Exhibit 99.1
[CENVEO logo]
For Immediate Release August 1, 2005
CENVEO ANNOUNCES SECOND QUARTER RESULTS AND ADDITIONAL MAJOR
COSTS SAVINGS, BRINGING TOTAL REDUCTIONS TO $55 MILLION
ENGLEWOOD, COLO. (AUGUST 1, 2005) -- Cenveo, Inc., (NYSE: CVO) announced its
results for the quarter and six months ended June 30, 2005. The net loss was
$10.6 million for the quarter and $33.2 million for the six months, or $0.22
per share and $0.69 per share, respectively. Sales for the quarter were $422
million and $871 million for the six months ended June 30, 2005. Last year,
the net loss for the corresponding quarter was $2.1 million or $0.04 per
share, on $409 million of sales and for the six months ended June 30, 2004,
the net loss was $18.6 million, or $0.39 per share, on $833 million of
sales. Cenveo's net loss for the six months ended June 30, 2005, included
restructuring, impairment and other charges of $13.0 million and losses on
sales of non-strategic businesses of $1.3 million.
EBITDA of ongoing operations for the second quarter of 2005 was $30 million
compared to EBITDA of $28 million achieved by the ongoing operations for the
same period last year, a 7.3% improvement on 3% better sales. The guidance
given previously had been for results to be flat to last year. For the six
months ended June 30, 2005, EBITDA was $56.2 million compared to $59.4
million for the corresponding period of the prior year. This decline was
primarily due to the costs of transitioning to a new CEO, lower margins on
our envelope products, lower net pricing in our office products channel and
higher incentive accruals. An explanation of the Company's use of EBITDA for
comparative purposes is provided below.
Net cash provided by operating activities in the quarter ended June 30, 2005
was $16.9 million compared to $9.8 million provided during the same period
last year. It is still expected that operations will generate approximately
$35 million of free cash flow for the full year.
Jim Malone, President and CEO, stated, "The second quarter has been a
turning point for Cenveo. Building on the previously announced plan to
reduce SG&A expenses by $20 million on an annual basis, we have identified
another $35 million of cost reductions that will be in place no later than
January 1, 2006. On this basis, and even before factoring in continued
strong market successes, we expect Cenveo to be at an annual EBITDA run rate
of $190 million going into 2006. This significant change in the expected
EBITDA of the company has been made possible by flattening the organization,
reducing the size and changing the role of head office and making Cenveo
much more customer and operations oriented. We have discontinued all
programs and activities that are not designed to serve our customers or
support the high level of corporate governance that we are committed to
maintain. We are confident that what we are doing is clearly the best option
for our shareholders and we will continue to aggressively pursue shareholder
value creation for all of our shareholders".
- more -
Cenveo will hold a conference call today, Tuesday August 2nd at 2:00 p.m.
Eastern Time (1:00 pm Central, 12:00 noon Mountain, 11:00 a.m. Pacific
Time). To participate in the Cenveo conference call, please dial in to
1-800-819-9193 and provide conference ID 1024706. Please call 5-7 minutes
before the call is to begin. The conference call will also be available via
webcast. To listen to the webcast, go to www.cenveo.com,
www.streetevents.com, or www.fulldisclosure.com.
INTERNATIONAL DIAL-IN: An operator will dial out to you. Contact Cenveo
Investor Relations at 303-790-8023 or email: bea.rodriguez@cenveo.com no
later than 1 hour prior to the call with your telephone information.
If you are unable to join the Cenveo conference call, you may access a
replay of the call starting Tuesday, August 2, 2004 at 5:00 pm Eastern Time
until Midnight Eastern Time, August 9, 2004. To access the replay, please
dial 1-888-203-1112 and reference the conference ID 1024706.
