Exhibit 99.1
[Cenveo logo]
NEWS RELEASE
CENVEO ANNOUNCES THIRD QUARTER 2005 RESULTS
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New Management Team on board since September 12th
At least $75 million in cost savings identified and to be implemented in 2006
Company to target $25 million of additional savings
Company to evaluate potential sale of Canadian Operations
ENGLEWOOD, CO - (NOVEMBER 2, 2005) - Cenveo, Inc., (NYSE: CVO) announced its
results for the third quarter and nine months ended September 30, 2005.
For the third quarter, the Company incurred a net loss of $64.1 million, or
$1.28 per share compared to net income of $2.5 million, or $0.05 per share,
in the third quarter of 2004. The third-quarter 2005 results included
restructuring and other charges ($15.2 million), asset impairments ($2.1
million), loss on sale of non-strategic businesses ($0.8 million), and proxy
contest related expenses ($7.0 million) totaling $25.1 million. In addition,
the Company recorded a non-cash valuation allowance of $35.3 million to
eliminate the remaining net U.S. deferred tax asset due to the decision not
to implement identified tax strategies that could have been used to realize
the net tax benefit. Net sales for the quarter were slightly higher at
$430.8 million compared with to $428.1 million in 2004.
EBITDA (earnings before interest, taxes, depreciation and amortization)
excluding restructuring and other charges, asset impairments, loss on sale
of non-strategic businesses, and proxy contest related expenses for the
third quarter of 2005 was $31.5 million compared to EBITDA of $33.5 million
in the same period last year. An explanation of the Company's use of EBITDA
for comparison purposes is provided below. Net cash used in operating
activities in the quarter ended September 30, 2005 was $17.7 million
compared to $18.7 million provided during the same period last year.
For the nine months ended September 30, 2005, the Company reported a net
loss of $97.2 million, or $1.99 per share. This compares to a net loss of
$16.1 million, or $0.34 per share for the same period in 2004. The results
for the nine months ended September 30, 2005 include restructuring and other
charges ($22.1 million), asset impairments of ($9.8 million), loss on sale
of non-strategic businesses ($2.0 million), and proxy contest related
expenses ($7.6 million) totaling $41.5 million. In addition, the Company
recorded an additional valuation allowance of $35.3 million against its net
U.S. deferred tax asset. EBITDA, excluding restructuring and other charges,
asset impairments, loss on sale of non-strategic businesses, and proxy
contest related expenses for the nine months ended September 30, 2005 was
$89.7 million versus EBITDA of $92.8 million for the prior year. Net sales
for the first nine months of 2005 were $1.30 billion compared to $1.26
billion in 2004. Net cash used in operating activities in the nine months
ended September 30, 2005 was $27.3 million compared to $14.0 million
provided during the same period last year.
ROBERT G. BURTON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER STATED:
"Looking back at Cenveo's results for the first nine months of the year, it
is clear that the financial results of the Company are completely
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unacceptable. Turning our performance around, and doing so quickly and
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effectively, is my number one mandate. Even before I was appointed the
senior manager of the Company, I felt that there was an opportunity to
reduce the Company's overall cost structure by $75 million in a two year
period. Over the past two months, we have analyzed the Company's business
and reviewed each cost center to identify excess costs and areas for
improvement. I now feel comfortable that after initiating a number of
significant actions in support of my commitment, we are well on our way to
achieving at least $75 million of cost reductions by the end of 2006. This
accelerated timeline is in large part due to the tremendous job the entire
team has done. Specific items identified, already implemented or scheduled
for implementation in the future include the following:
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o Centralization of general and administrative functions
o Consolidation of the Company's vendor base and implementation of
Company-wide purchasing initiatives
o Streamlining I.T. processes and infrastructure
o Corporate and field Human Resources staff rationalization
o Plant consolidation and rationalization
o Elimination of all discretionary spending
In addition, I believe that significant incremental cost savings can be
achieved. I have challenged the entire organization to identify an
additional $25 million of savings by the end of 2006 to bring our cost
structure in line with our competitors."
MR. BURTON CONTINUED:
"We have also decided to evaluate the sale of our Canadian operations. Our
longstanding success in Canada combined with current market conditions,
presents a unique opportunity that may help us to realize the substantial
value of our Canadian assets. Although, there can be no assurance that we
will be able to complete such a sale on acceptable terms, we believe that a
successful transaction would enable us to de-leverage the balance sheet and
provide an opportunity to redeploy capital that will generate additional
growth opportunities domestically."
MR. BURTON CONCLUDED:
"As we head into the fourth quarter and the upcoming year, I am optimistic
about the direction of the Company. We have already identified over $75
million in cost savings to be implemented throughout 2006, and it will be my
personal objective to achieve an additional $25 million more. While getting
there will not be easy, the new management team is on its way to building an
organization that can consistently deliver results. Our twenty-five newly
hired managers have worked with us in the past and fully understand that
current results are unsatisfactory. They are focused, working hard and
committed to delivering results that our customers, employees and
shareholders expect."
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CENVEO, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2005 2004 2005 2004
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Net sales $430,823 $428,099 $1,302,161 $1,261,238
Cost of sales 347,610 343,596 1,048,885 1,004,682
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Gross profit 83,213 84,503 253,276 256,556
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Operating expenses:
Selling, general and administrative expenses 62,615 62,315 197,741 196,728
Amortization of intangibles 1,272 1,313 3,878 4,114
Loss on sale of non-strategic businesses 759 - 2,019 -
Restructuring, impairment and other charges 24,378 (269) 39,467 851
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Operating income (loss) (5,811) 21,144 10,171 54,863
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Other expenses:
Interest expense 18,079 17,859 55,074 53,771
Loss on early extinguishment of debt - - - 17,748
Other 768 787 1,203 1,755
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Income (loss) before income taxes (24,658) 2,498 (46,106) (18,411)
Income tax expense (benefit) 39,420 8 51,140 (1,070)
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Income (loss) from continuing operations (64,078) 2,490 (97,246) (17,341)
Gain on disposal of discontinued operations, net of
$770 in income taxes - - - 1,230
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Net income (loss) $(64,078) $2,490 $(97,246) $(16,111)
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Income (loss) per share - basic:
Continuing operations $(1.28) $0.05 $(1.99) $(0.36)
Discontinued operations - - - 0.02
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Income (loss) per share - basic $(1.28) $0.05 $(1.99) $(0.34)
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Income (loss) per share - diluted:
Continuing operations $(1.28) $0.05 $(1.99) $(0.36)
Discontinued operations - - - 0.02
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Income (loss) per share - diluted $(1.28) $0.05 $(1.99) $(0.34)
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Weighted averages shares - basic 50,212 47,753 48,932 47,742
Weighted averages shares - diluted 50,212 48,504 48,932 47,742
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CENVEO, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
(unaudited)
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SEPTEMBER 30, DECEMBER 31,
2005 2004
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Assets
Current assets:
Cash and cash equivalents $883 $796
Accounts receivable 259,756 252,711
Inventories 125,006 112,219
Other current assets 43,706 46,019
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Total current assets 429,351 411,745
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Property, plant and equipment, net 339,154 367,260
Goodwill 311,697 308,938
Other intangible assets, net 25,232 28,788
Other assets 40,219 58,016
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Total assets $1,145,653 $1,174,747
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Liabilities and shareholders' equity
Current liabilities:
Accounts payable $173,086 $172,731
Accrued compensation and related liabilities 59,624 58,639
Other current liabilities 66,785 64,714
Current maturities of long-term debt 2,821 2,270
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Total current liabilities 302,316 298,354
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Long-term debt, less current maturities 789,613 767,499
Deferred income taxes 27,214 10,971
Other liabilities 38,655 40,569
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Total liabilities 1,157,798 1,117,393
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Shareholders' equity:
Common stock 530 487
Paid-in capital 236,083 214,902
Accumulated deficit (267,285) (170,039)
Deferred compensation - (2,003)
Accumulated other comprehensive income 18,527 14,007
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Total shareholders' equity (12,145) 57,354
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Total liabilities and shareholders' equity $1,145,653 $1,174,747
