WALNUT CREEK, CA--(Marketwire - November 5, 2009) - American Reprographics Company (NYSE: ARP)
-- Adjusted EPS of $0.06 per share
-- Cash from Operating Activities of $19.6 million
American Reprographics Company (NYSE: ARP) (the "Company" or "ARC"), the
nation's leading provider of reprographic services and technology, today
reported its financial results for the third quarter ended September 30,
2009.
"The Company continues to perform very well despite the ongoing challenges
in the end market," said K. "Suri" Suriyakumar, Chairman, President and
CEO. "At $19.6 million, our quarterly cash flow from operations remained
extraordinarily healthy, and at 19.5%, our EBITDA margin reiterates our
ability to remain flexible and available to pursue growth opportunities. We
were also gratified to see a stabilizing trend in daily sales continue
through the end of the quarter. Knowing how well positioned ARC is in the
current environment, we will continue to focus on the future by putting the
building blocks in place for new opportunities and new revenue streams as
the economy recovers."
Net revenue for the third quarter of 2009 was $119.4 million and gross
margin was 34.5%. ARC reported a net loss of income for the third quarter
of 2009 of $27.6 million, or a loss of $0.61 per diluted share, which
included a goodwill impairment charge of $37.4 million based on its annual
goodwill impairment assessment conducted as of September 30, 2009 (see
description below). Adjusted to exclude the period's goodwill impairment,
an impairment of long-lived assets, and a possible one-time charge
associated with our amended credit agreement, net income for the third
quarter of 2009 was $2.9 million, or $0.06 per diluted share.
Net revenue for the nine-month period ended September 30, 2009 was $389.9
million and gross margin was 36.5%. ARC reported a net loss for the first
nine months of 2009 of $13.7 million, or a loss of $0.30 per diluted share.
Adjusted to exclude the impairments and possible one-time charge for the
third quarter, net income for the first nine months of 2009 was $16.8
million, or $0.37 per diluted share.
Jonathan Mather, Chief Financial Officer, said, "Our capital structure is
showing continual improvement as we make aggressive use of our positive
cash flow to reduce our debt. To date, including the pre-payment of $36
million we made as a part of amending our credit agreement in early
October, we have addressed more than $90 million of our debt obligations."
Impairment of Goodwill, Long-Lived Assets and Certain One-Time Charges
The Company assesses goodwill for impairment at least annually as of
September 30, or more frequently if events and circumstances indicate that
goodwill might be impaired. Based on our annual assessment, we recorded a
$37.4 million impairment as of September 30, 2009. ARC also recorded an
impairment charge of approximately $781,000 against certain of its
long-lived assets. In addition, there is a possible one-time charge of
$700,000 to $1.3 million related to the Company's interest swap transaction
incurred in connection with the Company's amended credit agreement which
may be recorded in the financial statements for third quarter of 2009. The
Company will not be required to make any current or future cash
expenditures as a result of the impairments. The impairments and any
one-time charge will be reflected in the Company's unaudited financial
statements included in the Company's Form
10-Q for the third quarter of 2009 to be filed with the U.S. Securities and
Exchange Commission.
Outlook
The Company reaffirmed its revised annual earnings per share and cash flow
from operations forecast for 2009, excluding any one-time financing charge
arising from the amendment to its credit agreement in October 2009, and the
impairments recorded in the third quarter of 2009. EPS for the full year
of 2009 is forecast to be in the range of $0.27 to $0.33 on a fully-diluted
basis. Cash flow from operations for the same period is projected to be in
the range of $70 million to $90 million.
Teleconference and Webcast
American Reprographics Company will host a conference call and audio
webcast today at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time) to discuss
results for the Company's third quarter 2009 and business outlook. The
conference call can be accessed by dialing 866-921-3926. The conference ID
number is 34405657.
A replay of this call will be available approximately one hour after the
call for seven days following the call's conclusion. To access the replay,
dial 800-642-1687. The conference ID number is 34405657.
A Web archive will be made available at http://www.e-arc.com for
approximately 90 days following the call's conclusion.
About American Reprographics Company
American Reprographics Company is the leading reprographics company in the
United States providing business-to-business document management technology
and services to the architectural, engineering and construction, or AEC
industries. The Company provides these services to companies in non-AEC
industries, such as technology, financial services, retail, entertainment,
and food and hospitality, which also require sophisticated document
management services. American Reprographics Company provides its core
services through its suite of reprographics technology products, a network
of hundreds of locally-branded reprographics service centers across the
U.S., Canada and the U.K, on-site at more than 5,000 customer locations,
and through UDS, a joint-venture company headquartered in Beijing, China.
