-- Adjusted EPS of $0.06 per share
-- Cash from Operating Activities of $19.6 million
American Reprographics Company (
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