and the Interest Coverage Covenant. The Company’s Leverage Covenant, which it must be in pro forma compliance with at all times, has been increased to 6.25:1.00 through March 31, 2010, and then proceeds to step down through the end of the term of the Amended Credit Facilities. The Company’s Interest Coverage Covenant, which it must be in compliance with on a quarterly basis, has been reduced to 1.85:1.00 through December 31, 2009, and then proceeds to step up through the end of the term of the Amended Credit Facilities. Additionally, the calculations of the two financial covenants discussed above have been modified to permit the adding back of certain amounts.
6
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. Long-Term Debt (Continued)
As conditions to the amendment, the Company agreed, among other things, to increase the pricing on all outstanding Revolving Credit Facility balances and Term Loans to include interest at the three-month London Interbank Offered Rate (LIBOR) plus a spread ranging from 400 basis points to 450 basis points, depending on the quarterly Leverage Covenant then in effect. Previously, the Company’s LIBOR borrowing spread under the Revolving Credit Facility ranged from 175 basis points to 200 basis points, based upon the Leverage Covenant, and the LIBOR borrowing spread on the Term Loans was 200 basis points. Further, the amendment: (i) reduces the Revolving Credit Facility from $200.0 million to $172.5 million; (ii) increases the unfunded commitment fee paid to revolving credit lenders from 50 basis points to 75 basis points; (iii) eliminates the Company’s ability to request a $300.0 million incremental term loan facility; (iv) limits new senior unsecured debt and debt assumed from acquisitions to $50 million; (v) eliminates the restricted payments basket while leverage exceeds certain thresholds; (vi) requires that certain additional financial information be delivered; (vii) lowers the annual amount that can be spent on capital expenditures to $30 million; and (viii) increases certain mandatory prepayments. An amendment fee of 50 basis points was paid to all consenting lenders who approved the amendment. Except as provided in the amendment, all other provisions of the Company’s Amended Credit Facilities remain in full force and effect, including the Company’s failure to operate within the revised Leverage Covenant and Interest Coverage Covenant ratio thresholds, in certain circumstances, or have effective internal controls would prevent the Company from borrowing additional amounts and could result in a default under its Amended Credit Facilities. Such default could cause the indebtedness outstanding under its Amended Credit Facilities and, by reason of cross-acceleration or cross-default provisions, its 7⅞% Notes, 8⅜% Notes, 10½% Notes and any other indebtedness the Company may then have, to become immediately due and payable.
In connection with the above amendment in the second quarter of 2009, the Company will incur a loss on extinguishment of debt of approximately $5.0 million, of which approximately $3.9 million relates to fees paid to consenting lenders and approximately $1.1 million relates to the write-off of previously unamortized debt issuance costs. In addition, the Company will capitalize approximately $3.4 million of third party costs and fees paid to consenting lenders and amortize them over the remaining life of the Amended Credit Facilities.
Interest Rate and Forward Starting Interest Rate Swaps
The Company enters into interest rate swap agreements to hedge interest rate exposure of notional amounts of its floating rate debt. As of March 28, 2009 and January 3, 2009, the Company had $595.0 million of such interest rate swaps. The Company’s hedges of interest rate risk were designated and documented at inception as cash flow hedges and are evaluated for effectiveness at least quarterly. Effectiveness of the hedges is calculated by comparing the fair value of the derivatives to hypothetical derivatives that would be a perfect hedge of floating rate debt. The accounting for gains and losses associated with changes in the fair value of cash flow hedges and the effect on the Company’s condensed consolidated financial statements depends on whether the hedge is highly effective in achieving offsetting changes in fair value of cash flows of the liability hedged. As of March 28, 2009, the Company does not anticipate reclassifying any ineffectiveness into its results of operations for the next twelve months.
In June 2009, $220.0 million of the $595.0 million interest rate swap agreements will mature. In the fourth quarter of 2008, the Company entered into $75.0 million of forward starting interest rate swaps to partially replace these maturing swap agreements.
The Company’s interest rate swaps are valued using discounted cash flows, as no quoted market prices exist for the specific instruments. The primary inputs to the valuation are maturity and interest rate yield curves, specifically three-month LIBOR, using commercially available market sources. The interest rate swaps are categorized as Level 2 under SFAS No. 157, Fair value Measurements (“SFAS 157”). The table below presents the fair value of the Company’s interest rate swaps (in thousands):
March 28, 2009 | January 3, 2009 | |||||||
Current Liabilities: | ||||||||
Interest Rate Swaps | $ | 2,394 | $ | 4,483 | ||||
Long-Term Liabilities: | ||||||||
Interest Rate Swaps | 21,930 | 23,180 | ||||||
Forward Starting Swaps | 1,512 | 943 |
7
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Restructuring, Impairment and Other Charges
The Company has one active and two residual cost savings plans: (i) the 2009 Cost Savings and Restructuring Plan and (ii) the 2007 Cost Savings and Integration Plan and the 2005 Cost Savings and Restructuring Plan.
