-- Revenue of $184.9 Million; Growth of 4.0%
-- Reports Net Income of $18.9 Million, or Fully Diluted EPS of $0.42
-- Gross Margin of 42.8%
-- Reaffirms Full-Year Forecast: Revenue of $720-$760, EPS of $1.52-$1.60
American Reprographics Company (
-- The current downturn or a future general downturn in the
architectural, engineering and construction industries could diminish
demand for our products and services;
-- Competition in our industry and innovation by our competitors may
hinder our ability to execute our business strategy and maintain our
profitability;
-- Failure to anticipate and adapt to future changes in our industry
could harm our competitive position;
-- Failure to manage our acquisitions, including our inability to
integrate and merge the business operations of the acquired companies, and
failure to retain key personnel and customers of acquired companies could
have a negative effect on our future performance, results of operations and
financial condition;
-- Dependence on certain key vendors for equipment, maintenance services
and supplies, could make us vulnerable to supply shortages and price
fluctuations;
-- Damage or disruption to our facilities, our technology centers, our
vendors or a majority of our customers could impair our ability to
effectively provide our services and may have a significant impact on our
revenues, expenses and financial condition;
-- If we fail to continue to develop and introduce new services
successfully, our competitive positioning and our ability to grow our
business could be harmed.
The foregoing list of risks and uncertainties is illustrative but is by no
means exhaustive. For more information on factors that may affect future
performance, please review our SEC filings, specifically our annual report
on Form 10-K for the year ended December 31, 2007, and our quarterly report
on Form 10-Q for the quarter ended March 31, 2008. These documents contain
important risk factors that could cause actual results to differ materially
from those contained in our projections or forward-looking statements.
These forward-looking statements are based on information as of August 7,
2008, and except as required by law, the Company undertakes no obligation
to update or revise any forward-looking statements.
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
June 30, December 31,
------------ ------------
2008 2007
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 16,782 $ 24,802
Restricted cash 13,549 937
Accounts receivable, net 101,754 97,934
Inventories, net 10,973 11,233
Deferred income taxes 5,792 5,791
Prepaid expenses and other current assets 11,782 10,234
------------ ------------
Total current assets 160,632 150,931
Property and equipment, net 87,985 84,634
Goodwill 387,862 382,519
Other intangible assets, net 81,712 86,349
Deferred financing costs, net 4,204 5,170
Deferred income taxes 7,319 10,710
Other assets 2,193 2,298
------------ ------------
Total assets $ 731,907 $ 722,611
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 32,588 $ 35,659
Accrued payroll and payroll-related expenses 20,919 19,293
Accrued expenses 20,980 22,030
Current portion of long-term debt and capital
leases 52,589 69,254
------------ ------------
Total current liabilities 127,076 146,236
Long-term debt and capital leases 310,484 321,013
Other long-term liabilities 3,338 3,711
------------ ------------
Total liabilities 440,898 470,960
------------ ------------
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.001 par value, 25,000,000
shares authorized; zero and zero shares issued
and outstanding -- --
Common stock, $0.001 par value, 150,000,000
shares authorized; 45,654,726 and 45,561,773
shares issued and outstanding 46 46
Additional paid-in capital 83,073 81,153
Deferred stock-based compensation (415) (673)
Retained earnings 216,466 179,092
Accumulated other comprehensive income (452) (258)
------------ ------------
298,718 259,360
Less cost of common stock in treasury, 447,654
shares in 2008 and 2007 7,709 7,709
------------ ------------
Total stockholders' equity 291,009 251,651
------------ ------------
Total liabilities and stockholders' equity $ 731,907 $ 722,611
============ ============
American Reprographics Company
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
---------- ----------- ---------- -----------
Reprographics services $ 139,211 $ 133,257 $ 281,707 $ 253,035
Facilities management 31,209 28,984 60,760 55,340
Equipment and supplies
sales 14,521 15,542 29,917 29,621
---------- ----------- ---------- -----------
Total net sales 184,941 177,783 372,384 337,996
Cost of sales 105,853 102,967 213,693 195,401
---------- ----------- ---------- -----------
Gross profit 79,088 74,816 158,691 142,595
Selling, general and
administrative expenses 39,499 34,499 79,020 68,733
Amortization of intangible
assets 2,813 2,451 6,001 4,196
---------- ----------- ---------- -----------
Income from operations 36,776 37,866 73,670 69,666
Other income (43) - (245) -
Interest expense, net 6,559 6,642 13,705 11,802
---------- ----------- ---------- -----------
Income before income tax
provision 30,260 31,224 60,210 57,864
Income tax provision 11,384 11,612 22,836 21,407
---------- ----------- ---------- -----------
Net income $ 18,876 $ 19,612 $ 37,374 $ 36,457
========== =========== ========== ===========
Earnings per share:
Basic $ 0.42 $ 0.43 $ 0.83 $ 0.80
========== =========== ========== ===========
Diluted $ 0.42 $ 0.43 $ 0.82 $ 0.80
========== =========== ========== ===========
Weighted average common
shares outstanding:
Basic 45,051,449 45,455,828 45,048,244 45,400,380
Diluted 45,441,766 45,880,187 45,407,309 45,832,024
American Reprographics Company
Non-GAAP Measures
Reconciliation of Net Income to EBIT and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Net income $ 18,876 $ 19,612 $ 37,374 $ 36,457
Interest expense, net 6,559 6,642 13,705 11,802
Income tax provision 11,384 11,612 22,836 21,407
-------- -------- -------- --------
EBIT 36,819 37,866 73,915 69,666
Depreciation and amortization 12,216 10,029 24,333 18,387
-------- -------- -------- --------
EBITDA $ 49,035 $ 47,895 $ 98,248 $ 88,053
======== ======== ======== ========
Three Months Ended Six Months Ended
June 30, June 30,
2008 2007 2008 2007
-------- -------- -------- --------
Cash flows provided by operating
activities $ 41,137 $ 33,959 $ 61,485 $ 45,365
Changes in operating assets
and liabilities (6,096) (2,711) 6,819 12,121
Non-cash (expenses) income,
including depreciation and
amortization (16,165) (11,636) (30,930) (21,029)
Income tax provision 11,384 11,612 22,836 21,407
Interest expense 6,559 6,642 13,705 11,802
-------- -------- -------- --------
EBIT 36,819 37,866 73,915 69,666
Depreciation and amortization 12,216 10,029 24,333 18,387
-------- -------- -------- --------
EBITDA $ 49,035 $ 47,895 $ 98,248 $ 88,053
======== ======== ======== ========
Note 1. Non-GAAP Measures
EBIT and EBITDA and related ratios presented in this report are
supplemental measures of our performance that are not required by or
presented in accordance with GAAP. These measures are not measurements of
our financial performance under GAAP and should not be considered as
alternatives to net income, income from operations, or any other
performance measures derived in accordance with GAAP or as an alternative
to cash flow from operating, investing or financing activities as a measure
of our liquidity.
EBIT represents net income before interest and taxes. EBITDA represents net
income before interest, taxes, depreciation and amortization. Amortization
does not include $1.1 million and $1.0 million of stock based compensation
expense, for the three months ended June 30, 2008 and 2007, respectively
and $2.0 million and $1.6 million of stock based compensation expense, for
the six months ended June 30, 2008 and 2007, respectively.
We present EBIT and EBITDA and related ratios because we consider them
important supplemental measures of our performance and liquidity. We
believe investors may also find these measures meaningful, given how our
management makes use of them. The following is a discussion of our use of
these measures.
