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Investor Presentation
Protect Your Investment
Keep the Momentum Going!
On August 5, 2005, Cenveo, Inc. (Cenveo or the Company) filed with the Securities and Exchange Commission a definitive proxy
statement on Schedule 14A in connection with
a special meeting of its shareholders. Cenveos shareholders are strongly
encouraged to read carefully the definitive proxy statement, because it contains important
information. Free copies of the
definitive proxy statement are available at the SECs web site at www.sec.gov,
at Cenveos web site at www.cenveo.com, or by
directing requests to Cenveos proxy solicitor, Innisfree M&A Incorporated, toll free at 1-888-750-5834.
Statements made in this presentation and other written or oral statements made by or on behalf of Cenveo, other than those
concerning historical financial information, may constitute forward-looking
statements within the meaning of the federal securities
laws, which are subject to risks and uncertainties, including without limitation: (1) general economic, business and labor conditions,
(2) the ability to implement the Companys strategic
initiatives, (3) the ability to regain profitability after substantial losses in 2002 and
2001 and in the first quarter of 2004, (4) the majority of the Companys sales are not subject to long-term contracts, (5) the industry is
extremely competitive
due to over-capacity, (6) the impact of the Internet and other electronic media on the demand for envelopes
and printed material, (7) postage rates and other changes in the direct mail industry, (8) environmental laws may affect the
Companys business,
(9) the ability to retain key management personnel, (10) compliance with recently enacted and proposed
changes in laws and regulations affecting public companies could be burdensome and expensive, (11) the ability to successfully
identify, manage and
integrate possible future acquisitions, (12) dependence on suppliers and the costs of paper and other raw
materials and the ability to pass paper price increases onto customers, (13) the ability to meet customer demand for additional value-
added products
and services, (14) changes in interest rates and currency exchange rates of the Canadian dollar, (15) the ability to
manage operating expenses, (16) the risk that a decline in business volume or profitability
could result in a further impairment of
goodwill, and (17) the ability to timely or adequately respond to technological changes in the Companys industry.
Discussion of additional factors that could cause actual results to differ materially from management's projections, forecasts,
estimates and expectations is set forth under Management's Discussion
and Analysis of Results of Operations and Financial
Condition in the Cenveo Annual Report for the fiscal year ended December 31, 2004, and in the Company's other SEC filings. A copy
of the annual report is available on the Company's Web site
at http://www.cenveo.com.
The forward-looking statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond
Cenveos control. Cenveo cautions investors that
any forward-looking statements made by the Company are not guarantees of future
performance. These statements are based on current expectations and speak only as of the date of such statements. Cenveo
disclaims any obligation to
update any such factors or to announce publicly the results of any revisions to any of the forward-looking
statements, whether as a result of future events, new information or otherwise.
