Exhibit 99.1
News Release
Cenveo Announces Second Quarter 2009 Results
Significant operational improvement over prior quarter
2nd Quarter Adjusted EBITDA of $53.1 million
Company expects continued improvement in second half of 2009
STAMFORD, CT – (August 5, 2009) – Cenveo, Inc. (NYSE: CVO) today announced results for the three and six months ended June 27, 2009.
For the three months ended June 27, 2009, net sales were $397.6 million, as compared to $524.5 million for the same period in the previous year. For the three months ended June 27, 2009, the Company recorded a net loss of $18.3 million, or ($0.34) per share, compared to net income of $2.7 million, or $0.05 per share, in the three months ended June 28, 2008. On a Non-GAAP basis, income from continuing operations was $8.1 million, or $0.15 per diluted share for the three months ended June 27, 2009. Non-GAAP income from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, (gain) loss on early extinguishment of debt and includes an adjustment to income taxes to reflect an estimated cash tax rate.
Adjusted EBITDA for the three months ended June 27, 2009 was $53.1 million. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, integration, acquisition and other charges, stock-based compensation provision, restructuring, impairment and other charges, (gain) loss on early extinguishment of debt, and loss from discontinued operations, net of taxes. An explanation of the Company’s use of Non-GAAP measures and Adjusted EBITDA is detailed below.
For the six months ended June 27, 2009, net sales were $809.7 million, as compared to $1.1 billion for the same period in the previous year. For the six months ended June 27, 2009, the Company recorded a net loss of $22.6 million, or ($0.41) per share, compared to a net loss of $0.7 million, or ($0.01) per share, in the six months ended June 28, 2008. On a Non-GAAP basis, income from continuing operations was $0.6 million or $0.01 per diluted share for the first six months of 2009. Adjusted EBITDA in the first six months of 2009 was $84.6 million. The six month periods ending on June 27, 2009 and June 28, 2008 consist of 25 and 26 weeks, respectively, which affects the comparability of the periods.
In the first six months of 2009, the Company generated cash flows from operations of $22.0 million and also made open market repurchases of an aggregate $52.2 million principal amount of its outstanding 7⅞% senior subordinated notes due 2013, its 8⅜% senior subordinated notes due 2014, and its 10½% senior notes due 2016, (collectively the “Notes”) for approximately $30.6 million plus accrued interest. In connection with the repurchases of the Notes, the Company recognized gains of approximately $4.3 million and $21.9 million in the three and six month periods ending June 27, 2009, representing the difference between the net carrying amount and the total repurchase price of the Notes. The Company also recognized a $5.0 million loss on extinguishment of debt in connection with its Amendment of its debt facilities in the second quarter of 2009. Additionally the Company made the annual mandatory prepayment sweep of excess cash flow repaying $17.5 million to lenders, thereby further reducing the balance of its term loans outstanding.
Robert G. Burton, Chairman and Chief Executive Officer stated:
“Our improved operating results for the second quarter were reflective of a number of management initiatives implemented during this tough macroeconomic period. Despite the anticipated decline in sales and earnings resulting from the recessionary environment, our proactive, disciplined approach to matching our cost structure with lower sales resulted in improved Adjusted EBITDA margins during the quarter. This improved performance would not have been possible without the continued dedication and hard work of our most important asset, our employees. We also took several steps to provide the Company with increased financial flexibility going forward by amending our credit facilities and by taking advantage
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of the current interest rate environment to lock in our borrowing costs for a period of time, while continuing to pay down debt. Over the past twelve months, we have reduced our debt outstanding by over $107 million, a testament to our focus on generating free cash flow and improving our capital structure.
Mr. Burton concluded:
“We continue to see signs of stabilization in several of the markets we serve, as certain of our customers begin returning to more normalized spending patterns. This activity increase, coupled with the more recent cost actions we implemented and stronger seasonal effects that are beginning to materialize, gives me confidence that we will continue to improve our results each quarter going forward. Despite the unsettled print markets we face, I feel that we are uniquely positioned with our breadth of products and services as a low cost provider that delivers outstanding quality and service to our customers. This position will only be enhanced by our proposed combination with Nashua Corporation. As I have stated previously, this merger will provide many benefits to the customers of both companies and its shareholders. I look forward to completing this transaction during our third quarter.