2009 Cost Savings and Restructuring Plan
In the first quarter of 2009, the Company developed and implemented a cost savings and restructuring plan to reduce its operating costs and realign its manufacturing platform in order to compete effectively during the current economic downturn. Accordingly, in the first quarter of 2009, the Company implemented cost savings initiatives throughout its operations and closed three envelope plants in Deer Park, New York, Boone, Iowa and Carlstadt, New Jersey, as well as one commercial printing plant in Easton, Maryland and consolidated their operations into other existing operations. As a result of these actions in the first quarter of 2009, the Company reduced headcount by approximately 400. The following tables present the details of the expenses recognized as a result of this plan.
2009 Activity
Restructuring and impairment charges for the three months ended March 28, 2009 were as follows (in thousands):
Envelopes, Forms and Labels | Commercial Printing | Total | ||||||||||
Employee separation costs | $ | 1,999 | $ | 3,194 | $ | 5,193 | ||||||
Asset impairments | 2,571 | 147 | 2,718 | |||||||||
Equipment moving expenses | 133 | 18 | 151 | |||||||||
Lease termination expenses | — | 184 | 184 | |||||||||
Building clean-up and other expenses | 7 | 187 | 194 | |||||||||
Total restructuring and impairment charges | $ | 4,710 | $ | 3,730 | $ | 8,440 |
A summary of the activity charged to the restructuring liabilities for the 2009 Cost Savings and Restructuring Plan is as follows (in thousands):
Lease Termination Costs | Employee Separation Costs | Other Exit Costs | Total | |||||||||||||
Balance at January 3, 2009 | $ | — | $ | — | $ | — | $ | — | ||||||||
Accruals, net | 184 | 5,193 | 345 | 5,722 | ||||||||||||
Payments | — | (875 | ) | (244 | ) | (1,119 | ) | |||||||||
Balance at March 28, 2009 | $ | 184 | $ | 4,318 | $ | 101 | $ | 4,603 |
2007 Cost Savings and Integration Plan
The following tables present the details of the expenses recognized as a result of this plan.
2009 Activity
Restructuring and impairment charges for the three months ended March 28, 2009 were as follows (in thousands):
Envelopes, Forms and Labels | Commercial Printing | Corporate | Total | |||||||||||||
Employee separation costs | $ | 61 | $ | 82 | $ | 29 | $ | 172 | ||||||||
Asset impairments, net of gain on sale | — | 17 | — | 17 | ||||||||||||
Equipment moving expenses | — | 8 | — | 8 | ||||||||||||
Lease termination expenses | 13 | 54 | 3 | 70 | ||||||||||||
Building clean-up and other expenses | 8 | 192 | 18 | 218 | ||||||||||||
Total restructuring and impairment charges | $ | 82 | $ | 353 | $ | 50 | $ | 485 |
8
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Restructuring, Impairment and Other Charges (Continued)
2008 Activity
Restructuring and impairment charges for the three months ended March 29, 2008 were as follows (in thousands):
Envelopes, Forms and Labels | Commercial Printing | Total | ||||||||||
Employee separation costs | $ | 813 | $ | 730 | $ | 1,543 | ||||||
Asset impairments | 152 | — | 152 | |||||||||
Equipment moving expenses | 48 | 67 | 115 | |||||||||
Lease termination expenses | 294 | — | 294 | |||||||||
Building clean-up and other expenses | 155 | 228 | 383 | |||||||||
Total restructuring and impairment charges | $ | 1,462 | $ | 1,025 | $ | 2,487 |
A summary of the activity charged to the restructuring liabilities for the 2007 Cost Savings and Integration Plan is as follows (in thousands):
Lease Termination Costs | Employee Separation Costs | Pension Withdrawal Liabilities | Total | |||||||||||||
Balance at January 3, 2009 | $ | 3,589 | $ | 1,975 | $ | 1,800 | $ | 7,364 | ||||||||
Accruals, net | 70 | 172 | — | 242 | ||||||||||||
Payments | (434 | ) | (1,218 | ) | — | (1,652 | ) | |||||||||
Balance at March 28, 2009 | $ | 3,225 | $ | 929 | $ | 1,800 | $ | 5,954 |
2005 Cost Savings and Restructuring Plan
The following tables present the details of the expenses recognized as a result of this plan.