2
Table of Contents
3
Ensure the Future of Your Investment in Cenveo
Vote Against Proposals 1-5 and for Proposal 6 on the Gold Proxy Card Today
Sections
Title
Title
1
Introduction
4
2
Industry overview
11
3
Cenveo today
15
4
Operations
23
5
Sales and marketing
26
6
Cost reduction progress
33
7
Projections
38
8
Conclusion
47
Introduction
Introduction
We have a plan for creating shareholder value
That plan is working
Challenges are being met
The business is being transformed
Considerable momentum has already been established
Protect your investment
Keep the momentum going
5
Transformation aimed at increasing shareholder value
Introduction
Significant changes have already taken place at Cenveo
Strategic sales group formed to sell and service large national customers
Implementation of a company-wide sales coordination and management program
Expanded offerings and improved service by leveraging Cenveos hub and spoke
capabilities
Standardization of technology platforms and operating procedures
Implementation in June 2005 of $20m of SG&A cost reductions
Jim Malone joined Cenveo as President and CEO on June 27, 2005
First class track record of operational turnaround and creating shareholder value
6
Transformation aimed at increasing shareholder value (contd)
Introduction
Since June 27, Jim Malone has reviewed Cenveos operations from the ground up, visiting
more than 26 facilities and speaking at length with employees, customers and suppliers. He
has acted to:
Flatten and streamline the corporate management structure
Bureaucratic and redundant management layers removed
Identify and initiate a further $35m of cost reductions (in addition to the $20m cost
reduction program announced in June), with minimal disruption to the business
Relocate corporate headquarters to a smaller and cheaper location in Denver
Increase customer focus and plant efficiency across the organization
Focus management on reaching enhanced EBITDA goals
Renew emphasis on working capital management and cash flow generation
7
Transformation aimed at increasing shareholder value (contd)
Introduction
Jim Malone and his team are rigorously focused on realizing the full potential of Cenveo
through:
Continued enhancement of the base businesses
Improved profitability in the base businesses
Acceleration of strategic sales momentum
Leveraging Cenveos strengths
Strong customer and operations focus
National and local accountability
Strategic sales initiatives
Reinforcement of regional printing businesses
Promotion of customized printing solutions
Promoting a culture of profitable business expansion
8
Transformation aimed at increasing shareholder value (contd)
Introduction
Strong growth, profitability and cash flow generation going forward:
2006P Revenues $1.8bn $1.9bn; EBITDA $190m $210m; FCF(1) $65m $85m
2007P Revenues $2.0bn $2.1bn; EBITDA $210m $230m; FCF(1) $70m $90m
2008P Revenues $2.2bn+; EBITDA $250m+; FCF (1) $130m+
Disciplined and responsible focus on overhead and costs
$55m of cost reductions already identified (since June 2005) with minimal disruption to
the business
Operational efficiencies being driven across all facilities
Continued measurement and implementation of efficiency
initiatives and profit
enhancement measures
Further profit enhancement measures under consideration
Sourcing/procurement
Selected pricing initiatives
Six sigma
Enhanced focus on working capital, cash flow management and debt paydown
Cenveo continues to be open to all strategic alternatives
(1) FCF = Free Cash Flow available for debt paydown (as defined in Projections section). 2007P FCF is net of $14m of expansion capital spending as per
Projections section
9
Introduction
Cenveo is on the right track dont derail it!
10
Cenveo would be damaged by a disruptive change in management and operations; the
Company is on the right track; lets keep the momentum going!
Subject
Cenveo
Burton
Management
Reorganized and streamlined
Focus on operations and customers
Extensive printing and envelope experience
Jim Malone has made a 3 year commitment
Family (three sons identified) and others
(unidentified)
No envelope expe
rience
Unclear experience in strategic sales
Cost cutting
$55m being implemented in 2005 without
business disruption
$50m proposed (but not identified) in
yr. 1 accompanied by major management
overhaul ($50m is prior to Cenveos
$55m plan)
Headquarte
rs
Relocating to smaller and cheaper location in
Denver
Propose to relocate to
Greenwich, CT
Specific operating plan
Yes
based on profitable growth and long
-
term value creation for all shareholders
Unclear (Cenveo is more than a printing
company)
Slash and burn not optimal for Cenveo in
long term
Specific earnings targets
EBITDA run rate $190m
$210m in 2006
Unclear
Continuity
No disruption
No change of control issues
Major management and operational
changes
Significant change of control pay
ments
triggered in debt and severance
Industry overview
Industry overview
Rapidly evolving technologies
Changing customer profiles and demands
Regional vs. national
Customized vs. commodity
Competition
Consolidation
Other industry changes/challenges
An industry in transition
12
Industry overview
Cenveo competes in a $60b market
Commercial market overview
Periodicals
Paperback books
Free-standing inserts
Directories
Long-run business forms
Financial printing
Newspapers
Markets in which Cenveo
does not compete
RR Donnelley
Quebecor World
Banta
Bowne
Valassis
Cadmus
Vertis
GTC / Transcontinental
Key players in the markets in which
Cenveo does not compete
Total market:
$175b
Market in which Cenveo
does not compete $115b
$6b
$4b
Key players Sales
RR Donnelley $3.5b
(Moore-Wallace)
Cenveo $1.8b
Customized printing
broad product offerings
Key Players Sales
Consolidated Graphics $770m
National Williamhouse $650m
Quebecor World (portion) $600m
MeadWestvaco (portion) $400m
American Color $400m
Tension $300m
Atlantic $200m
Customized printing
limited product offerings
(including envelopes)
Closely held / local
$50b
Source: Management and public documents
13
Market overview
One of the largest and most fragmented industries in the U.S.