EBITDA (earnings before interest, taxes, depreciation and amortization)
should not be considered as an alternative to any measure of operating
results as promulgated under accounting principles generally accepted (GAAP)
in the United States (such as operating income or net income), nor should it
be considered as an indicator of our overall financial performance. EBITDA
does not fully consider the impact of investing or financing transactions as
it specifically excludes depreciation and interest charges, which should
also be considered in the overall evaluation of results. Additionally, our
method of calculating EBITDA may be different from the method used by other
companies and therefore comparability may be limited. EBITDA has not been
provided as a measure of liquidity. The Supplemental Information to the
press release includes the Company's Statement of Cash Flows.
We use EBITDA as a supplemental measure of performance because we believe it
gives the reader a more complete understanding of our operating results
before the impact of investing and financing transactions. A reconciliation
of net income (loss) under U.S. GAAP to EBITDA is presented in the
Supplemental Information to this press release and clearly demonstrates our
method of calculating EBITDA.
ABOUT CENVEO
Cenveo, Inc. (NYSE: CVO), www.cenveo.com, is one of North America's leading
providers of visual communications with one-stop services from design
through fulfillment. The company is uniquely positioned to serve both direct
customers through its commercial segment, and distributors and resellers of
printed office products through its Quality Park resale segment. The
company's broad portfolio of services and products include e-services,
envelopes, offset and digital printing, labels and business documents.
Cenveo currently has approximately 9,400 employees and more than 80
production locations plus five advanced fulfillment and distribution centers
throughout North America. In 2004 and 2005, Cenveo was voted among Fortune
Magazine's Most Admired Companies in the printing and publishing category
and has consistently earned one of the highest Corporate Governance
Quotients by Institutional Shareholder Services. The company is
headquartered in Englewood, Colorado.
- more -
Forward-Looking Statements
- --------------------------
Statements made in this release, other than those concerning historical
financial information, may be considered forward-looking statements, which
are subject to risks and uncertainties, including without limitation: (1)
general economic, business and labor conditions, (2) the ability to
implement the Company's strategic initiatives, (3) the ability to regain
profitability after substantial losses in 2004 and the first six months of
2005, (4) the majority of Company's sales are not subject to long-term
contracts, (5) the impact of a new CEO and changes in management and
strategic direction that may be made, (6) the impact of a special
shareholders' meeting to be held September 14, 2005 called by a dissident
shareholder group to replace the current board of directors, (7) the ability
to effectively execute cost reduction programs and management
reorganizations, (8) the industry is extremely competitive due to over
capacity, (9) the impact of the Internet and other electronic media on the
demand for envelopes and printed material, (10) postage rates and other
changes in the direct mail industry, (11) environmental laws may affect the
Company's business, (12) the ability to retain key management personnel,
(13) compliance with recently enacted and proposed changes in laws and
regulations affecting public companies could be burdensome and expensive,
(14) the ability to successfully identify, manage and integrate possible
future acquisitions, (15) dependence on suppliers and the costs of paper and
other raw materials and the ability to pass paper price increases onto
customers, (16) the ability to meet customer demand for additional
value-added products and services, (17) changes in interest rates and
currency exchange rates of the Canadian dollar, (18) the ability to manage
operating expenses, (19) the risk that a decline in business volume or
profitability could result in a further impairment of goodwill, and (20) the
ability to timely or adequately respond to technological changes in the
Company's industry.
These risks and uncertainties are also set forth under Management's
Discussion and Analysis of Results of Operations and Financial Condition in
the Cenveo, Inc. Annual Report for the fiscal year ended December 31, 2004,
and in the Company's other SEC filings. A copy of the annual report is
available on the Company's website at http://www.cenveo.com.
None of management's statements in this release should be considered an
offer to sell or a solicitation of an offer to buy Cenveo securities.
CONTACT: Mr. Michel P. Salbaing
Senior Vice President and Chief Financial Officer
Cenveo, Inc.