2009 Activity
Restructuring and impairment charges (income) for the three months ended March 28, 2009 were as follows (in thousands):
Envelopes, Forms and Labels | Commercial Printing | Corporate | Total | |||||||||||||
Employee separation costs | $ | — | $ | — | $ | — | $ | — | ||||||||
Asset impairments | — | — | — | — | ||||||||||||
Equipment moving expenses | — | — | — | — | ||||||||||||
Lease termination expenses | (41 | ) | 20 | 67 | 46 | |||||||||||
Building clean-up and other expenses | 5 | (244 | ) | — | (239 | ) | ||||||||||
Total restructuring and impairment charges (income) | $ | (36 | ) | $ | (224 | ) | $ | 67 | $ | (193 | ) |
9
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Restructuring, Impairment and Other Charges (Continued)
2008 Activity
Restructuring and impairment charges for the three months ended March 29, 2008 were as follows (in thousands):
Envelopes, Forms and Labels | Commercial Printing | Corporate | Total | |||||||||||||
Employee separation costs | $ | 13 | $ | 122 | $ | 68 | $ | 203 | ||||||||
Asset impairments, net of gain on sale | — | (476 | ) | — | (476 | ) | ||||||||||
Equipment moving expenses | — | 322 | — | 322 | ||||||||||||
Lease termination expenses | 32 | — | 34 | 66 | ||||||||||||
Building clean-up and other expenses | 148 | 361 | — | 509 | ||||||||||||
Total restructuring and impairment charges | $ | 193 | $ | 329 | $ | 102 | $ | 624 |
A summary of the activity charged to the restructuring liabilities for the 2005 Cost Savings and Restructuring Plan is as follows (in thousands):
Lease Termination Costs | Employee Separation Costs | Pension Withdrawal Liabilities | Total | |||||||||||||
Balance at January 3, 2009 | $ | 3,877 | $ | — | $ | 208 | $ | 4,085 | ||||||||
Accruals, net | 46 | — | — | 46 | ||||||||||||
Payments | (948 | ) | — | (29 | ) | (977 | ) | |||||||||
Balance at March 28, 2009 | $ | 2,975 | $ | — | $ | 179 | $ | 3,154 |
Other Charges
In connection with the internal review conducted by outside counsel under the direction of the Company’s audit committee in the first quarter of 2008, the Company incurred a non-recurring charge in 2008 of approximately $6.7 million for professional fees.
Liabilities Related to Exit Activities from Acquisitions
The Company recorded liabilities in the purchase price allocation in connection with its plans to exit certain activities of prior year acquisitions. A summary of the activity recorded for these liabilities is as follows (in thousands):
Lease Termination Costs | ||||
Balance at January 3, 2009 | $ | 2,264 | ||
Accruals, net | — | |||
Payments | (134 | ) | ||
Balance at March 28, 2009 | $ | 2,130 |
10
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Pension Plans
The components of the net periodic pension expense for the Company’s pension plans and other postretirement benefit plans are as follows (in thousands):
Pension and Postretirement Plans | ||||||||
Three Months Ended | ||||||||
March 28, 2009 | March 29, 2008 | |||||||
Service cost | $ | 99 | $ | 119 | ||||
Interest cost | 2,493 | 2,581 | ||||||
Expected return on plan assets | (1,926 | ) | (2,685 | ) | ||||
Net amortization and deferral | — | 2 | ||||||
Recognized net actuarial loss | 588 | 56 | ||||||
Net periodic pension expense | $ | 1,254 | $ | 73 |
Interest cost on projected benefit obligation includes $0.2 million and $0.3 million related to the Company’s postretirement plans in the three months ended March 28, 2009 and March 29, 2008, respectively.
For the three months ended March 28, 2009, the Company made contributions of $1.2 million to its pension plans and postretirement plans. The Company expects to contribute approximately $6.1 million to its pension plans and postretirement plans for the remainder of 2009.
9. Commitments and Contingencies
The Company is party to various legal actions that are ordinary and incidental to its business. While the outcome of pending legal actions cannot be predicted with certainty, management believes the outcome of these various proceedings will not have a material adverse effect on the Company’s consolidated financial condition or results of operations.
10. Comprehensive Loss
A summary of comprehensive loss is as follows (in thousands):
Three Months Ended | ||||||||
March 28, 2009 | March 29, 2008 | |||||||
Net loss | $ | (4,311 | ) | $ | (3,399 | ) | ||
Other comprehensive income (loss): | ||||||||
Unrealized gain (loss) on cash flow hedges | 1,555 | (9,359 | ) | |||||
Currency translation adjustment | (700 | ) | (1,250 | ) | ||||
Comprehensive loss | $ | (3,456 | ) | $ | (14,008 | ) |
11. Loss per Share
Basic loss per share is computed based upon the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if options, restricted stock and restricted share units (“RSUs”) to issue common stock were exercised under the treasury stock method. The only Company securities as of March 28, 2009 that could dilute basic loss per share for periods subsequent to March 28, 2009 that were not included in the computation of diluted earnings per share are (i) outstanding stock options which are exercisable into 2,901,975 shares of the Company’s common stock and (ii) 2,122,628 shares of restricted stock and RSUs.