Estimated sales of $157 billion in 2003 generated by more than 44,500 companies 1
Market in which Cenveo competes is defined by run lengths and the degree of customization of
end products
Long-run printers generally sell capacity, largely on a contractual basis
Short-run includes walk-in, retail store fronts (e.g., FedEx Kinkos) printing small quantities
Cenveo fits between the two ends of the spectrum
Industry overview
Commercial print
1 Source: Printing Industries of America, Inc. 2004 Print Market Atlas
Print industry by degree of customization of end products
RR Donnelley (Moore-Wallace)
Cenveo
Quebecor World
Consolidated Graphics
Sir Speedy
FedEx Kinkos
Capacity sellers
Long run
Located where economical
Commodity pricing and approach
Pricing behavior driven by machine capacity
Service oriented
Short run
Located near customers
Every print unique
Pricing driven by labor capacity
Commercial print market in which Cenveo competes is estimated to be
$56 billion (serviced by 20,000+ businesses) this excludes the resale market (labels,
documents, custom envelopes and wholesale/retail envelopes)
14
Cenveo today
Cenveos geographic footprint and product/service breadth create the
platform to deliver the right value proposition
Cenveo today
Leading provider of visual communication solutions
Products include commercial printing, envelopes, business documents and labels
Value-added services include mailing, fulfillment, design and eCommerce
Successfully filling the rapidly growing demand for enterprise solutions
Broad geographic platform with 84 strategically located facilities to produce and deliver solutions
9,400 employees, > 550 selling to > 85,000 customers
Recent investments to improve and grow the business include:
Strategic sales team
Sales management process
Increased use of hub and spoke capabilities
Systems standardization
Selected growth capital (e.g., Labels)
2005 cost reduction programs expected to yield $55 million of annualized savings
Additional profitability enhancement measures being considered as part of a rigorous and continuing
process
16
Cenveo today
Broad manufacturing and distribution network
Cenveo operates 84 manufacturing and fulfilment facilities across the U.S. and Canada
providing an unrivalled geographic and service footprint
Manufacturing and facilities
17
Operating strengths
Cenveo today
Customer/
market
positioning
Unrivaled
geographic
footprint
Maximizing
benefits of
size
Experienced
management
Breadth of products and
services provides one-stop
shop and cross-selling
opportunities
Unmatched manufacturing
and service capabilities
Largest envelope
manufacturer in North
America
Network of Strategic Sales
relationships
Largest multi-site installed
base of HP Indigo color
digital presses
Leading provider of new car
brochures
Leading printer of annual
reports
Cenveos coverage is
attractive to multi-location
customers
Distribution hubs (mailing
and fulfillment) deliver quick
time to mailbox
Web, sheetfed and digital
presses are part of a hub
and spoke model
Purchasing power
Best practices and
benchmarking
Significant capital
investments
Distribute and print
Experienced management
team
Voted #2 most admired
company in industry
Fortune Magazine 2004
Top 1% corporate
governance quotient (CGQ)
rating
Sappi North American
Printer of the year 2004
Industry leading safety
record
Jim Malone and his team seek to leverage Cenveos operating strengths to grow profitably
18
Product line contribution
Cenveo today
2006P sales: $1.8bn $1.9bn