As I’ve also said before, Cenveo’s short and long term success is built around operating diverse niche businesses that are market leaders; generating strong cash flows; and having an experienced management team that knows how to deliver results. We have been able to demonstrate the benefit of these strategies in this recessionary environment, and it is our belief that our businesses will continue to outperform within their product categories in good times as well as under difficult market conditions. ”
Conference Call:
Cenveo will host a conference call tomorrow, Thursday, August 6, 2009, 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.
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Cenveo, Inc. and Subsidiaries Condensed Consolidated Statements of Operations (in thousands, except per share data) (unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2009 | June 28, 2008 | June 27, 2009 | June 28, 2008 | |||||||||||||
Net sales | $ | 397,644 | $ | 524,501 | $ | 809,744 | $ | 1,058,829 | ||||||||
Cost of sales | 320,365 | 417,406 | 668,681 | 853,704 | ||||||||||||
Selling, general and administrative expenses | 48,370 | 63,240 | 100,885 | 126,366 | ||||||||||||
Amortization of intangible assets | 2,355 | 2,279 | 4,671 | 4,454 | ||||||||||||
Restructuring, impairment and other charges | 32,031 | 5,425 | 40,763 | 15,174 | ||||||||||||
Operating income (loss) | (5,477 | ) | 36,151 | (5,256 | ) | 59,131 | ||||||||||
Interest expense, net | 27,807 | 26,175 | 50,352 | 53,153 | ||||||||||||
(Gain) loss on early extinguishment of debt | 725 | 4,242 | (16,917 | ) | 4,242 | |||||||||||
Other (income) expense, net | (2,621 | ) | 663 | (2,586 | ) | 1,124 | ||||||||||
Income (loss) from continuing operations before income taxes | (31,388 | ) | 5,071 | (36,105 | ) | 612 | ||||||||||
Income tax (benefit) expense | (13,547 | ) | 2,005 | (14,077 | ) | 289 | ||||||||||
Income (loss) from continuing operations | (17,841 | ) | 3,066 | (22,028 | ) | 323 | ||||||||||
Loss from discontinued operations, net of taxes | (411 | ) | (399 | ) | (535 | ) | (1,055 | ) | ||||||||
Net income (loss) | $ | (18,252 | ) | $ | 2,667 | $ | (22,563 | ) | $ | (732 | ) | |||||
Income (loss) per share – basic and diluted: | ||||||||||||||||
Continuing operations | $ | (0.33 | ) | $ | 0.06 | $ | (0.40 | ) | $ | 0.01 | ||||||
Discontinued operations | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.02 | ) | ||||||||
Net income (loss) | $ | (0.34 | ) | $ | 0.05 | $ | (0.41 | ) | $ | (0.01 | ) | |||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 54,551 | 53,776 | 54,456 | 53,745 | ||||||||||||
Diluted | 54,551 | 54,216 | 54,456 | 54,219 | ||||||||||||
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Cenveo, Inc. and Subsidiaries Reconciliation of Income (Loss) from Continuing Operations to Non-GAAP Income from Continuing Operations and Related Per Share Data (in thousands, except per share data) (unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2009 | June 28, 2008 | June 27, 2009 | June 28, 2008 | |||||||||||||
Income (loss) from continuing operations | $ | (17,841 | ) | $ | 3,066 | $ | (22,028 | ) | $ | 323 | ||||||
Integration, acquisition and other charges | 4,359 | 2,806 | 6,029 | 6,033 | ||||||||||||
Stock-based compensation provision | 3,394 | 4,269 | 6,856 | 6,961 | ||||||||||||
Restructuring, impairment and other charges | 32,031 | 5,425 | 40,763 | 15,174 | ||||||||||||
(Gain) loss on early extinguishment of debt | 725 | 4,242 | (16,917 | ) | 4,242 | |||||||||||
Income tax (expense) benefit | (14,550 | ) | (394 | ) | (14,146 | ) | (3,343 | ) | ||||||||
Non-GAAP income from continuing operations | $ | 8,118 | $ | 19,414 | $ | 557 | $ | 29,390 | ||||||||
Income (loss) per share – diluted: | ||||||||||||||||
Continuing operations | $ | (0.33 | ) | $ | 0.06 | $ | (0.40 | ) | $ | 0.01 | ||||||
Integration, acquisition and other charges | 0.08 | 0.05 | 0.11 | 0.10 | ||||||||||||
Stock-based compensation provision | 0.06 | 0.08 | 0.13 | 0.13 | ||||||||||||
Restructuring, impairment and other charges | 0.59 | 0.10 | 0.74 | 0.28 | ||||||||||||