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CENVEO, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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NINE MONTHS ENDED
SEPTEMBER 30,
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2005 2004
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Cash flows from operating activities:
Net loss from continuing operations $(97,246) $(17,341)
Adjustments to reconcile net loss from continuing operations to
net cash used in operating activities:
Depreciation 34,900 35,014
Amortization 6,864 7,513
Deferred income tax expense (benefit) 35,970 (9,718)
Impairment charges 9,801 -
Loss on sale of non-strategic businesses 2,019 -
Write-off of deferred financing fees - 4,220
Other non-cash charges, net 3,247 (1,520)
Changes in operating assets and liabilities, excluding effects of
operations acquired and sold:
Accounts receivable (5,423) (23,941)
Inventories (11,861) (21,893)
Accounts payable (712) 40,863
Other, net (4,860) 800
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Net cash provided by (used in) operating activities (27,301) 13,997
Cash flows from investing activities:
Acquisitions, net of cash acquired (3,980) (9,803)
Capital expenditures (19,698) (20,246)
Proceeds from divestitures 6,514 2,000
Proceeds from sales of property, plant and equipment 724 1,475
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Net cash used in investing activities (16,440) (26,574)
Cash flows from financing activities:
Increase in borrowings under credit facility 25,200 4,666
Proceeds from issuance of long-term debt - 320,000
Repayments of long-term debt (2,535) (303,644)
Proceeds from the issuance of common stock 21,087 1,053
Capitalized loan fees - (9,076)
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Net cash provided by financing activities 43,752 12,999
Effect of exchange rate changes on cash and cash equivalents 76 (350)
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Net increase in cash and cash equivalents 87 72
Cash and cash equivalents at beginning of year 796 307
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Cash and cash equivalents at end of quarter $883 $379
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CENVEO, INC. AND SUBSIDIARIES
Reconciliation of Net Income to EBITDA
(in thousands)
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THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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2005 2004 2005 2004
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Net loss $(64,078) $2,490 $(97,246) $(16,111)
Interest 18,079 17,859 55,074 53,771
Income taxes 39,420 8 51,140 (1,070)
Depreciation 11,611 12,171 34,900 35,014
Amortization 1,329 1,343 3,995 4,244
Restructuring, impairment and other charges 24,378 (269) 39,467 851
Loss on sale of non-strategic businesses 759 - 2,019 -
Divested operations 28 (67) 320 (2,437)
Loss from the early extinguishment of debt - - - 17,748
Tax on discontinued operations - - - 770
Gain on discontinued operations - - - -
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EBITDA, as defined $31,526 $33,535 $89,669 $92,780
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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 Consolidated Statements 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.
Cenveo, Inc. (NYSE: CVO), www.cenveo.com, is one of North America's leading
providers of print and visual communications with one-stop services from
design through fulfillment. The company's broad portfolio of services and
products include, commercial printing, envelopes, labels and business
documents through a network of over 80 production, fulfillment and
distribution facilities throughout North America.
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 nine months of
2005, (4) the majority of Company's sales are not subject to long-term
contracts, (5) the impact of changes in the board of directors, the
company's CEO and other management and strategic direction that may be made,
(6) the ability to effectively execute cost reduction programs and
management reorganizations, (7) the industry is extremely competitive due to
over capacity, (8) the impact of the Internet and other electronic media on
the demand for envelopes and printed material, (9) postage rates and other
changes in the direct mail industry, (10) environmental laws may affect the
Company's business, (11) the ability to retain key management personnel,
(12) compliance with recently enacted and proposed changes in laws and
regulations affecting public companies could be burdensome and expensive,
(13) the ability to successfully identify, manage and integrate possible
future acquisitions, (14) dependence on suppliers and the costs of paper and
other raw materials and the ability to pass paper price increases onto
customers, (15) the ability to meet customer demand for additional
value-added products and services, (16) changes in interest rates and
currency exchange rates of the Canadian dollar, (17) the ability to manage
operating expenses, (18) the risk that a decline in business volume or
profitability could result in a further impairment of goodwill, and (19) 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.
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Inquiries from analysts and investors should be directed to Robert G.
Burton, Jr. at (203) 302-2707.
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