Net sales in the first quarter of 2017 were $374.5 million compared to $432.8 million in the same period last year, a 13.5% decline. The sales decline was primarily driven by: (i) lower sales in the envelope segment, primarily due to lower demand in office product and wholesale envelope product lines primarily due to marketplace trends, and lower direct mail demand from our customers; (ii) lower sales in the label segment primarily due to the decision to exit the coating operation, which was completed in the second quarter of 2016, and lower sales volumes; and (iii) lower sales volumes in the commercial print group, primarily driven by lower customer demand and continued pricing pressures.
Operating income in the first quarter declined 41.0% to $10.0 million, compared to $17.0 million in the same period last year. The decrease was primarily due to lower gross profit due to lower sales volumes, the impact of the decision to exit the coating operation, and higher restructuring and other charges resulting from the 2017 Profitability Improvement Plan, including the announced closure of two facilities, partially offset by the benefit of lower selling, general and administrative expenses due to cost reduction initiatives and lower commission expense due to lower sales volumes.
“Despite headwinds impacting net sales, we achieved several accomplishments this past quarter,” said Robert G. Burton, Sr., Chairman and CEO of Cenveo. “The continued softness in our office products envelope business and the closure of our coating operation in mid-2016 were contributors to the decline in our sales year over year. Those events combined with further market softness across our print, direct mail and label platforms led to the decline of our net sales.
“On the other hand, our cost reduction efforts are beginning to show results,” Burton said. “Our 2017 Profitability Improvement Plan provided sustainable savings of over $5.0 million during the quarter, which allowed us to improve our margins despite lower sales volume. The benefits of the 2017 Profitability Improvement Plan will continue in the second quarter and throughout the remainder of the year. We have now identified the remaining $10 million of our proposed $50 million of cost savings and feel good about our ability to achieve our stated goal of generating $25 million in savings for the full year.”
Loss from continuing operations during the first quarter of 2017 was $8.7 million, or $(1.02) per diluted share, compared to income of $13.0 million, or $1.38 per diluted share, in the first quarter of 2016. Income in the first quarter of 2016 was primarily driven by gains on the early extinguishment of debt of $21.6 million.
Net loss in the first quarter of 2017 was $8.7 million compared to net income of $11.2 million for the same period last year. Adjusted EBITDA was $31.2 million in the first quarter of 2017 compared to $35.0 million for the same period last year.
During the first quarter 2017, net cash used in operating activities of continuing operations was $6.4 million compared to $11.4 million for the same period last year. The decline was primarily due to changes in working capital, particularly the timing of payments to vendors and higher inventories due to the timing of customer orders, partially offset by sales to and collections from our customers.
At April 1, 2017, cash and cash equivalents totaled $3.9 million, compared to $5.5 million at December 31, 2016. Total outstanding long-term debt, including current maturities, was approximately $1.0 billion as of April 1, 2017, an increase of $16.0 million from Dec. 31, 2016.