(Gain) loss on early extinguishment of debt | 0.01 | 0.08 | (0.31 | ) | 0.08 | |||||||||||
Income tax (expense) benefit | (0.26 | ) | (0.01 | ) | (0.26 | ) | (0.06 | ) | ||||||||
Non-GAAP continuing operations | $ | 0.15 | $ | 0.36 | $ | 0.01 | $ | 0.54 | ||||||||
Weighted average shares—diluted | 54,597 | 54,216 | 54,618 | 54,219 | ||||||||||||
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Cenveo, Inc. and Subsidiaries Reconciliation of Net Income (Loss) to Adjusted EBITDA (in thousands) (unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2009 | June 28, 2008 | June 27, 2009 | June 28, 2008 | |||||||||||||
Net income (loss) | $ | (18,252 | ) | $ | 2,667 | $ | (22,563 | ) | $ | (732 | ) | |||||
Interest expense, net | 27,807 | 26,175 | 50,352 | 53,153 | ||||||||||||
Income tax (benefit) expense | (13,547 | ) | 2,005 | (14,077 | ) | 289 | ||||||||||
Depreciation | 13,822 | 16,209 | 28,956 | 32,047 | ||||||||||||
Amortization of intangible assets | 2,355 | 2,279 | 4,671 | 4,454 | ||||||||||||
Integration, acquisition and other charges | 4,359 | 2,806 | 6,029 | 6,033 | ||||||||||||
Stock-based compensation provision | 3,394 | 4,269 | 6,856 | 6,961 | ||||||||||||
Restructuring, impairment and other charges | 32,031 | 5,425 | 40,763 | 15,174 | ||||||||||||
(Gain) loss on early extinguishment of debt | 725 | 4,242 | (16,917 | ) | 4,242 | |||||||||||
Loss from discontinued operations, net of taxes | 411 | 399 | 535 | 1,055 | ||||||||||||
Adjusted EBITDA, as defined | $ | 53,105 | $ | 66,476 | $ | 84,605 | $ | 122,676 | ||||||||
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Cenveo, Inc. and Subsidiaries Reconciliation of Operating Income (Loss) to Non-GAAP Operating Income (in thousands) (unaudited) | ||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
June 27, 2009 | June 28, 2008 | June 27, 2009 | June 28, 2008 | |||||||||||||
Operating income (loss) | $ | (5,477 | ) | $ | 36,151 | $ | (5,256 | ) | $ | 59,131 | ||||||
Integration, acquisition and other charges | 4,359 | 2,806 | 6,029 | 6,033 | ||||||||||||
Stock-based compensation provision | 3,394 | 4,269 | 6,856 | 6,961 | ||||||||||||
Restructuring, impairment and other charges | 32,031 | 5,425 | 40,763 | 15,174 | ||||||||||||
Non-GAAP operating income | $ | 34,307 | $ | 48,651 | $ | 48,392 | $ | 87,299 | ||||||||
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Cenveo, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(in thousands)
(unaudited)
June 27, 2009 | January 3, 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 8,365 | $ | 10,444 | ||||
Accounts receivable, net | 230,999 | 270,145 | ||||||
Inventories | 140,341 | 159,569 | ||||||
Prepaid and other current assets | 76,351 | 74,890 | ||||||
Total current assets | 456,056 | 515,048 | ||||||
Property, plant and equipment, net | 394,316 | 420,457 | ||||||
Goodwill | 311,183 | 311,183 | ||||||
Other intangible assets, net | 271,553 | 276,944 | ||||||
Other assets, net | 26,801 | 28,482 | ||||||
Total assets | $ | 1,459,909 | $ | 1,552,114 | ||||
Liabilities and Shareholders’ Deficit | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 16,808 | $ | 24,314 | ||||
Accounts payable | 146,328 | 174,435 | ||||||
Accrued compensation and related liabilities | 25,389 | 37,319 | ||||||
Other current liabilities | 81,364 | 88,870 | ||||||
Total current liabilities | 269,889 | 324,938 | ||||||
Long-term debt | 1,257,880 | 1,282,041 | ||||||
Deferred income taxes | 18,989 | 26,772 | ||||||
Other liabilities | 144,583 | 139,318 | ||||||
Shareholders’ deficit: | ||||||||
Preferred stock | — | — | ||||||
Common stock | 546 | 542 | ||||||
Paid-in capital | 278,199 | 271,821 | ||||||
Retained deficit | (469,529 | ) | (446,966 | ) | ||||
Accumulated other comprehensive loss | (40,648 | ) | (46,352 | ) | ||||
Total shareholders’ deficit | (231,432 | ) | (220,955 | ) | ||||
Total liabilities and shareholders’ deficit | $ | 1,459,909 | $ | 1,552,114 |
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Cenveo, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