The Company's service centers are arranged in a hub and satellite structure
and are digitally connected as a cohesive network, allowing the provision
of services both locally and nationally to more than 160,000 active
customers.
Forward-Looking Statements
This press release contains forward-looking statements that are based on
current opinions and estimates of management regarding future events and
the future financial performance of the Company. Words such as "forecast,"
"outlook," "will," and similar expressions identify forward-looking
statements. We caution you that such statements are only predictions and
are subject to certain risks and uncertainties that could cause actual
results to differ materially from those contained in the forward-looking
statements. Factors that could cause our actual results to differ
materially from those set forth in the forward-looking statements include,
but are not limited to, the current economic recession and downturn in the
architectural, engineering and construction industries specifically; our
ability to streamline operations and costs; competition in our industry and
innovation by our competitors; our failure to anticipate and adapt to
future changes in our industry; our failure to pursue growth opportunities
and/or to complete acquisitions, or our failure to manage our acquisitions,
including our inability to integrate and merge the business operations of
acquired companies or our failure to retain key personnel and customers of
acquired companies; our dependence on certain key vendors for equipment,
maintenance services and supplies; damage or disruption to our facilities,
our technology centers, our vendors or a majority of our customers; and our
failure to continue to develop and introduce new services successfully.
The foregoing list of risks and uncertainties is illustrative but is by no
means exhaustive. For more information on factors that may affect our
future performance, please review our periodic filings with the U.S.
Securities and Exchange Commission, and specifically the risk factors set
forth in our most recent reports on Form 10-K and Form 10-Q. The Company
undertakes no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events, or
otherwise, except as required by law.
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
September 30, December 31,
------------- -------------
2009 2008
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 59,179 $ 46,542
Accounts receivable, net 63,749 77,216
Inventories, net 11,672 11,097
Deferred income taxes 5,827 5,831
Prepaid expenses and other current assets 9,624 11,976
------------- -------------
Total current assets 150,051 152,662
Property and equipment, net 78,169 89,712
Goodwill 330,665 366,513
Other intangible assets, net 76,846 85,967
Deferred financing costs, net 2,609 3,537
Deferred income taxes 25,981 25,404
Other assets 2,200 2,136
------------- -------------
Total assets $ 666,521 $ 725,931
============= =============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 23,159 $ 25,171
Accrued payroll and payroll-related expenses 11,572 13,587
Accrued expenses 23,171 24,913
Current portion of long-term debt and capital
leases 79,064 59,193
------------- -------------
Total current liabilities 136,966 122,864
Long-term debt and capital leases 238,521 301,847
Other long-term liabilities 10,465 13,318
------------- -------------
Total liabilities 385,952 438,029
------------- -------------
Commitments and contingencies
Stockholders' equity:
American Reprographics Company 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;
45,760,397 and 45,674,810 shares issued and
45,312,743 and 45,227,156 shares outstanding
in 2009 and 2008, respectively 46 46
Additional paid-in capital 88,806 85,207
Deferred stock-based compensation - (195)
Retained earnings 202,151 215,846
Accumulated other comprehensive loss (8,807) (11,414)
------------- -------------
282,196 289,490
Less cost of common stock in treasury,
447,654 shares in 2009 and 2008 7,709 7,709
------------- -------------
Total American Reprographics Company
stockholders' equity 274,487 281,781
Noncontrolling interest 6,082 6,121
------------- -------------
Total stockholders' equity 280,569 287,902
------------- -------------
Total liabilities and stockholders' equity $ 666,521 $ 725,931
============= =============
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,
---------------------- ----------------------
2009 2008 2009 2008
---------- ---------- ---------- ----------
Reprographics services $ 81,989 $ 127,455 $ 274,663 $ 409,162
Facilities management 23,395 30,977 75,158 91,737
Equipment and supplies
sales 13,966 16,153 40,066 46,070
---------- ---------- ---------- ----------
Total net sales 119,350 174,585 389,887 546,969
Cost of sales 78,219 104,570 247,622 318,263
---------- ---------- ---------- ----------
Gross profit 41,131 70,015 142,265 228,706
Selling, general and
administrative expenses 27,330 38,800 88,335 117,820
Amortization of intangible
assets 2,777 2,987 8,674 8,988
Goodwill impairment 37,382 - 37,382 -
Impairment of long-lived
assets 781 - 781 -
