CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Other intangible assets are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
Weighted Average Remaining Amortization Period (Years)
|
|
Gross
Carrying
Amount
|
|
Accumulated Impairment Charges
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated Impairment Charges
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
Intangible assets with definite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customer relationships
|
|
7
|
|
$
|
114,287
|
|
|
$
|
(27,234
|
)
|
|
$
|
(60,014
|
)
|
|
$
|
27,039
|
|
|
$
|
114,345
|
|
|
$
|
(27,234
|
)
|
|
$
|
(55,209
|
)
|
|
$
|
31,902
|
|
Trademarks and trade names
|
|
22
|
|
64,533
|
|
|
(46,493
|
)
|
|
(9,138
|
)
|
|
8,902
|
|
|
64,540
|
|
|
(46,493
|
)
|
|
(8,649
|
)
|
|
9,398
|
|
Leasehold interest
|
|
16
|
|
4,430
|
|
|
—
|
|
|
(743
|
)
|
|
3,687
|
|
|
4,430
|
|
|
—
|
|
|
(516
|
)
|
|
3,914
|
|
Patents
|
|
9
|
|
3,528
|
|
|
—
|
|
|
(3,225
|
)
|
|
303
|
|
|
3,528
|
|
|
—
|
|
|
(3,192
|
)
|
|
336
|
|
Subtotal
|
|
11
|
|
186,778
|
|
|
(73,727
|
)
|
|
(73,120
|
)
|
|
39,931
|
|
|
186,843
|
|
|
(73,727
|
)
|
|
(67,566
|
)
|
|
45,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade names
|
|
|
|
84,900
|
|
|
—
|
|
|
—
|
|
|
84,900
|
|
|
84,900
|
|
|
—
|
|
|
—
|
|
|
84,900
|
|
Total
|
|
|
|
$
|
271,678
|
|
|
$
|
(73,727
|
)
|
|
$
|
(73,120
|
)
|
|
$
|
124,831
|
|
|
$
|
271,743
|
|
|
$
|
(73,727
|
)
|
|
$
|
(67,566
|
)
|
|
$
|
130,450
|
|
Annual amortization expense of intangible assets for the next five years and all future periods is estimated to be as follows (in thousands):
|
|
|
|
|
|
|
|
Annual Estimated
Expense
|
2017
|
|
$
|
5,269
|
|
2018
|
|
5,003
|
|
2019
|
|
4,885
|
|
2020
|
|
4,885
|
|
2021
|
|
4,731
|
|
Thereafter
|
|
15,158
|
|
Total
|
|
$
|
39,931
|
|
Asset Impairments
There were no intangible asset impairments for the years ended
2016
or
2015
.
7. Other Current Liabilities
Other current liabilities are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Accrued interest expense
|
|
$
|
21,074
|
|
|
$
|
23,644
|
|
Accrued customer rebates
|
|
21,126
|
|
|
20,591
|
|
Restructuring liabilities
|
|
5,477
|
|
|
3,198
|
|
Other accrued liabilities
|
|
35,222
|
|
|
41,381
|
|
|
|
$
|
82,899
|
|
|
$
|
88,814
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8. Long-Term Debt
Long-term debt is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
ABL Facility due 2021
(1)
|
|
$
|
81,700
|
|
|
$
|
148,200
|
|
4.0% senior secured notes due 2021 ($50.0 million outstanding principal amount as of the year ended 2016)
|
|
49,813
|
|
|
—
|
|
8.500% junior priority secured notes due 2022 ($241.0 million and $248.0 million outstanding principal amount as of the years ended 2016 and 2015, respectively)
|
|
234,742
|
|
|
240,533
|
|
6.000% senior priority secured notes due 2019 ($540.0 million outstanding principal amount as of the years ended 2016 and 2015)
|
|
530,166
|
|
|
526,533
|
|
6.000% senior unsecured notes due 2024 ($104.5 million outstanding principal amount as of the year ended 2016)
|
|
85,591
|
|
|
—
|
|
11.5% senior notes due 2017 ($20.5 million and $199.7 million outstanding principal amount as of the years ended 2016 and 2015, respectively)
|
|
20,371
|
|
|
195,846
|
|
7% senior exchangeable notes due 2017 ($5.5 million and $83.3 million outstanding principal amount as of the years ended 2016 and 2015, respectively)
|
|
5,468
|
|
|
82,430
|
|
Other debt including capital leases
|
|
10,815
|
|
|
15,081
|
|
|
|
1,018,666
|
|
|
1,208,623
|
|
Less current maturities
|
|
(31,727
|
)
|
|
(5,373
|
)
|
Long-term debt
|
|
$
|
986,939
|
|
|
$
|
1,203,250
|
|
__________________________
(1)
The weighted average interest rate outstanding for the ABL Facility was
3.4%
and
2.8%
as of the years ended
2016
and
2015
, respectively.
The estimated fair value of the Company’s long-term debt was approximately
$881.7 million
and
$895.7 million
as of the years ended
2016
and
2015
, respectively. The fair value was determined by the Company to be Level 2 under the fair value hierarchy and was based upon review of observable pricing in secondary markets for each debt instrument. Interest expense for the year ended
2016
reflected average outstanding debt of approximately
$1.1 billion
and a weighted average interest rate of
6.8%
, compared to the average outstanding debt of approximately
$1.2 billion
and a weighted average interest rate of
7.2%
for the year ended
2015
.
Exchange Offer
On June 10, 2016, Cenveo, Inc.'s wholly-owned subsidiary, Cenveo Corporation (the "Subsidiary Issuer") closed its exchange offer (the "Exchange Offer") whereby
$149.3 million
, or approximately
80%
, of its outstanding 11.5% senior notes due 2017 (the "11.5% Notes") were exchanged for
$104.5 million
of newly issued 6.000% senior unsecured notes due 2024 (the "6.000% Unsecured Notes") and warrants (the "Warrants") to purchase shares of Common Stock, representing in the aggregate
16.6%
of the outstanding Common Stock as of June 10, 2016. Included in the total amount exchanged was
$4.2 million
of 11.5% Notes owned by affiliated noteholders, whose notes were exchanged for 6.000% Unsecured Notes and Warrants pursuant to a simultaneous and separately negotiated securities exchange agreement. In connection with the Exchange Offer, the Company capitalized debt issuance costs of
$7.4 million
, all of which will be amortized over the life of the 6.000% Unsecured Notes, and of which
$7.1 million
is unamortized as of the year ended
2016
. Subsequent to the Exchange Offer,
$40.5 million
of 11.5% Notes remained outstanding.
For accounting purposes, the Exchange Offer was treated as an extinguishment of the 11.5% Notes and the issuance of the new 6.000% Unsecured Notes. Upon extinguishment, the net carrying amount of the 11.5% Notes was written off and the 6.000% Unsecured Notes were recorded at fair value based on market comparable transactions at the time of the Exchange Offer. The fair value of the 6.000% Unsecured Notes was based on market value pricing, using observable market-based data for similar issuances (Level 2). The Company estimates the fair value of the 6.000% Unsecured Notes on the date of issuance was
$92.0 million
. The discount of
$12.5 million
was recorded as a component of the gain on early extinguishment of debt, net, and will be amortized over the life of the 6.000% Unsecured Notes using the effective interest method.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The 6.000% Unsecured Notes were issued pursuant to an Indenture, dated as of June 10, 2016 (the "6.000% Unsecured Indenture"), among Cenveo, Inc., Subsidiary Issuer, the other guarantors party thereto and The Bank of New York Mellon, as trustee. The 6.000% Unsecured Notes will mature on May 15, 2024. Interest on the 6.000% Unsecured Notes is payable semi-annually in arrears on May 15 and November 15 of each year, commencing November 15, 2016. The 6.000% Unsecured Notes and the related guarantees are the Subsidiary Issuer's and the guarantors’ senior unsecured obligations. The 6.000% Unsecured Notes are fully and unconditionally guaranteed on a senior basis by Cenveo, Inc. and by certain of its existing and future U.S. subsidiaries (other than the Subsidiary Issuer) and, under certain circumstances, certain of its future Canadian subsidiaries. As such, the 6.000% Unsecured Notes rank pari passu with the Subsidiary Issuer's and the guarantors’ existing and future senior indebtedness, senior to the Subsidiary Issuer's and the guarantors’ future indebtedness that is expressly subordinated to the 6.000% Unsecured Notes, effectively junior to the Subsidiary Issuer's and the guarantors’ existing and future indebtedness that is secured by liens to the extent of the value of the collateral securing such indebtedness and structurally subordinated to all of the existing and future liabilities, including trade payables, of Cenveo, Inc.'s subsidiaries that do not guarantee the 6.000% Unsecured Notes. The 6.000% Unsecured Indenture contains a number of covenants which, among other things, restrict, subject to certain exceptions, Cenveo, Inc.'s ability and the ability of the Subsidiary Issuer and the other subsidiaries of Cenveo, Inc. to incur additional indebtedness; declare or pay dividends, redeem stock or make other distributions to shareholders; purchase or prepay subordinated indebtedness; make investments; create liens or use assets as security in other transactions; merge or consolidate, or sell, transfer, lease or dispose of assets; and engage in transactions with affiliates. The 6.000% Unsecured Indenture also contains certain customary affirmative covenants and events of default.
The Subsidiary Issuer issued
11,046,028
Warrants pursuant to a Warrant Agreement, dated as of June 10, 2016 (the "Warrant Agreement"), between Cenveo, Inc. and Computershare Trust Company, N.A., as warrant agent. Each Warrant is currently exercisable for
0.125
shares of Common Stock at
$12.00
per share as adjusted as a result of Cenveo, Inc.’s recent Reverse Stock Split, subject to mandatory cashless exercise provisions. The number of shares for which a Warrant may be exercised and the exercise price are subject to adjustment in certain events. The Warrants will be exercisable at any time prior to their expiration on June 10, 2024. The Company used the Black-Scholes model, which resulted in a fair value of
$6.3 million
for the Warrants. The Company recorded the fair value in paid-in capital in the Company's consolidated balance sheet.
In connection with the issuance of the Warrants, Cenveo, Inc. and Allianz Global Investors U.S. LLC ("Allianz") entered into a Warrant Registration Rights Agreement, dated as of June 10, 2016 (the "Registration Rights Agreement"), pursuant to which Cenveo, Inc. initially filed a shelf registration statement on November 23, 2016, covering the resale of the Warrants and the shares of Common Stock to be issued upon exercise of the Warrants, which shelf registration statement was declared effective on December 16, 2016. Under the Registration Rights Agreement, Cenveo, Inc. is obligated to use its commercially reasonable efforts to keep such shelf registration statement effective until the earlier of: (i) the fifth anniversary of the effective date of the shelf registration statement; and (ii) the date all transfer restricted securities covered by the shelf registration statement have been sold as contemplated in the shelf registration statement. If Cenveo, Inc. fails to satisfy its obligations under the Registration Rights Agreement, it will be required to pay liquidated damages to the holders of the Warrants under certain circumstances.
ABL Amendment
Concurrent with the Exchange Offer, Cenveo, Inc. and Subsidiary Issuer entered into Amendment No. 4, dated as of June 10, 2016 (the "ABL Amendment No. 4"), to the Subsidiary Issuer's ABL Facility, which, among other things, extends the term of the ABL Facility to 2021 and reduces the commitments thereunder by
$50 million
to
$190 million
. The ABL Facility now matures in June 2021, with a springing maturity of May 2019 ahead of the Subsidiary Issuer's existing 6.000% senior priority secured notes due 2019 (the "6.000% Secured Notes") in the event that more than
$10.0 million
of the 6.000% Secured Notes remain outstanding at such time. In connection with this amendment, the Company capitalized debt issuance costs of
$2.3 million
. See below for further discussion related to the Company's ABL Facility.
Indenture and Note Purchase Agreement
Concurrent with the Exchange Offer, Cenveo, Inc. and Subsidiary Issuer also entered into a secured Indenture and Note Purchase Agreement, dated as of June 10, 2016 (the "Indenture and Note Purchase Agreement"), with certain affiliates of or funds managed by Allianz (collectively, the "Purchasers"), pursuant to which Subsidiary Issuer issued 4% senior secured notes to the Purchasers in an aggregate principal amount of
$50.0 million
(the "4% Secured Notes") at par, the proceeds of which were applied to reduce the outstanding principal amount under the ABL Facility. The 4% Secured Notes mature in December 2021, with a springing maturity of May 2019 ahead of the 6.000% Secured Notes. The 4% Secured Notes bear interest at 4% per annum, payable quarterly in arrears on the last day of March, June, September and December in each year, commencing September 30, 2016, and are secured by the same collateral that secures the ABL Facility, the 6.000% Secured Notes and the Subsidiary Issuer's existing 8.500% junior priority secured notes due 2022 (the "8.500% Notes"). The obligations under the 4% Secured Notes are guaranteed by the Company and each existing and future direct and indirect North American subsidiary of the Company. With respect to the
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
ABL Facility, the 4% Secured Notes rank junior with respect to all collateral up to a certain maximum principal amount of the ABL Facility. With respect to the 6.000% Secured Notes, the 4% Secured Notes rank junior with respect to notes priority collateral and senior with respect to ABL Facility priority collateral. With respect to the 8.500% Notes, the 4% Secured Notes rank senior with respect to all collateral. Such ranking of the 4% Secured Notes with respect to the 6.000% Secured Notes and the 8.500% Notes is the same ranking that the ABL Facility has with such notes. The Indenture and Note Purchase Agreement contains a number of covenants which, among other things, restrict, subject to certain exceptions, Cenveo, Inc.’s ability and the ability of the Subsidiary Issuer and the other subsidiaries of Cenveo, Inc. to incur additional indebtedness; declare or pay dividends, redeem stock or make other distributions to shareholders; purchase or prepay certain specified indebtedness; dispose of assets; make investments; grant liens on assets; merge or consolidate or transfer certain assets; and engage in transactions with affiliates. The Indenture and Note Purchase Agreement also contains certain customary affirmative covenants. In connection with the issuance of the 4% Secured Notes, the Company capitalized debt issuance costs of
$0.1 million
.
7% Note Purchase Agreement
In addition, on July 18, 2016, Cenveo, Inc., Subsidiary Issuer and Allianz completed the last transactions contemplated by the Support Agreement, dated as of May 10, 2016, among Cenveo, Inc., the Subsidiary Issuer and Allianz, pursuant to which Allianz agreed to, among other things, tender and sell to Subsidiary Issuer all of its 7% Notes owned by Allianz in the aggregate principal amount of
$37.5 million
(the "Allianz 7% Note Purchase") in exchange for: (a) payment in cash in an amount equal to (i) the aggregate principal amount of such 7% Notes multiplied by
0.6
plus (ii) an amount of interest on the amount payable pursuant to the immediately preceding clause (i) at an annual interest rate of 7% per annum, such interest accruing from June 10, 2016 until (and including) the closings of the purchases and computed based on a year of 360 days; (b) payment in cash of interest that accrued in respect of such 7% Notes in accordance with the indenture relating to such 7% Notes but remained unpaid at the closings of the purchases; and (c) delivery to Allianz of Warrants to purchase Common Stock, representing in the aggregate
3.3%
of the outstanding Common Stock as of June 10, 2016. In connection with such agreement, during 2016 the Subsidiary Issuer repurchased an aggregate of
$37.5 million
of its 7% Notes for
$22.5 million
and issued an aggregate of
2,239,827
Warrants.
