Indiana-based Discount Labels (asi/49890) says its operations have not been impacted by parent company Cenveo’s restructuring plan after the printing giant declared bankruptcy in February. “We’re running business as usual,” John Becker, senior VP of sales and marketing at Discount Labels, told Counselor. “We’re actually investing more in people, iron and equipment. We just finished the acquisition of new machinery and are about to hire six regional salespeople.”
Discount Labels’ stability is a welcomed development, especially after the news this week that Cenveo is shuttering its Port City Press Inc. plant in Pikesville, MD. The closure is resulting in 113 employees being laid off, according to the Baltimore Business Journal. Stamford, CT-based Cenveo reported the changes in a notice filed with the Maryland Department of Labor, Licensing and Regulation.
A combination of more than $1 billion in debt and digital disruption of the printing industry led to Cenveo filing for Chapter 11 bankruptcy protection, executives said. “Negative industry trends” and an “unsustainable capital structure” were contributing factors, according to an affidavit by Ayman Zameli, executive vice president.
As customers departed the paper trail in favor of the internet, a “highly competitive pricing environment" emerged, the company said. In an effort to transform its business into one of the largest envelope and label manufacturers in North America, Cenveo acquired 16 companies from 2006 to 2013, Westfair Online reported. However, vendors continued to reduce the size of their orders, and as a result, Cenveo attempted to cut costs by divesting, downsizing its workforce, closing plants and consolidating operations.
Burdened with annual debt payments of approximately $99.4 million, the company’s liabilities were $1.4 billion as of December 30, 2017, compared to assets of $790 million, according to bankruptcy filings. The company’s price per share has declined by 99.8% in 10 years, from $120.32 to less than 20 cents on February 13. “Cenveo’s funded debt obligations are unsustainable, which has created pressure on its businesses,” the company said in its filings.
As 2017 progressed, Cenveo executives realized that a comprehensive restructuring plan was necessary “to survive in this competitive and transformative industry,” the company said.
On Tuesday, Cenveo announced it secured $290 million in debtor-in-possession financing to help it through the bankruptcy process. The financing ensures suppliers and other business partners are paid in a timely manner for goods and services provided during the reorganization process.
“This is a critical milestone for Cenveo in these Chapter 11 cases and a step forward in achieving the plan we outlined when we filed in early February,” said Robert G. Burton, Sr., chairman and CEO of Cenveo, in a press release. “We look forward to filing our plan of reorganization by the end of March. The transaction embodied in the Restructuring Support Agreement will, once approved, reduce our leverage by approximately $700 million, and allow us to quickly emerge from this process with a stronger balance sheet to support the company’s long-term success, benefiting our valued customers, business partners and employees in the years ahead.”
Cenveo manufactures 50 billion envelopes a year for direct-mail campaigns, bills and wholesale customers. As the fourth largest commercial printer in the U.S., the company also produces catalogs, annual reports, brochures, comic books, magazines, specialty books and scholarly publications.