(303) 790-8023
# # #
FINANCIAL HIGHLIGHTS
Cenveo, Inc. and Subsidiaries
(dollars in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
2005 2004 2005 2004
CONSOLIDATED RESULTS
- --------------------
Net sales $ 421,736 $ 409,396 $ 871,338 $ 833,138
Gross profit 83,308 83,634 170,063 172,054
Operating income 12,012 14,805 15,983 33,719
Loss from continuing operations (10,609) (3,296) (33,167) (19,831)
Gain on disposal of discontinued operations - 1,230 - 1,230
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Net loss $ (10,609) $ (2,066) $ (33,167) $ (18,601)
Net loss per share $ (0.22) $ (0.04) $ (0.69) $ (0.39)
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SEGMENT INFORMATION
NET SALES:
Commercial $ 320,195 $ 307,583 $ 666,603 $ 631,432
Resale 101,541 101,813 204,735 201,706
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Total $ 421,736 $ 409,396 $ 871,338 $ 833,138
OPERATING INCOME (EXPENSE):
Commercial $ 7,918 $ 9,920 $ 10,181 $ 21,914
Resale 9,321 12,359 18,059 23,822
Corporate services (5,227) (7,474) (12,257) (12,017)
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Total $ 12,012 $ 14,805 $ 15,983 $ 33,719
OPERATING INCOME MARGINS:
Commercial 2.5% 3.2% 1.5% 3.5%
Resale 9.2% 12.1% 8.8% 11.8%
EBITDA (1):
Commercial $ 21,436 $ 21,419 $ 43,513 $ 43,545
Resale 13,496 14,409 24,618 28,303
Corporate services (4,887) (7,827) (11,934) (12,428)
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Total $ 30,045 $ 28,001 $ 56,197 $ 59,420
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FINANCIAL POSITION JUNE 30, 2005 DECEMBER 31, 2004
Working capital $ 118,501 $ 113,391
Total assets 1,128,219 1,174,747
Total debt 783,575 769,769
Shareholders' equity $ 28,081 $ 57,354
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<FN>
(1) See Appendix 1 in the Supplemental Information to the Press Release for
the definition of EBITDA, the reconciliation of net income to EBITDA and the
reason why EBITDA is a relevant non-GAAP financial measure for Cenveo.
[CENVEO logo]
SUPPLEMENTAL INFORMATION TO THE PRESS RELEASE
FOR THE QUARTER ENDED
JUNE 30, 2005
RELEASED AUGUST 2, 2005
[CENVEO logo]
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Three and six months ended June 30, 2005
Page
Financial and Operational Summary and Recent Developments 1, 2
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Consolidated Balance Sheets 3
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Consolidated Statements of Operations 4
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Consolidated Cash Flow Statements 5
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Segment Results 6
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Appendix 1 - Reconciliation of Net Income to EBITDA 7, 8
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Financial and Operational Summary
- -------------------------------------------------------------------------------
Three and six months ended June 30, 2005
Financial and Operational Summary
- ---------------------------------
CONSOLIDATED RESULTS: Consolidated net sales increased $12.3 million, or 3%,
in the second quarter of 2005 compared to the second quarter of 2004. On a
year-to-date basis, consolidated net sales are $38.2 million, or 4.6%,
higher than the corresponding period of 2004. This strong growth in sales is
primarily the result of our strategy of offering the full range of products
and services to our customers.
Operating income declined $2.8 million in the second quarter of 2004 and on
a year-to-date basis has declined $17.7 million compared to the
corresponding period of 2004. These declines are primarily the result of
restructuring expenses related to our program to reduce SG&A expenses by $20
million, impairment charges on equipment that will be taken out of service,
expenses related to the evaluation of our strategic alternatives and losses
incurred on the dispositions of non-strategic businesses.
COMMERCIAL: Net sales increased $12.6 million, or 4%, in the second quarter
compared to the second quarter of 2004 and are $35.2 million higher on a
year-to-date basis than the prior year.
Sales to our strategic accounts have increased $24.0 million in the first
six months of 2005.
RESALE: Net sales were down slightly in the second quarter but are $3.0
million higher than 2004 on a year-to-date basis. This growth is occurring
in our sales of office products to retail superstores.
DEBT: Total debt was reduced by $18.2 million in the second quarter.