6.000% Senior Priority Secured Notes
On June 26, 2014, the Subsidiary Issuer issued
$540.0 million
aggregate principal amount of
6.000%
Secured Notes, which were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act of 1933. The 6.000% Secured Notes were issued at par, pursuant to an indenture (the "6.000% Secured Indenture") among the Subsidiary Issuer, Cenveo, Inc. and the other guarantors party thereto, and The Bank of New York Mellon, as trustee and collateral agent. The Subsidiary Issuer pays interest on the 6.000% Secured Notes semi-annually, in cash in arrears, on February 1 and August 1 of each year, commencing on August 1, 2014. The 6.000% Secured Notes have no required principal payments prior to their maturity on August 1, 2019. The 6.000% Secured Notes are guaranteed on a senior secured basis by Cenveo, Inc. and substantially all of its existing and future North American subsidiaries (other than the Subsidiary Issuer). As such, the 6.000% Secured Notes rank pari passu with all of the Subsidiary Issuer's existing and future senior debt, and senior to any of the Subsidiary Issuer's subordinated debt and effectively junior to the Subsidiary Issuer's obligations under the ABL Facility and the 4% Secured Notes, to the extent that the ABL Facility and the 4% Secured Notes have a first priority perfected security interest in certain of the Company's assets. The Subsidiary Issuer may redeem the 6.000% Secured Notes, in whole or in part, on or after February 1, 2019, at a redemption price of
100.0%
plus accrued and unpaid interest. In addition, at any time between August 1, 2017, and February 1, 2019, the Subsidiary Issuer may redeem in whole or in part the remaining aggregate principal amount of the notes originally issued at a redemption price of
100%
plus accrued and unpaid interest and a "make-whole" premium of not less than
1%
. At any time prior to August 1, 2017, the Subsidiary Issuer may redeem up to
35%
of the aggregate principal amount of the notes originally issued with the net cash proceeds of certain public equity offerings, at a redemption price of
106.0%
plus accrued and unpaid interest. Each holder of the 6.000% Secured Notes has the right to require the Subsidiary Issuer to repurchase such holder's notes at a purchase price of
101%
of the principal amount thereof, plus accrued and unpaid interest thereon, upon the occurrence of certain events specified in the indenture that constitute a change of control. The 6.000% Secured Indenture contains a number of covenants which, among other things, restrict, subject to certain exceptions, Cenveo, Inc.'s ability and the ability of the Subsidiary Issuer and Cenveo, Inc.'s other subsidiaries, to incur or guarantee additional indebtedness, make restricted payments (including paying dividends on, redeeming or repurchasing the Company's capital stock), permit restricted subsidiaries to pay dividends or make other distributions or payments, dispose of assets, make investments, grant liens on assets, merge or consolidate or transfer certain assets, and enter into transactions with affiliates. With respect to a disposition of assets, the 6.000% Secured Indenture requires, within 360 days after the receipt of any net proceeds, that the Company apply all such net proceeds (i) to be reinvested in the business of the Company; (ii) to repay obligations under the ABL Facility and the 4% Secured Notes under certain circumstances; or (iii) to make an offer to purchase the 6.000% Secured Notes. The 6.000% Secured Indenture also contains certain customary affirmative covenants and events of default.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8.500% Junior Priority Secured Notes
Concurrently with the issuance of the 6.000% Secured Notes on June 26, 2014, the Subsidiary Issuer issued
$250.0 million
aggregate principal amount of
8.500%
Notes, which were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. The 8.500% Notes were issued at par, pursuant to an indenture (the "8.500% Indenture") among the Subsidiary Issuer, Cenveo, Inc. and the other guarantors party thereto, and The Bank of New York Mellon, as trustee and collateral agent. The Subsidiary Issuer pays interest on the 8.500% Notes semi-annually, in cash in arrears, on March 15 and September 15 of each year, commencing on September 15, 2014. The 8.500% Notes have no required principal payments prior to their maturity on September 15, 2022. The 8.500% Notes are guaranteed on a junior secured basis by Cenveo, Inc. and substantially all of its existing and future North American subsidiaries (other than the Subsidiary Issuer). As such, the 8.500% Notes rank junior to any senior secured obligations of the Subsidiary Issuer, senior to any existing and future unsecured obligations of the Subsidiary Issuer, and senior to all existing and future obligations of the Subsidiary Issuer that are expressly subordinated to the 8.500% Notes. The Subsidiary Issuer may redeem the 8.500% Notes, in whole or in part, on or after September 15, 2017, September 15, 2018, September 15, 2019, or September 15, 2020, at redemption prices of
106.375%
,
104.250%
,
102.125%
and
100.00%
, respectively, plus accrued and unpaid interest. At any time prior to September 15, 2017, the Subsidiary Issuer may redeem up to
35%
of the aggregate principal amount of the notes originally issued with the net cash proceeds of certain public equity offerings, at a redemption price of
108.5%
plus accrued and unpaid interest. Each holder of the 8.500% Notes has the right to require the Subsidiary Issuer to repurchase such holder's notes at a purchase price of
101%
of the principal amount thereof, plus accrued and unpaid interest thereon, upon the occurrence of certain events specified in the indenture that constitute a change of control. The 8.500% Indenture contains a number of covenants which, among other things, restrict, subject to certain exceptions, Cenveo, Inc.'s ability and the ability of the Subsidiary Issuer and Cenveo, Inc.'s other subsidiaries, to incur or guarantee additional indebtedness, make restricted payments (including paying dividends on, redeeming or repurchasing the Company's capital stock), permit restricted subsidiaries to pay dividends or make other distributions or payments, dispose of assets, make investments, grant liens on assets, merge or consolidate or transfer certain assets, and enter into transactions with affiliates. With respect to a disposition of assets, the 8.500% Indenture requires, within 360 days after the receipt of any net proceeds, that the Company apply all such net proceeds (i) to be reinvested in the business of the Company; (ii) to repay indebtedness constituting senior priority obligations; or (iii) to make an offer to purchase the 8.500% Notes. The 8.500% Indenture also contains certain customary affirmative covenants and events of default.
Net proceeds of the 6.000% Secured Notes and 8.500% Notes were used to: (i) refinance the
$360 million
secured term loan facility (the "Term Loan Facility"), which at the time had a remaining principal balance of
$327.3 million
; (ii) refinance the 8.875% senior second lien notes due 2018 (the "8.875% Notes"), which at the time had a remaining principal balance of
$400.0 million
; and (iii) pay related fees, expenses and accrued interest. In connection with the issuance of the 6.000% Secured Notes and the 8.500% Notes, the Company capitalized debt issuance costs of
$14.7 million
and
$7.1 million
, respectively, all of which will be amortized over the life of the 6.000% Secured Notes and the 8.500% Notes, of which
$6.5 million
and
$4.2 million
, respectively, remain unamortized as of the year ended
2016
.
A portion of the refinancing was accounted for as a modification of debt. As a result, the Company will continue to amortize a portion of the unamortized debt issuance costs on the 8.875% Notes and Term Loan Facility. The modification resulted in the recording of a discount of
$5.9 million
on the 6.000% Secured Notes and
$2.8 million
on the 8.500% Notes, of which
$3.3 million
and
$2.0 million
, respectively, remain unamortized as of the year ended
2016
.
ABL Facility
On April 16, 2013, the Subsidiary Issuer completed the refinancing of its
$170 million
revolving credit facility due 2014 (the "Revolving Credit Facility") and its existing term loan B due 2016 (collectively with the Revolving Credit Facility, the "Refinanced Facility") by entering into: (i) a Second Amended and Restated Credit Agreement providing for the Term Loan Facility, with a syndicate of lenders arranged by Bank of America, N.A., Macquarie Capital (USA) Inc. and Barclays Bank PLC, with Bank of America, N.A. serving as administrative agent, syndication agent and documentation agent; and (ii) a Credit Agreement providing for a
$200 million
ABL Facility (together with the Term Loan Facility, the "2013 Credit Facilities"), with a syndicate of lenders arranged by Bank of America, N.A., Barclays Bank PLC, General Electric Capital Corporation and Wells Fargo Bank, National Association, with Bank of America, N.A. serving as administrative agent, issuing bank and swingline lender. In connection with the 2013 Credit Facilities, the Company capitalized debt issuance costs of
$7.2 million
. Proceeds from the 2013 Credit Facilities, together with available cash on hand, were used to refinance the outstanding term loans and revolving loans, and accrued interest thereon, under the Refinanced Facility, and to pay certain fees and expenses incurred in connection with the transactions. The Company extinguished the Term Loan Facility during 2014.
Borrowing rates under the ABL Facility are selected at the Subsidiary Issuer's option at the time of each borrowing and are generally based on London Interbank Offered Rate ("LIBOR") or the prime rate publicly announced by Bank of America,
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
N.A. from time to time, in each case plus a specified interest rate margin. LIBOR-based borrowings have an interest rate margin ranging from
2.00%
to
2.50%
per annum, and prime rate borrowings have an interest rate margin ranging from
1.00%
to
1.50%
per annum, in each case depending on average availability under the ABL Facility for the most recent fiscal quarter. Under the ABL Facility, the Subsidiary Issuer pays a commitment fee on unused revolving loan commitments of
0.375%
per annum or
0.50%
per annum, depending on average usage under the ABL Facility for the most recent fiscal quarter.
The ABL Facility contains a minimum consolidated fixed charge coverage ratio covenant that applies if availability thereunder falls below a certain level. In addition, the ABL Facility contains customary covenants that, among other things, place limits on the Company’s ability to incur debt, create liens, make investments and acquisitions, sell assets, pay dividends, prepay subordinated debt, merge with other entities, engage in transactions with affiliates and make capital expenditures. The ABL Facility also contains customary events of default.
The obligations under the ABL Facility are guaranteed by Cenveo, Inc. and each existing and future direct and indirect North American subsidiary (other than the Subsidiary Issuer). The ABL Facility is secured by a first priority perfected security interest in substantially all assets of Cenveo, Inc. and its North American subsidiaries, including: (i) all capital stock of each present and future subsidiary (with certain exclusions of foreign subsidiaries); (ii) all present and future inter-company debt; (iii) all intellectual property rights, including patents, trademarks and copyrights; and (iv) substantially all of the present and future other property and assets, including material real property.
On December 11, 2013, Cenveo, Inc. and Subsidiary Issuer entered into an Amendment No. 1 to the ABL Facility ("ABL Amendment No. 1"), pursuant to which the revolving commitments under the original agreement were increased by
$30.0 million
. Capitalized fees and expenses associated with the ABL Amendment No. 1 were approximately
$0.3 million
. A portion of the additional $30.0 million borrowing capacity under the ABL Facility, together with cash on hand, were used to repay
$28.2 million
of its Term Loan Facility.
On June 10, 2014, Cenveo, Inc. and Subsidiary Issuer entered into Amendment No. 2 to the ABL Facility, which amended the ABL Facility in order to allow the issuance of the 6.000% Secured Notes and 8.500% Notes and the related refinancing transactions.
On January 30, 2015, Cenveo, Inc. and Subsidiary Issuer entered into Amendment No. 3 to the ABL Facility ("ABL Amendment No. 3"), and an accompanying Increasing Lender Agreement on February 4, 2015, pursuant to which the revolving commitments were increased by
$10.0 million
to a total capacity of
$240.0 million
. Among other things, ABL Amendment No. 3 increased the Subsidiary Issuer's flexibility to use the proceeds of any future asset sales to prepay its other indebtedness. The amendment also generally increased the Subsidiary Issuer's flexibility to prepay outstanding indebtedness, make acquisitions and other investments, and pay dividends, subject to the satisfaction of certain conditions. In connection with this amendment, the Company capitalized debt issuance costs of
$1.3 million
.
On June 10, 2016, Cenveo, Inc. and Subsidiary Issuer entered into Amendment No. 4 to the ABL Facility (the "ABL Amendment No. 4"), which, among other things, extends the term of the ABL Facility through 2021 and reduces the commitments thereunder by
$50 million
to
$190 million
. The ABL Facility now matures in June 2021, with a springing maturity of May 2019 ahead of the Subsidiary Issuer's existing 6.000% Secured Notes in the event that more than
$10.0 million
of the 6.000% Secured Notes remain outstanding at such time. In connection with this amendment, the Company capitalized debt issuance costs of
$2.3 million
.
In connection with the ABL Facility,
$3.6 million
of debt issuance costs remained unamortized as of the year ended
2016
and is recorded in other assets, net.
Other Debt
On September 30, 2015, the Subsidiary Issuer entered into an equipment loan in the aggregate amount of
$12.5 million
, secured by certain machinery and equipment of the Subsidiary Issuer. Interest on the equipment loan accrues at
8.25%
per year and is payable monthly in arrears beginning on November 1, 2015, through February 1, 2019. If the Subsidiary Issuer elects to prepay the loan in full before the maturity date, a prepayment fee of
3%
will apply if such payment is made during the first year following closing of the equipment loan,
2%
if such prepayment is made during the second year following such closing, and
1%
if such prepayment is made during the third year following such closing or thereafter. Net proceeds from the equipment loan were used to repay in full the equipment loan entered into in connection with the acquisition of certain assets of National Envelope Corporation ("National") on September 16, 2013.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.5% Senior Notes
On March 28, 2012, the Subsidiary Issuer issued
$225 million
aggregate principal amount of 11.5% Notes that were sold with registration rights to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, and to certain non-U.S. persons in accordance with Regulation S under the Securities Act of 1933. The 11.5% Notes were issued at a discount of approximately
$8.3 million
, of which less than
$0.1 million
remains unamortized as of
December 31, 2016
. The 11.5% Notes were issued pursuant to an indenture (the "11.5% Indenture") among the Subsidiary Issuer, Cenveo, Inc., certain subsidiary guarantors and U.S. Bank N.A., as trustee. The Subsidiary Issuer has paid interest on the 11.5% Notes, semi-annually, in cash in arrears, on May 15 and November 15 of each year, commencing on May 15, 2012, with the final interest payment occurring on the maturity date of May 15, 2017. The 11.5% Notes have no required principal payments prior to their maturity on May 15, 2017. The 11.5% Notes are guaranteed on a senior unsecured basis by Cenveo, Inc. and substantially all of its existing and future North American subsidiaries (other than the Subsidiary Issuer). As such, the 11.5% Notes rank pari passu with all of the Subsidiary Issuer's existing and future senior debt and senior to any of the Subsidiary Issuer's subordinated debt. The Subsidiary Issuer has the right to redeem the 11.5% Notes, in whole or in part, on or after May 15, 2015, at redemption prices ranging from
100%
to
105.75%
, plus accrued and unpaid interest. Each holder of the 11.5% Notes has the right to require the Subsidiary Issuer to repurchase such holder's notes at a purchase price of
101%
of the principal amount thereof, plus accrued and unpaid interest thereon, upon the occurrence of certain events specified in the indenture that constitute a change of control. The 11.5% Indenture contains a number of covenants that, among other things, restrict, subject to certain exceptions, Cenveo, Inc.'s ability and the ability of the Subsidiary Issuer and Cenveo, Inc.'s other subsidiaries to incur or guarantee additional indebtedness, make restricted payments (including paying dividends on, redeeming or repurchasing the Company's capital stock), permit restricted subsidiaries to pay dividends or make other distributions or payments, dispose of assets, make investments, grant liens on assets, merge or consolidate or transfer certain assets, and enter into transactions with affiliates. With respect to a disposition of assets, the 11.5% Indenture requires, within 360 days after the receipt of any net proceeds from an asset sale, that the Company apply all such net proceeds: (i) to be reinvested in the business of the Company; (ii) to repay or retire any senior debt; or (iii) to make an offer to purchase the 11.5% Notes. The 11.5% Indenture also contains certain customary affirmative covenants.
Subsequent Event
On January 13, 2017, the Subsidiary Issuer filed a notice of redemption calling the
$20.5 million
remaining principal balance of its 11.5% Notes at par. The Company intends to redeem the full outstanding principal balance during the first quarter of 2017.
7% Senior Exchangeable Notes
Concurrently with the issuance of the 11.5% Notes on March 28, 2012, the Subsidiary Issuer issued
$86.3 million
aggregate principal amount of the 7% Notes that were sold to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933. The 7% Notes were issued pursuant to an indenture (the "7% Indenture") among the Subsidiary Issuer, Cenveo, Inc., certain subsidiary guarantors and U.S. Bank N.A., as trustee. The Subsidiary Issuer has paid interest on the 7% Notes semi-annually, in cash in arrears, on May 15 and November 15 of each year, commencing on November 15, 2012, with the final interest payment occurring on the maturity date of May 15, 2017. The 7% Notes have no required principal payments prior to their maturity on May 15, 2017. The 7% Notes are guaranteed on a senior unsecured basis by Cenveo, Inc. and substantially all of its existing and future North American subsidiaries (other than the Subsidiary Issuer). As such, the 7% Notes rank pari passu with all of the Subsidiary Issuer's existing and future senior debt and senior to any of Subsidiary Issuer's subordinated debt. The Subsidiary Issuer may not redeem the notes at its option. Upon a fundamental change, as defined in the 7% Indenture, each holder of 7% Notes may require the Subsidiary Issuer to repurchase all or a portion of such holder's notes for cash at a repurchase price equal to
100%
of the principal amount of the notes to be repurchased, plus any accrued and unpaid interest to, but excluding, the fundamental change repurchase date, as defined in the 7% Indenture. The 7% Indenture does not contain any financial covenants or any restrictions, among other things, on the payment of dividends, the incurrence of other indebtedness, or the issuance or repurchase of securities by the Subsidiary Issuer. The 7% Indenture does not contain any covenants or other provisions to protect holders of the notes in the event of a highly leveraged transaction or a change of control, except to the extent described in the 7% Indenture.
The 7% Notes are exchangeable at any time prior to the close of business on the business day immediately preceding the maturity date, for shares of Cenveo, Inc.'s common stock at an exchange rate of
30.1896
shares per
$1,000
principal amount of 7% Notes (as adjusted as a result of Cenveo, Inc.’s recent Reverse Stock Split), which is equal to an exchange price of approximately
$33.12
per share (as adjusted as a result of Cenveo, Inc.'s recent Reverse Stock Split), subject to adjustment under certain specified circumstances. This represents a premium of
373.8%
above the last reported sale price of Cenveo, Inc.'s common stock on the New York Stock Exchange on Friday, December 30, 2016, which was
$6.99
per share. If a holder elects
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
to exchange notes in connection with a make-whole fundamental change, as described in the 7% Indenture, such holder may also be entitled to receive a make-whole premium upon exchange in certain circumstances.