2006P EBITDA: $190m $210m
Envelope businesses represent approximately $790m
Envelope businesses represent approximately $100m
Cenveo is more than just a printing company (approximately 50% of profits contributed by
envelope businesses)
Within printing, products and services tailored to national accounts are the heart of the
Strategic Sales story and Strategic Sales
are the engine to Cenveos growth projections
Jim Malone brings a broad business skill-set and expertise to Cenveos business model
Envelopes
Envelopes
19
Cenveo today
James R. Malone installed as President and CEO June 2005
Jim has a proven track record of helping companies restructure, grow and prosper
Most recently, Jim was founding and managing partner of Qorval, LLC, a financial and business
restructuring firm based in Naples, FL
In this capacity, he assumed the role of Chief Executive Officer of several companies, including
Mail Contractors of America, Inc., Avborne, Inc. and Brown Jordan International
Jim led the restructuring team at InaCom Corporation, a $5 billion public company with over 10,000
employees that was a leading single source provider of information technology products and
services
to Fortune 1000 companies
In addition, Jims successful career includes CEO positions with Anchor Glass Container
Corporation, a leading glass container manufacturer; Grimes Aerospace, a global provider of
integrated
avionics, engines, systems and service solutions for the airline industry; and Purolator
Products Company. Under Jims leadership, Purolators market capitalization grew from $12
million to $350 million
He currently serves on the boards of AmSouth Bancorporation (NYSE) in Birmingham, AL,
Ametek, Inc. (NYSE) in Paoli, PA, and Brown Jordan International, Inc. in Pompano Beach, FL
New CEO New direction
20
Cenveo today
New CEO New direction (contd)
New management structure
Accounting
Treasury
General
Counsel
CIO
CEO & President
Jim Malone
President
Supremex
Gilles Cyr
President
Resale
Allen Conway
President
Gordon Griffiths
President
U.S. Envelope
Rob Young
Senior Vice President
Chief Financial Officer
Michel Salbaing
Vice President
Human Resources
Brian Hairston
President Strategic
Sales
Keith Larson
Business
Development
Internal
Audit
Jim Malone has flattened the corporate management structure
Jim has seven direct reports (five of whom are directly responsible
for operations)
Five reporting levels now exist between Jim and the plant floor
(two layers of management have effectively been removed)
Staff administrative functions are focused on servicing operations
and ensuring regulatory compliance
Key operators have been moved back into the field
The organization is now in a better position to quickly respond to opportunities and challenges
21
Cenveo today
Operational excellence
Facility by facility operating efficiencies
Purchasing leverage
Benchmarking and best practices
Coordinated information systems
Shared services
Focused sales and marketing
Profitable sales growth
Sell breadth and depth of Cenveo platform
Sales management process
Acceleration of strategic sales
Disciplined overhead and cost management
Flat and streamlined corporate management function
Corporate structure focused on supporting operations
and compliance
New CEO New direction (contd)
Corporate strategy
Disciplined cash flow generation and working capital
management
The businesses generate strong and steady cash flows
affording the opportunity for significant debt paydown
