-- Adjusted EPS of $0.01 per share -- Cash from Operating Activities of $10.3 millionAmerican Reprographics Company (
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
September 30, December 31,
------------- ------------
2010 2009
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 29,755 $ 29,377
Accounts receivable, net 58,432 53,919
Inventories, net 11,034 10,605
Deferred income taxes 5,640 5,568
Prepaid expenses and other current assets 13,082 7,011
------------- ------------
Total current assets 117,943 106,480
Property and equipment, net 60,402 74,568
Goodwill 294,759 332,518
Other intangible assets, net 66,592 74,208
Deferred financing costs, net 2,923 4,082
Deferred income taxes 36,816 26,987
Other assets 2,157 2,111
------------- ------------
Total assets $ 581,592 $ 620,954
============= ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 24,180 $ 23,355
Accrued payroll and payroll-related expenses 11,575 8,804
Accrued expenses 24,353 24,540
Current portion of long-term debt and capital
leases 64,444 53,520
------------- ------------
Total current liabilities 124,552 110,219
Long-term debt and capital leases 183,802 220,711
Other long-term liabilities 9,067 8,000
------------- ------------
Total liabilities 317,421 338,930
------------- ------------
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; 46,172,122 and 46,112,653
shares issued and 45,724,468 and 45,664,999
shares outstanding in 2010 and 2009,
respectively 46 46
Additional paid-in capital 94,550 89,982
Retained earnings 178,213 200,961
Accumulated other comprehensive loss (7,078) (7,273)
------------- ------------
265,731 283,716
Less cost of common stock in treasury, 447,654
shares in 2010 and 2009 7,709 7,709
------------- ------------
Total American Reprographics Company
stockholders' equity 258,022 276,007
Noncontrolling interest 6,149 6,017
------------- ------------
Total stockholders' equity 264,171 282,024
------------- ------------
Total liabilities and stockholders' equity $ 581,592 $ 620,954
============= ============
American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Reprographics services $ 72,709 $ 81,989 $ 227,419 $ 274,663
Facilities management 22,602 23,395 67,632 75,158
Equipment and supplies
sales 14,110 13,966 41,619 40,066
---------- ---------- ---------- ----------
Total net sales 109,421 119,350 336,670 389,887
Cost of sales 74,403 78,219 225,346 247,622
---------- ---------- ---------- ----------
Gross profit 35,018 41,131 111,324 142,265
Selling, general and
administrative expenses 26,612 27,330 81,912 88,335
Amortization of intangible
assets 2,466 2,777 7,659 8,674
Goodwill impairment 38,263 37,382 38,263 37,382
Impairment of long-lived
assets - 781 - 781
---------- ---------- ---------- ----------
(Loss) income from
operations (32,323) (27,139) (16,510) 7,093
Other income, net (52) (41) (129) (138)
Interest expense, net 5,614 6,428 17,256 18,060
---------- ---------- ---------- ----------
Loss before income tax
(benefit) provision (37,885) (33,526) (33,637) (10,829)
Income tax (benefit)
provision (12,668) (5,334) (10,862) 3,520
---------- ---------- ---------- ----------
Net loss (25,217) (28,192) (22,775) (14,349)
Loss attributable to the
noncontrolling interest 73 28 27 39
---------- ---------- ---------- ----------
Net loss attributable to
American Reprographics
Company $ (25,144) $ (28,164) $ (22,748) $ (14,310)
========== ========== ========== ==========
Earnings per share
attributable to American
Reprographics Company
shareholders:
Basic $ (0.56) $ (0.62) $ (0.50) $ (0.32)
========== ========== ========== ==========
Diluted $ (0.56) $ (0.62) $ (0.50) $ (0.32)
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 45,224,369 45,138,446 45,190,660 45,115,059
Diluted 45,224,369 45,138,446 45,190,660 45,115,059
American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities
to EBIT and EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Cash flows provided by
operating activities $ 10,262 $ 19,566 $ 38,008 $ 75,364
Changes in operating assets
and liabilities 6,166 704 7,443 (8,851)
Non-cash (expenses) income,
including
depreciation and amortization (41,645) (48,462) (68,226) (80,862)
Income tax (benefit) provision (12,668) (5,334) (10,862) 3,520
Interest expense 5,614 6,428 17,256 18,060
Net loss attributable to the
noncontrolling interest 73 28 27 39
--------- --------- --------- ---------
EBIT (32,198) (27,070) (16,354) 7,270
Depreciation and amortization 10,757 12,185 33,521 37,651
Stock-based compensation 1,453 1,403 4,371 3,564
--------- --------- --------- ---------
EBITDA $ (19,988) $ (13,482) $ 21,538 $ 48,485
========= ========= ========= =========
American Reprographics Company
Non-GAAP Measures
Reconciliation of net loss attributable to ARC to unaudited adjusted
net income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2010 2009 2010 2009
---------- ---------- ---------- ----------
Net loss attributable to
ARC $ (25,144) $ (28,164) $ (22,748) $ (14,310)
Goodwill impairment 38,263 37,382 38,263 37,382
Impairment of long-lived
assets - 781 - 781
Ineffective portion of
Swap
Transaction 44 960 150 960
Income tax benefit,
related
to above items (12,838) (8,041) (12,880) (8,041)
---------- ---------- ---------- ----------
Unaudited adjusted net
income attributable to
ARC $ 325 $ 2,918 $ 2,785 $ 16,772
========== ========== ========== ==========
Earnings per share
attributable to ARC
shareholders (actual):
Basic $ (0.56) $ (0.62) $ (0.50) $ (0.32)
========== ========== ========== ==========
Diluted $ (0.56) $ (0.62) $ (0.50) $ (0.32)
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 45,224,369 45,138,446 45,190,660 45,115,059
Diluted 45,224,369 45,138,446 45,190,660 45,115,059
Earnings per share