CAPITAL EXPENDITURES: Capital expenditures were $6.2 million in the second
quarter.
1
Financial and Operational Summary and Recent Developments
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Second Quarter ended June 30, 2005
Recent Developments
- -------------------
- - The Company announced on June 22, 2005 the appointment of James R. Malone
as Chief Executive Officer, effective Monday, June 27, 2005.
Mr. Malone was founding and managing partner of Qorval, LLC, a financial and
business restructuring firm based in Naples, Florida. In this capacity, he
assumed the role of Chief Executive Officer of several companies including
Mail Contractors of America, Inc., Avborne, Inc. and Brown Jordan
International.
- - On June 1, 2005, the Company announced a comprehensive program initiated
to streamline certain management functions, increase flexibility and
efficiency, and reduce operating expense. This program, when completed
before the end of 2005, will provide an annual savings in excess of $20
million and eliminate approximately 125 positions.
2
CONSOLIDATED BALANCE SHEETS
Cenveo, Inc. and Subsidiaries
(in thousands)
(unaudited)
JUNE 30, DECEMBER 31,
2005 2004
ASSETS
Current assets:
Cash and cash equivalents $ 1,844 $ 796
Accounts receivable, net 226,951 252,711
Inventories, net 113,585 112,219
Other current assets 46,881 46,019
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Total current assets 389,261 411,745
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Property, plant and equipment, net 345,061 367,260
Goodwill 307,627 308,938
Other intangible assets, net 29,853 28,788
Other assets, net 56,417 58,016
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TOTAL ASSETS $ 1,128,219 $ 1,174,747
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 150,600 $ 172,731
Accrued compensation and related liabilities 60,249 58,639
Other current liabilities 57,070 64,714
Current maturities of long-term debt 2,841 2,270
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Total current liabilities 270,760 298,354
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Long-term debt, less current maturities 780,734 767,499
Other liabilities 48,644 51,540
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Total liabilities 1,100,138 1,117,393
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Shareholders' equity:
Common stock 505 487
Paid-in capital 224,100 214,902
Retained deficit (203,205) (170,039)
Deferred compensation (2,885) (2,003)
Accumulated other comprehensive income 9,566 14,007
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Total shareholders' equity 28,081 57,354
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,128,219 $ 1,174,747
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3
CONSOLIDATED STATEMENTS OF OPERATIONS
Cenveo, Inc. and Subsidiaries
(in thousands, except per share data)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2005 2004 2005 2004
Net sales $ 421,736 $ 409,396 $ 871,338 $ 833,138
Cost of sales 338,428 325,762 701,275 661,084
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Gross profit 83,308 83,634 170,063 172,054
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Operating expenses:
Selling, general and administrative expenses 64,559 66,415 137,224 134,413
Amortization of intangibles 1,276 1,396 2,606 2,801
Loss on sale of non-strategic businesses 539 - 1,260 -
Restructuring, impairment and other charges 4,922 1,018 12,990 1,121
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Operating income 12,012 14,805 15,983 33,719
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Other expense:
Interest expense 18,802 17,513 36,995 35,912
Loss on early extinguishment of debt - - - 17,748
Other 445 527 434 968
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Loss before income taxes (7,235) (3,235) (21,446) (20,909)
Income tax expense (benefit) 3,374 61 11,721 (1,078)
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Loss from continuing operations (10,609) (3,296) (33,167) (19,831)
Gain on disposal of discontinued operations, net of