Working capital requirements continuously monitored
and optimized
Grow human capital
Industry-leading safety programs
Culture of employee empowerment
Performance management and succession planning
Efficient capital allocation
Reallocate and invest capital from mature, slow growth
businesses into faster growth opportunities
Targeted M&A to strengthen existing markets and
expand capabilities
Exit under-performing businesses
22
Operations
Operations
Streamlined management
Headquarter operating staff moved to operating locations
Relocating to smaller and cheaper headquarter location in Denver
Eliminated two layers of management
Direct line of sight from CEO to operations
Focus on operating efficiency
Operating management now in field
Reporting lines shortened
Hands-on management will drive increased profitability
Plant closings/consolidations
Reduced management overhead retaining critical expertise
Opportunity to drive a substantial amount of margin improvement in print side
Increase efficiencies at the plant level
Enhanced agility
Flattened organizational structure allows faster decision-making
Capitalizing on local market opportunities
Challenges being met
Cenveo is customer focused, operationally oriented and re-energized
24
Operations
Growing the top-line
Customer-centric, re-dedication to service
Top-of-the-line national and regional service will generate significant top-line growth
Local focus can insulate from industry trends
Driving customer response and value
Improved margins for both Cenveo and customer
Cenveo will continue to grow from a technology and capability perspective
Evaluation continues
Necessary changes being identified and implemented
Challenges being met (contd)
25
Sales and marketing
Sales and marketing
Cenveos hub and spoke capabilities enable sales representatives to meet the needs of
customers by selling into the Companys geographic and product/service breadth
Hub and spoke model Commercial
Hub and Spoke sales model
27
Web Offset Printing
Mailing
Fulfillment
Color Digital
Sales and marketing
Strategic sales overview
Strategic sales margins are significantly higher than the margins of the base print business
Mission is to support large and/or multi-location customers with multi-product needs who
benefit most from Cenveos full value proposition
Poised to meet the growing need for single-source solution providers required by larger,
more sophisticated customers
Vertical market focus, including travel and leisure, health services, financial services and
technology
Team members report to a group separate from local sales teams
Sales support provided by central sales operation team along with local facilities
After making a significant investment in the Strategic Sales team and having achieved $147
million in sales in 2003, Cenveo achieved more than $40 million incremental growth in 2004
Cenveo projects strategic sales growth of $60m in 2006 and $60m-$100m in 2007
Strategic sales
Strategic sales growth alone is projected to provide overall growth for Cenveo of 3%
28
Sales and marketing
The effect of technology on Strategic Sales
1980
1990
2000 forward
Designer
Typesetter
Pre-press
Printer
Finishing
Fulfillment/
mailing
Designer
Printer
Fulfillment/
mailing
Designer
Solution
provider
Strategic sales (contd)
Cenveos strategic sales team is meeting the demand for solution providers
29
For Every $1 Spent on Print
Sources: IDC, CAPV
This is the NEW value chain!
Another $6 is spent on Content and Fulfillment
Content is a $1 Trillion Market