In connection with the issuance of the 11.5% Notes and the 7% Notes, the Company capitalized debt issuance costs of
$6.0 million
and
$3.0 million
, respectively, all of which will be amortized over the life of the 11.5% Notes and the 7% Notes, each of which have less than
$0.1 million
unamortized as of the year ended
2016
.
2016 Extinguishments
For the year ended
2016
, the Company recorded a total gain on early extinguishment of debt of
$82.5 million
comprised of the following transactions:
Subsequent to the completion of the Exchange Offer and the Allianz 7% Note Purchase, the Company recorded a gain on early extinguishment of debt of
$2.3 million
related to the repurchase of
$7.0 million
of its 8.500% Notes, of which
$2.5 million
related to a discount on the purchase price, partially offset by a write-off of unamortized debt issuance costs of
$0.1 million
and a write-off of original issuance discount of
$0.1 million
. The Company also recorded a loss on early extinguishment of debt of
$0.1 million
related to the repurchase of
$20.0 million
of its 11.5% Notes, all of which related to the write-off of unamortized debt issuance costs and original issuance discount. Additionally, the Company recorded a loss on early extinguishment of debt of less than
$0.1 million
related to the repurchase of
$5.7 million
of its 7% Notes, all of which related to the write-off of unamortized debt issuance costs.
In connection with the Allianz 7% Note Purchase, the Company recorded a gain on early extinguishment of debt of
$12.8 million
related to the repurchase of
$37.5 million
of its 7% Notes, of which
$15.0 million
related to a discount on the purchase price, partially offset by the fair value of the Warrants issued of
$1.3 million
,
$0.6 million
of transaction fees and expenses and a write-off of unamortized debt issuance costs of
$0.3 million
. The fair value of the Warrants was determined using the Black-Scholes model.
In connection with the Exchange Offer, the Company recorded a gain on early extinguishment of debt of
$46.1 million
, of which
$49.6 million
related to a discount on the difference of the net carrying value of the extinguished 11.5% Notes and the fair value of the new 6.000% Unsecured Notes, partially offset by a write-off of unamortized debt issuance costs of
$0.8 million
, a write-off of original issuance discount of
$1.2 million
, and
$1.5 million
of transaction fees and expenses. Additionally,
$1.4 million
of gain on early extinguishment of debt related to the
$4.2 million
exchange by affiliated noteholders was recorded as a component of paid-in capital, all of which related to a discount on the Exchange Offer.
In connection with ABL Amendment No. 4, the Company recorded a loss on early extinguishment of debt of
$0.2 million
related to the write off of unamortized debt issuance costs.
Prior to the Exchange Offer, the Company recorded a gain on early extinguishment of debt of
$16.5 million
related to the repurchase of
$34.5 million
of its 7% Notes, of which
$16.8 million
related to a discount on the purchase price, partially offset by a write-off of unamortized debt issuance costs of
$0.3 million
. Additionally, the Company recorded a gain on early extinguishment of debt of
$5.1 million
related to the repurchase of
$10.0 million
of its 11.5% Notes, of which
$5.3 million
related to a discount on the purchase, partially offset by a write-off of unamortized debt issuance costs of
$0.1 million
and a write-off of original issuance discount of
$0.1 million
.
2015 Extinguishments
For the year ended 2015, the Company recorded a total loss on early extinguishment of debt of
$1.3 million
. The Subsidiary Issuer paid in full an existing equipment loan, which had a remaining principal balance at the time of
$12.3 million
. In connection with this extinguishment, the Company recorded a loss on early extinguishment of debt of
$0.7 million
, of which
$0.5 million
related to the write-off of unamortized debt issuance costs and
$0.2 million
related to prepayment fees. Additionally, the Company recorded a loss on early extinguishment of debt of
$0.6 million
related to the repurchase of
$22.6 million
of its 11.5% Notes, of which
$0.2 million
related to the write-off of unamortized debt issuance costs,
$0.2 million
related to the write-off of original issuance discount, and
$0.2 million
related to a premium paid over the principal amount upon repurchase.
Debt Restrictions and Compliance
The agreements governing the Subsidiary Issuer's outstanding indebtedness contain a number of significant restrictions and covenants which limit the Company's ability (subject in each case to limited exceptions) to, among other things: (i) incur or guarantee additional indebtedness; (ii) make restricted payments, including dividends and prepaying indebtedness; (iii) create or
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
permit certain liens; (iv) enter into business combinations and asset sale transactions; (v) make investments, including capital expenditures; (vi) amend organizational documents and change accounting methods; (vii) enter into transactions with affiliates; and (viii) enter into new businesses.
The ABL Facility also contains a negative covenant restricting dispositions, including dispositions the aggregate book value of which exceeds
$35.0 million
. Such dispositions are permitted, however, if within 360 days after the receipt of any net proceeds from such dispositions, the Company applies all of the net proceeds thereof: (i) to be reinvested in the business of the Company; (ii) to repay obligations under the ABL Facility under certain circumstances; or (iii) to make an offer to purchase the 6.000% Secured Notes. Each of the indentures governing the 6.000% Secured Notes, 8.500% Notes, 11.5% Notes, and 6.000% Unsecured Notes and the Indenture and Note Purchase Agreement governing the 4% Secured Notes also contains a negative covenant requiring the Company to apply any net proceeds from an asset sale: (i) to be reinvested in the business of the Company; (ii) to repay certain of the Company's indebtedness; or (iii) to make an offer to purchase the 6.000% Secured Notes, 8.500% Notes, 11.5% Notes, 6.000% Unsecured Notes or 4% Secured Notes, respectively. On January 19, 2016, the Company completed the sale of the Packaging Business, realizing total cash proceeds of approximately
$89.6 million
, net of transaction costs. The Company has satisfied the reinvestment requirements set forth in the debt agreements with respect to such net cash proceeds.
In addition, the ABL Facility contains a minimum consolidated fixed charge coverage ratio with which, under certain circumstances, the Company must comply on a quarterly basis. The Company's ability to meet such fixed charge coverage ratio may be affected by events beyond the Company's control, such as further deterioration in general economic conditions. The Company is also required to provide certain financial information on a quarterly basis. Failure to maintain the fixed charge coverage ratio or effective internal controls could, in certain circumstances, prevent the Subsidiary Issuer from borrowing additional amounts, and could result in a default under the ABL Facility. Such a default could cause the indebtedness outstanding under the ABL Facility, and, by reason of cross-acceleration or cross-default provisions, the 6.000% Secured Notes, the 8.500% Notes, the 11.5% Notes, the 6.000% Unsecured Notes, the 4% Secured Notes and the 7% Notes, and any other indebtedness the Subsidiary Issuer may then have, to become immediately due and payable.
If any such defaults occur and if the Subsidiary Issuer is unable to repay those amounts, the lenders under the ABL Facility, the indentures governing the 6.000% Secured Notes and 8.500% Notes and the Indenture and Note Purchase Agreement governing the 4% Secured Notes could initiate a bankruptcy or liquidation proceeding, or proceed against the collateral granted to them which secures that indebtedness.
The obligations under the ABL Facility are guaranteed by Cenveo, Inc. and each existing and future direct and indirect North American subsidiary of Cenveo, Inc. (other than the Subsidiary Issuer). The ABL Facility is secured by a first priority perfected security interest in substantially all accounts receivable and inventory, and a junior priority perfected security interest in substantially all other assets, of Cenveo, Inc. and its North American subsidiaries. Provided the Company is in compliance with the covenants contained in the ABL Facility, the Company would also be in compliance, in most circumstances, with the Company’s incurrence tests within all of the Company’s debt indentures.
As of the year ended
2016
, the Company was in compliance with all debt agreement covenants.
The aggregate annual maturities for long-term debt, including the original issuance discount, are as follows (in thousands):
|
|
|
|
|
|
2017
|
|
$
|
31,847
|
|
2018
|
|
3,881
|
|
2019
|
|
540,736
|
|
2020
|
|
205
|
|
2021
|
|
131,796
|
|
Thereafter
|
|
345,516
|
|
|
|
$
|
1,053,981
|
|
The Subsidiary Issuer may from time to time seek to purchase its outstanding notes in open market purchases, privately negotiated transactions or other means. Such repurchases, if any, will depend on prevailing market conditions, the Company's liquidity requirements, contractual restrictions and other factors.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Fair Value Measurements
Certain assets and liabilities of the Company are required to be recorded at fair value on either a recurring or non-recurring basis. Fair value is determined based on the price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants.
Assets and Liabilities Measured at Fair Value on a Recurring Basis:
On a recurring basis, the Company records its pension plan assets (Note 13) at fair value. No additional assets or liabilities were recorded at fair value on a recurring basis for the years ended
2016
and
2015
.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis:
Assets and liabilities measured at fair value on a nonrecurring basis relate primarily to the Company's tangible fixed assets, goodwill and other intangible assets, which are remeasured when the derived fair value is below carrying value on the consolidated balance sheets. For these assets, the Company does not periodically adjust carrying value to fair value except in the event of impairment. When the Company determines that impairment has occurred, the carrying value of the asset is reduced to fair value and the difference is recorded within operating income in the statement of operations. No impairment of fixed assets or goodwill has been recorded for the years ended
2016
or
2015
, except as disclosed in Note 3 or Note 11.
Fair Value of Financial Instruments:
The Company’s financial instruments include cash and cash equivalents, accounts receivable, net, long-term debt and accounts payable. The carrying values of cash and cash equivalents, accounts receivable, net, and accounts payable are reasonable estimates of their fair values as of the years ended
2016
and
2015
due to the short-term nature of these instruments. See Note 8 for fair value of the Company’s outstanding debt. Additionally, the Company also records the assets and liabilities assumed in its acquisitions (Note 2) at fair value.
10. Income Taxes
Income Tax Expense
Income (loss) from continuing operations before income taxes was as follows for the years ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Domestic
|
|
$
|
74,288
|
|
|
$
|
(17,196
|
)
|
Foreign
|
|
816
|
|
|
2,128
|
|
|
|
$
|
75,104
|
|
|
$
|
(15,068
|
)
|
Income tax expense on income (loss) from continuing operations consisted of the following for the years ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Current tax expense:
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign
|
|
1,230
|
|
|
592
|
|
State
|
|
1,748
|
|
|
1,058
|
|
|
|
2,978
|
|
|
1,650
|
|
Deferred tax expense:
|
|
|
|
|
|
|
Federal
|
|
1,165
|
|
|
1,109
|
|
Foreign
|
|
(279
|
)
|
|
270
|
|
State
|
|
394
|
|
|
1,364
|
|
|
|
1,280
|
|
|
2,743
|
|
Income tax expense
|
|
$
|
4,258
|
|
|
$
|
4,393
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A reconciliation of the expected tax benefit based on the federal statutory tax rate to the Company’s actual income tax expense is summarized as follows for the years ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Expected tax expense (benefit) at federal statutory income tax rate
|
|
$
|
26,286
|
|
|
$
|
(5,274
|
)
|
State and local income tax expense (benefit)
|
|
5,917
|
|
|
(3,295
|
)
|
State net operating loss adjustments
|
|
1,273
|
|
|
2,259
|
|
Change in valuation allowance
|
|
(35,659
|
)
|
|
5,914
|
|
Change in contingency reserves
|
|
(132
|
)
|
|
(118
|
)
|
Non-U.S. tax rate differences
|
|
665
|
|
|
116
|
|
Non-deductible expenses
|
|
4,325
|
|
|
3,094
|
|
Change in state tax rates
|
|
99
|
|
|
802
|
|
Other
|
|
1,484
|
|
|
895
|
|
Income tax expense
|
|
$
|
4,258
|
|
|
$
|
4,393
|
|
Deferred Income Taxes
Deferred taxes are recorded to give recognition to temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. The tax effects of these temporary differences are recorded as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that can be used as a tax deduction or credit in future years. Deferred tax liabilities generally represent items that have been deducted for tax purposes, but have not yet been recorded in the consolidated statement of operations. The Company has not recorded a U.S. deferred tax liability with respect to its unremitted foreign earnings as the Company’s intention is to permanently reinvest those earnings in the local jurisdiction, as these amounts are not material.
The tax effects of temporary differences that give rise to the deferred tax assets and deferred tax liabilities of the Company, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Deferred tax assets:
|
|
|
|
|
Net operating loss carryforwards
|
|
$
|
81,949
|
|
|
$
|
128,232
|
|
Compensation and benefit related accruals
|
|
50,261
|
|
|
50,255
|
|
Alternative minimum tax credit carryforwards
|
|
7,307
|
|
|
7,450
|
|
Accounts receivable
|
|
1,004
|
|
|
2,679
|
|
Inventory
|
|
2,083
|
|
|
2,816
|
|
Restructuring accruals
|
|
8,158
|
|
|
8,810
|
|
Accrued tax and interest
|
|
2,015
|
|
|
1,882
|
|
Other
|
|
6,292
|
|
|
4,022
|
|
Valuation allowance
|
|
(129,159
|
)
|
|
(163,225
|
)
|
Total deferred tax assets
|
|
29,910
|
|
|
42,921
|
|
|
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
Property, plant and equipment
|
|
(19,771
|
)
|
|
(27,850
|
)
|
Goodwill and other intangible assets
|
|
(48,744
|
)
|
|
(52,438
|
)
|
Other
|
|
(630
|
)
|
|
(553
|
)
|
Total deferred tax liabilities
|
|
(69,145
|
)
|
|
(80,841
|
)
|
Net deferred tax liability
|
|
$
|
(39,235
|
)
|
|
$
|
(37,920
|
)
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The net deferred tax liability included the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Current deferred tax asset (included in prepaid and other current assets)
|
|
$
|
3,382
|
|
|
$
|
4,116
|
|
Long-term deferred tax liability (included in other liabilities)
|
|
(42,617
|
)
|
|
(42,036
|
)
|
Total
|
|
$
|
(39,235
|
)
|
|
$
|
(37,920
|
)
|
The Company has federal and state net operating loss carryforwards. The tax effect of these attributes was
$81.9 million
as of the year ended
2016
. Federal net operating loss carryforwards of
$220.0 million
will expire from
2025
through
2034
and alternative minimum tax credit carryforwards of
$7.3 million
do not have an expiration date.
The Company reviews the likelihood that it will realize the benefit of its deferred tax assets and therefore the need for valuation allowances on a quarterly basis, or more frequently if events indicate that a review is required. In determining the requirement for a valuation allowance, the historical and projected financial results of the legal entity or consolidated group recording the net deferred tax asset is considered, along with all other available positive and negative evidence. The factors considered in the determination of the probability of the realization of the deferred tax assets include, but are not limited to: recent historical financial results, historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences, the duration of statutory carryforward periods and tax planning strategies. If, based upon the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded.
Concluding that a valuation allowance is not required is difficult when there is significant negative evidence which is objective and verifiable, such as cumulative losses in recent years. The Company utilizes a rolling twelve quarters of pre-tax income or loss adjusted for significant permanent book to tax differences, as well as non-recurring items, as a measure of its cumulative results in recent years. In the United States, the Company's analysis indicates that it has cumulative three year historical losses on this basis. While there are significant impairment, restructuring and refinancing charges driving the cumulative three year loss, this is considered significant negative evidence which is objective and verifiable and therefore, difficult to overcome. However, the three year loss position is not solely determinative and accordingly, the Company considers all other available positive and negative evidence in its analysis. Based upon the Company's analysis, which incorporated the excess capacity and pricing pressure experienced in certain product lines, the Company believes it is more likely than not that the net deferred tax assets in the United States will not be fully realized in the future. Accordingly, the Company has a valuation allowance related to those net deferred tax assets of
$117.8 million
as of the year ended
2016
. Deferred tax assets related to certain state net operating losses also did not reach the more likely than not realizability criteria and accordingly, were subject to a valuation allowance, the balance of which, as of the year ended
2016
was
$11.4 million
.
There is no corresponding income tax benefit recognized with respect to losses incurred and no corresponding income tax expense recognized with respect to earnings generated in jurisdictions with a valuation allowance. This causes variability in the Company's effective tax rate. As a result of generating an estimated
$112.5 million
of federal taxable income for the year ended 2016, primarily as a result of the gain on early extinguishment of debt and the sale of the Packaging Business, there is no federal income tax expense recognized for the year ended 2016. The significant reduction in the valuation allowance for the year ended 2016 is related to these transactions. The Company intends to maintain the valuation allowances until it is more likely than not that the net deferred tax assets will be realized. If operating results improve on a sustained basis, or if certain tax planning strategies are implemented, conclusions regarding the need for valuation allowances could change, resulting in a decrease of the valuation allowances in the future, which could have a significant impact on income tax expense in the period recognized and subsequent periods.
