-- Revenue of $174.6 Million
-- Net Income of $15.1 Million, or Fully Diluted EPS of $0.33
-- Gross Margin of 40.1%
-- YTD Cash from Operating Activities of $95.3 Million
-- Reaffirms September 2008 Forecast: Revenue of $700-$710 million, EPS
of $1.36-$1.40
American Reprographics Company (
-- Prolonged volatility in financial markets that result in restrictive
lending conditions for private construction projects and reduce business
activity in the markets in which we operate could have a negative effect on
our results of operations and financial condition;
-- The continued downturn in the architectural, engineering and
construction industries would 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 not
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
reports on Form 10-Q for the quarters ended March 31, 2008, and June 30,
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 November 6, 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)
September December
30, 31,
--------- ---------
2008 2007
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 34,629 $ 24,802
Restricted cash 1,959 937
Accounts receivable, net 97,179 97,934
Inventories, net 12,388 11,233
Deferred income taxes 5,793 5,791
Prepaid expenses and other current assets 16,156 10,234
--------- ---------
Total current assets 168,104 150,931
Property and equipment, net 89,268 84,634
Goodwill 397,188 382,519
Other intangible assets, net 87,176 86,349
Deferred financing costs, net 3,868 5,170
Deferred income taxes 3,488 10,710
Other assets 2,156 2,298
--------- ---------
Total assets $ 751,248 $ 722,611
========= =========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 31,307 $ 35,659
Accrued payroll and payroll-related expenses 17,331 19,293
Accrued expenses 22,012 22,030
Current portion of long-term debt and capital leases 56,715 69,254
--------- ---------
Total current liabilities 127,365 146,236
Long-term debt and capital leases 307,263 321,013
Other long-term liabilities 4,189 3,711
Minority interest 6,057 -
--------- ---------
Total liabilities 444,874 470,960
--------- ---------
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; 45,673,535 and 45,561,773 shares issued
and outstanding 46 46
Additional paid-in capital 84,231 81,153
Deferred stock-based compensation (302) (673)
Retained earnings 231,533 179,092
Accumulated other comprehensive income (1,425) (258)
--------- ---------
314,083 259,360
Less cost of common stock in treasury, 447,654 shares
in 2008 and 2007 7,709 7,709
--------- ---------
Total stockholders' equity 306,374 251,651
--------- ---------
Total liabilities and stockholders' equity $ 751,248 $ 722,611
========= =========
American Reprographics Company
Consolidated Statements of Income
(Dollars in thousands,
except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
---------- ----------- ---------- -----------
Reprographics services $ 127,455 $ 131,655 $ 409,162 $ 384,690
Facilities management 30,977 29,241 91,737 84,581
Equipment and supplies
sales 16,153 15,316 46,070 44,937
---------- ----------- ---------- -----------
Total net sales 174,585 176,212 546,969 514,208
Cost of sales 104,570 103,548 318,263 298,948
---------- ----------- ---------- -----------
Gross profit 70,015 72,664 228,706 215,260
Selling, general and
administrative expenses 38,800 37,175 117,820 105,908
Amortization of intangible
assets 2,987 2,423 8,988 6,619
---------- ----------- ---------- -----------
Income from operations 28,228 33,066 101,898 102,733
Other income (55) - (300) -
Interest expense, net 6,180 6,872 19,885 18,675
---------- ----------- ---------- -----------
Income before minority
interest and income tax
provision 22,103 26,194 82,313 84,058
Minority interest (5) - (5) -
Income tax provision 7,041 10,249 29,877 31,656
---------- ----------- ---------- -----------
Net income $ 15,067 $ 15,945 $ 52,441 $ 52,402
========== =========== ========== ===========
Earnings per share:
Basic $ 0.33 $ 0.35 $ 1.16 $ 1.15
========== =========== ========== ===========
Diluted $ 0.33 $ 0.35 $ 1.15 $ 1.14
========== =========== ========== ===========
Weighted average common
shares outstanding:
Basic 45,066,654 45,486,012 45,054,425 45,429,238
Diluted 45,413,747 45,865,453 45,413,948 45,848,177
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 Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Net income $ 15,067 $ 15,945 $ 52,441 $ 52,402
