Cenveo, Inc. has announced results for the three months ended April 2, 2011.
For the first quarter of 2011, net sales increased approximately 11 percent to $503.1 million, as compared to $453.9 million in the first quarter of 2010. This increase was driven by the acquisition of MeadWestvaco Corporation's Envelope Product Group ("EPG"), which closed in February, and mid-single digit percentage organic growth in our custom label, commercial print, and specialty packaging products.
The Company generated operating income of $22.2 million in the first quarter of 2011, compared to $12.2 million in the first quarter of 2010, an increase of approximately 82 percent. Non-GAAP operating income increased approximately 16 percent to $34.5 million in the first quarter of 2011, compared to $29.8 million in the first quarter of 2010, as a result of both the benefits of the Company's focus on cost containment and increased utilization in certain businesses. Non-GAAP operating income excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges and divested operations or asset held for sale. A reconciliation of operating income to Non-GAAP operating income is presented in the attached tables.
For the first quarter of 2011, the Company recorded net income of $2.8 million, or $0.04 per share, compared to a net loss of $11.1 million, or $0.18 per share, for the first quarter of 2010.
The results for the first quarter of 2011 include a preliminary bargain purchase gain of $10.5 million related to the EPG acquisition while the results for the first quarter of 2010 include a loss on early extinguishment of debt of $2.6 million. On a Non-GAAP basis, income from continuing operations was $4.0 million, or $0.06 per share, for the first quarter of 2011 as compared to a Non-GAAP loss from continuing operations of $0.5 million, or $0.01 per share, in the same prior year period. Non-GAAP income (loss) from continuing operations excludes integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges, gain on bargain purchase, divested operations or asset held for sale, loss on early extinguishment of debt and adjusts income taxes to reflect an estimated cash tax rate.
Adjusted EBITDA in the first quarter of 2011 grew approximately 12 percent to $51.1 million compared to $45.5 million in the first quarter of 2010. This increase is primarily attributable to stronger performance across the majority of the Company's product lines and minimal contribution from EPG given the timing of our integration plan. Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization, excluding integration, acquisition and other charges, stock-based compensation provision, restructuring and impairment charges, gain on bargain purchase, divested operations or asset held for sale, loss on early extinguishment of debt, and loss from discontinued operations, net of taxes.
The results for the first quarter of 2011 include a preliminary bargain purchase gain related to the EPG acquisition. The purchase price allocation of acquired assets and liabilities assumed in the EPG acquisition and the related bargain purchase gain recognized in the Company's statement of operations are preliminary. Differences between the preliminary and final purchase price allocations could have a material impact on the Company's financial statements, including the bargain purchase gain. The Company will finalize the purchase price allocation as soon as practicable within the EPG acquisition's measurement period, but in no event later than one year after the acquisition date.
Robert G. Burton, Sr., Chairman and Chief Executive Officer stated:
"As I stated last week, we delivered a strong first quarter, and we are pleased by our operating performance which showed mid-single digit organic revenue growth across most of our products and growth of approximately 12 percent in Adjusted EBITDA. We also began our integration efforts relating to the EPG acquisition, which closed in February. We are very pleased with the results of the acquisition to date as we now are the largest and most innovative envelope company in the world. I am also encouraged by the continued momentum that we saw in our businesses as industry and economic conditions continue to improve.
"The positive momentum that we began to see at the end of 2010 continued through the first quarter of 2011 as our operating environment stabilized or improved across most of our products. The envelope market continued to benefit from strong direct mail volumes in the financial services sector and from continued industry stabilization. Our custom label and packaging products once again produced another solid performance as our investments in their platforms continued to do well. Commercial print delivered organic growth for the quarter as our national platform allowed us to increase market share while benefiting from increased marketing campaigns in the automotive, financial services, travel and leisure markets."
Mr. Burton concluded:
"As we move into the second quarter of the year I remain optimistic that the improvement that we have seen at the end of 2010 and first quarter of 2011 will continue. Operationally, we remain focused on completing the integration of EPG into our business, driving free cash flow and paying down debt. We remain on track to deliver the full year revenues, free cash flow, and Adjusted EBITDA targets that are consistent with our previous guidance."