CENVEO INC. — REBUILDING WINNERS

“Some of us will do our jobs well and some will not, but we will be judged by only one thing—the result.”—Vince Lombardi

THE MEETING had just broken up between a commercial printer and a group of Moore Corp. senior executives, led by Robert Burton, and some subordinates. Burton had come to town to discuss acquiring this particular commercial printer, and was preparing for his trip back home to Stamford, CT.

Before leaving, a thirsty Burton asks one of his lower-level subordinates to go back into the facility for a soda. So the employee heads back inside and ambles into the conference room, where he finds an executive of the printing company. The subordinate recounts Burton’s request, obtains a soda and makes for the exit.

“Wait,” the printing executive calls out to Burton’s subordinate. “Do you want one for (another Moore executive)?”

The subordinate furrows his brow.

“Screw him,” he exclaims. “I work for Bob Burton.”

* * *

In The Great Gatsby, an F. Scott Fitzgerald character marveled at fictional gambling kingpin Meyer Wolfsheim (modeled after gangster/gambler Arnold Rothstein) and his role in the fixing of baseball’s 1919 World Series: “It never occurred to me that one man could start to play with the faith of 50 million people—with the single-mindedness of a burglar blowing a safe.”

Robert Gene Burton is not unlike Wolfsheim in some regards. During his illustrious career as a printing executive for World Color, Moore Corp. and now Cenveo Inc., Burton has held the fate of thousands of employees in his hands. Some of those workers would go through a wall for Burton. Others would prefer to smash Burton’s head through the wall; hence, the need for a bodyguard. Perhaps no single executive in the entire printing industry has developed a more polarized persona.

Since his successful hostile takeover of Cenveo, the company has released 1,900 employees as part of a $100 million cost-cutting initiative aimed at restoring value to the once-great company. On that Friday in early September last year, following the announcement that the former Mail-Well had cracked under Burton’s takeover attempt, approximately 25 members of ‘Team Burton’ flew in to Denver. Three days later, only one person remained from the former Cenveo executive regime.

Military Mentality

“MacArthur not only knew the rules of the game, he was a leader,” Burton says of his idol, the famed U.S. Army general. “When you run a company, especially in this business, you know what’s going on around you. I felt MacArthur actually knew what was happening and knew what needed to be done. He just didn’t have a board of directors that let him do it—he got fired.”

It is that trait of single-mindedness that has elevated Burton to legendary status in the commercial printing industry. The next Earnings per Share (EPS) target Burton misses will be his first with any company. Cenveo’s stock was trading in the $5.50 range when Burton, behind his Burton Capital Management (BCM), first began pursuing the $1.7 billion envelope, forms, label and commercial printing giant in April of 2005. By April of 2006, that share price had escalated to above $16.

This past March, Burton put his money where his job is, buying an additional $1 million worth of company stock to bring his total number of shares up to three million. Between him and the Cenveo management team, they own 12 percent of the company. They serve to bolster shareholder value, just like they did for World Color and Moore Corp.

“We run a results-oriented program here,” Burton says of his managerial style. “The rules are that there are no excuses. You need to deliver what you promise and what you commit. You need to be hands-on and you are measured on your results.

“A lot of people think we’re very ruthless and treat individuals in such a bad way because we fire a lot of people. No, we just ask people to deliver what they say they’re going to deliver. That’s sort of been our philosophy. We’re all measured, and we’re all evaluated in everything that we do.”

Yet, for an organization known for its exactness of performance, Team Burton consists of about 40 people who have been on board at all three printer stops. It is a combination of loyalty and aligning oneself with like-minded individuals who recognize the big picture. Company names and cities may change, but the corporate ideal is a static model for Burton and Co.

“We’re very consistent in the way we measure everyone,” notes Tom Oliva, Cenveo president. “From the plant manager to the sales exec to the management team, everyone is paid on margin, on performance, on EPS. When you align everyone with the same direction, then you have a consistency in approach.”

* * *

The knock against Burton for years is that his style of management, a “slash and burn” mentality, focuses on quickly reducing staff and building the value of a public company’s stock, yet does not speak to the future of the organization. Burton points out that both Moore Corp. and World Color are now integrated into the top two printers in North America—RR Donnelley and Quebecor World, respectively.

One former member of his executive team from World Color, whose current employer requested anonymity, staunchly defends Burton’s management style.