True cost of business communication
Sales and marketing
Process
Data
Design
Compose
RIP
Finish
Fulfill
Distribute
Track
Response
Repository
30
Sales and marketing
Case studies Strategic selling success stories
In 2002, Cenveo purchased Company As in-house print and fulfilment
center in Minneapolis, along with four other satellite locations
In 2004, during the second year of a five year agreement, the Company
serviced over $65 million of work
The world-class SAP technology platform that runs fulfillment operations
has been built to accommodate additional customers
Service model for Company B provides end to end service across the
visual communications value chain
In 2005, projected sales are $10 million, to be produced at 12 Cenveo
plants
This model ensures brand consistency and integrity by printing through
a common color standard enabled by Cenveo ColorScience
TM
Company A
Leading financial
services company
Company B
Leading software
company
31
Sales and marketing
Case studies Strategic selling success stories (contd)
Company Cs account has grown from $3 million serviced out of one
facility in Seattle to $20 million serviced by 26 local sales
representatives at 20 Cenveo facilities (driven by the
Minneapolis
fulfilment hub)
In 2005, Cenveo created a digital print-on-demand solution driven by an
automated online ordering system
Under a three year contract, Company Ds 400 strong dispersed sales
force can place on-demand print orders for 600 different items, and
personalize print communications
Cenveo solution saves Company D approximately 40% compared to
previous production model
Company C
Leading hotel and
leisure company
Company D
Leading medical
device company
32
Cost reduction progress
Cost reduction progress
$55 million in savings already identified
Run rate of $190 million EBITDA expected by end of Q4 2005
Potential for further profitability enhancement
Selected pricing initiatives
Procurement/sourcing efficiency
Six sigma
Results to date
Cost reduction initiatives
34
Cost reduction progress
June SG&A Cost Reduction Program Progress
June Cost Reduction Program Progress
Of the $20m of SG&A cost reductions announced in June, approximately $6m are related to
Selling and $14m related to G&A
Cash cost to achieve $20m of cost savings is $5.7m
35
($ in millions)
Already
Expected
Target
Achieved
Completion
Commercial
11.7
$
10.2
$
11/1/2005
Resale
4.0
2.9
10/14/2005
Corporate
4.3
4.0
12/31/2005
Total
20.0
$
17.1
$
Cost reduction progress
July Cost Reduction Program Progress
July Cost Reduction Program Progress
Cash cost to achieve $35 million of savings is estimated at $5 to $8 million
36
($ in millions)
Expected
Target
Achieved
Completion
SG&A
4.6
$
0.9
$
10/1/05
Fixed Overhead
19.8
1.7
12/31/05
Closure of Underperforming Plants
5.7
0.5
12/31/05
Headquarters Reduction
1.4
1.4
Completed
Headquarters Move
1.1
-
10/1/05
Other
2.3
-
12/31/05
35.0
$
4.6
$
Cost reduction progress
Additional cost reduction opportunities
Opportunities currently under consideration:
Selected pricing initiatives
100% purchasing compliance
Six sigma
37
Projections
Projections
Projection ranges ($ in millions)
Summary of projections
39
(2)
(2)
Notes
1
EBITDA is net of projected incremental operating lease expense of $6.2m in 2006, $6.3m in 2007 and $6.7m in 2008, which replaces cash capital expenditures of $30.6m
in 2006, $31.1m in 2007 and $32.6 in 2008
2 Includes expansion spending of $14m
FYE December 31,
2006P
2007P
2008P
Net Sales
$1,825
-
$1,925
$1,950
-
$2,050