---------- ---------- ---------- ----------
(Loss) income from
operations (27,139) 28,228 7,093 101,898
Other income, net (41) (55) (138) (300)
Interest expense, net 5,468 6,180 17,100 19,885
---------- ---------- ---------- ----------
Income before income tax
(benefit) provision (32,566) 22,103 (9,869) 82,313
Income tax (benefit)
provision (4,989) 7,041 3,865 29,877
---------- ---------- ---------- ----------
Net (loss) income (27,577) 15,062 (13,734) 52,436
Loss attributable to the
noncontrolling interest 28 5 39 5
---------- ---------- ---------- ----------
Net (loss) income
attributable to American
Reprographics Company $ (27,549) $ 15,067 $ (13,695) $ 52,441
========== ========== ========== ==========
Earnings per share
attributable to American
Reprographics
Company shareholders:
Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16
========== ========== ========== ==========
Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 45,138,446 45,066,654 45,115,059 45,054,425
Diluted 45,138,446 45,413,747 45,115,059 45,413,948
American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT and
EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Cash flows provided by
operating activities $ 19,566 $ 33,778 $ 75,364 $ 95,263
Changes in operating assets
and liabilities 1,306 1,086 (8,249) 7,905
Non-cash (expenses) income,
including depreciation and
amortization (48,449) (19,802) (80,849) (50,732)
Income tax (benefit) provision (4,989) 7,041 3,865 29,877
Interest expense 5,468 6,180 17,100 19,885
Net loss attributable to the
noncontrolling interest 28 5 39 5
--------- --------- --------- ---------
EBIT (27,070) 28,288 7,270 102,203
Depreciation and
amortization 12,185 12,848 37,651 37,181
--------- --------- --------- ---------
EBITDA $ (14,885) $ 41,136 $ 44,921 $ 139,384
========= ========= ========= =========
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited
adjusted net income attributable to ARC and earnings per share to adjusted
earnings per share:
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2009 2008 2009 2008
---------- ----------- ---------- -----------
(Dollars in thousands, except share and per
share data)
Net (loss) income
attributable to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441
Goodwill impairment 37,382 - 37,382 -
Impairment of long-lived
assets 781 - 781 -
Income tax benefit (7,696) - (7,696) -
Unaudited adjusted net
income
---------- ----------- ---------- -----------
attributable to ARC $ 2,918 $ 15,067 $ 16,772 $ 52,441
========== =========== ========== ===========
Earnings per share
attributable to ARC
shareholders (actual):
Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16
========== =========== ========== ===========
Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15
========== =========== ========== ===========
Earnings per share
attributable to ARC
shareholders (adjusted):
Basic $ 0.06 $ 0.33 $ 0.37 $ 1.16
========== =========== ========== ===========
Diluted $ 0.06 $ 0.33 $ 0.37 $ 1.15
========== =========== ========== ===========
Weighted average common
shares
outstanding:
Basic 45,138,446 45,066,654 45,115,059 45,054,425
Diluted 45,138,446 45,413,747 45,115,059 45,413,948
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and
adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- ---------- --------- ----------
(Dollars in thousands)
Net (loss) income attributable
to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441
Interest expense, net 5,468 6,180 17,100 19,885
Income tax (benefit) provision (4,989) 7,041 3,865 29,877
--------- ---------- --------- ----------
EBIT (27,070) 28,288 7,270 102,203
Depreciation and amortization 12,185 12,848 37,651 37,181
--------- ---------- --------- ----------
EBITDA (14,885) 41,136 44,921 139,384
--------- ---------- --------- ----------
Special items:
Goodwill impairment 37,382 - 37,382 -
Impairment of long-lived
assets 781 - 781 -
--------- ---------- --------- ----------
Adjusted EBITDA $ 23,278 $ 41,136 $ 83,084 $ 139,384
========= ========== ========= ==========
Non-GAAP Measures
EBIT, EBITDA and related ratios presented in this report are supplemental
measures of our performance that are not required by or presented in
accordance with accounting principles generally accepted in the United
States of America ("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 flows 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 $1.4 million and $1.1 million of stock based compensation
expense, for the three months ended September 30, 2009 and 2008,
respectively, and $3.6 million and $3.1 million of stock based compensation
expense, for the nine months ended September 30, 2009 and 2008,
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, 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
segment-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, EBITDA
and related ratios only as supplements. For more information, see our
interim Condensed Consolidated Financial Statements and related notes on
our 2009 third quarter report on Form 10-Q. Additionally, please refer to
our 2008 Annual Report on Form 10-K.