11
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Loss per Share (Continued)
The following table sets forth the computation of basic and diluted loss per share for the periods ended (in thousands, except per share data):
Three Months Ended | ||||||||
March 28, 2009 | March 29, 2008 | |||||||
Numerator for basic and diluted loss per share: | ||||||||
Loss from continuing operations | $ | 4,187 | $ | 2,743 | ||||
Loss from discontinued operations, net of taxes | 124 | 656 | ||||||
Net loss | $ | 4,311 | $ | 3,399 | ||||
Denominator weighted average common shares outstanding: | ||||||||
Basic and diluted shares | 54,352 | 53,715 | ||||||
Loss per share – basic and diluted: | ||||||||
Continuing operations | $ | 0.08 | $ | 0.05 | ||||
Discontinued operations | — | 0.01 | ||||||
Net loss | $ | 0.08 | $ | 0.06 | ||||
12. Segment Information
The Company operates in two segments: the envelopes, forms and labels segment and the commercial printing segment. The envelopes, forms and labels segment specializes in the design, manufacturing and printing of: (i) custom and direct mail envelopes developed for the advertising, billing and remittance needs of a variety of customers, including financial services companies; (ii) custom labels and specialty forms sold through an extensive network of resale distributors for industries including food and beverage, manufacturing and pharmacy chains; and (iii) stock envelopes, labels and business forms generally sold to independent distributors, office-products suppliers and office-products retail chains. The commercial printing segment provides print, design and content management offerings, including: (i) high-end printed materials, which includes a wide range of premium products for major national and regional customers; (ii) general commercial printing products for regional and local customers; (iii) scientific, technical and medical journals and special interest and trade magazines for non-profit organizations, educational institutions and specialty publishers; and (iv) specialty packaging and high quality promotional materials for multinational consumer products companies.
Operating income of each segment includes substantially all costs and expenses directly related to the segment’s operations. Corporate expenses include corporate general and administrative expenses (Note 2).
Corporate identifiable assets primarily consist of cash and cash equivalents, deferred financing fees, deferred tax assets and other assets.
12
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Segment Information (Continued)
The following tables present certain segment information (in thousands):
Three Months Ended | |||||||||
March 28, 2009 | March 29, 2008 | ||||||||
Net sales: | |||||||||
Envelopes, forms and labels | $ | 182,431 | $ | 238,137 | |||||
Commercial printing | 229,669 | 296,191 | |||||||
Total | $ | 412,100 | $ | 534,328 | |||||
Operating income (loss): | |||||||||
Envelopes, forms and labels | $ | 8,406 | $ | 25,626 | |||||
Commercial printing | 1,430 | 11,278 | |||||||
Corporate | (9,615 | ) | (13,924 | ) | |||||
Total | $ | 221 | $ | 22,980 | |||||
Restructuring, impairment and other charges: | |||||||||
Envelopes, forms and labels | $ | 4,756 | $ | 1,655 | |||||
Commercial printing | 3,859 | 1,354 | |||||||
Corporate | 117 | 6,740 | |||||||
Total | $ | 8,732 | $ | 9,749 | |||||
150 | |||||||||
Net sales by product line: | |||||||||
Envelopes | $ | 126,675 | $ | 165,668 | |||||
Commercial printing | 155,775 | 201,405 | |||||||
Journals and periodicals | 73,333 | 93,845 | |||||||
Labels and business forms | 56,317 | 73,410 | |||||||
Total | $ | 412,100 | $ | 534,328 | |||||
Intercompany sales: | |||||||||
Envelopes, forms and labels to commercial printing | $ | 1,367 | $ | 1,234 | |||||
Commercial printing to envelopes, forms and labels | 540 | 1,514 | |||||||
Total | $ | 1,907 | $ | 2,748 | |||||
March 28, 2009 | January 3, 2009 | ||||||||
Identifiable assets: | |||||||||
Envelopes, forms and labels | $ | 601,180 | $ | 624,760 | |||||
Commercial printing | 837,310 | 863,224 | |||||||
Corporate | 62,955 | 64,130 | |||||||
Total | $ | 1,501,445 | 1,552,114 | ||||||
13
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information
Cenveo is a holding company (“Parent Company”), which is the ultimate parent of all Cenveo subsidiaries. In January 2004, the Parent Company’s wholly owned subsidiary, Cenveo Corporation (the “Subsidiary Issuer”), issued 7⅞% Notes and, in connection with the acquisition of Cadmus Communications Corporation (“Cadmus”), assumed Cadmus’ 8⅜% Notes (the “Subsidiary Issuer Notes”), which are fully and unconditionally guaranteed, on a joint and several basis, by the Parent Company and substantially all of its wholly-owned subsidiaries (the “Guarantor Subsidiaries”).