“Before Bob came to World Color, there were grave concerns about the future of the company,” the printing executive recalls. “The reality is that he has to make difficult decisions to give companies he’s taking over the chance to be successful. Bob looks at every expense report, at every line item. He likes to get his hands around it, develop an understanding of what needs to be done.

“There are times, from a business perspective, that you need to look at the needs of the many as opposed to the needs of the few,” the former co-worker adds. “If he has to lay off 500 people out of 10,000, that means 9,500 jobs are being saved.”

For better or for worse, the Team Burton game plan has essentially remained the same—revenues, expenses and margins, and what margins are deemed as acceptable. And for public companies, of course, it is EPS that floats (or sinks) investor boats. Burton points out that for the fourth quarter 2005, Cenveo EBITDA was up 26 percent versus the prior year. He has projected 50 cents EPS for 2006.

But long turnaround times are not a luxury that franchise-building specialists like Burton can enjoy; however, his “courtship” of Cenveo provided a little prep time to decide how things were going to be done. As was the case at Moore Corp., Burton had to act quickly.

Similar Situations

“There are a lot of similarities between the turnarounds at both Moore and Cenveo,” Oliva points out. “These were companies we inherited that were misdirected and whose costs were out of line. We had to act quickly because the patience level of the investor community is the next quarter. Especially when you’re shutting down a number of facilities, you want to get through the devastation stage and quickly get into the rebuilding stage. That’s when you see the morale of your people turning around and everyone starts embracing the growth stage of your business. There have been many cases where employees have said to me, ‘You’re making the right decision...I’m just sorry that I’m not part of it.’ ”

Cenveo CFO Sean Sullivan stresses that a primary challenge during the takeover of a company of this magnitude is getting a grasp on the employee collateral. “In any proxy contest, the biggest challenge is going to be an HR challenge,” he says. “There was a tremendous amount of distraction; no one knew what to do or what was going to happen. We showed up with 25 people and were ready to mitigate that issue right at the front end.

“Just as we found at Moore and World Color, there are a lot of good people working at Cenveo. It’s just a matter of tearing back the management layers and identifying those people, giving them the opportunity to perform.”

Oliva notes that a fair amount of the company’s facilities suffered from overcapacity, and under-utilization was generating unacceptable profit margins. After seven months of the devastation stage, Cenveo appears to have hit the “bottoming out” phase. Burton also anticipates Cenveo being active on the M&A front and expanding its business platform (he has 55 deals to his credit). Equipment is being redeployed from shuttered facilities to optimize capacity, and those plants receiving the transferred gear will also see an influx in workers, according to Oliva.

Suffice to say, the past seven months have been extremely difficult for Team Burton and Cenveo.

“The challenge we had with Cenveo was very real...there were just way too many people there,” Burton says. “And it wasn’t because those employees were bad—they just didn’t fit into the culture that was needed to actually save the company.

“We saved Moore’s life, and I can say that for a fact,” he stresses. “Moore would have gone into bankruptcy, and its employees would have been without jobs. Everyone criticizes us for how many people we had to lay off, but we saved many people’s lives. If you had been at that annual meeting we faced in Toronto after having been on that job for four months and saw the look in shareholders’ eyes—that their stock price used to be $30 and had dropped to $2.50—you’d understand the importance of these decisions.”

Today, Burton says he is just as committed to turning Cenveo around. “We take our responsibility very seriously, almost to a religious standpoint, to come in and make this company better, saving jobs.”

One step Team Burton took toward making the company better was by taking another holding, Supremex Inc., public earlier this spring. The total transaction value of $290 million will help drive down Cenveo’s considerable debt and improve the company’s balance sheet. Cenveo still retains a 361/2 percent interest in the Canadian-based company.

“This positions us well for the second part of our growth strategy,” notes Robert (Rob) Burton Jr., senior vice president of investor relations and communications. “We now have the working capital to grow domestically in the U.S. by enhancing our core competencies and expanding our service platform.”

Plans to Centralize

Another avenue toward building value throughout the network is by cross-selling the Cenveo platform. According to Oliva, the genesis of Mail-Well/Cenveo as a roll-up strategy led to a large collection of companies that operated autonomously, with no structure or support system for leveraging assets across the network. To remedy the situation, Cenveo will centralize its pricing and estimating, creating a communications channel for sales to showcase the full spectrum of its assets.