We have presented adjusted net income attributable to ARC and adjusted
earnings per share attributable to ARC shareholders for the three and nine
months ended September 30, 2009 and 2008 to reflect the exclusion of the
goodwill and long-lived assets impairment charges. This presentation
facilitates a meaningful comparison of our operating results for the three
and nine months ended September 30, 2009 and 2008. We presented adjusted
EBITDA in the three and nine months ended September 30, 2009 to exclude the
non-cash goodwill and long-lived assets impairment total charges of $38.2
million as we believe this was a result of the current macroeconomic
environment and not indicative of our operations. The exclusion of the
goodwill and long-lived assets impairment charges to arrive at adjusted
EBITDA is consistent with the definition of adjusted EBITDA in the
amendment to the Credit Agreement, therefore we believe this information is
useful to investors in assessing our ability to meet our debt covenants.
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2009 2008 2009 2008
--------- --------- --------- ---------
Cash flows from operating
activities
Net (loss) income $ (27,577) $ 15,062 $ (13,734) $ 52,436
Adjustments to reconcile net
income to net cash provided by
operating activities:
Allowance for accounts
receivable 299 1,255 2,842 3,164
Depreciation 9,408 9,861 28,977 28,193
Amortization of intangible
assets 2,777 2,987 8,674 8,988
Amortization of deferred
financing costs 317 336 972 936
Goodwill impairment 37,382 - 37,382 -
Impairment of long-lived
assets 781 - 781 -
Stock-based compensation 1,403 1,114 3,564 3,143
Excess tax benefit related
to stock options exercised (13) (48) (18) (102)
Deferred income taxes (3,942) 4,259 (2,271) 6,498
Write-off of deferred
financing costs - - - 313
Litigation charge (gain) - - - -
Other noncash items, net 37 38 (54) (401)
Changes in operating assets
and liabilities, net of
effect of business
acquisitions:
Accounts receivable 5,503 6,988 11,237 1,900
Inventory (563) 525 355 1,251
Prepaid expenses and other
assets (1,918) (3,808) 3,236 (4,795)
Litigation settlement
payment - - - -
Accounts payable and
accrued expenses (4,328) (4,791) (6,579) (6,261)
--------- --------- --------- ---------
Net cash provided by operating
activities 19,566 33,778 75,364 95,263
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (1,928) (2,027) (5,852) (6,359)
Payments for businesses
acquired, net of cash acquired
and including other cash
payments associated with
the acquisitions (1,102) (12,738) (2,023) (18,216)
Restricted cash - 11,590 - (1,022)
Other 274 161 716 946
--------- --------- --------- ---------
Net cash used in investing
activities (2,756) (3,014) (7,159) (24,651)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from stock option
exercises 46 107 63 177
Proceeds from issuance of
common stock under Employee
Stock Purchase Plan 70 2 116 27
Treasury stock repurchase - - - -
Excess tax benefit related to
stock options exercised 13 48 18 102
Proceeds from borrowings under
debt agreements - - - -
Payments on long-term debt
agreements and capital leases (14,632) (13,253) (55,838) (38,507)
Net repayments under revolving
credit facility - - - (22,000)
Payment of loan fees - - (44) (726)
--------- --------- --------- ---------
Net cash used in financing
activities (14,503) (13,096) (55,685) (60,927)
--------- --------- --------- ---------
Effect of foreign currency
translation on cash balances (14) 179 117 142
--------- --------- --------- ---------
Net change in cash and cash
equivalents 2,293 17,847 12,637 9,827
Cash and cash equivalents at
beginning of period 56,886 16,782 46,542 24,802
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $ 59,179 $ 34,629 $ 59,179 $ 34,629
========= ========= ========= =========
Supplemental disclosure of
cash flow information
Noncash investing and financing
activities
Noncash transactions include
the following:
Capital lease obligations
incurred $ 2,411 $ 8,258 $ 12,134 $ 26,611
Issuance of subordinated notes
in connection with the
acquisition of businesses $ - $ 5,836 $ 246 $ 7,653
Accrued liabilities in
connection with acquisition
of businesses $ (500) $ - $ - $ -
Stock issued for acquisition $ - $ - $ - $ -
Accrued liabilities in
connection with deferred
financing fees $ - $ - $ - $ -
Change in fair value of
derivative, net of tax
effects $ (312) $ (777) $ 1,875 $ (780)
Contribution from
noncontrolling interest $ - $ 6,062 $ - $ 6,062
Contact Information: Contacts:
David Stickney
American Reprographics Company
Phone: 925-949-5100
Joseph Villalta
The Ruth Group
Phone: 646-536-7003