WhatTheyThink Talks with New Cenveo CEO James R. Malone

By Cary Sherburne, Senior WTT Editor

July 20, 2005 -- Mega-printer Cenveo has been much in the news of late, with the resignation of President and CEO Paul Reilly effective April 30, disappointing financial results and a hostile takeover bid by Robert Burton, who also demanded appointment as the company’s CEO. Meanwhile, on April 18, 2005, Cenveo announced that it had, with the assistance of its financial and legal advisors, commenced an aggressive and thorough evaluation of strategic alternatives with the goal of maximizing shareholder value. And in response to a request made by certain shareholders (read that as Robert Burton), the Company set September 14, 2005 as the date for a special meeting of shareholders.

On June 22, 2005, Cenveo announced James R. Malone as its new CEO. Most recently, Mr. Malone was founding and managing partner of Qorval, LLC, a financial and business restructuring firm based in Naples , Florida . In this capacity, he assumed the role of Chief Executive Officer of several companies including Mail Contractors Of America, Inc., Avborne, Inc. and Brown Jordan International.

Mr. Malone graciously agreed to speak with WhatTheyThink just two weeks into his new assignment to share his thoughts about the future of Cenveo with our readers.

WTT: Mr. Malone, thank you so much for taking the time to speak with us. You have an impressive background coming into Cenveo. I was struck by your emphasis on saving companies versus liquidation, which seems a little unusual these days. Can you share with us your perspective on this approach, and particularly how you see it relating to Cenveo’s current situation?

JRM: It is much more satisfying for every constituency to be able to be a part of turning a company around, improving it and adding value for the employees, the customers, and certainly the shareholders. And it is harder to do. But I find that it is worth the effort, both from an emotional standpoint and an economic standpoint. It is to everyone’s benefit to focus on fixing the company and doing what is right for the long term building of a business rather than carving it up and getting rid of it.

WTT: Give us your thoughts about what is facing companies like Cenveo and the printing industry overall.

JRM: Within the printing and visual communications industry, you have a very dynamic environment and a huge rate of change, and you have all different levels of change going on. While that certainly creates challenges, it automatically creates a huge amount of opportunity as well. You have technology driving change; you have change within channels of distribution and sales channels; you have a regulatory environment that is changing both for the public company sector and to some extent the private company sector in terms of expectations for returns. You have the internationalization of both our competitors and our customers and the challenge of strategically aligning with people outside of the normal boundaries of the business. That is much of the reason that it is more satisfying to figure out ways to improve the company, turning the operating focus and results around.

The analogy I use is that the healthiest company is not unlike a healthy tree. The healthiest tree is one that is constantly fertilized and encouraged to grow. But at the same time, the tree is pruned and strengthened so that it is stronger in the long term. Those two things must take place simultaneously in any dynamic company and they also need to go on continuously. When you come into a troubled or turnaround situation, it is not just an issue of cutting costs. It is also an issue of how we grow margins, with a focus on top line revenues, operating efficiencies, overhead costs—a holistic focus that is driven by the whole organization being dedicated to getting it fixed and making it best in class. This is an important subject, and it is not one that lends itself, in my experience, to an easy 90-second sound bite.

WTT: What was your primary interest in accepting the position at Cenveo?

JRM: As I have said to everyone here when asked that question, on the one hand it is what I do. And this was particularly interesting because it has all the elements of a situation where I know I can add value based on past experience and the difficult issues that I have dealt with in the past. It has it all—a large dynamic ,industry with a huge amount of chaos going on within the industry itself relative to change on a number of different levels. And the company itself has lot of different issues that need to be addressed. But at the same time, it has tremendous strengths that can be focused, directed and be very productive for our customer base and for our shareholders, as well as provide the security our employees are looking for. Then with all that noise going on, you add to it the uncertainty of having a 13D filed against the company and the necessity of bringing focus to a very concerned, very upset shareholder set. And all of this needs to be done with a sense of urgency.

[Editor’s Note: 13D refers to an SEC filing under Section 13(d) of the Securities Exchange Act of 1934. Click here for the text of the filing.]