June 27, 2009 | June 28, 2008 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (22,563 | ) | $ | (732 | ) | ||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Loss from discontinued operations, net of taxes | 535 | 1,055 | ||||||
Depreciation and amortization, excluding non-cash interest expense | 33,627 | 36,501 | ||||||
Non-cash interest expense, net | 1,064 | 775 | ||||||
(Gain) loss on early extinguishment of debt | (16,917 | ) | 4,242 | |||||
Stock-based compensation provision | 6,856 | 6,961 | ||||||
Non-cash restructuring, impairment and other charges | 24,489 | 2,952 | ||||||
Deferred income taxes | (16,316 | ) | (990 | ) | ||||
Gain on sale of assets | (3,907 | ) | (2,420 | ) | ||||
Other non-cash charges, net | 3,518 | 5,575 | ||||||
Changes in operating assets and liabilities, excluding the effects of acquired businesses: | ||||||||
Accounts receivable | 38,086 | 60,965 | ||||||
Inventories | 17,509 | (1,487 | ) | |||||
Accounts payable and accrued compensation and related liabilities | (39,267 | ) | 10,774 | |||||
Other working capital changes | (4,797 | ) | 7,891 | |||||
Other, net | 120 | (5,679 | ) | |||||
Net cash provided by operating activities | 22,037 | 126,383 | ||||||
Cash flows from investing activities: | ||||||||
Capital expenditures | (16,075 | ) | (25,387 | ) | ||||
Proceeds from sale of property, plant and equipment | 5,159 | 12,014 | ||||||
Proceeds from sale of investment | 4,032 | — | ||||||
Cost of business acquisitions, net of cash acquired | — | (38,453 | ) | |||||
Acquisition payments | — | (3,653 | ) | |||||
Net cash used in investing activities | (6,884 | ) | (55,479 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of 8⅜% senior subordinated notes | (23,024 | ) | — | |||||
Repayments of term loans | (21,083 | ) | (3,600 | ) | ||||
Payment of amendment and debt issuance costs | (7,296 | ) | (5,297 | ) | ||||
Repayments of other-long term debt | (4,870 | ) | (11,624 | ) | ||||
Repayment of 7⅞% senior subordinated notes | (4,295 | ) | — | |||||
Repayment of 10½% senior notes | (3,250 | ) | — | |||||
Purchase and retirement of common stock upon vesting of RSUs | (478 | ) | — | |||||
Payment of refinancing fees, redemption premiums and expenses | (94 | ) | — | |||||
Borrowings (repayments) under revolving credit facility, net | 47,200 | (64,200 | ) | |||||
Repayment of senior unsecured loan | — | (175,000 | ) | |||||
Proceeds from issuance of 10½% senior notes | — | 175,000 | ||||||
Proceeds from issuance of other long-term debt | — | 9,311 | ||||||
Proceeds from exercise of stock options | — | 1,154 | ||||||
Net cash used in financing activities | (17,190 | ) | (74,256 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | (42 | ) | 9 | |||||
Net decrease in cash and cash equivalents | (2,079 | ) | (3,343 | ) | ||||
Cash and cash equivalents at beginning of period | 10,444 | 15,882 | ||||||
Cash and cash equivalents at end of period | $ | 8,365 | $ | 12,539 |
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In addition to results presented in accordance with generally accepted accounting principles in the U.S. (“GAAP”), included in this release are certain Non-GAAP financial measures, including Adjusted EBITDA, Non-GAAP income (loss) from continuing operations and Non-GAAP operating income. These Non-GAAP financial measures are defined herein, and should be read in conjunction with GAAP financial measures. Non-GAAP operating income excludes integration, acquisition and other charges, stock based compensation provision and restructuring, impairment and other charges, (gain) loss on early extinguishment of debt and includes an adjustment to income taxes to reflect an estimated cash tax rate. A reconciliation of income (loss) from continuing operations to Non-GAAP income from continuing operations and operating income (loss) to Non-GAAP operating income is presented in the attached tables. These Non-GAAP financial measures are not presented as an alternative to cash flows from operations, as a measure of our liquidity or as an alternative to reported net income (loss) as an indicator of our operating performance. The Non-GAAP financial measures as used herein may not be comparable to similarly titled measures reported by competitors.
We believe the use of Adjusted EBITDA, Non-GAAP income from continuing operations and Non-GAAP operating income along with GAAP financial measures enhances the understanding of our operating results and may be useful to investors in comparing our operating performance with that of our competitors and estimating our enterprise value. Adjusted EBITDA is also a useful tool in evaluating the core operating results of the Company given the significant variation that can result from, for example, the timing of capital expenditures, the amount of intangible assets recorded or the differences in assets’ lives. We also use Adjusted EBITDA internally to evaluate the operating performance of our segments, to allocate resources and capital to such segments, to measure performance for incentive compensation programs, and to evaluate future growth opportunities. The Non-GAAP financial measures included in this press release are reconciled to their most directly comparable GAAP financial measures in the tables included herein.
Cenveo (NYSE: CVO), headquartered in Stamford, Connecticut, is a leader in the management and distribution of print and related products and services. The Company provides its customers with low-cost solutions within its core businesses of commercial printing and packaging, envelope, form, and label manufacturing, and publisher services; offering one-stop services from design through fulfillment. Cenveo delivers everyday for its customers through a network of production, fulfillment, content management, and distribution facilities across the globe.
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___________________________
Statements made in this release, other than those concerning historical financial information, may be considered “forward-looking statements,” which are based upon current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. In view of such uncertainties, investors should not place undue reliance on our forward-looking statements. Such statements speak only as of the date of this release, and we undertake no obligation to update any forward-looking statements made herein. Factors that could cause actual results to differ materially from management’s expectations include, without limitation: (i) a decline of our consolidated or individual reporting units operating performance as a result of the current economic environment could affect the results of our operations and financial position, including the impairment of our goodwill and other long-lived assets; (ii) our substantial indebtedness could impair our financial condition and prevent us from fulfilling our business obligations; (iii) our ability to service or refinance our debt; (iv) the terms of our indebtedness imposing significant restrictions on our operating and financial flexibility; (v) additional borrowings are available to us that could further exacerbate our risk exposure from debt; (vi) our ability to successfully integrate acquisitions; (vii) intense competition in our industry; (viii) the general absence of long-term customer agreements in our industry, subjecting our business to quarterly and cyclical fluctuations; (ix) factors affecting the U.S. postal services impacting demand for our products; (x) the availability of the Internet and other electronic media affecting demand for our products; (xi) increases in paper costs and decreases in its availability; (xii) our labor relations; (xiii) compliance with environmental rules and regulations; and (xiv) dependence on key management personnel. This list of factors is not exhaustive, and new factors may emerge or changes to the foregoing factors may occur that would impact our business. Additional information regarding these and other factors can be found in Cenveo, Inc.’s periodic filings with the SEC, which are available at http://www.cenveo.com.
Inquiries from analysts and investors should be directed to Robert G. Burton, Jr. at (203) 595-3005.
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