Uncertain Tax Positions
The Company accounts for uncertain tax positions by prescribing a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken on a tax return. During
2016
and
2015
, the Company did not reduce its liability for uncertain tax positions. The Company does not anticipate significant changes to its unrecognized tax benefits in the next twelve months. The balance of the Company’s remaining unrecognized tax benefits as of the year ended
2016
includes
$2.2 million
of tax benefits that, if recognized would affect the effective tax rate. These amounts are included in other liabilities. The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. Related to the uncertain tax benefits noted above, the Company accrued interest of
$0.4 million
for the year ended
2016
and, in total, as of the year ended
2016
, has recognized no liabilities for penalties and has recognized liabilities of
$3.2 million
for interest.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company’s unrecognized tax benefit activity for the years ended
2016
,
2015
and
2014
was as follows (in thousands):
|
|
|
|
|
|
Unrecognized tax benefit – As of year end 2014
|
|
$
|
2,226
|
|
Gross decreases – tax positions in prior period
|
|
—
|
|
Gross decreases – expiration of applicable statute of limitations
|
|
—
|
|
Unrecognized tax benefit – As of year end 2015
|
|
2,226
|
|
Gross decreases – tax positions in prior period
|
|
—
|
|
Gross decreases – expiration of applicable statute of limitations
|
|
—
|
|
Unrecognized tax benefit – As of year end 2016
|
|
$
|
2,226
|
|
The Internal Revenue Service ("IRS") has examined the Company’s federal income tax returns through 2010. The Company’s federal income tax returns for tax years 2004 through 2006, 2009 through 2010, and 2012, remain subject to examination by the IRS due to a federal net operating loss generated in those years. Federal tax returns filed for 2013 forward remain subject to examination by statute. The various states in which the Company is subject to income tax audits are generally open for the tax years after 2011. The Company does not believe that the outcome of any examination will have a material impact on its consolidated financial statements.
Current Taxes
As of the years ended
2016
and
2015
, the Company had income tax receivables of
$2.0 million
and
$0.3 million
, respectively, included in other current assets.
11. Restructuring and Other Charges
Cost Savings, Restructuring and Integration Plans
The Company currently has
three
active cost savings, restructuring and integration plans, which are related to the implementation of cost savings initiatives focused on overhead cost eliminations, including headcount reductions, and the potential closure of certain manufacturing facilities (the "2017 Plan," "2016 Plan" and the "2015 Plan"). Each plan is primarily associated with a specific fiscal year of the planned cost actions.
During 2016, the Company implemented the 2017 Plan and the 2016 Plan and substantially completed the 2015 Plan. The Company is still contemplating additional cost actions that would be associated with the 2017 Plan. During 2015, the Company also completed the plan to integrate certain assets of National into existing envelope operations (the "National Plan") by completing the closure and consolidation of
nine
manufacturing facilities into existing envelope operations and the opening of
two
new facilities.
The Company currently has certain residual cost savings, restructuring and integration plans (the "Residual Plans"). As a result of these cost savings actions over the last several years, the Company has closed or consolidated a significant amount of manufacturing facilities and has had a significant number of headcount reductions.
The Company does not anticipate any significant future expenses related to the Residual Plans other than modifications to current assumptions for lease terminations, multi-employer pension withdrawal liabilities and ongoing expenses related to maintaining restructured assets.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following tables present the details of the expenses recognized as a result of these plans.
2016 Activity
Restructuring and other charges for the year ended
2016
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
Separation
Costs
|
|
Asset Charges Net of Gain on Sale
|
|
Equipment
Moving
Expenses
|
|
Lease
Termination
Expenses
|
|
Multi-employer Pension
Withdrawal Expenses
|
|
Building
Clean-up &
Other
Expenses
|
|
Total
|
Envelope
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Plan
|
|
$
|
465
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
465
|
|
|
2016 Plan
|
|
442
|
|
|
802
|
|
|
82
|
|
|
35
|
|
|
—
|
|
|
145
|
|
|
1,506
|
|
|
2015 Plan
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|
Residual Plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
9
|
|
|
63
|
|
|
Acquisition Integration Plans
|
|
—
|
|
|
146
|
|
|
276
|
|
|
—
|
|
|
—
|
|
|
149
|
|
|
571
|
|
Total Envelope
|
|
920
|
|
|
948
|
|
|
358
|
|
|
35
|
|
|
54
|
|
|
303
|
|
|
2,618
|
|
Print
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Plan
|
|
660
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
660
|
|
|
2016 Plan
|
|
98
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
98
|
|
|
2015 Plan
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
294
|
|
|
291
|
|
|
Residual Plans
|
|
1
|
|
|
—
|
|
|
—
|
|
|
113
|
|
|
759
|
|
|
61
|
|
|
934
|
|
|
Acquisition Integration Plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
—
|
|
|
45
|
|
Total Print
|
|
756
|
|
|
—
|
|
|
—
|
|
|
158
|
|
|
759
|
|
|
355
|
|
|
2,028
|
|
Label
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Plan
|
|
220
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
220
|
|
|
2016 Plan
|
|
124
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
131
|
|
|
2015 Plan
|
|
639
|
|
|
—
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
1,319
|
|
|
2,120
|
|
|
Asset Impairments
|
|
—
|
|
|
2,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,300
|
|
Total Label
|
|
983
|
|
|
2,300
|
|
|
—
|
|
|
162
|
|
|
—
|
|
|
1,326
|
|
|
4,771
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 Plan
|
|
655
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
655
|
|
|
2016 Plan
|
|
1,889
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
1,892
|
|
|
2015 Plan
|
|
(54
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
|
Residual Plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
44
|
|
|
44
|
|
Total Corporate
|
|
2,490
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
47
|
|
|
2,537
|
|
Total Restructuring and Other Charges
|
|
$
|
5,149
|
|
|
$
|
3,248
|
|
|
$
|
358
|
|
|
$
|
355
|
|
|
$
|
813
|
|
|
$
|
2,031
|
|
|
$
|
11,954
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2015 Activity
Restructuring and other charges for the year ended
2015
were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee
Separation
Costs
|
|
Asset Charges Net of Gain on Sale
|
|
Equipment
Moving
Expenses
|
|
Lease
Termination
Expenses
|
|
Multi-employer Pension
Withdrawal Expenses
|
|
Building
Clean-up &
Other
Expenses
|
|
Total
|
Envelope
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Plan
|
|
$
|
150
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
150
|
|
|
Residual Plans
|
|
252
|
|
|
—
|
|
|
—
|
|
|
(22
|
)
|
|
174
|
|
|
65
|
|
|
469
|
|
|
Acquisition Integration Plans
|
|
45
|
|
|
1,895
|
|
|
33
|
|
|
338
|
|
|
—
|
|
|
570
|
|
|
2,881
|
|
Total Envelope
|
|
447
|
|
|
1,895
|
|
|
33
|
|
|
316
|
|
|
174
|
|
|
635
|
|
|
3,500
|
|
Print
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Plan
|
|
397
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
397
|
|
|
Residual Plans
|
|
65
|
|
|
181
|
|
|
52
|
|
|
163
|
|
|
4,807
|
|
|
1,188
|
|
|
6,456
|
|
Total Print
|
|
462
|
|
|
181
|
|
|
52
|
|
|
163
|
|
|
4,807
|
|
|
1,188
|
|
|
6,853
|
|
Label
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Plan
|
|
20
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
—
|
|
|
200
|
|
|
359
|
|
|
Residual Plans
|
|
127
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
127
|
|
Total Label
|
|
147
|
|
|
—
|
|
|
139
|
|
|
—
|
|
|
—
|
|
|
200
|
|
|
486
|
|
Corporate
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Plan
|
|
1,552
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
171
|
|
|
1,723
|
|
|
Residual Plans
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
14
|
|
|
14
|
|
Total Corporate
|
|
1,552
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
185
|
|
|
1,737
|
|
Total Restructuring and Other Charges
|
|
$
|
2,608
|
|
|
$
|
2,076
|
|
|
$
|
224
|
|
|
$
|
479
|
|
|
$
|
4,981
|
|
|
$
|
2,208
|
|
|
$
|
12,576
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
A summary of the activity related to the restructuring liabilities for all the cost savings, restructuring and integration initiatives were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Employee Separation Costs
|
|
Lease Termination Expenses
|
|
Pension
Withdrawal
Liabilities
|
|
Building Clean-up,
Equipment Moving
and Other Expenses
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
2017 Plan
|
|
|
|
|
|
|
|
|
|
|
Balance as of the year ended 2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accruals, net
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
Payments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Balance as of the year ended 2016
|
|
$
|
2,000
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,000
|
|
|
|
|
|
|
|
|
|
|
|
|
2016 Plan
|
|
|
|
|
|
|
|
|
|
|
Balance as of the year ended 2015
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accruals, net
|
|
2,553
|
|
|
35
|
|
|
—
|
|
|
237
|
|
|
2,825
|
|
Payments
|
|
(1,709
|
)
|
|
(35
|
)
|
|
—
|
|
|
(237
|
)
|
|
(1,981
|
)
|
Balance as of the year ended 2016
|
|
$
|
844
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
844
|
|
|
|
|
|
|
|
|
|
|
|
|
2015 Plan
|
|
|
|
|
|
|
|
|
|
|
Balance as of the year ended 2014
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Accruals, net
|
|
2,119
|
|
|
—
|
|
|
—
|
|
|
510
|
|
|
2,629
|
|
Payments
|
|
(1,843
|
)
|
|
—
|
|
|
—
|
|
|
(510
|
)
|
|
(2,353
|
)
|
Balance as of the year ended 2015
|
|
276
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
276
|
|
Accruals, net
|
|
595
|
|
|
162
|
|
|
—
|
|
|
1,613
|
|
|
2,370
|
|
Payments
|
|
(624
|
)
|
|
(162
|
)
|
|
—
|
|
|
(1,254
|
)
|
|
(2,040
|
)
|
Balance as of the year ended 2016
|
|
$
|
247
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
359
|
|
|
$
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
Residual Plans
|
|
|
|
|
|
|
|
|
|
|
Balance as of the year ended 2014
|
|
$
|
1,560
|
|
|
$
|
677
|
|
|
$
|
18,700
|
|
|
$
|
—
|
|
|
$
|
20,937
|
|
Accruals, net
|
|
444
|
|
|
141
|
|
|
4,981
|
|
|
1,319
|
|
|
6,885
|
|
Payments
|
|
(2,001
|
)
|
|
(407
|
)
|
|
(3,839
|
)
|
|
(1,319
|
)
|
|
(7,566
|
)
|
Balance as of the year ended 2015
|
|
3
|
|
|
411
|
|
|
19,842
|
|
|
—
|
|
|
20,256
|
|
Accruals, net
|
|
1
|
|
|
113
|
|
|
813
|
|
|
114
|
|
|
1,041
|
|
Payments
|
|
(4
|
)
|
|
(524
|
)
|
|
(3,173
|
)
|
|
(114
|
)
|
|
(3,815
|
)
|
Balance as of the year ended 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
17,482
|
|
|
$
|
—
|
|
|
$
|
17,482
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition Integration Plans
|
|
|
|
|
|
|
|
|
|
|
Balance as of the year ended 2014
|
|
$
|
77
|
|
|
$
|
1,136
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,213
|
|
Accruals, net
|
|
45
|
|
|
338
|
|
|
—
|
|
|
603
|
|
|
986
|
|
Payments
|
|
(122
|
)
|
|
(1,082
|
)
|
|
—
|
|
|
(603
|
)
|
|
(1,807
|
)
|
Balance as of the year ended 2015
|
|
—
|
|
|
392
|
|
|
—
|
|
|
—
|
|
|
392
|
|
Accruals, net
|
|
—
|
|
|
45
|
|
|
—
|
|
|
425
|
|
|
470
|
|
Payments
|
|
—
|
|
|
(437
|
)
|
|
—
|
|
|
(425
|
)
|
|
(862
|
)
|
Balance as of the year ended 2016
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Restructuring Liability
|
|
$
|
3,091
|
|
|
$
|
—
|
|
|
$
|
17,482
|
|
|
$
|
359
|
|
|
$
|
20,932
|
|
The total restructuring liability was
$20.9 million
, of which
$5.5 million
is included in other current liabilities, and
$15.4 million
is included in other liabilities.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Stock-Based Compensation
The Company’s 2007 Long-Term Equity Incentive Plan, as amended, approved in May 2008 (the "2007 Plan"), authorizes the issuance of up to
562,500
shares of the Company’s common stock. Unused shares previously authorized under prior plans have been rolled over into the 2007 Plan and increased the total number of shares authorized for issuance under the 2007 Plan by
130,000
.
The Company’s outstanding unvested stock options have maximum contractual terms of up to
six
years, principally vest ratably over
four
years and are granted at exercise prices equal to the market price of the Company’s common stock on the date of grant. The Company’s outstanding stock options are exercisable into shares of the Company’s common stock. The Company’s outstanding RSUs principally vest ratably over
four
years. Upon vesting, RSUs convert into shares of the Company’s common stock. The Company currently issues authorized shares of common stock upon vesting of restricted shares or the exercise of other equity awards. The Company has no outstanding stock appreciation rights.
The Company measures the cost of employee services received in exchange for an award of equity instruments, including grants of employee stock options, RSUs and PSUs, based on the fair value of the award at the date of grant in accordance with the modified prospective method. The Black-Scholes model requires the Company to make significant judgments regarding the assumptions used within the model, the most significant of which are the stock price volatility assumption, the expected life of the option award, the risk-free rate of return and dividends during the expected term. Stock-based compensation is expensed on a straight-line basis over the service period of the awards, with the exception of PSUs, which are expensed based on the probability that the performance condition will be satisfied.
Total stock-based compensation expense recognized in selling, general and administrative expenses was
$1.5 million
and
$1.6 million
for the years ended
2016
and
2015
, respectively. The income tax benefits related to the Company’s stock-based compensation expense were
$0.1 million
and
$0.4 million
for the years ended
2016
and
2015
, respectively.
As of the year ended
2016
, there was approximately
$1.4 million
of total unrecognized compensation cost related to unvested stock-based compensation grants, which is expected to be amortized over a weighted average period of
2.1 years
.
Stock Options
A summary of the Company’s outstanding stock options as of and for the years ended
2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term
(In Years)
|
|
Aggregate
Intrinsic
Value
(1)
(in thousands)
|
Outstanding as of the year ended 2014
|
|
208,813
|
|
|
$
|
41.44
|
|
|
1.4
|
|
$
|
29
|
|
Granted
|
|
85,687
|
|
|
19.04
|
|
|
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
Forfeited/expired
|
|
(104,250
|
)
|
|
35.12
|
|
|
|
|
|
Outstanding as of the year ended 2015
|
|
190,250
|
|
|
$
|
34.56
|
|
|
3.0
|
|
$
|
—
|
|
Granted
|
|
—
|
|
|
—
|
|
|
|
|
|
Exercised
|
|
—
|
|
|
—
|
|
|
|
|
$
|
—
|
|
Forfeited/expired
|
|
(60,885
|
)
|
|
52.09
|
|
|
|
|
|
Outstanding as of the year ended 2016
|
|
129,365
|
|
|
$
|
26.31
|
|
|
2.9
|
|
$
|
—
|
|
Exercisable as of the year ended 2016
|
|
69,684
|
|
|
$
|
32.71
|
|
|
1.7
|
|
$
|
—
|
|
__________________________
|
|
(1)
|
Intrinsic value for purposes of this table represents the amount by which the fair value of the underlying stock, based on the respective market prices as of the years ended
2016
,
2015
and
2014
, or, if exercised, the exercise dates, exceeds the exercise prices of the respective options.
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The weighted average grant date fair value of stock options granted during the year ended
2015
, were at exercise prices equal to the market price of the stock on the grant dates, as calculated under the Black-Scholes model with the weighted average assumptions as follows:
|
|
|
|
|
|
|
|
2015
|
Weighted average fair value of option grants during the year
|
|
$
|
6.88
|
|
Assumptions:
|
|
|
Expected option life in years
|
|
4.25
|
|
Risk-free interest rate
|
|
1.24
|
%
|
Expected volatility
|
|
43.0
|
%
|
Expected dividend yield
|
|
0.0
|
%
|
The risk-free interest rate represents the United States Treasury Bond constant maturity yield approximating the expected option life of stock options granted during the period. The expected option life represents the period of time that the stock options granted during the period are expected to be outstanding, based on the mid-point between the vesting date and contractual expiration date of the option. The expected volatility is based on the historical market price volatility of the Company’s common stock for the expected term of the options, adjusted for expected mean reversion.
There were no stock options granted during the year ended
2016
.
RSUs
A summary of the Company’s non-vested RSUs as of and for the years ended
2016
and
2015
is as follows:
|
|
|
|
|
|
|
|
|
|
|
RSUs
|
|
Weighted Average
Grant Date
Fair Value
|
Unvested as of the year ended 2014
|
|
64,108
|
|
|
$
|
25.76
|
|
Granted
|
|
86,994
|
|
|
19.04
|
|
Vested
|
|
(40,858
|
)
|
|
31.36
|
|
Forfeited
|
|
(5,157
|
)
|
|
18.00
|
|
Unvested as of the year ended 2015
|
|
105,087
|
|
|
$
|
18.43
|
|
Granted
|
|
20,961
|
|
|
9.66
|
|
Vested
|
|
(43,084
|
)
|
|
18.29
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Unvested as of the year ended 2016
|
|
82,964
|
|
|
$
|
16.28
|
|
On July 28, 2016, a total of
20,961
RSUs, which vest one year from the date of issuance, were issued to the independent members of the Company's Board of Directors. The fair value of these awards was determined based on the Company's stock price on the dates of issuance.