taxes of $770 - 1,230 - 1,230
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Net loss $ (10,609) $ (2,066) $ (33,167) $ (18,601)
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Loss per share - basic and diluted $ (0.22) $ (0.04) $ (0.69) $ (0.39)
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Weighted averages shares - basic and diluted 48,804 47,740 48,292 47,737
4
CONSOLIDATED CASH FLOW STATEMENTS
Cenveo, Inc. and Subsidiaries
(in thousands)
(unaudited)
SIX MONTHS ENDED
JUNE 30,
2005 2004
Cash flows from operating activities:
Net loss from continuing operations $ (33,167) $ (19,831)
Adjustments to reconcile net loss from continuing operations to net cash used in operating
activities:
Depreciation 23,289 22,841
Amortization 4,896 5,093
Asset impairment charges 7,689 -
Loss on sale of non-strategic businesses 1,260 -
Write-off of deferred financing fees - 4,220
Deferred income tax expense (benefit) 456 (7,949)
Loss on disposal of assets 77 240
Other non-cash charges, net (703) (366)
Changes in operating assets and liabilities, excluding effects of acquisitions and
operations sold:
Accounts receivable 25,723 4,210
Inventories (2,247) (20,011)
Accounts payable and accrued compensation (20,077) 7,686
Income taxes payable (476) (991)
Other working capital changes (9,415) 211
Other, net (6,877) (76)
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Net cash used in operating activities (9,572) (4,723)
Cash flows from investing activities:
Acquisitions, net of cash acquired (3,995) -
Capital expenditures (12,652) (12,460)
Proceeds from divestitures, net 4,158 2,000
Proceeds from sales of property, plant and equipment 284 346
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Net cash used in investing activities (12,205) (10,114)
Cash flows from financing activities:
Increase in borrowings under credit facility 14,824 6,806
Proceeds from issuance of long-term debt - 320,000
Repayments of long-term debt (1,018) (302,809)
Proceeds from the issuance of common stock 9,082 46
Capitalized loan fees - (8,936)
- -------------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 22,888 15,107
Effect of exchange rate changes on cash and cash equivalents (63) (412)
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Net increase (decrease) in cash and cash equivalents 1,048 (142)
Cash and cash equivalents at beginning of year 796 307
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Cash and cash equivalents at end of quarter $ 1,844 $ 165
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5
SEGMENT RESULTS
Cenveo, Inc. and Subsidiaries
(in thousands)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2005 2004 2005 2004
Net sales:
Commercial $ 320,195 $ 307,583 $ 666,603 $ 631,432
Resale 101,541 101,813 204,735 201,706
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Total net sales $ 421,736 $ 409,396 $ 871,338 $ 833,138
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Operating income (expense):
Commercial $ 7,918 $ 9,920 $ 10,181 $ 21,914
Resale 9,321 12,359 18,059 23,822
Corporate services (5,227) (7,474) (12,257) (12,017)
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Total operating income $ 12,012 $ 14,805 $ 15,983 $ 33,719
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EBITDA (1):
Commercial $ 21,436 $ 21,419 $ 43,513 $ 43,545
Resale 13,496 14,409 24,618 28,303
Corporate services (4,887) (7,827) (11,934) (12,428)
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Total EBITDA $ 30,045 $ 28,001 $ 56,197 $ 59,420
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Net sales by product line:
Commercial printing $ 188,748 $ 186,873 $ 399,125 $ 385,073
Envelopes 183,322 172,077 373,093 346,180
Business forms and labels 49,666 50,446 99,120 101,885
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Total net sales $ 421,736 $ 409,396 $ 871,338 $ 833,138
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<FN>
(1) See Appendix 1 for the definition of EBITDA, the reconciliation of
net income to EBITDA and the reason why EBITDA is a relevant
non-GAAP financial measure for Cenveo.
