Cenveo's Reports Q2 Net Loss, Direct Mail Volume Up

STAMFORD, CT—August 7, 2013—Cenveo Inc. (NYSE: CVO) today announced results for the three and six months ended June 29, 2013.

The company generated net sales of $415.7 million for the three months ended June 29, 2013, compared to $433.2 million for the same period last year. The company generated net sales of $844.0 million for the six months ended June 29, 2013, compared to $883.0 million for the same period last year. The decrease in net sales for both periods was primarily due to lower sales volumes in our commercial print operations mainly resulting from production timing and lower customer demand, lower sales of office product envelopes due to the transition of a low margin account out of our operating platform, lower average selling price from our direct envelopes due to our initiatives to gain market share as well as pricing pressures primarily from a competitor now in bankruptcy protection. These decreases were offset in part by higher sales volume from our direct envelopes due to our initiatives to increase market share and increased direct mail demand.

Operating income was $19.2 million for the three months ended June 29, 2013, compared to $28.6 million for the same period last year. The decrease in operating income was primarily due to lower sales volumes and higher input costs in ancillary raw material categories. Non-GAAP operating income was $24.9 million for the three months ended June 29, 2013, compared to $35.9 million for the same period last year. Operating income was $33.5 million for the six months ended June 29, 2013, compared to $42.7 million for the same period last year. The decrease in operating income was primarily due to lower sales volumes and higher input costs in ancillary raw material categories, offset in part by lower restructuring, impairment and other charges. Non-GAAP operating income was $45.6 million for the six months June 29, 2013, compared to $67.4 million for the same period last year. A reconciliation of operating income to non-GAAP operating income is presented in the attached tables.

For the three months ended June 29, 2013, the company had a loss from continuing operations of $17.6 million, or $0.28 per share, compared to a loss of $0.2 million, or $0.01 per share for the same period last year. Non-GAAP loss from continuing operations was $0.5 million, or $0.01 per share, for the three months ended June 29, 2013, as compared to non-GAAP income from continuing operations of $8.0 million, or $0.13 per share, for the same period last year. For the six months ended June 29, 2013, the company had a loss from continuing operations of $36.5 million, or $0.57 per share, compared to a loss of $22.8 million, or $0.36 per share for the same period last year. Non-GAAP loss from continuing operations was $9.8 million, or $0.15 per share, for the six months ended June 29, 2013, as compared to non-GAAP income from continuing operations of $11.2 million, or $0.18 per share, for the same period last year. A reconciliation of loss from continuing operations to non-GAAP (loss) income from continuing operations is presented in the attached tables.

Cash flow provided by operating activities of continuing operations for the six months ended June 29, 2013 was $9.6 million, compared to cash flow provided by operating activities of continuing operations of $15.9 million for the same period last year. The change in our cash flows year over year is due to an inventory build related to potential supply constraints and pending price increases for certain raw materials and the timing of interest and vendor payments in the first six months compared to prior year.

Adjusted EBITDA for the three months ended June 29, 2013 was $42.0 million, compared to Adjusted EBITDA of $52.6 million for the same period last year. Adjusted EBITDA for the six months ended June 29, 2013 was $78.3 million, compared to Adjusted EBITDA of $99.4 million for the same period last year. A reconciliation of net loss to Adjusted EBITDA is presented in the attached tables.

Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
“Our second quarter performance was mixed. Our labels and packaging operations had a solid quarter with positive revenue growth up 2.5 percent despite continued disruption from the press fire that occurred earlier this year. I am very proud of our team's performance during this difficult period of time and I remain optimistic about our future prospects in our packaging business as the replacement press became fully operational in late June. We continue to expect that the performance of our print operations will begin to stabilize as we enter the back-half of the year as important industry verticals, such as managed care and travel and leisure enter seasonally stronger periods. In the meantime, we continue to remain vigilant on costs and increasing sales within this segment. Our envelope operations have continued to see significant improvement in direct mail as credit card mailing volumes have increased over 20 percent in the first half of the year, the strongest performance we have experienced since 2011. Despite this improvement in volume, we have experienced pricing pressures due to industry competitive dynamics.”

Strategic Update:
As discussed on our last conference call, we initiated reviews of all strategic options for some of our operating assets. Our recent focus has narrowed on divesting certain underperforming assets or assets that do not fit our future strategic plans. We continue to be in discussions with multiple parties for certain assets and expect to conclude any present opportunities over the coming months. More importantly, since our last conference call, we began evaluating distressed assets within certain industries that we operate and may look to potentially integrate them into our existing platform. While no assurances can be made that any transaction will be consummated, we expect that any potential transaction currently being contemplated regarding these distressed assets would be in the best interests of our customers and shareholders as it must be deleveraging to our capital structure and must be accretive to earnings and cash flow per share.

About Cenveo Inc.
Cenveo (NYSE: CVO), headquartered in Stamford, CT, is a leading global provider of print and related resources, offering world-class solutions in the areas of custom labels, specialty packaging, 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.