Cenveo Reports Q3 Net Sales of $480.6M, Accelerated Consolidation of National Envelope

STAMFORD, CT—November 6, 2014—Cenveo Inc. announced results for the three and nine months ended Sept. 27, 2014.

Robert Burton Sr., chairman and CEO stated: "During the third quarter we successfully completed several of our key initiatives, including the consolidation of five legacy National Envelope facilities into two brand new locations and into certain legacy Cenveo operations. Since the beginning of the year, our consolidation efforts have resulted in a total net reduction of six envelope facilities. Given the ramifications of the bankruptcy process, the short time frame to complete this monumental consolidation and our desire to minimize customer disruption, we incurred significant one-time costs as a result of the integration efforts. In addition to integration, acquisition, restructuring and other charges reported in our non-GAAP results related to the National Envelope integration, we believe that year to date we have experienced approximately $15 million in other one-time costs and lost profits in connection with the integration.

"These items include, but are not limited to, lower production volumes during the relocation period, excess overtime at existing facilities to meet customer deadlines, and incremental freight expense for inventory relocation and expedited deliveries during the transition period. Despite this disruption, we were able to generate $20 million of cash flow from continuing operations during the third quarter. While we are substantially complete with the integration, we anticipate further manufacturing disruption during the fourth quarter, although to a lesser extent, as our production capacity at our new facilities continues to ramp up."

The Company generated net sales of $480.6 million for the three months ended Sept. 27, 2014, compared to $442.8 million for the same period last year, an increase of 8.5 percent. The Company generated net sales of $1.5 billion for the nine months ended Sept. 27, 2014, compared to $1.3 billion for the same period last year, an increase of 14.4 percent. The increase in net sales is primarily due to sales generated from the integration of National Envelope into our envelope operations, as National Envelope was only included in our 2013 results beginning on Sept. 16, 2013, the date of acquisition, as well as our ability to pass along paper price increases to certain customers in our envelope operations.

Operating income was $9.3 million for the three months ended Sept. 27, 2014, compared to $16.5 million for the same period last year. Operating income was $32.7 million for the nine months ended Sept. 27, 2014, compared to $45.0 million for the same period last year. The decrease was primarily due to higher restructuring and integration charges from the closure of two print plants, the closure and consolidation of several envelope plants related to the integration of National Envelope, and the impact of the higher cost structure of National Envelope. Non-GAAP operating income was $21.4 million for the three months ended Sept. 27, 2014, compared to $28.8 million for the same period last year, and $67.2 million for the nine months ended Sept. 27, 2014, compared to $69.5 million for the same period last year.

For the three months ended Sept. 27, 2014, the Company had a loss from continuing operations of $10.8 million, or $0.16 per diluted share, compared to income of $13.4 million, or $0.16 per diluted share, for the same period last year. For the nine months ended Sept. 27, 2014, the Company had a loss from continuing operations of $66.9 million, or $1.00 per diluted share, compared to a loss of $26.1 million, or $0.40 per diluted share, for the same period last year. Non-GAAP income from continuing operations was $3.0 million, or $0.03 per diluted share, for the three months ended Sept. 27, 2014, as compared to non-GAAP income from continuing operations of $1.2 million, or $0.01 per diluted share, for the same period last year. For the nine months ended Sept. 27, 2014, non-GAAP loss from continuing operations was $7.6 million, or $0.11 per diluted share, compared to $14.5 million, or $0.23 per diluted share, for the same period last year.

Adjusted EBITDA for the three months ended Sept. 27, 2014, was $44.1 million, compared to Adjusted EBITDA of $42.3 million for the same period last year. For the nine months ended Sept. 27, 2014, Adjusted EBITDA was $123.0 million, compared to $115.2 million for the same period last year. These Adjusted EBITDA results do not include the approximately $15 million of one-time costs referenced previously, and include a one-time litigation settlement.

Cash flow provided by operating activities of continuing operations for the three months ended Sept. 27, 2014, was $20.0 million, compared to $5.0 million for the same period last year. Cash flow used in operating activities of continuing operations for the nine months ended Sept. 27, 2014, was $5.4 million, compared to cash flow provided by operating activities of continuing operations of $10.7 million for the same period last year. The use of cash was primarily due to changes in working capital, primarily due to certain vendor arrangements and a use of cash from accounts receivables due to the timing of collections from and sales to our customers.

Burton concluded, "As we enter the fourth quarter and look towards 2015, we are pleased to have substantially completed the accelerated integration of National Envelope. We will continue to look to improve margins, drive stronger cash flow and pay down debt. Based on current operational trends and backlogs, and excluding the expected full year impact of one-time disruption costs related to the accelerated National Envelope integration of approximately $20 million, we expect to achieve 95-100 percent of our 2014 full year Adjusted EBITDA guidance. As we have addressed the majority of our capital structure earlier this year, we will now focus on using our cash flow to reduce our higher cost debt. We expect significant cash flow improvement in the fourth quarter and beyond as a result of: the interest savings realized in our June refinancing; the reduction of future contributions to our pension plans as a result of the Highway and Transportation Funding Act of 2014; and the completion of the majority of the restructuring and integration of National Envelope. We continue to evaluate our options in regards to our strategic review and are currently in preliminary discussions with multiple parties for certain assets that do not fit our long-term strategic plan."

About Cenveo
Cenveo (NYSE: CVO), world headquartered in Stamford, CT, is a leading global provider of print and related resources, offering world-class solutions in the areas of custom boxes, custom labels, shrink sleeve labels, envelopes, commercial print, content management and publisher solutions. The company provides a one-stop offering through services ranging from design and content management to fulfillment and distribution. With a worldwide distribution platform, we pride ourselves on delivering quality solutions and service every day for our more than 100,000 customers.

Source: Cenveo.