attributable to ARC
shareholders (adjusted):
Basic $ 0.01 $ 0.06 $ 0.06 $ 0.37
========== ========== ========== ==========
Diluted $ 0.01 $ 0.06 $ 0.06 $ 0.37
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 45,224,369 45,138,446 45,190,660 45,115,059
Diluted 45,439,385 45,352,608 45,432,553 45,229,386
American Reprographics Company
Non-GAAP Measures
Reconciliation of net loss attributable to ARC to EBIT and adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Net loss attributable to ARC $ (25,144) $ (28,164) $ (22,748) $ (14,310)
Interest expense, net 5,614 6,428 17,256 18,060
Income tax (benefit) provision (12,668) (5,334) (10,862) 3,520
--------- --------- --------- ---------
EBIT (32,198) (27,070) (16,354) 7,270
Depreciation and amortization 10,757 12,185 33,521 37,651
Stock-based compensation 1,453 1,403 4,371 3,564
--------- --------- --------- ---------
EBITDA $ (19,988) $ (13,482) $ 21,538 $ 48,485
========= ========= ========= =========
Special items:
Goodwill impairment 38,263 37,382 38,263 37,382
Impairment of long-lived
assets - 781 - 781
--------- --------- --------- ---------
Adjusted EBITDA $ 18,275 $ 24,681 $ 59,801 $ 86,648
========= ========= ========= =========
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, amortization and stock-based
compensation. Deducting stock-based compensation in calculating EBITDA is
consistent with the definition of EBITDA in our amended credit and guaranty
agreement, therefore we believe this information is useful to investors in
assessing our ability to meet our debt covenants. 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.
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 we 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 2010 third quarter report on Form 10-Q. Additionally, please refer to
our 2009 Annual Report on Form 10-K.
We have presented adjusted net loss attributable to ARC and adjusted
earnings per share attributable to ARC shareholders for the three and nine
months ended September 30, 2010 and 2009 to reflect the exclusion of the
goodwill impairment charges, long-lived assets impairment charge and the
ineffective portion of the Swap Transaction. This presentation facilitates
a meaningful comparison of our operating results for the three and nine
months ended September 30, 2010 and 2009. We presented adjusted EBITDA in
the three and nine months ended September 30, 2010 and 2009 to exclude the
non-cash goodwill and long-lived assets impairment total charges of $38.3
million and $38.2 million, respectively, 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 (the "Amended Credit Agreement") 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,
-------------------- --------------------
2010 2009 2010 2009
--------- --------- --------- ---------
Cash flows from operating
activities
Net loss $ (25,217) $ (28,192) $ (22,775) $ (14,349)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Allowance for accounts
receivable 281 299 598 2,842
Depreciation 8,291 9,408 25,862 28,977
Amortization of intangible
assets 2,466 2,777 7,659 8,674
Amortization of deferred
financing costs 389 317 1,159 972
Goodwill impairment 38,263 37,382 38,263 37,382
Impairment of long-lived
assets - 781 - 781
Stock-based compensation 1,453 1,403 4,371 3,564
Excess tax benefit related
to stock-based compensation - (13) (38) (18)
Deferred income taxes (9,914) (3,929) (9,750) (2,258)
Other noncash items, net 416 37 102 (54)
Changes in operating assets
and liabilities, net of
effect of business
acquisitions:
Accounts receivable 751 5,503 (5,033) 11,237
Inventory 829 (563) (456) 355
Prepaid expenses and other
assets (3,582) (1,479) (5,516) 3,675
Accounts payable and
accrued expenses (4,164) (4,165) 3,562 (6,416)
--------- --------- --------- ---------
Net cash provided by operating
activities 10,262 19,566 38,008 75,364
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (2,919) (1,928) (5,696) (5,852)
Payments for businesses
acquired, net of cash acquired
and including other cash
payments associated with
the acquisitions (500) (1,102) (500) (2,023)
Other (91) 274 754 716
--------- --------- --------- ---------
Net cash used in investing
activities (3,510) (2,756) (5,442) (7,159)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from stock option
exercises - 46 125 63
Proceeds from issuance of
common stock under Employee
Stock Purchase Plan 21 70 37 116
Excess tax benefit related to
stock-based compensation - 13 38 18
Payments on long-term debt
agreements and capital leases (10,607) (14,632) (32,203) (55,838)
Net borrowings (repayments)
under revolving credit
facility (327) - (450) -
Payment of loan fees - - - (44)
--------- --------- --------- ---------
Net cash used in financing
activities (10,913) (14,503) (32,453) (55,685)
--------- --------- --------- ---------
Effect of foreign currency
translation on cash balances 243 (14) 265 117
--------- --------- --------- ---------
Net change in cash and cash
equivalents (3,918) 2,293 378 12,637
Cash and cash equivalents at
beginning of period 33,673 56,886 29,377 46,542
--------- --------- --------- ---------
Cash and cash equivalents at
end of period $ 29,755 $ 59,179 $ 29,755 $ 59,179
========= ========= ========= =========
Supplemental disclosure of
cash flow information
Noncash investing and financing
activities
Noncash transactions include
the following:
Capital lease obligations
incurred $ 2,408 $ 2,411 $ 6,802 $ 12,134
Issuance of subordinated notes
in connection with the
acquisition of businesses $ - $ - $ - $ 246
Net gain (loss) on derivative $ 55 $ 289 $ (119) $ 2,476
Contact Information: Contacts: David Stickney American Reprographics Company Phone: 925-949-5100 Joseph Villalta The Ruth Group Phone: 646-536-7003