On May 20, 2015,
72,813
RSUs were issued to certain employees of the Company, which vest ratably over
four
years. Additionally,
14,181
RSUs were issued to certain members of the Company's Board of Directors, which vested
one
year from the date of issuance. The fair value of these awards was determined based on the Company's stock price on the dates of issuance.
The total fair value of RSUs, which vested during the years ended
2016
and
2015
, was
$0.3 million
and
$0.6 million
, respectively, as of the respective vesting dates.
PSUs
A summary of the Company's non-vested PSUs as of and for the years ended
2016
and
2015
is as follows:
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
PSUs
|
|
Weighted Average
Grant Date
Fair Value
|
Unvested as of the year ended 2014
|
|
—
|
|
|
$
|
—
|
|
Granted
|
|
73,750
|
|
|
19.04
|
|
Vested
|
|
—
|
|
|
—
|
|
Forfeited
|
|
(3,125
|
)
|
|
19.04
|
|
Unvested as of the year ended 2015
|
|
70,625
|
|
|
$
|
19.04
|
|
Granted
|
|
—
|
|
|
—
|
|
Vested
|
|
(70,625
|
)
|
|
19.04
|
|
Forfeited
|
|
—
|
|
|
—
|
|
Unvested as of the year ended 2016
|
|
—
|
|
|
$
|
—
|
|
On May 20, 2015,
73,750
PSUs were granted to certain employees, with each award representing the right to receive one share of the Company's common stock upon the achievement of certain established performance targets and service conditions. The performance period for the awards was December 28, 2014 through January 2, 2016. Distributions under these awards were payable on the one year anniversary of the grant date provided the grantee's employment had not ceased prior to such date.
The fair value of these awards was determined based on the Company's stock price on the grant date. These awards are subject to forfeiture upon termination of employment prior to vesting.
There were
no
PSUs granted during the year ended
2016
.
13. Retirement Plans
Pension Plans
:
The Company currently has two defined benefit pension plans for certain of its employees in the United States. The defined benefit plans provide benefit payments using formulas based on an employee's compensation and length of service, or stated amounts for each year of service. The Company expects to continue to fund these plans based on governmental requirements, amounts deductible for income tax purposes and as needed to ensure that plan assets are sufficient to satisfy plan liabilities. The benefits under the Company’s defined benefit pension plans are frozen.
Supplemental Executive Retirement Plans:
The Company has various supplemental executive retirement plans ("SERP"), which provide benefits to certain former directors and executives. For accounting purposes, these plans are unfunded; however, one plan utilizes income from annuities to offset a portion of the cost of the plan. These annuities are included in other assets, net and are not netted against the plan's benefit obligation. Additionally, the income or loss from the annuities are not reflected in net periodic expense related to the plan.
Other
Postretirement
Plans:
The Company has various other postretirement benefit plans ("OPEB"), primarily focused on postretirement healthcare, such as medical insurance and life insurance and related benefits for certain of its former employees and, in some instances, their spouses. Benefits, eligibility and cost-sharing provisions vary by plan documents or union collective bargaining arrangements.
Savings Plan:
The Company sponsors a defined contribution plan to provide substantially all United States salaried and certain hourly employees an opportunity to accumulate personal funds for their retirement. The Company contributed
$0.5 million
to the plan for each of the years ended
2016
and
2015
, for certain union employees. Employees participating in the plan held
342,329
shares of the Company’s common stock as of the year ended
2016
.
Funded Status and Net Periodic Cost:
The following tables provide a reconciliation of the changes in the Company’s pension, SERP and OPEB plans' benefit obligations and fair value of assets for
2016
and
2015
, a statement of the funded status as of the years ended
2016
and
2015
, respectively, and the amounts recognized in the consolidated balance sheets as of the years ended
2016
and
2015
(in thousands).
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
SERPs
|
|
OPEBs
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Benefit obligation at beginning of year
|
|
$
|
345,901
|
|
|
$
|
365,326
|
|
|
$
|
16,998
|
|
|
$
|
18,508
|
|
|
$
|
1,504
|
|
|
$
|
1,789
|
|
Plan changes
|
|
—
|
|
|
—
|
|
|
1,822
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2
|
|
|
2
|
|
Interest cost
|
|
13,495
|
|
|
13,341
|
|
|
640
|
|
|
656
|
|
|
58
|
|
|
63
|
|
Actuarial loss (gain)
|
|
304
|
|
|
(14,715
|
)
|
|
(531
|
)
|
|
(94
|
)
|
|
60
|
|
|
(274
|
)
|
Benefits paid
|
|
(19,152
|
)
|
|
(18,051
|
)
|
|
(1,908
|
)
|
|
(2,072
|
)
|
|
(68
|
)
|
|
(76
|
)
|
Benefit obligation at end of year
|
|
$
|
340,548
|
|
|
$
|
345,901
|
|
|
$
|
17,021
|
|
|
$
|
16,998
|
|
|
$
|
1,556
|
|
|
$
|
1,504
|
|
The following table provides a reconciliation of the Company’s fair value of plan assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
SERPs
|
|
OPEBs
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Fair value of plan assets at beginning of year
|
|
$
|
247,519
|
|
|
$
|
267,635
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Actual return on plan assets
|
|
9,965
|
|
|
(6,610
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Employer contributions
|
|
11
|
|
|
4,545
|
|
|
1,908
|
|
|
2,072
|
|
|
68
|
|
|
76
|
|
Benefits paid
|
|
(19,152
|
)
|
|
(18,051
|
)
|
|
(1,908
|
)
|
|
(2,072
|
)
|
|
(68
|
)
|
|
(76
|
)
|
Fair value of plan assets at end of year
|
|
$
|
238,343
|
|
|
$
|
247,519
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
The following table shows the funded status at the end of the year:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
SERPs
|
|
OPEBs
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Funded status at end of year
|
|
$
|
(102,205
|
)
|
|
$
|
(98,382
|
)
|
|
$
|
(17,021
|
)
|
|
$
|
(16,998
|
)
|
|
$
|
(1,556
|
)
|
|
$
|
(1,504
|
)
|
The following table shows amounts recognized in AOCI:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
SERPs
|
|
OPEBs
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Net actuarial loss (gain)
|
|
$
|
119,450
|
|
|
$
|
119,712
|
|
|
$
|
4,567
|
|
|
$
|
5,438
|
|
|
$
|
(899
|
)
|
|
$
|
(1,045
|
)
|
Prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
40
|
|
|
44
|
|
Total
|
|
$
|
119,450
|
|
|
$
|
119,712
|
|
|
$
|
4,567
|
|
|
$
|
5,438
|
|
|
$
|
(859
|
)
|
|
$
|
(1,001
|
)
|
The following table shows amounts recognized in the consolidated balance sheets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pensions
|
|
SERPs
|
|
OPEBs
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
Other current liabilities
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2,038
|
|
|
$
|
1,967
|
|
|
$
|
148
|
|
|
$
|
130
|
|
Other liabilities
|
|
102,205
|
|
|
98,382
|
|
|
14,983
|
|
|
15,031
|
|
|
1,408
|
|
|
1,374
|
|
Total liabilities
|
|
$
|
102,205
|
|
|
$
|
98,382
|
|
|
$
|
17,021
|
|
|
$
|
16,998
|
|
|
$
|
1,556
|
|
|
$
|
1,504
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following table provides components of the net periodic cost for the pension, SERP and OPEB plans for the years ended
2016
and
2015
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended
|
|
|
2016
|
|
2015
|
Service cost
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
|
14,196
|
|
|
14,061
|
|
Expected return on plan assets
|
|
(19,101
|
)
|
|
(20,976
|
)
|
Net amortization and deferral
|
|
—
|
|
|
—
|
|
Recognized net actuarial loss
|
|
9,956
|
|
|
8,877
|
|
Net periodic expense
|
|
$
|
5,053
|
|
|
$
|
1,964
|
|
Interest cost on projected benefit obligation includes
$0.7 million
related to the Company’s SERP and OPEB plans for each of the years ended
2016
and
2015
.
The pre-tax amount of actuarial losses in AOCI as of the year ended
2016
that are expected to be recognized in net periodic benefit cost in
2017
is
$10.2 million
for defined benefit pension plans and
$0.2 million
for other postretirement benefit plans, including SERP. The pre-tax amount of prior service cost included in AOCI as of the year ended
2016
that is expected to be recognized in net periodic benefit cost in
2017
is
zero
for all defined benefit plans.
The assumptions used were as follows:
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Discount rate used to calculate net periodic benefit expense
|
|
4.00
|
%
|
|
3.75
|
%
|
Discount rate used to calculate projected benefit obligation
|
|
3.75
|
%
|
|
4.00
|
%
|
Expected long-term rate of return on plan assets
|
|
8.00
|
%
|
|
8.00
|
%
|
Rate of compensation increase
|
|
n/a
|
|
|
n/a
|
|
The discount rate assumption used to determine the Company’s pension obligations as of the years ended
2016
and
2015
takes into account the projected future benefit cash flow and the underlying individual yields in the Citigroup Pension Liability Index that would be available to provide for the payment of those benefits. The ultimate rate is developed by calculating an equivalent discounted present value of the benefit cash flow as of the years ended
2016
and
2015
, respectively, using a single discount rate rounded to the nearest quarter percent.
The expected long-term rate of return on plan assets of
8.0%
for each of the years ended
2016
and
2015
was based on historical returns and the expectations for future returns for each asset class in which plan assets are invested as well as the target asset allocation of the investments of the plan assets.
The projected benefit obligation, accumulated benefit obligation and fair value of plan assets for the Company’s pension plans with accumulated benefit obligations in excess of plan assets were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Projected benefit obligation
|
|
$
|
357,569
|
|
|
$
|
362,899
|
|
Accumulated benefit obligation
|
|
357,569
|
|
|
362,899
|
|
Fair value of plan assets
|
|
238,343
|
|
|
247,519
|
|
The Company currently expects to contribute
$7.1 million
to its pension plans in
2017
.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The estimated pension benefit payments expected to be paid by the pension plans and the estimated SERP and OPEB payments expected to be paid by the Company for the years
2017
through
2021
, and in the aggregate for the years 2022 through 2026, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
SERP
|
|
OPEB
|
2017
|
|
$
|
18,453
|
|
|
$
|
2,076
|
|
|
$
|
150
|
|
2018
|
|
18,743
|
|
|
1,897
|
|
|
145
|
|
2019
|
|
19,078
|
|
|
1,817
|
|
|
139
|
|
2020
|
|
19,365
|
|
|
1,733
|
|
|
133
|
|
2021
|
|
19,650
|
|
|
1,646
|
|
|
127
|
|
2022 through 2026
|
|
101,161
|
|
|
6,721
|
|
|
540
|
|
Fair Value of Assets:
The Company's investment objective is to maximize the long-term return on its pension plan assets within prudent levels of risk. Investments are primarily diversified with a blend of equity securities, fixed income securities and alternative investments. The intent is to minimize plan expenses by outperforming plan liabilities over the long run.
The Company segregated its plan assets by the following major categories and levels for determining their fair values as of the years ended
2016
and
2015
:
Cash and cash equivalents
- Carrying value approximates fair value. As such, these assets were classified as Level 1.
Equity
- Equity investments are diversified by including United States and non-United States stocks, growth stocks, value stocks and stocks of large and small companies. The values of individual equity securities are based on quoted prices in active markets and are classified as Level 1.
Fixed income
- Fixed income securities are primarily United States governmental and corporate bonds including mutual funds. The Company invests in certain fixed income funds that were priced in active markets and were classified as Level 1. The Company also invests in certain fixed income securities that are priced based on valuation models rather than a last trade basis and are not exchange-traded and are classified as Level 2.
Other
- The Company also invests in group annuity contracts, which are invested in certain fixed income securities and are classified as Level 2.
Alternative investments
- Alternative investments are primarily private equity hedge funds and hedge fund-of-funds. The fair value of alternative investments has been estimated using their Net Asset Values ("NAV") as reported by the investment manager of the respective alternative investment funds. NAV reported by the hedge funds is used as a practical expedient to estimate the fair value. The investment manager values these investments on a periodic basis with models that use market, income and valuation methods. The valuation inputs are not highly observable, and these investments are not actively traded in an open market.
The methods described above may produce a fair value calculation that may not be indicative of net realizable value, or reflective of future fair values. While the Company believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement. The Company invests in various assets in which valuation is determined by NAV. The Company believes that the NAV is representative of fair value, as there are no significant restrictions on redemption on these investments or other reasons that indicate the investment would be redeemed at an amount different than the NAV.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The fair values of the Company’s pension plan assets as of the years ended
2016
and
2015
, by asset category are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
|
Level 1
|
|
Level 2
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Total
|
Cash and cash equivalents
|
|
$
|
7,624
|
|
|
$
|
—
|
|
|
$
|
7,624
|
|
|
$
|
12,306
|
|
|
$
|
—
|
|
|
$
|
12,306
|
|
Equity
|
|
123,352
|
|
|
—
|
|
|
123,352
|
|
|
120,953
|
|
|
—
|
|
|
120,953
|
|
Fixed income
|
|
15,908
|
|
|
46,280
|
|
|
62,188
|
|
|
12,497
|
|
|
49,993
|
|
|
62,490
|
|
Other
|
|
—
|
|
|
1,369
|
|
|
1,369
|
|
|
—
|
|
|
1,489
|
|
|
1,489
|
|
Total of Level 1 and Level 2 assets
|
|
$
|
146,884
|
|
|
$
|
47,649
|
|
|
$
|
194,533
|
|
|
$
|
145,756
|
|
|
$
|
51,482
|
|
|
$
|
197,238
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments at Net Asset Value
(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
Alternative investments
|
|
|
|
|
|
43,810
|
|
|
|
|
|
|
50,281
|
|
Total net assets
|
|
|
|
|
|
$
|
238,343
|
|
|
|
|
|
|
$
|
247,519
|
|
__________________________
(1)
Investments are measured at fair value using the net asset value per share practical expedient, and therefore, are not classified in the fair value hierarchy.
The range of asset allocations and the target allocations for the pension plan assets were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
|
Target
|
Equity securities
|
|
52
|
%
|
61
|
%
|
|
49
|
%
|
62
|
%
|
|
60
|
%
|
75
|
%
|
Fixed income securities
|
|
26
|
%
|
34
|
%
|
|
29
|
%
|
33
|
%
|
|
25
|
%
|
35
|
%
|
Alternative investments and other
|
|
5
|
%
|
22
|
%
|
|
5
|
%
|
22
|
%
|
|
10
|
%
|
30
|
%
|
Multi-Employer Pension Plans:
Certain of the Company’s union employees are included in multi-employer pension plans, to which the Company makes contributions in accordance with contractual union agreements. Such contributions are made on a monthly basis in accordance with the requirements of the plans and the actuarial computations and assumptions of the administrators of the plans. Contributions to the multi-employer pension plans were
$0.6 million
for each of the years ended
2016
and
2015
. In
2016
and
2015
, the Company recorded charges of
$0.8 million
and
$5.0 million
, respectively, as a result of exiting certain multi-employer pension plans in connection with its cost savings and restructuring plans.
The Company's participation in these plans for the years ended
2016
and
2015
is outlined in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension Fund
|
EIN
|
Pension Plan Number
|
Pension Protection Act Reported Status
(1)
|
FIP/RP Status
(2)
|
Contributions
|
Surcharge imposed
|
Expiration Date of Collective Bargaining Agreement
|
|
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
GCC/IBT National Pension Fund
|
526118568
|
001
|
Red
|
|
Red
|
Implemented
|
$
|
183
|
|
|
$
|
219
|
|
No
|
6/30/2019
|
GCC/IBT National Pension Fund
|
526118568
|
001
|
Red
|
|
Red
|
Implemented
|
177
|
|
|
177
|
|
No
|
2/26/2017
|
CWA/ITU Negotiated Pension Plan
|
136212879
|
001
|
Red
|
|
Red
|
Implemented
|
228
|
|
|
158
|
|
No
|
3/1/2018
|
|
|
|
|
|
Total contributions
|
$
|
588
|
|
|
$
|
554
|
|
|
|
__________________________
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
(1)
|
The most recent Pension Protection Act ("PPA") zone status available in
2016
and
2015
is for the plan's year end, not the Company's year end. The zone status is based on information that the Company received from the plan and is certified by the plan's actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded.
|
|
|
(2)
|
The FIP/RP Status column indicates plans for which a financial improvement plan ("FIP") or a rehabilitation plan ("RP") is either pending or has been implemented.
|
14. Commitments and Contingencies
Leases:
The Company leases buildings and equipment under operating lease agreements expiring at various dates through
2033
. Certain leases include renewal and/or purchase options, which may be exercised by us. As of the year ended
2016
, future minimum annual lease payments by year and, in the aggregate, under non-cancelable operating lease agreements with original terms of one year or more consisted of the following (in thousands):
|
|
|
|
|
|
2017
|
|
$
|
21,929
|
|
2018
|
|
19,391
|
|
2019
|
|
14,937
|
|
2020
|
|
11,870
|
|
2021
|
|
7,306
|
|
Thereafter
|
|
15,392
|
|
Total
|
|
$
|
90,825
|
|
Rent expense was
$24.5 million
and
$25.3 million
for the years ended
2016
and
2015
, respectively.