$2,172
+
EBITDA
(1)
190
-
210
210
-
230
250
+
Margin
10.4%
-
10.9%
10.8%
-
11.2%
11.5%
Operating Income (EBIT)
140
-
160
157
-
177
196
+
Margin
7.7%
-
8.3%
8.0%
-
8.6%
9.0%
Net Income
46
-
58
58
-
70
97
+
EPS
$0.92
-
$1.16
$1.16
-
$1.41
$1.94
+
Cash Capex
(1)
(31)
-
(31)
(45)
-
(45)
(33)
EBITDA - Capex
159
-
179
165
-
185
217
+
Cash flow available to repay debt
64
-
83
72
-
93
132
+
Net Debt
694
-
674
622
-
581
450
Net Debt/EBITDA
3.7x
-
3.2x
3.0x
-
2.5x
1.8x
EBITDA/Net Interest
2.9
-
3.2
3.4
-
3.7
4.2
Projections
Revenue by product line
Revenue breakdown
40
($ in millions)
2006P
2007P
2008P
Sales
Commercial
Printing
$961
$1,065
$1,168
Domestic Envelope
364
373
383
Supremex
170
173
176
Total Commercial
$1,495
$1,612
$1,727
Resale
Labels
$125
$131
$138
Documents
87
85
82
Custom Envelopes
40
41
42
Wholesale/Retail Envelopes
216
220
225
Total Resale
$467
$478
$486
Eliminations
(37)
(39)
(41)
Total Company
$1,925
$2,050
$2,172
Projections
EBITDA by product line
EBITDA breakdown
41
($ in millions)
2006P
2007P
2008P
EBITDA
Commercial
Printing
$105
$120
$138
Domestic Envelope
33
32
33
Supremex
40
41
41
Region expense
(3)
(3)
(3)
Segment
(12)
(12)
(13)
Total Commercial
$163
$179
$197
Resale
Labels
$33
$34
$36
Documents
6
8
7
Custom Envelopes
11
12
12
Wholesale/Retail Envelopes
19
21
23
Segment
(3)
(4)
(5)
Total Resale
$65
$70
$73
Corporate HQ
(17)
(19)
(20)
Total Company
$210
$230
$250
Projections
Sales growth and EBITDA margins by product line
Growth and margins summary
42
Sales Growth
2006P
2007P
2008P
Commercial
Printing
10.2%
10.9%
9.7%
Domestic Envelope
2.3%
2.3%
2.8%
Supremex
2.5%
2.2%
1.4%
Total Commercial
7.4%
7.9%
7.3%
Resale
Labels
5.0%
5.0%
5.0%
Documents
(3.3%)
(1.4%)
(4.5%)
Custom Envelopes
3.0%
3.0%
3.0%
Wholesale/Retail Envelopes
2.5%
2.0%
2.0%
Total Resale
2.1%
2.3%
1.7%
Total Company
6.1%
6.6%
6.0%
EBITDA Margin
2006P
2007P
2008P
Commercial
Printing
10.9%
11.3%
11.8%
Domestic Envelope
9.0%
8.7%
8.7%
Supremex
23.3%
23.4%
23.4%
Total Commercial
11.0%
11.3%
11.6%
Resale
Labels
26.3%
26.3%
26.3%
Documents
6.4%
9.4%
8.8%
Custom Envelopes
27.9%
28.1%
28.4%
Wholesale/Retail Envelopes
8.6%
9.3%
10.1%
Total Resale
13.7%
14.7%
15.2%
Total Company
10.9%
11.2%
11.5%
Projections
Income Statement projection ($ in millions)
Summary Income Statement (high end of range)
Notes
1
EBITDA is net of projected incremental operating lease expense of $6.2m in 2006, $6.3m in 2007 and $6.7m in 2008, which replaces cash capital expenditures of $30.6m
in 2006, $31.1m in 2007 and $32.6 in 2008
2 U.S. operations are projected to utilize all remaining net operating loss carry forwards in 2008. Therefore, the company will record the benefit of releasing
approximately $12.8 million of
valuation allowance that will be recorded against the net operating losses generated in 2005. The recognition of this benefit results in a decrease in the overall 2008 effective tax rate
when compared to 2006
& 2007
3 Calculated as (Tax-Effected EBIT)/(Avg. Adjusted Assets), where Adjusted Assets is defined as Total Debt plus Book Equity
43
(2)
FYE December 31,
2006P
2007P
2008P
Net Sales
$1,925
$2,050
$2,172
Growth
6.2%
6.5%
6.0%
EBITDA
(1)
210
230
250
Margin
10.9%
11.2%
11.5%
Operating Income (EBIT)
160
177
196
Margin
8.3%
8.6%
9.0%
Net Interest Expense
(65)
(62)
(59)
Other Non-cash Charges
-
-
-
Pretax Income (EBT)
$94
$115
$137
Effective Tax Rate
38.5%
39.0%
29.6%
Taxes
(36)
(45)
(41)
Net Income
$58
$70
$97
Diluted Shares Outstanding
50
50
50
EPS
$1.16
$1.41
$1.94
Growth
n.m.
