SOURCE: American Reprographics Company

May 08, 2008 16:00 ET

American Reprographics Company Posts Financial Results for First Quarter 2008

WALNUT CREEK, CA--(Marketwire - May 8, 2008) -


--  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 (NYSE: ARP), the nation's leading provider of reprographics services and technology, today reported its financial results for the first quarter ended March 31, 2008.

Net revenue for the first quarter of 2008 was $187.4 million, compared to $160.2 million in the first quarter of 2007, an increase of 17.0%. The Company's gross margin for the first quarter was 42.5% compared to 42.3% in the same period in 2007, and up from 41.2% in the fourth quarter of 2007.

Net income for the first quarter of 2008 was $18.5 million, or $0.41 per diluted share. This compares to net income for the first quarter of 2007 of $16.8 million, or $0.37 per diluted share.

"I'm very pleased with our performance in the first quarter," said K. "Suri" Suriyakumar, President and Chief Executive Officer. "Our performance reinforces my belief that the company is well-positioned to operate successfully even when the broader economy is softening. This has been clearly established by our financial results during the past two quarters. While the indications of a slowing construction market are unmistakable, our continuing focus on sales and improving operational efficiencies, while aggressively implementing cost cutting measures, should continue to serve us well throughout the year."

"The trends in our business mix remain consistent with the bulk of our sales being generated by non-residential construction," said Jonathan Mather, Chief Financial Officer. "As the economy slows, however, we are seeing a small increase in sales of our digital services, suggesting that our offering is appealing to those customers who are trying to manage more of their business more efficiently with less overhead and labor. Our position as the industry leader and the strength of our technology portfolio allow us to offer services that are compelling even in difficult economic conditions, and sometimes because of them."

Outlook

"We have clear evidence in the results of our last two quarters that the Company should be able to perform very well throughout the year," said Mr. Suriyakumar. "As such, we are reaffirming our guidance for 2008 and expect revenues to be in the range of $720 million to $760 million and that earnings per share will be in the range of $ 1.52 to $1.60 on a fully diluted basis."

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 first quarter 2008 and business outlook. The conference call can be accessed by dialing 201-689-8562.

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 201-612-7415. The account number to access the phone replay is 3055 and the conference ID number is 282260.

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 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 more than 300 locally-branded reprographics service centers across the U.S., and on-site at their customers' locations. 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 140,000 active customers.

Forward-Looking Statements Disclaimer

This press release contains forward-looking statements that fall within the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the Company. Words such as "should," "outlook," "will," and similar expressions also identify forward-looking statements. We wish to caution you that such statements are only predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. These risks and uncertainties include, among others:

--  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: Email Contact

    Tyler Wilson
    The Ruth Group
    Phone: 646-536-7018
    Email:twilson@theruthgroup.com