Energy Commitments:
The Company has entered into various energy contracts in order to lock-in energy prices over the next two fiscal years. Future contractual obligations under these energy contracts are
$4.9 million
and
$0.9 million
for 2017 and 2018, respectively.
Environmental:
The Company is involved in certain environmental matters and has been designated as a potentially responsible party for certain hazardous waste sites. Prior to the Company’s acquisition of Nashua, Nashua was involved in certain environmental matters and was designated by the Environmental Protection Agency ("EPA") as a potentially responsible party for certain hazardous waste sites. In addition, Nashua had been notified by certain state environmental agencies that Nashua may bear responsibility for remedial action at other sites which have not been addressed by the EPA. The sites at which Nashua may have remedial responsibilities are in various stages of investigation and remediation. Due to the unique physical characteristics of each site, the remedial technology employed, the extended time-frames of each remediation, the interpretation of applicable laws and regulations and the financial viability of other potential participants, the ultimate range of outcomes cannot be predicted with certainty; therefore, the Company’s ultimate cost of remediation is an estimate and is contingent on these factors. Based on information currently available, the Company believes that Nashua’s remediation expense, if any, is not likely to have a material effect on its consolidated financial position or results of operations. As of the years ended
2016
and
2015
, the undiscounted liability relating to the Company’s environmental matters was
$0.7 million
and
$1.6 million
, respectively, and is included in other liabilities. There have been no material changes related to these environmental matters since Nashua's acquisition date.
Litigation:
The Company is party to various legal actions that are ordinary and incidental to its business. While the outcome of pending legal actions cannot be predicted with certainty, the Company believes the outcome of these various proceedings will not have a material effect on the Company’s consolidated financial statements. During the year ended
2016
, the Company reached confidential agreements to settle controversies and disputes in connection with certain product warranty litigations. Total expense related to the litigation and associated accruals, recognized in selling, general and administrative expenses was
$1.5 million
for the year ended
2016
.
Concentrations of Credit Risk:
The Company has limited concentrations of credit risk with respect to financial instruments. Temporary cash investments and other investments are placed with high credit quality institutions, and concentrations within accounts receivable are generally limited due to the Company’s diverse customer base and its dispersion across different industries and geographic areas. The Company extends credit to customers based on its evaluation of the customer's financial condition. The Company does not require that any collateral be provided by its customers.
Letters of Credit:
As of the year ended
2016
, the Company had outstanding letters of credit of approximately
$17.7 million
and a de minimis amount of surety bonds. Based on the Company’s experience with these arrangements, it does not believe
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
that any obligations that may arise will have a material effect on the Company's consolidated financial condition or results of operations.
Tax Audits:
The Company’s income, sales and use, and other tax returns are routinely subject to audit by various authorities. The Company is currently under audit related to unclaimed property, which is being led by the state of Delaware and includes other states as well. The Company believes that the resolution of any matters raised during such audits will not have a material effect on the Company’s consolidated financial position or its results of operations.
Multi-Employer Pension Plans:
The Company participates in a number of multi-employer pension plans and is exposed to significant risks and uncertainties arising from its participation in these multi-employer pension plans. These risks and uncertainties, including changes in future contributions due to partial or full withdrawal of the Company and other participating employers from these multi-employer pension plans, could significantly increase the Company’s future contributions or the underfunded status of these multi-employer pension plans. Two of the multi-employer pension plans are in mass withdrawal status. While it is not possible to quantify the potential impact of future actions of the Company or other participating employers from these multi-employer pension plans, continued participation in or withdrawal from these multi-employer pension plans could have a material impact on the Company’s consolidated financial statements.
15. Accumulated Other Comprehensive Income (Loss)
The following table presents the changes in the balances of each component of AOCI, net of tax (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign Currency Translation
|
|
Pension and Other Postretirement Benefits
|
|
Total
|
Balance as of the year ended 2014
|
|
$
|
(2,905
|
)
|
|
$
|
(95,292
|
)
|
|
$
|
(98,197
|
)
|
|
Other comprehensive loss before reclassifications
|
|
(4,295
|
)
|
|
(12,315
|
)
|
|
(16,610
|
)
|
|
Amounts reclassified from AOCI
|
|
—
|
|
|
8,877
|
|
|
8,877
|
|
|
Other comprehensive loss
|
|
(4,295
|
)
|
|
(3,438
|
)
|
|
(7,733
|
)
|
Balance as of the year ended 2015
|
|
(7,200
|
)
|
|
(98,730
|
)
|
|
(105,930
|
)
|
|
Other comprehensive loss before reclassifications
|
|
(393
|
)
|
|
(9,200
|
)
|
|
(9,593
|
)
|
|
Amounts reclassified from AOCI
|
|
2,338
|
|
|
9,956
|
|
|
12,294
|
|
|
Other comprehensive loss
|
|
1,945
|
|
|
756
|
|
|
2,701
|
|
Balance as of the year ended 2016
|
|
$
|
(5,255
|
)
|
|
$
|
(97,974
|
)
|
|
$
|
(103,229
|
)
|
Reclassifications from AOCI
|
|
|
|
|
|
|
|
|
|
|
|
|
AOCI Components
|
|
Amounts Reclassified from AOCI (in thousands)
|
|
Income Statement Line Item
|
|
|
|
2016
|
|
2015
|
|
|
Changes in Foreign Currency Translations
|
|
|
|
|
|
|
|
Loss on foreign exchange
|
|
$
|
2,338
|
|
|
$
|
—
|
|
|
Loss from discontinued operations, net of taxes
|
Changes in pension and other employee benefit accounts
|
|
|
|
|
|
|
|
Net actuarial losses
(1)
|
|
9,956
|
|
|
8,877
|
|
|
Cost of sales
|
|
|
|
12,294
|
|
|
8,877
|
|
|
Total before tax
|
Taxes
|
|
—
|
|
|
—
|
|
|
Income tax expense
|
Total reclassifications for the period
|
|
$
|
12,294
|
|
|
$
|
8,877
|
|
|
Net of tax
|
__________________________
(1)
Components are included in the computation of net periodic benefit cost as presented in Note 13.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. Related Party Transactions
In the fourth quarter of 2013, the Company entered into a
10
-year lease of a manufacturing facility with a related party wholly-owned and managed by the Burton family. The Company believes the lease terms have not been significantly affected by the fact that the Company and the lessors are related parties. The Company recognized approximately
$0.5 million
in rental expense associated with the lease for each of the years ended
2016
and
2015
, which is recorded in cost of sales. Future undiscounted lease payments related to this lease are
$3.8 million
as of the year ended
2016
. The Company has no other commitments or guarantees related to the lease. In the fourth quarter of 2015, this related party also purchased land located under an adjacent Cenveo manufacturing facility. The Company is currently sub-leasing this facility under a separate agreement with an unrelated third party, which is leasing the land from the related party.
Horizon Paper Co., Inc. ("Horizon"), whose Chairman was a member of the Company’s Board of Directors through September 10, 2015, has supplied raw materials to the Company. For the year ended 2015, purchases of raw materials from Horizon made by the Company were
$1.9 million
. As of the year ended
2015
, the balance due to Horizon was
$0.2 million
.
Roosevelt Paper Company ("Roosevelt") is both a paper supplier to, and a customer of, the Company. The sole owners of Roosevelt are related to Mr. Scheinmann, Senior Vice President, Legal Affairs and Corporate Secretary. Mr. Scheinmann has no ownership in Roosevelt. Purchases of paper from Roosevelt were approximately
$1.4 million
and
$1.0 million
for the years ended 2016 and 2015, respectively. The balance due to Roosevelt was
$0.3 million
for each of the years ended
2016
and
2015
. Additionally, the Company had net sales to Roosevelt of
zero
and
$0.1 million
for the years ended 2016 and 2015, respectively. As of both the years ended
2016
and
2015
, there were
no
balances due from Roosevelt.
17. Income (Loss) per Share
On July 8, 2016, the Company announced a Reverse Stock Split of its Common Stock at a ratio of 1-for-8, effective July 13, 2016. The Common Stock began trading on a split-adjusted basis on July 14, 2016. As a result of the Reverse Stock Split, each eight pre-split shares of Common Stock outstanding were automatically combined into one new share of Common Stock without any action on the part of the respective holders. The Reverse Stock Split also applied to Common Stock issuable upon the exchange of the Company's outstanding 7% Notes and upon the exercise of the Company's outstanding Warrants and Equity Awards. The share and per share amounts below have been retroactively adjusted to give recognition to the Reverse Stock Split for all periods presented.
Basic income (loss) per share is computed based upon the weighted average number of common shares outstanding for the period. When applicable, diluted income (loss) per share is calculated using two approaches. The first approach, the treasury stock method, reflects the potential dilution that could occur if the Equity Awards to issue Common Stock were exercised. The second approach, the if converted method, reflects the potential dilution of the Equity Awards and the 7% Notes and the Warrants being exchanged for Common Stock. Under this method, interest expense associated with the 7% Notes, net of tax, if any, is added back to income from continuing operations and the shares outstanding are increased by the underlying 7% Notes equivalent.
For the year ended
2015
, the effect of approximately
2.5 million
shares related to the exchange of the 7% Notes for Common Stock were excluded from the calculation of diluted income (loss) per share, as the effect would be anti-dilutive.
For the years ended
2016
and
2015
, the effect of approximately
212,000
and
366,000
shares, respectively, related to the issuance of Common Stock upon exercise of Equity Awards were excluded for the calculation of diluted income (loss) per share, as the effect would be anti-dilutive.
For the years ended
2016
and
2015
, the effect of approximately
1.7 million
and
zero
shares, respectively, related to the issuance of Common Stock upon exercise of Warrants were excluded from the calculation of diluted income (loss) per share, as the effect would be anti-dilutive.
The following table sets forth the computation of basic and diluted (loss) income per share for the periods ended (in thousands, except per share data):
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended
|
|
|
2016
|
|
2015
|
Numerator for basic and diluted loss per share:
|
|
|
|
|
Income (loss) from continuing operations
|
|
$
|
70,846
|
|
|
$
|
(19,461
|
)
|
Loss from discontinued operations, net of taxes
|
|
(2,897
|
)
|
|
(11,390
|
)
|
Net income (loss)
|
|
$
|
67,949
|
|
|
$
|
(30,851
|
)
|
Numerator for diluted income (loss) per share:
|
|
|
|
|
Income (loss) from continuing operations - as reported
|
|
$
|
70,846
|
|
|
$
|
(19,461
|
)
|
Interest expense on 7% Notes, net of taxes
|
|
1,572
|
|
|
—
|
|
Income (loss) from continuing operations - after assumed conversions of dilutive shares
|
|
72,418
|
|
|
(19,461
|
)
|
Loss from discontinued operations, net of taxes
|
|
(2,897
|
)
|
|
(11,390
|
)
|
Net income (loss) for diluted loss per share - after assumed conversions of dilutive shares
|
|
$
|
69,521
|
|
|
$
|
(30,851
|
)
|
Denominator for weighted average common shares outstanding:
|
|
|
|
|
|
|
Basic shares
|
|
8,527
|
|
|
8,479
|
|
Dilutive effect of 7% Notes
|
|
965
|
|
|
—
|
|
Dilutive effect of Equity Awards
|
|
—
|
|
|
—
|
|
Dilutive effect of Warrants
|
|
—
|
|
|
—
|
|
Diluted shares
|
|
9,492
|
|
|
8,479
|
|
|
|
|
|
|
Income (loss) per share – basic:
|
|
|
|
|
Continuing operations
|
|
$
|
8.31
|
|
|
$
|
(2.30
|
)
|
Discontinued operations
|
|
(0.34
|
)
|
|
(1.34
|
)
|
Net income (loss)
|
|
$
|
7.97
|
|
|
$
|
(3.64
|
)
|
|
|
|
|
|
Income (loss) per share – diluted:
|
|
|
|
|
Continuing operations
|
|
$
|
7.63
|
|
|
$
|
(2.30
|
)
|
Discontinued operations
|
|
(0.31
|
)
|
|
(1.34
|
)
|
Net income (loss)
|
|
$
|
7.32
|
|
|
$
|
(3.64
|
)
|
18. Segment Information
T
he Company operates
three
operating and reportable segments: envelope, print and label. The envelope segment provides direct mail offerings and transactional and stock envelopes. The print segment provides a wide array of print offerings such as high-end printed materials including car brochures, advertising literature, corporate identity and brand marketing material, digital printing and content management. The label segment specializes in the design, manufacturing and printing of labels such as custom labels, overnight packaging labels and pressure-sensitive prescription labels.
Prior to the disposition of the Packaging Business, the Company operated
four
operating segments: envelope, print, label and packaging. Based upon similar economic characteristics and management reporting, the Company previously aggregated the label and packaging operating segments to have a total of
three
reportable segments: envelope, print and label and packaging.
Operating income (loss) of each segment includes all costs and expenses directly related to the segment's operations. Corporate expenses include corporate general and administrative expenses including stock-based compensation.
Corporate identifiable assets primarily consist of cash and cash equivalents, miscellaneous receivables, deferred financing fees, deferred tax assets and other assets.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following tables present certain segment information (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
For The Years Ended
|
|
|
2016
|
|
2015
|
Net sales:
|
|
|
|
|
Envelope
|
|
$
|
865,160
|
|
|
$
|
908,718
|
|
Print
|
|
493,464
|
|
|
510,974
|
|
Label
|
|
301,377
|
|
|
322,087
|
|
Total
|
|
$
|
1,660,001
|
|
|
$
|
1,741,779
|
|
Operating income (loss):
|
|
|
|
|
|
|
Envelope
|
|
$
|
60,684
|
|
|
$
|
66,424
|
|
Print
|
|
17,613
|
|
|
15,122
|
|
Label
|
|
30,549
|
|
|
39,533
|
|
Corporate
|
|
(32,814
|
)
|
|
(37,286
|
)
|
Total
|
|
$
|
76,032
|
|
|
$
|
83,793
|
|
Restructuring and other charges:
|
|
|
|
|
|
|
Envelope
|
|
$
|
2,618
|
|
|
$
|
3,500
|
|
Print
|
|
2,028
|
|
|
6,853
|
|
Label
|
|
4,771
|
|
|
486
|
|
Corporate
|
|
2,537
|
|
|
1,737
|
|
Total
|
|
$
|
11,954
|
|
|
$
|
12,576
|
|
Depreciation and intangible asset amortization:
|
|
|
|
|
|
|
Envelope
|
|
$
|
18,982
|
|
|
$
|
20,318
|
|
Print
|
|
18,010
|
|
|
17,424
|
|
Label
|
|
6,988
|
|
|
8,584
|
|
Corporate
|
|
3,220
|
|
|
3,363
|
|
Total
|
|
$
|
47,200
|
|
|
$
|
49,689
|
|
Capital expenditures:
|
|
|
|
|
|
|
Envelope
|
|
$
|
13,130
|
|
|
$
|
7,480
|
|
Print
|
|
10,984
|
|
|
9,240
|
|
Label
|
|
11,172
|
|
|
3,678
|
|
Corporate
|
|
5,851
|
|
|
5,530
|
|
Total
|
|
$
|
41,137
|
|
|
$
|
25,928
|
|
Intercompany sales:
|
|
|
|
|
|
|
Envelope
|
|
$
|
6,589
|
|
|
$
|
6,357
|
|
Print
|
|
19,983
|
|
|
17,627
|
|
Label
|
|
2,833
|
|
|
4,297
|
|
Total
|
|
$
|
29,405
|
|
|
$
|
28,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Total assets:
|
|
|
|
|
Envelope
|
|
$
|
403,157
|
|
|
$
|
445,443
|
|
Print
|
|
256,888
|
|
|
266,074
|
|
Label
|
|
216,627
|
|
|
223,534
|
|
Corporate
|
|
36,287
|
|
|
35,558
|
|
Assets of discontinued operations
|
|
—
|
|
|
111,417
|
|
Total
|
|
$
|
912,959
|
|
|
$
|
1,082,026
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Geographic information is as follows as of and for the years ended (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Net sales:
|
|
|
|
|
|
|
U.S.
|
|
$
|
1,654,996
|
|
|
$
|
1,735,921
|
|
Foreign
|
|
5,005
|
|
|
5,858
|
|
Total
|
|
$
|
1,660,001
|
|
|
$
|
1,741,779
|
|
|
|
|
|
|
|
|
2016
|
|
2015
|
Long-lived assets (property, plant and equipment, goodwill and intangible assets):
|
|
|
U.S.
|
|
$
|
501,685
|
|
|
$
|
510,205
|
|
Foreign
|
|
6,034
|
|
|
6,161
|
|
Total
|
|
$
|
507,719
|
|
|
$
|
516,366
|
|
19. Condensed Consolidating Financial Information
Cenveo, Inc. is a holding company (the "Parent Company"), which is the ultimate parent of all Cenveo subsidiaries. The Parent Company’s wholly-owned subsidiary, Cenveo Corporation (the "Subsidiary Issuer"), issued the
6.000%
Secured Notes, the
8.500%
Notes, the
6.000%
Unsecured Notes, the
7%
Notes, the
11.5%
Notes, and the
4%
Secured Notes (collectively the "Subsidiary Issuer Notes"), which are fully and unconditionally guaranteed, on a joint and several basis, by the Parent Company and substantially all of its wholly-owned domestic subsidiaries, other than the Subsidiary Issuer (the "Guarantor Subsidiaries").