We use EBIT to measure and compare the performance of our operating
segments. Our operating segments' financial performance includes all of the
operating activities except for debt and taxation which are managed at the
corporate level. As a result, EBIT is the best measure of divisional
profitability and the most useful metric by which to measure and compare
the performance of our operating segments. We also use EBIT to measure
performance for determining operating division-level compensation and use
EBITDA to measure performance for determining consolidated-level
compensation. We also use EBITDA as a metric to manage cash flow from our
operating segments to the corporate level and to determine the financial
health of each operating segment. As noted above, since debt and taxation
are managed at the corporate level, the cash flow from each operating
segment should be approximately equal to the corresponding EBITDA of each
operating segment, assuming no other changes to an operating segment's
balance sheet. As a result, we reconcile EBITDA to cash flow monthly as one
of our key internal controls. We also use EBIT and EBITDA to evaluate
potential acquisitions and to evaluate whether to incur capital
expenditures.
EBIT, EBITDA and related ratios have limitations as analytical tools, and
you should not consider them in isolation, or as a substitute for analysis
of our results as reported under GAAP. Some of these limitations are as
follows:
-- They do not reflect our cash expenditures, or future
requirements for capital expenditures and contractual commitments;
-- They do not reflect changes in, or cash requirements for, our
working capital needs;
-- They do not reflect the significant interest expense, or the
cash requirements necessary, to service interest or principal
payments on our debt;
-- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to
be replaced in the future, and EBITDA does not reflect any cash
requirements for such replacements; and
-- Other companies, including companies in our industry, may
calculate these measures differently than we do, limiting their
usefulness as comparative measures.
Because of these limitations, EBIT, EBITDA, and related ratios should not
be considered as measures of discretionary cash available to us to invest
in business growth or to reduce our indebtedness. We compensate for these
limitations by relying primarily on our GAAP results and using EBIT and
EBITDA only as supplements. For more information, see our consolidated
financial statements and related notes elsewhere in this report.
Additionally, please refer to our 2007 Annual Report on Form 10-K.
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Six Months Ended
June 30,
------------------
2008 2007
-------- --------
Cash flows from operating activities
Net income $ 37,374 $ 36,457
Adjustments to reconcile net income to net cash
provided by operating activities:
Allowance for doubtful accounts 1,909 438
Depreciation 18,332 14,191
Amortization of intangible assets 6,001 4,196
Amortization of deferred financing costs 600 215
Stock-based compensation 2,029 1,569
Excess tax benefit related to stock options
exercised (54) (1,534)
Deferred income taxes 2,239 1,840
Write-off of deferred financing costs 313 -
Litigation charge - 407
Other noncash items, net (439) (292)
Changes in operating assets and liabilities, net of
effect of business acquisitions:
Accounts receivable (5,088) (9,775)
Inventory 726 (362)
Prepaid expenses and other assets (987) (2,583)
Accounts payable and accrued expenses (1,470) 598
-------- --------
Net cash provided by operating activities 61,485 45,365
-------- --------
Cash flows from investing activities
Capital expenditures (4,332) (5,232)
Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions (5,478) (86,546)
Restricted cash (12,612) -
Other 785 283
-------- --------
Net cash used in investing activities (21,637) (91,495)
-------- --------
Cash flows from financing activities
Proceeds from stock option exercises 70 1,080
Proceeds from issuance of common stock under Employee
Stock Purchase Plan 25 52
Excess tax benefit related to stock options exercised 54 1,534
Proceeds from borrowings under debt agreements - 50,000
Payments on long-term debt agreements and capital
leases (25,254) (12,952)
Net (repayments) borrowings under revolving credit
facility (22,000) 11,629
Payment of loan fees (726) (429)
-------- --------
Net cash (used in) provided by financing activities (47,831) 50,914
-------- --------
Effect of foreign currency translation on cash balances (37) -
-------- --------
Net change in cash and cash equivalents (8,020) 4,784
Cash and cash equivalents at beginning of period 24,802 11,642
-------- --------
Cash and cash equivalents at end of period $ 16,782 $ 16,426
======== ========
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Noncash transactions include the following:
Capital lease obligations incurred $ 18,353 $ 19,589
Issuance of subordinated notes in connection with
the acquisition of businesses $ 1,817 $ 4,550
Change in fair value of derivatives, net of tax
effects $ (3) $ 66
Contact Information: Contact: David Stickney VP of Corporate Communications Phone: 925-949-5100 Email: