-- Revenue of $187.4 Million; Growth of 17.0%
-- Reports Net Income of $18.5 Million, or Fully Diluted EPS of $0.41
-- Reaffirms Full-Year Forecast: Revenue of $720-$760 million, EPS of
$1.52-$1.60
American Reprographics Company (
-- The current residential 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 complete acquisitions, or failure to manage our
acquisitions, including our inability to integrate and merge the business
operations of the acquired companies or 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
reports on Form 10-Q for the quarters ended March 31, 2007, June 30, 2007,
and September 30, 2007. 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 May 8, 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)
March 31, December 31,
----------- -----------
2008 2007
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 16,796 $ 24,802
Restricted cash - 937
Accounts receivable, net 106,894 97,934
Inventories, net 11,146 11,233
Deferred income taxes 5,792 5,791
Prepaid expenses and other current assets 10,346 10,234
----------- -----------
Total current assets 150,974 150,931
Property and equipment, net 86,881 84,634
Goodwill 386,657 382,519
Other intangible assets, net 84,471 86,349
Deferred financing costs, net 4,764 5,170
Deferred income taxes 12,261 10,710
Other assets 2,267 2,298
----------- -----------
Total assets $ 728,275 $ 722,611
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 33,955 $ 35,659
Accrued payroll and payroll-related expenses 16,417 19,293
Accrued expenses 23,431 22,030
Current portion of long-term debt and capital
leases 62,128 69,254
----------- -----------
Total current liabilities 135,931 146,236
Long-term debt and capital leases 316,906 321,013
Other long-term liabilities 10,024 3,711
----------- -----------
Total liabilities 462,861 470,960
----------- -----------
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; 45,562,724 and 45,561,773
shares issued and outstanding 46 46
Additional paid-in capital 81,962 81,153
Deferred stock-based compensation (556) (673)
Retained earnings 197,590 179,092
Accumulated other comprehensive income (5,919) (258)
----------- -----------
273,123 259,360
Less cost of common stock in treasury, 447,654
shares in 2007 7,709 7,709
----------- -----------
Total stockholders' equity 265,414 251,651
----------- -----------
Total liabilities and stockholders' equity $ 728,275 $ 722,611
=========== ===========
American Reprographics Company
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
2008 2007
----------- ------------
Reprographics services $ 142,496 $ 119,779
Facilities management 29,551 26,356
Equipment and supplies sales 15,396 14,079
----------- ------------
Total net sales 187,443 160,214
Cost of sales 107,840 92,435
----------- ------------
Gross profit 79,603 67,779
Selling, general and administrative expenses 39,521 34,234
Amortization of intangible assets 3,188 1,745
----------- ------------
Income from operations 36,894 31,800
Other income (202) -
Interest expense, net 7,146 5,161
----------- ------------
Income before income tax provision 29,950 26,639
Income tax provision 11,452 9,795
----------- ------------
Net income $ 18,498 $ 16,844
=========== ============
Earnings per share:
Basic $ 0.41 $ 0.37
=========== ============
Diluted $ 0.41 $ 0.37
=========== ============
Weighted average common shares outstanding:
Basic 45,045,038 45,344,317
Diluted 45,390,827 45,790,548
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
March 31,
2008 2007
----------- -----------
Net income $ 18,498 $ 16,844
Interest expense, net 7,146 5,161
Income tax provision 11,452 9,795
----------- -----------
EBIT 37,096 31,800
Depreciation and amortization 12,117 8,358
----------- -----------
EBITDA $ 49,213 $ 40,158
=========== ===========
Three Months Ended
March 31,
2008 2007
----------- -----------
Cash flows provided by operating activities $ 20,348 $ 11,406
Changes in operating assets and liabilities 12,915 14,833
Non-cash (expenses) income, including
depreciation and amortization (14,765) (9,395)
Income tax provision 11,452 9,795
Interest expense 7,146 5,161
----------- -----------
EBIT 37,096 31,800
Depreciation and amortization 12,117 8,358
----------- -----------
EBITDA $ 49,213 $ 40,158
=========== ===========
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 $0.9 million and $0.6 million of amortization of stock
based compensation, for the three months ended March 31, 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 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)
Three Months Ended
March 31,
------------------------
2008 2007
----------- -----------
Cash flows from operating activities
Net income $ 18,498 $ 16,844
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 8,929 6,613
Amortization of intangible assets 3,188 1,745
Amortization of deferred financing costs 260 89
Stock-based compensation 912 572
Excess tax benefit related to stock options
exercised - (1,138)
Deferred income taxes 613 1,329
Other noncash items, net 863 185
Changes in operating assets and liabilities,
net of effect of business acquisitions:
Accounts receivable (9,478) (7,308)
Inventory 438 (261)
Prepaid expenses and other assets 1,426 217
Accounts payable and accrued expenses (5,301) (7,481)
----------- -----------
Net cash provided by operating activities 20,348 11,406
----------- -----------
Cash flows from investing activities
Capital expenditures (2,301) (2,128)
Payments for businesses acquired, net of cash
acquired and including other cash payments
associated with the acquisitions (4,831) (22,044)
Restricted cash 940 -
Other 554 98
----------- -----------
Net cash used in investing activities (5,638) (24,074)
----------- -----------
Cash flows from financing activities
Proceeds from stock option exercises - 592
Proceeds from issuance of common stock under
Employee Stock Purchase Plan 13 11
Excess tax benefit related to stock options
exercised - 1,138
Payments on long-term debt agreements (12,115) (6,052)
Net (repayments) borrowings under revolving
credit facility (10,000) 18,000
Payment of loan fees (632) -
----------- -----------
Net cash (used in) provided by financing
activities (22,734) 13,689
----------- -----------
Effect of foreign currency translation on cash
balances 18 -
----------- -----------
Net change in cash and cash equivalents (8,006) 1,021
Cash and cash equivalents at beginning of period 24,802 11,642
----------- -----------
Cash and cash equivalents at end of period $ 16,796 $ 12,663
=========== ===========
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Noncash transactions include the following:
Capital lease obligations incurred $ 9,184 $ 7,056
Issuance of subordinated notes in connection
with the acquisition of businesses $ 1,660 $ -
Change in fair value of derivatives $ (5,421) $ (41)
Contact Information: Contacts: David Stickney VP of Corporate Communications Phone: 925-949-5100 Email: Tyler Wilson The Ruth Group Phone: 646-536-7018 Email:twilson@theruthgroup.com