Presented below is condensed consolidating financial information for the Parent Company, the Subsidiary Issuer, the Guarantor Subsidiaries and the Parent Company's subsidiaries other than the Subsidiary Issuer and the Guarantor Subsidiaries (the "Non-Guarantor Subsidiaries") as of and for the years ended
2016
and
2015
. The condensed consolidating financial information has been presented to show the financial position, results of operations and cash flows of the Parent Company, the Subsidiary Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries, assuming the guarantee structure of the Subsidiary Issuer Notes was in effect at the beginning of the periods presented.
The supplemental condensed consolidating financial information reflects the investments of the Parent Company in the Subsidiary Issuer, the Guarantor Subsidiaries and the Non-Guarantor Subsidiaries using the equity method of accounting. The Parent Company’s primary transactions with its subsidiaries, other than the investment account and related equity in net income (loss) of subsidiaries, are the intercompany payables and receivables between its subsidiaries.
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
December 31, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
4,678
|
|
|
$
|
—
|
|
|
$
|
854
|
|
|
$
|
—
|
|
|
$
|
5,532
|
|
Accounts receivable, net
|
—
|
|
|
131,770
|
|
|
102,417
|
|
|
—
|
|
|
—
|
|
|
234,187
|
|
Inventories, net
|
—
|
|
|
62,179
|
|
|
39,771
|
|
|
—
|
|
|
—
|
|
|
101,950
|
|
Intercompany receivable
|
—
|
|
|
—
|
|
|
1,783,858
|
|
|
—
|
|
|
(1,783,858
|
)
|
|
—
|
|
Notes receivable from subsidiaries
|
—
|
|
|
36,938
|
|
|
3,245
|
|
|
—
|
|
|
(40,183
|
)
|
|
—
|
|
Prepaid and other current assets
|
—
|
|
|
35,659
|
|
|
4,789
|
|
|
1,128
|
|
|
—
|
|
|
41,576
|
|
Total current assets
|
—
|
|
|
271,224
|
|
|
1,934,080
|
|
|
1,982
|
|
|
(1,824,041
|
)
|
|
383,245
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
(589,157
|
)
|
|
2,112,403
|
|
|
4,173
|
|
|
7,829
|
|
|
(1,535,248
|
)
|
|
—
|
|
Property, plant and equipment, net
|
—
|
|
|
108,395
|
|
|
98,255
|
|
|
1,029
|
|
|
—
|
|
|
207,679
|
|
Goodwill
|
—
|
|
|
49,170
|
|
|
121,181
|
|
|
4,858
|
|
|
—
|
|
|
175,209
|
|
Other intangible assets, net
|
—
|
|
|
9,770
|
|
|
114,914
|
|
|
147
|
|
|
—
|
|
|
124,831
|
|
Other assets, net
|
—
|
|
|
18,317
|
|
|
3,100
|
|
|
1,694
|
|
|
(1,116
|
)
|
|
21,995
|
|
Total assets
|
$
|
(589,157
|
)
|
|
$
|
2,569,279
|
|
|
$
|
2,275,703
|
|
|
$
|
17,539
|
|
|
$
|
(3,360,405
|
)
|
|
$
|
912,959
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
—
|
|
|
$
|
30,709
|
|
|
$
|
1,018
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
31,727
|
|
Accounts payable
|
—
|
|
|
114,533
|
|
|
61,098
|
|
|
265
|
|
|
—
|
|
|
175,896
|
|
Accrued compensation and related liabilities
|
—
|
|
|
19,245
|
|
|
4,699
|
|
|
740
|
|
|
—
|
|
|
24,684
|
|
Other current liabilities
|
—
|
|
|
70,118
|
|
|
11,962
|
|
|
819
|
|
|
—
|
|
|
82,899
|
|
Intercompany payable
|
—
|
|
|
1,783,390
|
|
|
—
|
|
|
468
|
|
|
(1,783,858
|
)
|
|
—
|
|
Notes payable to issuer
|
—
|
|
|
—
|
|
|
36,938
|
|
|
3,245
|
|
|
(40,183
|
)
|
|
—
|
|
Total current liabilities
|
—
|
|
|
2,017,995
|
|
|
115,715
|
|
|
5,537
|
|
|
(1,824,041
|
)
|
|
315,206
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
—
|
|
|
984,833
|
|
|
2,106
|
|
|
—
|
|
|
—
|
|
|
986,939
|
|
Other liabilities
|
—
|
|
|
155,608
|
|
|
45,479
|
|
|
—
|
|
|
(1,116
|
)
|
|
199,971
|
|
Shareholders’ (deficit) equity
|
(589,157
|
)
|
|
(589,157
|
)
|
|
2,112,403
|
|
|
12,002
|
|
|
(1,535,248
|
)
|
|
(589,157
|
)
|
Total liabilities and shareholders’ (deficit) equity
|
$
|
(589,157
|
)
|
|
$
|
2,569,279
|
|
|
$
|
2,275,703
|
|
|
$
|
17,539
|
|
|
$
|
(3,360,405
|
)
|
|
$
|
912,959
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME
For The Year Ended 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
882,195
|
|
|
$
|
775,915
|
|
|
$
|
1,891
|
|
|
$
|
—
|
|
|
$
|
1,660,001
|
|
Cost of sales
|
—
|
|
|
779,574
|
|
|
607,172
|
|
|
—
|
|
|
—
|
|
|
1,386,746
|
|
Selling, general and administrative expenses
|
—
|
|
|
110,870
|
|
|
67,907
|
|
|
748
|
|
|
—
|
|
|
179,525
|
|
Amortization of intangible assets
|
—
|
|
|
608
|
|
|
4,692
|
|
|
444
|
|
|
—
|
|
|
5,744
|
|
Restructuring and other charges
|
—
|
|
|
10,469
|
|
|
1,485
|
|
|
—
|
|
|
—
|
|
|
11,954
|
|
Operating (loss) income
|
—
|
|
|
(19,326
|
)
|
|
94,659
|
|
|
699
|
|
|
—
|
|
|
76,032
|
|
Interest expense, net
|
—
|
|
|
85,537
|
|
|
216
|
|
|
—
|
|
|
—
|
|
|
85,753
|
|
Intercompany interest (income) expense
|
—
|
|
|
(1,008
|
)
|
|
1,008
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Gain on early extinguishment of debt, net
|
—
|
|
|
(82,481
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(82,481
|
)
|
Other income, net
|
—
|
|
|
(490
|
)
|
|
(1,737
|
)
|
|
(117
|
)
|
|
—
|
|
|
(2,344
|
)
|
(Loss) income from continuing operations before income taxes and equity in income (loss) of subsidiaries
|
—
|
|
|
(20,884
|
)
|
|
95,172
|
|
|
816
|
|
|
—
|
|
|
75,104
|
|
Income tax expense
|
—
|
|
|
2,688
|
|
|
619
|
|
|
951
|
|
|
—
|
|
|
4,258
|
|
(Loss) income from continuing operations before equity in income (loss) of subsidiaries
|
—
|
|
|
(23,572
|
)
|
|
94,553
|
|
|
(135
|
)
|
|
—
|
|
|
70,846
|
|
Equity in income (loss) of subsidiaries
|
67,949
|
|
|
95,485
|
|
|
(146
|
)
|
|
—
|
|
|
(163,288
|
)
|
|
—
|
|
Income (loss) from continuing operations
|
67,949
|
|
|
71,913
|
|
|
94,407
|
|
|
(135
|
)
|
|
(163,288
|
)
|
|
70,846
|
|
(Loss) income from discontinued operations, net of taxes
|
—
|
|
|
(3,964
|
)
|
|
1,078
|
|
|
(11
|
)
|
|
—
|
|
|
(2,897
|
)
|
Net income (loss)
|
67,949
|
|
|
67,949
|
|
|
95,485
|
|
|
(146
|
)
|
|
(163,288
|
)
|
|
67,949
|
|
Other comprehensive income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive income (loss) of subsidiaries
|
2,701
|
|
|
2,290
|
|
|
(172
|
)
|
|
—
|
|
|
(4,819
|
)
|
|
—
|
|
Changes in pension and other employee benefit accounts, net of taxes
|
—
|
|
|
411
|
|
|
345
|
|
|
—
|
|
|
—
|
|
|
756
|
|
Currency translation adjustment, net
|
—
|
|
|
—
|
|
|
2,117
|
|
|
(172
|
)
|
|
—
|
|
|
1,945
|
|
Total other comprehensive income (loss)
|
2,701
|
|
|
2,701
|
|
|
2,290
|
|
|
(172
|
)
|
|
(4,819
|
)
|
|
2,701
|
|
Comprehensive income (loss)
|
$
|
70,650
|
|
|
$
|
70,650
|
|
|
$
|
97,775
|
|
|
$
|
(318
|
)
|
|
$
|
(168,107
|
)
|
|
$
|
70,650
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of continuing operations
|
$
|
1,468
|
|
|
$
|
(93,513
|
)
|
|
$
|
142,605
|
|
|
$
|
(1,177
|
)
|
|
$
|
—
|
|
|
$
|
49,383
|
|
Net cash used in operating activities of discontinued operations
|
—
|
|
|
—
|
|
|
(10,074
|
)
|
|
(438
|
)
|
|
—
|
|
|
(10,512
|
)
|
Net cash provided by (used in) operating activities
|
1,468
|
|
|
(93,513
|
)
|
|
132,531
|
|
|
(1,615
|
)
|
|
—
|
|
|
38,871
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures
|
—
|
|
|
(19,281
|
)
|
|
(21,120
|
)
|
|
(736
|
)
|
|
—
|
|
|
(41,137
|
)
|
Proceeds from sale of property, plant and equipment
|
—
|
|
|
8,189
|
|
|
141
|
|
|
—
|
|
|
—
|
|
|
8,330
|
|
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
2,000
|
|
|
—
|
|
|
—
|
|
|
2,000
|
|
Net cash used in investing activities of continuing operations
|
—
|
|
|
(11,092
|
)
|
|
(18,979
|
)
|
|
(736
|
)
|
|
—
|
|
|
(30,807
|
)
|
Net cash provided by investing activities of discontinued operations
|
—
|
|
|
—
|
|
|
89,379
|
|
|
6,487
|
|
|
—
|
|
|
95,866
|
|
Net cash (used in) provided by investing activities
|
—
|
|
|
(11,092
|
)
|
|
70,400
|
|
|
5,751
|
|
|
—
|
|
|
65,059
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of 4% senior secured notes due 2021
|
—
|
|
|
50,000
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
50,000
|
|
Payment of financing related costs and expenses and debt issuance discounts
|
—
|
|
|
(11,576
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(11,576
|
)
|
Repayments of other long-term debt
|
—
|
|
|
(5,381
|
)
|
|
(197
|
)
|
|
—
|
|
|
—
|
|
|
(5,578
|
)
|
Repayment of 11.5% senior notes due 2017
|
—
|
|
|
(24,725
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(24,725
|
)
|
Repayment of 7% senior exchangeable notes due 2017
|
—
|
|
|
(45,903
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(45,903
|
)
|
Repayment of 8.500% junior secured priority notes due 2022
|
—
|
|
|
(4,550
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(4,550
|
)
|
Purchase and retirement of common stock upon vesting of RSUs
|
(346
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(346
|
)
|
Borrowings under ABL Facility due 2021
|
—
|
|
|
474,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
474,300
|
|
Repayments under ABL Facility due 2021
|
—
|
|
|
(540,800
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(540,800
|
)
|
Intercompany advances
|
(1,122
|
)
|
|
212,360
|
|
|
(203,366
|
)
|
|
(7,872
|
)
|
|
—
|
|
|
—
|
|
Net cash (used in) provided by financing activities of continuing operations
|
(1,468
|
)
|
|
103,725
|
|
|
(203,563
|
)
|
|
(7,872
|
)
|
|
—
|
|
|
(109,178
|
)
|
Net cash used in financing activities of discontinued operations
|
—
|
|
|
—
|
|
|
(8
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
Net cash (used in) provided by financing activities
|
(1,468
|
)
|
|
103,725
|
|
|
(203,571
|
)
|
|
(7,872
|
)
|
|
—
|
|
|
(109,186
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
316
|
|
|
(84
|
)
|
|
—
|
|
|
232
|
|
Net decrease in cash and cash equivalents
|
—
|
|
|
(880
|
)
|
|
(324
|
)
|
|
(3,820
|
)
|
|
—
|
|
|
(5,024
|
)
|
Cash and cash equivalents at beginning of period
|
—
|
|
|
5,558
|
|
|
324
|
|
|
4,674
|
|
|
—
|
|
|
10,556
|
|
Cash and cash equivalents at end of period
|
$
|
—
|
|
|
$
|
4,678
|
|
|
$
|
—
|
|
|
$
|
854
|
|
|
$
|
—
|
|
|
$
|
5,532
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEET
January 2, 2016
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
$
|
—
|
|
|
$
|
5,558
|
|
|
$
|
235
|
|
|
$
|
1,992
|
|
|
$
|
—
|
|
|
$
|
7,785
|
|
Accounts receivable, net
|
—
|
|
|
133,232
|
|
|
120,810
|
|
|
—
|
|
|
—
|
|
|
254,042
|
|
Inventories, net
|
—
|
|
|
74,116
|
|
|
47,499
|
|
|
—
|
|
|
—
|
|
|
121,615
|
|
Intercompany receivable
|
—
|
|
|
—
|
|
|
1,580,492
|
|
|
—
|
|
|
(1,580,492
|
)
|
|
—
|
|
Notes receivable from subsidiaries
|
—
|
|
|
36,938
|
|
|
3,245
|
|
|
—
|
|
|
(40,183
|
)
|
|
—
|
|
Prepaid and other current assets
|
—
|
|
|
43,349
|
|
|
1,807
|
|
|
1,575
|
|
|
—
|
|
|
46,731
|
|
Assets of discontinued operations - current
|
—
|
|
|
—
|
|
|
41,821
|
|
|
6,745
|
|
|
—
|
|
|
48,566
|
|
Total current assets
|
—
|
|
|
293,193
|
|
|
1,795,909
|
|
|
10,312
|
|
|
(1,620,675
|
)
|
|
478,739
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investment in subsidiaries
|
(669,839
|
)
|
|
2,014,972
|
|
|
4,492
|
|
|
7,829
|
|
|
(1,357,454
|
)
|
|
—
|
|
Property, plant and equipment, net
|
—
|
|
|
113,608
|
|
|
96,262
|
|
|
708
|
|
|
—
|
|
|
210,578
|
|
Goodwill
|
—
|
|
|
22,940
|
|
|
147,409
|
|
|
4,989
|
|
|
—
|
|
|
175,338
|
|
Other intangible assets, net
|
—
|
|
|
9,533
|
|
|
120,451
|
|
|
466
|
|
|
—
|
|
|
130,450
|
|
Other assets, net
|
—
|
|
|
20,327
|
|
|
3,154
|
|
|
1,477
|
|
|
(888
|
)
|
|
24,070
|
|
Assets of discontinued operations - long-term
|
—
|
|
|
1,226
|
|
|
62,184
|
|
|
—
|
|
|
(559
|
)
|
|
62,851
|
|
Total assets
|
$
|
(669,839
|
)
|
|
$
|
2,475,799
|
|
|
$
|
2,229,861
|
|
|
$
|
25,781
|
|
|
$
|
(2,979,576
|
)
|
|
$
|
1,082,026
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ (Deficit) Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt
|
$
|
—
|
|
|
$
|
4,454
|
|
|
$
|
919
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
5,373
|
|
Accounts payable
|
—
|
|
|
126,384
|
|
|
73,601
|
|
|
135
|
|
|
—
|
|
|
200,120
|
|
Accrued compensation and related liabilities
|
—
|
|
|
26,812
|
|
|
4,846
|
|
|
303
|
|
|
—
|
|
|
31,961
|
|
Other current liabilities
|
—
|
|
|
71,365
|
|
|
16,737
|
|
|
712
|
|
|
—
|
|
|
88,814
|
|