Presented below is condensed consolidating financial information for the Parent Company, the Subsidiary Issuer, the Guarantor Subsidiaries and Non-Guarantor Subsidiaries for the three months ended March 28, 2009 and March 29, 2008. The condensed consolidating financial information has been presented to show the nature of assets held, results of operations and cash flows of the Parent Company, the Subsidiary Issuer, the Guarantor Subsidiaries and Non-Guarantor Subsidiaries, assuming the guarantee structure of the Subsidiary Issuer Notes was in effect at the beginning of the periods presented.
The supplemental condensed consolidating financial information reflects the investments of the Parent Company in the Subsidiary Issuer, the Guarantor Subsidiaries and Non-Guarantor Subsidiaries using the equity method of accounting. The Company’s primary transactions with its subsidiaries other than the investment account and related equity in net loss of unconsolidated subsidiaries are the intercompany payables and receivables between its subsidiaries.
14
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
March 28, 2009
(in thousands)
Parent | Subsidiary | Guarantor | Non-Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 5,040 | $ | 634 | $ | 4,533 | $ | — | $ | 10,207 | ||||||||||||
Accounts receivable, net | — | 124,066 | 119,627 | 6,305 | — | 249,998 | ||||||||||||||||||
Inventories | — | 81,209 | 67,018 | 1,426 | — | 149,653 | ||||||||||||||||||
Notes receivable from subsidiaries | — | 39,213 | — | — | (39,213 | ) | — | |||||||||||||||||
Prepaid and other current assets | — | 54,658 | 11,671 | 2,215 | — | 68,544 | ||||||||||||||||||
Total current assets | — | 304,186 | 198,950 | 14,479 | (39,213 | ) | 478,402 | |||||||||||||||||
Investment in subsidiaries | (221,377 | ) | 1,385,122 | 8,739 | — | (1,172,484 | ) | — | ||||||||||||||||
Property, plant and equipment, net | — | 162,143 | 247,294 | 394 | — | 409,831 | ||||||||||||||||||
Goodwill | — | 29,245 | 281,938 | — | — | 311,183 | ||||||||||||||||||
Other intangible assets, net | — | 8,988 | 265,640 | — | — | 274,628 | ||||||||||||||||||
Other assets, net | — | 21,172 | 5,903 | 326 | — | 27,401 | ||||||||||||||||||
Total assets | $ | (221,377 | ) | $ | 1,910,856 | $ | 1,008,464 | $ | 15,199 | $ | (1,211,697 | ) | $ | 1,501,445 | ||||||||||
Liabilities and Shareholders’ Equity (Deficit) | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 8,466 | $ | 8,015 | $ | — | $ | — | $ | 16,481 | ||||||||||||
Accounts payable | — | 107,481 | 72,142 | 1,799 | — | 181,422 | ||||||||||||||||||
Accrued compensation and related liabilities | — | 20,596 | 12,357 | — | — | 32,953 | ||||||||||||||||||
Other current liabilities | — | 66,963 | 15,574 | 1,016 | — | 83,553 | ||||||||||||||||||
Intercompany payable (receivable) | — | 691,345 | (695,793 | ) | 4,448 | — | — | |||||||||||||||||
Notes payable to issuer | — | — | 39,213 | — | (39,213 | ) | — | |||||||||||||||||
Total current liabilities | — | 894,851 | (548,492 | ) | 7,263 | (39,213 | ) | 314,409 | ||||||||||||||||
Long-term debt | — | 1,223,619 | 21,122 | — | — | 1,244,741 | ||||||||||||||||||
Deferred income tax liability (asset) | — | (59,585 | ) | 86,343 | (803 | ) | — | 25,955 | ||||||||||||||||
Other liabilities | — | 73,348 | 64,369 | — | — | 137,717 | ||||||||||||||||||
Shareholders’ equity (deficit) | (221,377 | ) | (221,377 | ) | 1,385,122 | 8,739 | (1,172,484 | ) | (221,377 | ) | ||||||||||||||
Total liabilities and shareholders’ equity (deficit) | $ | (221,377 | ) | $ | 1,910,856 | $ | 1,008,464 | $ | 15,199 | $ | (1,211,697 | ) | $ | 1,501,445 |
15
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 28, 2009
(in thousands)
Parent | Subsidiary | Guarantor | Non- Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Net sales | $ | — | $ | 194,866 | $ | 212,442 | $ | 4,792 | $ | — | $ | 412,100 | ||||||||||||
Cost of sales | — | 166,643 | 178,831 | 2,842 | — | 348,316 | ||||||||||||||||||
Selling, general and administrative | — | 31,384 | 21,028 | 103 | — | 52,515 | ||||||||||||||||||
Amortization of intangible assets | — | 101 | 2,215 | — | — | 2,316 | ||||||||||||||||||
Restructuring, impairment and other charges | — | 4,229 | 4,503 | — | — | 8,732 | ||||||||||||||||||
Operating income (loss) | — | (7,491 | ) | 5,865 | 1,847 | — | 221 | |||||||||||||||||
Interest expense (income), net | — | 22,235 | 336 | (26 | ) | — | 22,545 | |||||||||||||||||
Intercompany interest expense (income) | — | (284 | ) | 284 | — | — | — | |||||||||||||||||
Gain on early extinguishment of debt | — | (17,642 | ) | — | — | — | (17,642 | ) | ||||||||||||||||
Other (income) expense, net | — | 248 | 54 | (267 | ) | — | 35 | |||||||||||||||||
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries | — | (12,048 | ) | 5,191 | 2,140 | — | (4,717 | ) | ||||||||||||||||
Income tax expense (benefit) | — | (2,362 | ) | 1,778 | 54 | — | (530 | ) | ||||||||||||||||
Income (loss) from continuing operations before equity in income of unconsolidated subsidiaries | — | (9,686 | ) | 3,413 | 2,086 | — | (4,187 | ) | ||||||||||||||||
Equity in income of unconsolidated subsidiaries | (4,311 | ) | 5,499 | 2,086 | — | (3,274 | ) | — | ||||||||||||||||
Income (loss) from continuing operations | (4,311 | ) | (4,187 | ) | 5,499 | 2,086 | (3,274 | ) | (4,187 | ) | ||||||||||||||
Loss from discontinued operations, net of taxes | — | (124 | ) | — | — | — | (124 | ) | ||||||||||||||||
Net income (loss) | $ | (4,311 | ) | $ | (4,311 | ) | $ | 5,499 | $ | 2,086 | $ | (3,274 | ) | $ | (4,311 | ) |
16
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 28, 2009
(in thousands)
Parent | Subsidiary | Guarantor | Non- Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 3,462 | $ | (5,730 | ) | $ | 38,636 | $ | 50 | $ | — | $ | 36,418 | |||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Capital expenditures | — | (4,258 | ) | (4,892 | ) | — | — | (9,150 | ) | |||||||||||||||
Intercompany note | — | (18 | ) | — | — | 18 | — | |||||||||||||||||
Proceeds from sale of property, plant and equipment | — | 1 | 362 | — | — | 363 | ||||||||||||||||||
Net cash (used in) provided by investing activities | — | (4,275 | ) | (4,530 | ) | — | 18 | (8,787 | ) | |||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Repayment of term loans | — | (19,328 | ) | — | — | — | (19,328 | ) | ||||||||||||||||
Repayment of 8⅜% senior subordinated notes | — | (18,959 | ) | — | — | — | (18,959 | ) | ||||||||||||||||
Repayment of 10½% senior notes | — | (3,250 | ) | — | — | — | (3,250 | ) | ||||||||||||||||
Repayment of 7⅞% senior subordinated notes | — | (3,125 | ) | — | — | — | (3,125 | ) | ||||||||||||||||
Repayments of other long-term debt | — | (155 | ) | (2,087 | ) | — | — | (2,242 | ) | |||||||||||||||
Purchase and retirement of common stock upon vesting of RSUs | (431 | ) | — | — | — | — | (431 | ) | ||||||||||||||||
Payment of fees on early extinguishment of debt | — | (94 | ) | — | — | — | (94 | ) | ||||||||||||||||
(Repayments) borrowings under revolving credit facility, net | — | 19,750 | — | — | — | 19,750 | ||||||||||||||||||
Intercompany note | — | — | 18 | — | (18 | ) | — | |||||||||||||||||
Intercompany advances | (3,031 | ) | 35,491 | (32,456 | ) | (4 | ) | — | — | |||||||||||||||
Net cash (used in) provided by financing activities | (3,462 | ) | 10,330 | (34,525 | ) | (4 | ) | (18 | ) | (27,679 | ) | |||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | — | (189 | ) | — | (189 | ) | ||||||||||||||||
Net (decrease) increase in cash and cash equivalents | — | 325 | (419 | ) | (143 | ) | — | (237 | ) | |||||||||||||||
Cash and cash equivalents at beginning of year | — | 4,715 | 1,053 | 4,676 | — | 10,444 | ||||||||||||||||||
Cash and cash equivalents at end of quarter | $ | — | $ | 5,040 | $ | 634 | $ | 4,533 | $ | — | $ | 10,207 |
17
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
January 3, 2009
(in thousands)
Parent | Subsidiary | Guarantor | Non-Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Assets | ||||||||||||||||||||||||
Current assets: | ||||||||||||||||||||||||
Cash and cash equivalents | $ | — | $ | 4,715 | $ | 1,053 | $ | 4,676 | $ | — | $ | 10,444 | ||||||||||||
Accounts receivable, net | — | 127,634 | 137,746 | 4,765 | — | 270,145 | ||||||||||||||||||
Inventories | — | 86,219 | 72,149 | 1,201 | — | 159,569 | ||||||||||||||||||
Notes receivable from subsidiaries | — | 39,195 | — | — | (39,195 | ) | — | |||||||||||||||||
Prepaid and other current assets | — | 62,961 | 9,879 | 2,050 | — | 74,890 | ||||||||||||||||||
Total current assets | — | 320,724 | 220,827 | 12,692 | (39,195 | ) | 515,048 | |||||||||||||||||
Investment in subsidiaries | (220,955 | ) | 1,380,326 | 7,063 | — | (1,166,434 | ) | — | ||||||||||||||||
Property, plant and equipment, net | — | 165,140 | 254,841 | 476 | — | 420,457 | ||||||||||||||||||
Goodwill | — | 29,245 | 281,938 | — | — | 311,183 | ||||||||||||||||||
Other intangible assets, net | — | 9,089 | 267,855 | — | — | 276,944 | ||||||||||||||||||
Other assets, net | — | 21,936 | 6,205 | 341 | — | 28,482 | ||||||||||||||||||
Total assets | $ | (220,955 | ) | $ | 1,926,460 | $ | 1,038,729 | $ | 13,509 | $ | (1,205,629 | ) | $ | 1,552,114 | ||||||||||
Liabilities and Shareholders’ (Deficit) Equity | ||||||||||||||||||||||||
Current liabilities: | ||||||||||||||||||||||||
Current maturities of long-term debt | $ | — | $ | 15,956 | $ | 8,358 | $ | — | $ | — | $ | 24,314 | ||||||||||||
Accounts payable | — | 99,150 | 73,402 | 1,883 | — | 174,435 | ||||||||||||||||||
Accrued compensation and related liabilities | — | 21,311 | 16,008 | — | — | 37,319 | ||||||||||||||||||
Other current liabilities | — | 74,653 | 13,302 | 915 | — | 88,870 | ||||||||||||||||||
Intercompany payable (receivable) | — | 658,885 | (663,337 | ) | 4,452 | — | — | |||||||||||||||||
Notes payable to issuer | — | — | 39,195 | — | (39,195 | ) | — | |||||||||||||||||
Total current liabilities | — | 869,955 | (513,072 | ) | 7,250 | (39,195 | ) | 324,938 | ||||||||||||||||
Long-term debt | — | 1,259,175 | 22,866 | — | — | 1,282,041 | ||||||||||||||||||
Deferred income tax liability (asset) | — | (56,500 | ) | 84,076 | (804 | ) | — | 26,772 | ||||||||||||||||
Other liabilities | — | 74,785 | 64,533 | — | — | 139,318 | ||||||||||||||||||
Shareholders’ (deficit) equity | (220,955 | ) | (220,955 | ) | 1,380,326 | 7,063 | (1,166,434 | ) | (220,955 | ) | ||||||||||||||
Total liabilities and shareholders’ (deficit) equity | $ | (220,955 | ) | $ | 1,926,460 | $ | 1,038,729 | $ | 13,509 | $ | (1,205,629 | ) | $ | 1,552,114 |
18
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
For the three months ended March 29, 2008
(in thousands)
Parent | Subsidiary | Guarantor | Non- Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Net sales | $ | — | $ | 260,292 | $ | 269,624 | $ | 4,412 | $ | — | $ | 534,328 | ||||||||||||
Cost of sales | — | 218,786 | 214,254 | 3,258 | — | 436,298 | ||||||||||||||||||
Selling, general and administrative | — | 36,468 | 26,507 | 151 | — | 63,126 | ||||||||||||||||||
Amortization of intangible assets | — | 111 | 2,064 | — | — | 2,175 | ||||||||||||||||||
Restructuring, impairment and other charges | — | 9,708 | 41 | — | — | 9,749 | ||||||||||||||||||
Operating income (loss) | — | (4,781 | ) | 26,758 | 1,003 | — | 22,980 | |||||||||||||||||
Interest expense, net | — | 26,560 | 437 | (19 | ) | — | 26,978 | |||||||||||||||||
Intercompany interest expense (income) | — | (944 | ) | 944 | — | — | — | |||||||||||||||||
Other expense, net | — | 186 | 275 | — | — | 461 | ||||||||||||||||||
Income (loss) from continuing operations before income taxes and equity in income of unconsolidated subsidiaries | — | (30,583 | ) | 25,102 | 1,022 | — | (4,459 | ) | ||||||||||||||||
Income tax expense (benefit) | — | (3,823 | ) | 2,107 | — | — | (1,716 | ) | ||||||||||||||||
Income (loss) from continuing operations before equity in income of unconsolidated subsidiaries | — | (26,760 | ) | 22,995 | 1,022 | — | (2,743 | ) | ||||||||||||||||
Equity in income of unconsolidated subsidiaries | (3,399 | ) | 24,017 | 1,022 | — | (21,640 | ) | — | ||||||||||||||||
Income (loss) from continuing operations | (3,399 | ) | (2,743 | ) | 24,017 | 1,022 | (21,640 | ) | (2,743 | ) | ||||||||||||||
Loss from discontinued operations, net of taxes | — | (656 | ) | — | — | — | (656 | ) | ||||||||||||||||
Net income (loss) | $ | (3,399 | ) | $ | (3,399 | ) | $ | 24,017 | $ | 1,022 | $ | (21,640 | ) | $ | (3,399 | ) |
19
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Condensed Consolidating Financial Information (Continued)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For the three months ended March 29, 2008
(in thousands)
Parent | Subsidiary | Guarantor | Non- Guarantor | |||||||||||||||||||||
Company | Issuer | Subsidiaries | Subsidiaries | Eliminations | Consolidated | |||||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||||||||||
Net cash provided by operating activities | $ | 2,692 | $ | 13,903 | $ | 37,668 | $ | 168 | $ | — | $ | 54,431 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||||||||||
Intercompany note | — | 683 | — | — | (683 | ) | — | |||||||||||||||||
Capital expenditures | — | (1,712 | ) | (7,385 | ) | — | — | (9,097 | ) | |||||||||||||||
Proceeds from sale of property, plant and equipment | — | 195 | 153 | — | — | 348 | ||||||||||||||||||
Net cash used in investing activities | — | (834 | ) | (7,232 | ) | — | (683 | ) | (8,749 | ) | ||||||||||||||
Cash flows from financing activities: | ||||||||||||||||||||||||
Repayments under revolving credit facility, net | — | (45,200 | ) | — | — | — | (45,200 | ) | ||||||||||||||||
Proceeds from exercise of stock options | 288 | — | — | — | — | 288 | ||||||||||||||||||
Repayments of term loans | — | (1,800 | ) | — | — | — | (1,800 | ) | ||||||||||||||||
Repayments of other long-term debt | — | (97 | ) | (1,709 | ) | — | — | (1,806 | ) | |||||||||||||||
Intercompany note | — | — | (683 | ) | — | 683 | — | |||||||||||||||||
Intercompany advances | (2,980 | ) | 29,630 | (26,841 | ) | 191 | — | — | ||||||||||||||||
Net cash (used in) provided by financing activities | (2,692 | ) | (17,467 | ) | (29,233 | ) | 191 | 683 | (48,518 | ) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | — | — | 9 | — | — | 9 | ||||||||||||||||||
Net (decrease) increase in cash and cash equivalents | — | (4,398 | ) | 1,212 | 359 | — | (2,827 | ) | ||||||||||||||||
Cash and cash equivalents at beginning of year | — | 13,091 | 882 | 1,909 | — | 15,882 | ||||||||||||||||||
Cash and cash equivalents at end of quarter | $ | — | $ | 8,693 | $ | 2,094 | $ | 2,268 | $ | — | $ | 13,055 |
20
PART II. OTHER INFORMATION
Item 6 of the Original 10-Q is amended as follows:
Item 6. | Exhibits | |||
Exhibit Number | Description | |||
31.1* | Certification by Robert G. Burton, Sr., Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
31.2* | Certification by Kenneth P. Viret, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
32.1* | Certification of the Chief Executive Officer and of the Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished as an exhibit to this report on Form 10-Q. |
________________________
*Filed herewith.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Stamford, State of Connecticut, on July 30, 2009.
CENVEO, INC. | ||
By: | /s/ Robert G. Burton, Sr. | |
Robert G. Burton, Sr. | ||
Chairman and Chief Executive Officer | ||
(Principal Executive Officer) | ||
By: | /s/ Kenneth P. Viret | |
Kenneth P. Viret | ||
Chief Financial Officer | ||
(Principal Financial Officer and | ||
Principal Accounting Officer) |
22