Similarly, Cenveo plans to centralize its digital asset offerings, cashing in on the success of its Minnesota facility “We’re going to centralize that capability and support it as a logistical offering,” Oliva says. “I believe in the distribute-and-print model versus print-and-distribute. In this model, we’ll centralize our digital asset management and disseminate the information to the appropriate facility that can logistically support delivery of the product.”

The marriage of digital and offset printing should provide more versatility for Cenveo, and Oliva sees the company focusing on more of a combined program sell.

“We’ll consolidate variable and static printing into the same offering, which will allow the customer to get the economies of a static offering along with the personalization (capabilities of digital printing), especially to utilize databases more effectively,” he remarks.

Burton and his leadership team anticipate growth within Cenveo’s envelope business in the mid-single digit range. When the time comes to add more variety to the product and service mix, Burton sees packaging and direct mail as two of the most optimal growth areas. Cenveo plunked down $30 million in capital for new equipment in 2005, not bad considering the state of chaos it found itself in for much of the year. As the final job cuts and facility closings are made, and the assets redistributed through the network, Cenveo will have a better grasp on future investments.

* * *

Trivia time, sports fans. Name the deposed Cenveo CEO who essentially served the company during summer vacation in 2005.

That would be James Malone. He took the helm June 27, just as schools let out, then wrapped up his term sometime shortly after the September 8 announcement that Team Burton was taking control. That’s around the time of year when schools are back in session.

Unfortunately, Cenveo learned a harsh lesson from this ill-fated hiring. When Malone pulled the chord on his golden parachute, the company was out millions of dollars. Absent that puppet regime, one has to wonder if jobs might have been spared in yet another example of poor resource allocation. Talk about burning down your village before the enemy arrives.

“We knew we were going to win from Day One because we had the solution to the problem, and we felt that it was the right solution,” Burton says. “I would say that morale is pretty damn good around here, especially due to the fact that this company was about to go under until we showed up and started buying the stock. It just wasn’t going to make it. When people know their facilities and their jobs are still going to be around, it gives you a pretty positive type of work force.”

Burton knows about winning numbers. He bolstered Moore Corp.’s stock from $2.38 to $10.16 in a matter of roughly 24 months. In eight-plus years with World Color, which includes the 1996 IPO, the stock doubled from its opening price of $19.

* * *

Were it not for a series of knee injuries from playing football at Murray State, Burton might have played professionally for the San Francisco 49ers or the Buffalo Bills, teams that drafted the former two-way lineman. Instead, he embarked on a colorful career that has included stints with IBM and ABC.

No Silver Spoon

The assumption/portrait of Burton is as a heartless corporate raider in search of his next multimillion-dollar challenge. His past suggests anything but an executive pedigree; Burton hails from the coal-mining town of West Frankfort, IL. His father was a salesman, but it was a football scholarship that paid the tuition for the 1997 PRINTING IMPRESSIONS/RIT Printing Industry Hall of Fame inductee.

People who make a name for themselves despite hailing from modest backgrounds are often proud of the fact, and rarely do they turn their backs on those in need.

He donated $2.5 million to the University of Connecticut’s football program to construct the Burton Family Football Complex. Burton also donated more than $1 million to establish scholarships for UConn student athletes. His son, Michael, captained the Huskies in 1999.

“He’s a very strong family man,” says a former World Color executive. “There is a very human element to him that people don’t get to see very often.”

* * *

Burton will be the first to admit he isn’t in this for the money. In a sense, the man makes money even when he fails; a prime example was his bid to take control of Creo that ended with Kodak’s acquisition of the struggling manufacturer. Some of the stock that Kodak bought out belonged to Burton.

For him, the challenge is in the turnaround—taking a floundering franchise and turning it in a positive direction. Like NFL coach Bill Parcells, who has rescued his share of gridiron organizations, Burton wants to leave his signature on a printer for the better.

“I really feel that we have a responsibility—and it doesn’t come off this way because you always read about us firing people—to make the lives better for workers in these plants and to try to save jobs,” he says. “If we can take a company that has real problems and was probably going to go under, then save that company, create jobs and value...I think that’s saying a lot.

“We’re 100 percent focused on growing Cenveo and making this platform very, very attractive to the outside world and, more importantly, to our customers. We’re not going away quickly—we think there’s an opportunity here because Cenveo has talented people. We’re very excited about what the future holds.”