Liabilities of discontinued operations - current
|
—
|
|
|
—
|
|
|
21,543
|
|
|
725
|
|
|
—
|
|
|
22,268
|
|
Intercompany payable
|
—
|
|
|
1,572,152
|
|
|
—
|
|
|
8,340
|
|
|
(1,580,492
|
)
|
|
—
|
|
Notes payable to issuer
|
—
|
|
|
—
|
|
|
36,938
|
|
|
3,245
|
|
|
(40,183
|
)
|
|
—
|
|
Total current liabilities
|
—
|
|
|
1,801,167
|
|
|
154,584
|
|
|
13,460
|
|
|
(1,620,675
|
)
|
|
348,536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-term debt
|
—
|
|
|
1,200,848
|
|
|
2,402
|
|
|
—
|
|
|
—
|
|
|
1,203,250
|
|
Other liabilities
|
—
|
|
|
143,623
|
|
|
56,191
|
|
|
—
|
|
|
(888
|
)
|
|
198,926
|
|
Liabilities of discontinued operations - long-term
|
—
|
|
|
—
|
|
|
1,712
|
|
|
—
|
|
|
(559
|
)
|
|
1,153
|
|
Shareholders’ (deficit) equity
|
(669,839
|
)
|
|
(669,839
|
)
|
|
2,014,972
|
|
|
12,321
|
|
|
(1,357,454
|
)
|
|
(669,839
|
)
|
Total liabilities and shareholders’ (deficit) equity
|
$
|
(669,839
|
)
|
|
$
|
2,475,799
|
|
|
$
|
2,229,861
|
|
|
$
|
25,781
|
|
|
$
|
(2,979,576
|
)
|
|
$
|
1,082,026
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF COMPREHENSIVE (LOSS) INCOME
For The Year Ended 2015
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Net sales
|
$
|
—
|
|
|
$
|
898,529
|
|
|
$
|
839,500
|
|
|
$
|
3,750
|
|
|
$
|
—
|
|
|
$
|
1,741,779
|
|
Cost of sales
|
—
|
|
|
775,386
|
|
|
674,759
|
|
|
731
|
|
|
—
|
|
|
1,450,876
|
|
Selling, general and administrative expenses
|
—
|
|
|
119,149
|
|
|
66,882
|
|
|
718
|
|
|
—
|
|
|
186,749
|
|
Amortization of intangible assets
|
—
|
|
|
743
|
|
|
6,574
|
|
|
468
|
|
|
—
|
|
|
7,785
|
|
Restructuring and other charges
|
—
|
|
|
10,751
|
|
|
1,825
|
|
|
—
|
|
|
—
|
|
|
12,576
|
|
Operating (loss) income
|
—
|
|
|
(7,500
|
)
|
|
89,460
|
|
|
1,833
|
|
|
—
|
|
|
83,793
|
|
Interest expense, net
|
—
|
|
|
100,592
|
|
|
213
|
|
|
—
|
|
|
—
|
|
|
100,805
|
|
Intercompany interest (income) expense
|
—
|
|
|
(998
|
)
|
|
998
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Loss on early extinguishment of debt, net
|
—
|
|
|
1,252
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1,252
|
|
Other income, net
|
—
|
|
|
(2,658
|
)
|
|
(258
|
)
|
|
(280
|
)
|
|
—
|
|
|
(3,196
|
)
|
(Loss) income from continuing operations before income taxes and equity in (loss) income of subsidiaries
|
—
|
|
|
(105,688
|
)
|
|
88,507
|
|
|
2,113
|
|
|
—
|
|
|
(15,068
|
)
|
Income tax expense (benefit)
|
—
|
|
|
5,425
|
|
|
(1,893
|
)
|
|
861
|
|
|
—
|
|
|
4,393
|
|
(Loss) income from continuing operations before equity in (loss) income of subsidiaries
|
—
|
|
|
(111,113
|
)
|
|
90,400
|
|
|
1,252
|
|
|
—
|
|
|
(19,461
|
)
|
Equity in (loss) income of subsidiaries
|
(30,851
|
)
|
|
74,968
|
|
|
1,644
|
|
|
—
|
|
|
(45,761
|
)
|
|
—
|
|
(Loss) income from continuing operations
|
(30,851
|
)
|
|
(36,145
|
)
|
|
92,044
|
|
|
1,252
|
|
|
(45,761
|
)
|
|
(19,461
|
)
|
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
5,294
|
|
|
(17,076
|
)
|
|
392
|
|
|
—
|
|
|
(11,390
|
)
|
Net (loss) income
|
(30,851
|
)
|
|
(30,851
|
)
|
|
74,968
|
|
|
1,644
|
|
|
(45,761
|
)
|
|
(30,851
|
)
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income of subsidiaries
|
(7,733
|
)
|
|
(4,240
|
)
|
|
(760
|
)
|
|
—
|
|
|
12,733
|
|
|
—
|
|
Changes in pension and other employee benefit accounts, net of taxes
|
—
|
|
|
(3,493
|
)
|
|
55
|
|
|
—
|
|
|
—
|
|
|
(3,438
|
)
|
Currency translation adjustment, net
|
—
|
|
|
—
|
|
|
(3,535
|
)
|
|
(760
|
)
|
|
—
|
|
|
(4,295
|
)
|
Total other comprehensive (loss) income
|
(7,733
|
)
|
|
(7,733
|
)
|
|
(4,240
|
)
|
|
(760
|
)
|
|
12,733
|
|
|
(7,733
|
)
|
Comprehensive (loss) income
|
$
|
(38,584
|
)
|
|
$
|
(38,584
|
)
|
|
$
|
70,728
|
|
|
$
|
884
|
|
|
$
|
(33,028
|
)
|
|
$
|
(38,584
|
)
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
CENVEO, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
For The Year Ended 2015
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Parent
Company
|
|
Subsidiary
Issuer
|
|
Guarantor
Subsidiaries
|
|
Non-
Guarantor
Subsidiaries
|
|
Eliminations
|
|
Consolidated
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) operating activities of continuing operations
|
$
|
1,636
|
|
|
$
|
(110,318
|
)
|
|
$
|
122,254
|
|
|
$
|
2,654
|
|
|
$
|
—
|
|
|
$
|
16,226
|
|
Net cash provided by operating activities of discontinued operations
|
—
|
|
|
—
|
|
|
15,230
|
|
|
738
|
|
|
—
|
|
|
15,968
|
|
Net cash provided by (used in) operating activities
|
1,636
|
|
|
(110,318
|
)
|
|
137,484
|
|
|
3,392
|
|
|
—
|
|
|
32,194
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of business acquisitions, net of cash acquired
|
—
|
|
|
(1,996
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,996
|
)
|
Capital expenditures
|
—
|
|
|
(18,448
|
)
|
|
(6,921
|
)
|
|
(559
|
)
|
|
—
|
|
|
(25,928
|
)
|
Proceeds from sale of property, plant and equipment
|
—
|
|
|
7,673
|
|
|
885
|
|
|
—
|
|
|
—
|
|
|
8,558
|
|
Proceeds from sale of assets
|
—
|
|
|
—
|
|
|
2,180
|
|
|
—
|
|
|
—
|
|
|
2,180
|
|
Net cash used in investing activities of continuing operations
|
—
|
|
|
(12,771
|
)
|
|
(3,856
|
)
|
|
(559
|
)
|
|
—
|
|
|
(17,186
|
)
|
Net cash used in investing activities of discontinued operations
|
—
|
|
|
—
|
|
|
(2,282
|
)
|
|
—
|
|
|
—
|
|
|
(2,282
|
)
|
Net cash used in investing activities
|
—
|
|
|
(12,771
|
)
|
|
(6,138
|
)
|
|
(559
|
)
|
|
—
|
|
|
(19,468
|
)
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payment of financing related costs and expenses and debt issuance discounts
|
—
|
|
|
(1,596
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(1,596
|
)
|
Proceeds from issuance of other long-term debt
|
—
|
|
|
12,500
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12,500
|
|
Repayments of other long-term debt
|
—
|
|
|
(17,721
|
)
|
|
1,176
|
|
|
—
|
|
|
—
|
|
|
(16,545
|
)
|
Repayment of 11.5% senior notes due 2017
|
—
|
|
|
(22,720
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(22,720
|
)
|
Purchase and retirement of common stock upon vesting of RSUs
|
(216
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(216
|
)
|
Borrowings under ABL Facility due 2021
|
—
|
|
|
468,300
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
468,300
|
|
Repayments under ABL Facility due 2021
|
—
|
|
|
(454,800
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(454,800
|
)
|
Intercompany advances
|
(1,420
|
)
|
|
133,719
|
|
|
(130,879
|
)
|
|
(1,420
|
)
|
|
—
|
|
|
—
|
|
Net cash (used in) provided by financing activities of continuing operations
|
(1,636
|
)
|
|
117,682
|
|
|
(129,703
|
)
|
|
(1,420
|
)
|
|
—
|
|
|
(15,077
|
)
|
Net cash used in financing activities of discontinued operations
|
—
|
|
|
—
|
|
|
(473
|
)
|
|
—
|
|
|
—
|
|
|
(473
|
)
|
Net cash (used in) provided by financing activities
|
(1,636
|
)
|
|
117,682
|
|
|
(130,176
|
)
|
|
(1,420
|
)
|
|
—
|
|
|
(15,550
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
—
|
|
|
—
|
|
|
(1,690
|
)
|
|
477
|
|
|
—
|
|
|
(1,213
|
)
|
Net (decrease) increase in cash and cash equivalents
|
—
|
|
|
(5,407
|
)
|
|
(520
|
)
|
|
1,890
|
|
|
—
|
|
|
(4,037
|
)
|
Cash and cash equivalents at beginning of period
|
—
|
|
|
10,965
|
|
|
844
|
|
|
2,784
|
|
|
—
|
|
|
14,593
|
|
Cash and cash equivalents at end of period
|
—
|
|
|
5,558
|
|
|
324
|
|
|
4,674
|
|
|
—
|
|
|
10,556
|
|
Less cash and cash equivalents of discontinued operations
|
—
|
|
|
—
|
|
|
(89
|
)
|
|
(2,682
|
)
|
|
—
|
|
|
(2,771
|
)
|
Cash and cash equivalents of continuing operations at end of period
|
$
|
—
|
|
|
$
|
5,558
|
|
|
$
|
235
|
|
|
$
|
1,992
|
|
|
$
|
—
|
|
|
$
|
7,785
|
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. Selected Quarterly Financial Information (Unaudited)
The following table sets forth certain quarterly financial data for the periods indicated (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal Year 2016
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Envelope
|
$
|
229,260
|
|
|
$
|
212,277
|
|
|
$
|
212,578
|
|
|
$
|
211,045
|
|
Print
|
124,487
|
|
|
114,653
|
|
|
121,739
|
|
|
132,585
|
|
Label
|
79,014
|
|
|
77,111
|
|
|
71,638
|
|
|
73,614
|
|
Total
|
$
|
432,761
|
|
|
$
|
404,041
|
|
|
$
|
405,955
|
|
|
$
|
417,244
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
Envelope
|
$
|
17,559
|
|
|
$
|
17,213
|
|
|
$
|
16,832
|
|
|
$
|
9,080
|
|
Print
|
3,377
|
|
|
1,933
|
|
|
5,446
|
|
|
6,857
|
|
Label
|
4,708
|
|
|
11,901
|
|
|
6,764
|
|
|
7,176
|
|
Corporate
|
(8,630
|
)
|
|
(9,477
|
)
|
|
(8,169
|
)
|
|
(6,538
|
)
|
Total
|
$
|
17,014
|
|
|
$
|
21,570
|
|
|
$
|
20,873
|
|
|
$
|
16,575
|
|
Income (loss) from continuing operations
(2)
|
13,020
|
|
|
50,860
|
|
|
8,745
|
|
|
(1,779
|
)
|
(Loss) income from discontinued operations, net of taxes
(3)
|
(1,817
|
)
|
|
(3,304
|
)
|
|
686
|
|
|
1,538
|
|
Net income (loss)
|
$
|
11,203
|
|
|
$
|
47,556
|
|
|
$
|
9,431
|
|
|
$
|
(241
|
)
|
Net income (loss) per share—basic
|
|
|
|
|
|
|
|
Continuing operations
(1)
|
$
|
1.53
|
|
|
$
|
5.97
|
|
|
$
|
1.02
|
|
|
$
|
(0.21
|
)
|
Discontinued operations
(1)
|
(0.21
|
)
|
|
(0.39
|
)
|
|
0.08
|
|
|
0.18
|
|
Net income (loss)
(1)
|
$
|
1.32
|
|
|
$
|
5.58
|
|
|
$
|
1.10
|
|
|
$
|
(0.03
|
)
|
Net income (loss) per share—diluted
|
|
|
|
|
|
|
|
Continuing operations
(1)
|
$
|
1.37
|
|
|
$
|
5.15
|
|
|
$
|
1.00
|
|
|
$
|
(0.21
|
)
|
Discontinued operations
(1)
|
(0.17
|
)
|
|
(0.33
|
)
|
|
0.08
|
|
|
0.18
|
|
Net income (loss)
(1)
|
$
|
1.20
|
|
|
$
|
4.82
|
|
|
$
|
1.08
|
|
|
$
|
(0.03
|
)
|
CENVEO, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
Second
Quarter
|
|
Third
Quarter
|
|
Fourth
Quarter
|
Fiscal Year 2015
|
|
|
|
|
|
|
|
Net sales:
|
|
|
|
|
|
|
|
Envelope
|
$
|
227,410
|
|
|
$
|
218,139
|
|
|
$
|
218,454
|
|
|
$
|
244,715
|
|
Print
|
122,100
|
|
|
114,545
|
|
|
123,875
|
|
|
150,454
|
|
Label
|
80,167
|
|
|
80,675
|
|
|
77,454
|
|
|
83,791
|
|
Total
|
$
|
429,677
|
|
|
$
|
413,359
|
|
|
$
|
419,783
|
|
|
$
|
478,960
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
Envelope
|
$
|
14,840
|
|
|
$
|
16,711
|
|
|
$
|
17,746
|
|
|
$
|
17,127
|
|
Print
|
1,679
|
|
|
2,987
|
|
|
1,541
|
|
|
8,915
|
|
Label
|
9,704
|
|
|
11,150
|
|
|
10,146
|
|
|
8,533
|
|
Corporate
|
(8,423
|
)
|
|
(9,193
|
)
|
|
(9,917
|
)
|
|
(9,753
|
)
|
Total
|
$
|
17,800
|
|
|
$
|
21,655
|
|
|
$
|
19,516
|
|
|
$
|
24,822
|
|
Loss from continuing operations
|
(8,179
|
)
|
|
(3,355
|
)
|
|
(3,562
|
)
|
|
(4,365
|
)
|
Income (loss) from discontinued operations, net of taxes
(3)
|
500
|
|
|
950
|
|
|
319
|
|
|
(13,159
|
)
|
Net loss
|
$
|
(7,679
|
)
|
|
$
|
(2,405
|
)
|
|
$
|
(3,243
|
)
|
|
$
|
(17,524
|
)
|
Net (loss) income per share—basic
|
|
|
|
|
|
|
|
Continuing operations
(1)
|
$
|
(0.97
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
(0.51
|
)
|
Discontinued operations
(1)
|
0.06
|
|
|
0.11
|
|
|
0.04
|
|
|
(1.56
|
)
|
Net loss
(1)
|
$
|
(0.91
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(2.07
|
)
|
Net (loss) income per share—diluted
|
|
|
|
|
|
|
|
Continuing operations
(1)
|
$
|
(0.97
|
)
|
|
$
|
(0.39
|
)
|
|
$
|
(0.42
|
)
|
|
$
|
(0.51
|
)
|
Discontinued operations
(1)
|
0.06
|
|
|
0.11
|
|
|
0.04
|
|
|
(1.56
|
)
|
Net loss
(1)
|
$
|
(0.91
|
)
|
|
$
|
(0.28
|
)
|
|
$
|
(0.38
|
)
|
|
$
|
(2.07
|
)
|
__________________________
|
|
(1)
|
The quarterly earnings per share information is computed separately for each period. Therefore, the sum of such quarterly per share amounts may differ from the total year.
|
|
|
(2)
|
During the year ended 2016, the Company completed several transactions which resulted in a net gain on early extinguishment of debt. See further detail in Note 8.
|
|
|
(3)
|
In connection with the sale of the Packaging Business, the Company recorded a gain on sale of
$1.4 million
for the year ended 2016 and a loss on sale of
$5.0 million
for the year ended 2015. Additionally, the Company recorded a non-cash goodwill impairment charge of
$9.9 million
related to this transaction for the year ended 2015.
|