Interest expense, net 6,180 6,872 19,885 18,675
Income tax provision 7,041 10,249 29,877 31,656
--------- --------- --------- ---------
EBIT 28,288 33,066 102,203 102,733
Depreciation and amortization 12,848 10,500 37,181 28,887
--------- --------- --------- ---------
EBITDA $ 41,136 $ 43,566 $ 139,384 $ 131,620
========= ========= ========= =========
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
--------- --------- --------- ---------
Cash flows provided by
operating activities $ 33,778 $ 25,755 $ 95,263 $ 71,120
Changes in operating assets
and liabilities 1,086 2,695 7,905 14,817
Non-cash (expenses) income,
including depreciation and
amortization (19,797) (12,505) (50,727) (33,535)
Income tax provision 7,041 10,249 29,877 31,656
Interest expense 6,180 6,872 19,885 18,675
--------- --------- --------- ---------
EBIT 28,288 33,066 102,203 102,733
Depreciation and amortization 12,848 10,500 37,181 28,887
--------- --------- --------- ---------
EBITDA $ 41,136 $ 43,566 $ 139,384 $ 131,620
========= ========= ========= =========
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 September 30, 2008 and 2007,
respectively and $3.1 million and $2.6 million of stock based compensation
expense, for the nine months ended September 30, 2008 and 2007,
respectively. EBIT margin is a non-GAAP measure calculated by dividing EBIT
by net sales. EBITDA margin is a non-GAAP measure calculated by dividing
EBITDA by net sales. 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 and EBITDA 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 for U.S. operating segments. 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 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)
Nine Months Ended
September 30,
------------------
2008 2007
-------- --------
Cash flows from operating activities
Net income $ 52,441 $ 52,402
Adjustments to reconcile net income to net cash
provided by operating activities:
Allowance for doubtful accounts 3,164 738
Depreciation 28,193 22,268
Amortization of intangible assets 8,988 6,619
Amortization of deferred financing costs 936 357
Minority interest (5) -
Stock-based compensation 3,143 2,578
Excess tax benefit related to stock options
exercised (102) (1,541)
Deferred income taxes 6,498 2,278
Write-off of deferred financing costs 313 -
Litigation charge - 612
Other noncash items, net (401) (374)
Changes in operating assets and liabilities, net
of effect of business acquisitions:
Accounts receivable 1,900 (10,837)
Inventory 1,251 (488)
Prepaid expenses and other assets (4,795) 654
Accounts payable and accrued expenses (6,261) (4,146)
-------- --------
Net cash provided by operating activities 95,263 71,120
-------- --------
Cash flows from investing activities
Capital expenditures (6,359) (7,112)
Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions (18,216) (97,831)
Restricted cash (1,022) -
Other 946 345
-------- --------
Net cash used in investing activities (24,651) (104,598)
-------- --------
Cash flows from financing activities
Proceeds from stock option exercises 177 1,098
Proceeds from issuance of common stock under Employee
Stock Purchase Plan 27 82
Excess tax benefit related to stock options exercised 102 1,541
Proceeds from borrowings under debt agreements - 50,000
Payments on long-term debt agreements and capital
leases (38,507) (20,154)
Net (repayments) borrowings under revolving credit
facility (22,000) 9,629
Payment of loan fees (726) (433)
-------- --------
Net cash (used in) provided by financing activities (60,927) 41,763
-------- --------
Effect of foreign currency translation on cash balances 142 230
-------- --------
Net change in cash and cash equivalents 9,827 8,515
Cash and cash equivalents at beginning of period 24,802 11,642
-------- --------
Cash and cash equivalents at end of period $ 34,629 $ 20,157
======== ========
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Noncash transactions include the following:
Capital lease obligations incurred $ 26,611 $ 28,738
Issuance of subordinated notes in connection with
the acquisition of businesses $ 7,653 $ 7,342
Change in fair value of derivatives, net of tax
effects $ 780 $ (95)
Contact Information: Contacts: David Stickney VP of Corporate Communications Phone: 925-949-5100 Email: