Cenveo reported financial results for the third quarter ended 01 October 2016.
he reported results for all periods presented exclude the operating results of the Company's packaging operating segment as well as its top-sheet lithographic print operation, as they have been classified in the Company's condensed consolidated financial statements as discontinued operations.
Third Quarter 2016 vs. Third Quarter 2015 Overview
Net Sales of $406.0 million compared to $419.8 million.Net income of $9.4 million compared to a net loss of $3.2 million.Adjusted EBITDA of $38.9 million compared to $42.0 million.Income from continuing operations of $8.7 million, or $1.00 per diluted share, compared to a loss of $3.6 million, or $0.42 per diluted share.Cash flow from continuing operations of $7.8 million compared to $9.8 million.
Third Quarter Financial Results
Net sales in the third quarter of 2016 were $406.0 million compared to $419.8 million in the same period last year, a 3% decline. This was primarily driven by lower sales in the envelope segment, resulting from lower demand in the Company's wholesale and office product envelopes, which accounts for approximately 2% of our consolidated net sales decline.
In addition, Cenveo experienced lower sales in its label segment primarily due to the decision to exit its coating operation, which was completed in the second quarter of 2016 and accounts for approximately 1% of our consolidated net sales decline. These declines were offset in part by higher direct mail envelope volumes.
Operating income in the third quarter increased 7% to $20.9 million compared to $19.5 million in the same period last year. The increase was primarily due to a significant restructuring charge in the third quarter of 2015 related to the closure of a print facility, partially offset by lower gross profit in the label and envelope segments in the third quarter of 2016 due the aforementioned lower demand and decision to exit the coating operation.
Non-GAAP operating income in the third quarter of 2016 was $25.5 million compared to non-GAAP operating income of $29.0 million for the same period last year
ncome from continuing operations in the third quarter was $8.7 million, or $1.00 per diluted share, compared to a loss of $3.6 million, or $0.42 per diluted share, for the same period last year. The significant increase was primarily driven by gains on the early extinguishment of debt of $7.4 million. Non-GAAP income from continuing operations in the third quarter was $6.0 million, or $0.67 per diluted share, compared to income of $6.5 million, or $0.59 per diluted share, in the same period last year.
Net income in the third quarter was $9.4 million compared to a net loss of $3.2 million for the same period last year. Adjusted EBITDA was $38.9 million compared to $42.0 million for the same period last year.
Cash flow provided by operating activities of continuing operations for the third quarter of 2016 was $7.8 million compared to $9.8 million for the same period last year. The decrease was primarily due to changes in working capital, particularly the timing of sales and collections from customers and the timing of payments to vendors, partially offset by lower pension contributions.
At October 1, 2016, cash and equivalents totaled $4.9 million compared to $7.8 million at January 2, 2016. Total principal debt outstanding declined 12% to $1.1 billion compared to $1.2 billion at January 2, 2016. The Company has commenced the process of redeeming $20.0 million face value of its 11.5% unsecured notes due in May 2017 at a call price of par. It expects the redemption process for this portion of the remaining notes to close in December. The Company expects to redeem the remaining portion of the 11.5% unsecured notes no later than the end of the first quarter of 2017.