6
APPENDIX 1 - RECONCILIATION OF NET INCOME TO EBITDA
FOR THE THREE MONTHS ENDED JUNE 30, 2005 AND 2004
Cenveo, Inc. and Subsidiaries
(in thousands)
(unaudited)
FOR THE THREE MONTHS ENDED JUNE 30, 2005
COMMERCIAL RESALE CORPORATE TOTAL
Net income (loss) $ 5,500 $ 9,332 $ (25,441) $ (10,609)
Interest 58 7 18,737 18,802
Taxes 2,514 - 860 3,374
Depreciation 9,457 2,050 133 11,640
Amortization 1,172 134 - 1,306
Restructuring, impairment and other charges 2,422 1,676 824 4,922
Loss on sale of non-strategic businesses 313 226 - 539
Divested operations - 71 - 71
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EBITDA $ 21,436 $ 13,496 $ (4,887) $ 30,045
FOR THE THREE MONTHS ENDED JUNE 30, 2004
COMMERCIAL RESALE CORPORATE TOTAL
Net income (loss) $ (4,184) $ 10,020 $ (7,902) $ (2,066)
Interest 11,291 2,324 3,898 17,513
Taxes 2,939 - (2,878) 61
Depreciation 8,984 2,205 186 11,375
Amortization 1,182 135 99 1,416
Restructuring, impairment and other charges 1,018 - - 1,018
Divested operations 189 (275) - (86)
Gain on discontinued operations - - (1,230) (1,230)
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EBITDA $ 21,419 $ 14,409 $ (7,827) $ 28,001
Note: This schedule is a reconciliation of net income to EBITDA which we
define as earnings before interest, taxes, depreciation, amortization,
non-cash charges from asset impairments and gains and losses recognized on
divestitures. Additionally, we exclude the impacts of restructuring and
related charges and the EBITDA of divested operations. EBITDA should not be
considered as an alternative to any measure of operating results as
promulgated under accounting principles generally accepted in the United
States (such as operating income or net income), nor should it be considered
as an indicator of our overall financial performance. EBITDA does not fully
consider the impact of investing or financing transactions as it
specifically excludes depreciation and interest charges, which should also
be considered in the overall evaluation of results. Additionally, our method
of calculating EBITDA may be different from the method used by other
companies, and therefore, comparability may be limited. EBITDA has not
7
APPENDIX 1 - RECONCILIATION OF NET INCOME TO EBITDA
FOR THE SIX MONTHS ENDED JUNE 30, 2005 AND 2004
Cenveo, Inc. and Subsidiaries
(in thousands)
(unaudited)
FOR THE SIX MONTHS ENDED JUNE 30, 2005
COMMERCIAL RESALE CORPORATE TOTAL
Net income (loss) $ 4,537 $ 18,057 $ (55,761) $(33,167)
Interest 97 12 36,886 36,995
Taxes 5,864 - 5,857 11,721
Depreciation 18,869 4,160 260 23,289
Amortization 2,399 268 - 2,667
Restructuring, impairment and other charges 10,503 1,663 824 12,990
Loss on sale of non-strategic businesses 1,034 226 - 1,260
Divested operations 210 232 - 442
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EBITDA $ 43,513 $ 24,618 $ (11,934) $ 56,197
FOR THE SIX MONTHS ENDED JUNE 30, 2004
COMMERCIAL RESALE CORPORATE TOTAL
Net income (loss) $ (6,685) $ 19,106 $ (31,022) $ (18,601)
Interest 22,597 4,647 8,668 35,912
Taxes 6,066 - (7,144) (1,078)
Depreciation 18,009 4,478 354 22,841
Amortization 2,433 270 198 2,901
Restructuring, impairment and other charges 1,121 - - 1,121
Divested operations 4 (198) - (194)
Loss from the early extinguishment of debt - - 17,748 17,748
Gain on discontinued operations - - (1,230) (1,230)
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EBITDA $ 43,545 $ 28,303 $ (12,428) $ 59,420
Note: This schedule is a reconciliation of net income to EBITDA which we
define as earnings before interest, taxes, depreciation, amortization,
non-cash charges from asset impairments and gains and losses recognized on
divestitures. Additionally, we exclude the impacts of restructuring and
related charges and the EBITDA of divested operations. In 2004, we excluded
the loss on the early extinguishment of debt. EBITDA should not be
considered as an alternative to any measure of operating results as
promulgated under accounting principles generally accepted in the United
States (such as operating income or net income), nor should it be considered
as an indicator of our overall financial performance. EBITDA does not fully
consider the impact of investing or financing transactions as it
specifically excludes depreciation and interest charges, which should also
be considered in the overall evaluation of results. Additionally, our method
of calculating EBITDA may be different from the method used by other comp
8