WTT: Will you continue to operate and play a role at Qorval?

JRM: I am a founding partner and managing member of Qorval. I have other partners in the business, and Qorval has other assignments and projects it is going forward with. My partners are looking after that, and Cenveo is the center of my focus. I am not selling my interest or giving up my interest in Qorval. It is continuing to do its work and continuing to grow and help other companies. It is just that I will not be involved with the same level of detail or in multiple assignments within Qorval that I would normally, because of the size and diversity of issues that we have to deal with here at Cenveo.

WTT: What is the duration of your contract with Cenveo?

JRM: My contract with Cenveo is for three years, plus whatever might go on after that.

WTT: What do you see as the pros and cons of your not having any printing industry specific background?

JRM: I would say that every industry and every company we go into has one element that is absolutely and positively the same—every one of them is different. Every company, every industry, has its unique quirks, trends, technologies, history, etc. I bring to Cenveo a huge background of diversity, including crossover knowledge and technology and new ways of solving problems that might not have been applied in the past in this industry. I also have the luxury of being able to ask really stupid questions, and I have the luxury of being dependent on the embedded knowledge, experience and pride that exists in the organization. The embedded day-to-day knowledge that exists in a company like Cenveo is obviously very, very important. I have found that it is not as important that I be an industry expert as it is that I be able to bring leadership, enthusiasm and focus to the situation regardless of the specific industry.

WTT: What are your top three priorities as you take over the reins at Cenveo?

JRM: First, I want to point out that these priorities are of parallel importance; these are things that need to be done in parallel, not in a series. And I would describe them as dealing with the investor community and our shareholder community, defining what the future of our company can look like as the team that is in place here sees it. We also need to have that same level of communication with our customer base. And we need to have that same focus with our employees. This is important so that our customers, employees and shareholders, as universally as is humanly possible, know, understand and play a part in developing what the future of Cenveo can be. Simultaneously with that, we need to begin moving in that direction, bringing the elements of opportunity for growth and better performance to the surface, giving them visibility, direction and moving the company forward.

WTT: Is there a particular methodology that you bring to these types of situations?

JRM: No. I do not come in with a specific checklist. I come in with my own view which is developed as I have gone through the due diligence process of understanding what has gotten the company in the shape it is in. But the first place I go is to our employees. I ask them what is going on, what they see happening, what is getting in the way of their success, and what I can do to make them more successful. In my first eight days, I have been in nine plants and I have talked to a number of shareholders. My strategy is to engage with the people who know the industry, who know what we are doing well and what we are not doing so well, from both the operations and functional staff perspectives. I want to understand how and when Corporate gets in the way: I want to understand our decision process—do we ponder things to death or do we move quickly? This way I quickly get a sense of the dynamics in the organization and the attendant opportunities.

WTT: What do you see as the key challenges the company faces?

JRM: The answer to that question depends on the timeframe. Clearly, our key challenge up to September 14th is how we deal with the 13D action. Generally, a CEO or board or organization has a long period of time to develop a plan for the best ways of optimizing shareholder value. We don’t have that luxury. We have that September 14th date coming up quickly. We have a line drawn in the sand by a shareholder and he has every right to have us pay attention to his issues. But we must also pay attention to the 90%+ other shareholders. Our responsibility is to do what is right for the broader base of shareholders.

WTT: Mr. Malone, thanks again for speaking with us today. We will look forward to talking to you again after the Special Shareholders Meeting. Meanwhile, do you have any other thoughts or comments you would like to add before we close?

JRM: I have very much appreciated the enthusiasm with which the company has accepted an outsider, if you will, into the organization. I have felt well received and I couldn’t be happier with the response both inside the office here, and just as importantly if not more importantly, in the field. I am privileged to be part of this company. I do believe that this company has the basic assets, positions and people to be very, very successful, and I plan to take it there.

This Interview was conducted by Cary Sherburne. She can be reached via email at cary@sherburneassociates.com, online at www.sherburneassociates.com and by telephone at 603-430-5463.

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