Cenveo's Q1 Operations Impacted by Fire at Packaging Facility

STAMFORD, CT—May 8, 2013—Cenveo Inc. announced results for the three months ended March 30, 2013.

The company generated net sales of $432.3 million for the three months ended March 30, 2013, compared to $455.6 million for the same period last year. The decrease in net sales was primarily due to lower sales in our print and envelope segment as a result of decreased volumes from our primary print customers due to timing of current year production schedules versus the prior year, a journal plant closure that occurred in the first quarter of the prior year and lower office product envelope sales due to the transition of low margin accounts out of our operating platform. These decreases were partially offset by higher sales from our direct envelope customers due to our initiatives to increase market share. Net sales from our label and packaging segment were relatively flat for the first quarter of 2013 due to our decision to exit low margin business within our packaging platform along with a disruption due to a temporary loss of a press as a result of a fire in one of our packaging facilities, which has been offset largely by our e-commerce initiatives and new account wins in our label business.

Operating income was $13.9 million for the three months ended March 30, 2013, compared to $14.2 million for the same period last year. The decrease in operating income was primarily due to lower sales, higher input costs in smaller raw material categories and inefficiencies related to a press fire in one of our packaging facilities, offset in part by lower restructuring, impairment and other charges. Non-GAAP operating income was $20.4 million for the three months ended March 30, 2013, compared to $31.6 million for the same period last year.

For the three months ended March 30, 2013, the company had a loss from continuing operations of $19.2 million, or $0.30 per share, compared to a loss of $22.6 million, or $0.36 per share for the same period last year. Non-GAAP loss from continuing operations was $9.2 million, or $0.14 per share, for the three months ended March 30, 2013, as compared to non-GAAP income from continuing operations of $3.3 million, or $0.04 per share, for the same period last year.

Cash flow provided by operating activities of continuing operations for the three months ended March 30, 2013 was $3.3 million, compared to cash flow used in operating activities of continuing operations of $16.9 million for the same period last year. The increase in cash flow from operating activities of continuing operations is primarily attributable to non-recurring payments that occurred in the prior year, timing of cash interest payments, as well as positive impacts resulting from our working capital initiatives.

Adjusted EBITDA for the three months ended March 30, 2013 was $36.0 million, compared to Adjusted EBITDA of $47.0 million for the same period last year.

Robert G. Burton, Sr., Chairman and CEO stated:
“Our first quarter results were generally in line with our expectations. Year over year sales weakness was driven largely by timing of orders by several large customers on the commercial print side, disruption due to a press fire in one of our packaging facilities and lower office product envelope sales due to low margin accounts we exited in the prior year, offset by market share gains on our direct envelope sales initiatives. Despite the weakness that we saw in the first quarter, we do believe that we will see a return to more historical performance levels beginning in the third quarter and improving throughout the remainder of the year. We are encouraged by recent trends in the direct mail envelope market as we have begun to see positive year over year comparables in the credit card market along with other market share gains. The packaging plant where we had a press fire is scheduled to have the replacement press fully operational by the beginning of the third quarter, and we are expecting the timing of print production to stabilize beginning in the third quarter through the remainder of the year. Also, it is important to note that we have continued to shift our sales focus to industry verticals, such as managed care and travel and leisure, where sales are seasonally more weighted to the second half of the year.”

“We are extremely pleased with the improvement in operating cash flow during the quarter versus the prior year. During the first quarter we generated $3.3 million of cash flow from operating activities of continuing operations, representing over a $20 million improvement from the same period last year. This performance coupled with the annual interest savings driven by our recent refinancing gives us confidence to re-affirm our cash flow forecast of at least $75 million for 2013.”

Strategic Update:
As discussed on our last conference call, we are currently reviewing all strategic options for our non-core operations. The strategic review will examine and consider the alternatives available to us, both near and long-term, with a focus on enhancing shareholder value. Currently, we are exploring alternatives for several of our operations. This review has been underway for a period of time and we expect to conclude our review of these select transactions over the coming months.

About Cenveo
Cenveo (NYSE: CVO), headquartered in Stamford, Connecticut, 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.