24.6%
40.2%
ROCE
(2)
10.4%
11.7%
15.6%
Projections
Cash flow statement projection ($ in millions)
Cash Flow Statement (high end of range)
44
FYE December 31,
2006P
2007P
2008P
Operating
Net Income
$58
$70
$97
Depreciation
45
48
51
Amortization
5
5
2
Deferred income taxes
16
30
25
(Increase)/decrease in Working Capital
(15)
(19)
(14)
Other
3
3
3
Total
$113
$138
$165
Investing
Gross Capex
($61)
($62)
($65)
Less amount financed through operating leases
31
31
33
Net Capex
(31)
(31)
(33)
Expansion Spending
-
(14)
-
Total
($31)
($45)
($33)
Cash Available for debt repayment
$83
$93
$132
Projections
Balance sheet projection
Balance Sheet (high end of range)
45
($ in millions)
12/31/04
12/31/05
12/31/06
12/31/07
12/31/08
Cash
$1
-
$
$11
$92
$225
Accounts receivable
251
251
262
275
286
Inventory
111
115
119
124
130
Prepaids
46
43
43
43
44
$409
$409
$435
$535
$685
Net PP&E
$363
$335
$321
$314
$295
Other assets
$58
$56
$54
$52
$50
Intangible assets
29
23
18
13
10
Goodwill
306
305
305
309
309
Total Assets
$1,165
$1,129
$1,133
$1,223
$1,349
Accounts payable
$164
$158
$158
$158
$161
Other current liabilities
123
123
123
124
125
$287
$281
$281
$283
$286
Total debt
$770
$757
$687
$675
$674
Deferred income taxes
11
(147)
(130)
(100)
(75)
Other liabilities
41
41
42
42
43
Equity
57
196
253
323
422
Total Liabilities and Shareholders Equity
$1,165
$1,129
$1,133
$1,223
$1,349
46
Projected margin improvements are not out of line with the industry
Notes
1 Based on Wall Street Research reports
(1)
CVO margins versus comparable printing companies
Projections
Printing ($m)
EBIT Margin
Company
2006E
Consolidated Graphics (CGX)
7.8%
RR Donnelley & Sons (RRD)
10.6%
Banta (BN)
7.3%
Bowne (BNE)
5.7%
Quebecor (IQW)
8.0%
Cenveo (CVO)
7.7% - 8.3%
Conclusion
Conclusion
Robust market position
Cost reduction achievements and further opportunities
Strong cash flow generator
Well-positioned for growth
Strategic Sales strategy showing real traction
Moving from print to fulfilment
Advanced technology and systems
Leveraged with flexible balance sheet
Platform for accretive consolidation
You have a valuable investment protect it
Ensure the Future of Your Investment in Cenveo
Vote Against Proposals 1-5 and for Proposal 6 on the Gold Proxy Card Today
48
Regulation G disclosure
We believe the line item entitled: Net Income" is the most directly comparable GAAP measure to EBITDA. A reconciliation of
EBITDA to the line item entitled Net Income"
is presented below:
49
Note: This schedule is a reconciliation of net income to EBITDA which we define as earnings before interest, taxes, depreciation,
amortization, non- cash charges from asset impairments
and gains and losses recognized on divestitures. Additionally, we
exclude the impacts of restructuring and related charges and the EBITDA of divested operations. EBITDA should not be
considered as an alternative to any measure of operating results as
promulgated under accounting principles generally
accepted in the United States (such as operating income or net income), nor should it be considered as an indicator of our
overall financial performance. EBITDA does not fully consider the impact of
investing or financing transactions as it specifically
excludes depreciation and interest charges, which should also be considered in the overall evaluation of results. Additionally,
our method of calculating EBITDA may be different from the method
used by other companies, and therefore, comparability
may be limited. EBITDA has not been provided as a measure of liquidity. We believe EBITDA provides useful supplemental
information to investors since it excludes the impact of investing or financing
transactions on our operating results.
This presentation is based in part on management's
estimate of EBITDA for the years ended December 31, 2006, 2007 and
2008. Cenveo expects certain known GAAP charges for 2006-2008, as presented in the schedule above. Other GAAP charges
excluded from the estimated EBITDA are possible, but their amounts
are dependent on numerous factors that we currently
cannot ascertain with sufficient certainty or are presently unknown. These GAAP charges, such as potential asset impairment
charges, potential restructuring costs or potential tax valuation allowances
are dependent upon future events and valuations
that have not yet been performed.
Reconciliation of EBITDA to GAAP Net Income
2006P
2007P
2008P
Net Income
$56
$70
$97
Depreciation
45
48
51
Amortization
5
5
2
Taxes
36
45
41
Interest
65
62
59
Restructuring costs
2
-
-
EBITDA
$210
$230
$250