Cenveo Announces Third Quarter 2013 Results

Cenveo, Inc., Stamford, Conn., announced results for the three and nine months ended Sept. 28, 2013. The reported results include the effect of the acquisition of certain assets of National Envelope on Sept. 16, 2013 while the custom envelope division is reported as a discontinued operation.

"Our third quarter results were in line with our expectations. We continued to see similar trends during the third quarter that we experienced in the first half of the year with negative pricing pressures in our envelope and commercial print businesses impacting our results. However, several developments late in the third quarter began to change the operating landscape for us, including the acquisition of certain assets of National Envelope, which closed in mid-September, and the divestiture of our custom envelope division, which occurred at the end of the quarter," said Robert G. Burton, Sr., chairman and chief executive officer. "Despite the short period of operating the National Envelope assets, we are pleased with our progress to date and the fact that these assets operated profitably in a short period of time. These immediate results give us early confidence that our integration plan is on track, and our target to achieve $30 million in annual run rate EBITDA by the end of next year is attainable. Our packaging facility, which experienced the press fire earlier this year, finally achieved similar pre-fire throughput levels during September as well. Given these strategic transactions, signs of continued positive results within our label and packaging operations, pricing normalization in the envelope market and improving trends within our print business, we are optimistic that the fourth quarter and, more importantly, 2014 will be much stronger for Cenveo than what we have experienced to date in 2013."

The company generated net sales of $442.8 million for the three months ended Sept. 28, 2013, compared to $437.2 million for the same period last year, an increase of 1.3 percent. The increase in net sales is attributable to higher sales volumes in our direct envelope business due to our market share initiatives as well as National Envelope's sales for the stub period post acquisition. These increases were offset substantially by sales declines in our commercial print operations due to lower customer demand and continued pricing pressures. The company generated net sales of $1.27 billion in the nine months ended Sept. 28, 2013 versus $1.30 billion in the nine months ended Sept. 29, 2012. This decrease primarily relates to our commercial printing operations due to lower customer demand and continued pricing pressures, partially offset by an increase in sales from the company's envelope operations due to its market share initiatives and higher direct mail volumes as well as National Envelope's sales for the stub period post acquisition.

Operating income was $16.5 million for the three months ended Sept. 28, 2013, compared to $32.3 million for the same period last year. Non-GAAP operating income was $28.8 million for the three months ended Sept. 28, 2013, compared to $39.6 million for the same period last year. Operating income was $45.0 million for the nine months ended Sept. 28, 2013, compared to $69.5 million for the same period last year. Non-GAAP operating income was $69.5 million for the nine months ended Sept. 28, 2013, compared to $101.5 million for the same period last year. The decrease in operating income in both periods was primarily due to lower average selling prices and higher input costs within our envelope and commercial printing operations, and acquisition costs related to National Envelope.

For the three months ended Sept. 28, 2013, the company had income from continuing operations of $10.5 million, or $0.13 per diluted share, compared to income of $3.0 million, or $0.04 per diluted share for the same period last year. Non GAAP income from continuing operations was $1.2 million, or $0.01 per share, for the three months ended Sept. 28, 2013, as compared to non-GAAP income from continuing operations of $10.9 million, or $0.13 per diluted share, for the same period last year. For the nine months ended Sept. 28, 2013, the company had a loss from continuing operations of $29.0 million, or $0.45 per share, compared to a loss of $23.1 million, or $0.36 per share for the same period last year. Non-GAAP loss from continuing operations was $14.5 million, or $0.23 per share, for the nine months ended Sept. 28, 2013, as compared to non-GAAP income from continuing operations of $17.8 million, or $0.23 per share, for the same period last year.

Cash flow provided by operating activities for the nine months ended Sept. 28, 2013 was $17.8 million, compared to cash flow provided by operating activities of $18.7 million for the same period last year. Our operating cash flows remained relatively consistent through the first nine months despite inventory build-up in anticipation of supply constraints and the integration of certain assets of National Envelope, as we did not acquire working capital assets or liabilities in connection with the transaction.

Adjusted EBITDA for the three months ended Sept. 28, 2013 was $42.3 million, compared to Adjusted EBITDA of $54.0 million for the same period last year. Adjusted EBITDA for the nine months ended Sept. 28, 2013 was $115.2 million, compared to Adjusted EBITDA of $147.4 million for the same period last year.

"During the quarter we saw revenue growth across our envelope, labels and packaging businesses. In our envelope operations we have continued to see strong growth in direct mail volumes as credit card mailing volumes have increased over 15 percent year to date. The envelope pricing pressures due to recent industry dynamics, which continued in the third quarter, have recently begun to reverse due to market normalization and as industry capacity continues to be rationalized," said Robert G. Burton, Sr., chairman and chief executive officer. "As we discussed on our last conference call, we are currently reviewing all strategic options for our operations as we look to reposition the company for the future. During the third quarter we completed the divestiture of our custom envelope division for approximately $50 million in value and we are currently evaluating several options regarding other parts of our businesses. As we look toward 2014, I am very pleased with the direction the company is heading. I am optimistic the strategy we have put in place will create value and deliver improved results our shareholders expect. I look forward to updating our investors in more detail on our conference call tomorrow."

For more information, visit www.cenveo.com.