SOURCE: American Reprographics Company

May 03, 2011 16:00 ET

American Reprographics Company Reports Results for First Quarter 2011

WALNUT CREEK, CA--(Marketwire - May 3, 2011) - ARC (NYSE: ARC) (the "Company"), the nation's leading provider of document management services and technology to the architectural, engineering and construction industries, today reported its financial results for the first quarter ended March 31, 2011.

"First quarter results for 2011 were in line with our expectations, but March sales clearly show that project-related activity, which was at its lowest point during the past several years, will continue to remain a challenge for the rest of the year," said K. "Suri" Suriyakumar, Chairman, President and CEO. "However, we were extremely gratified to see the progress we are making in some of our newer service offerings like managed print services (MPS), Global Services and our color business. Together, they helped us offset the revenue decline we saw in project-related printing, and we expect these segments of business to continue to grow through the rest of the year."

Net revenue for the first quarter of 2011 was $106.5 million. The Company's gross margin was 31.3%. ARC reported a loss in net income of $3.6 million for the first quarter of 2011, or $0.08 per diluted share. Adjusted to exclude the previously announced accelerated amortization of trade names, and interest rate swap-related items associated with our previous debt agreement, the Company's quarterly loss in net income was $2.1 million or $0.05 per diluted share. Cash from operating activities was $4.6 million.

Management also noted that its restructuring plans are proceeding as previously announced, including the addition of new infrastructure and staff to address the growth in Global Services, MPS, color and Technology Services. The Company continues to restructure its outsourced reprographics service centers, reducing its staff and its branch network related to traditional revenue streams, including duplicate production facilities that were added to the Company in the past through ARC's aggressive acquisition program. Additional efficiencies will be achieved as a result of the Company's newly unified brand, which consolidates ARC's strong footprint in major metropolitan areas around the country. The Company's restructuring efforts are expected to continue throughout the year with anticipated annualized savings of more than $14 million.

Outlook

The Company reaffirmed its forecast of annual earnings per share in 2011 to be in the range of $0.01 to $0.15 on a fully-diluted basis, and annual cash flow from operations in the range of $40 million to $60 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 first quarter 2011 and business outlook. The conference call can be accessed by dialing 877-402-8179. The conference ID number is 60057717.

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 60057717.

A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call's conclusion.

About ARC

ARC (American Reprographics Company) is the leader in business-to-business document management technology and services to the architectural, engineering and construction, or AEC industries, in the United States. The Company also provides document management services to companies in non-AEC industries, such as technology, financial services, retail, entertainment, and food and hospitality. ARC provides its services through its suite of reprographics technology products, a network of hundreds of reprographics service centers around the world, and on-site at more than 5,500 customer locations. The Company's service centers are digitally connected as a cohesive network, allowing the provision of services both locally and nationally to more than 120,000 active customers.

Forward-Looking Statements

This press release contains forward-looking statements that are based on current opinions, estimates and assumptions of management regarding future events and the future financial performance of the Company. Words such as "will," "seems," "expect" and similar expressions identify forward-looking statements and all statements other than statements of historical fact, including, but not limited to, any projections regarding earnings, revenues and financial performance of the Company, could be deemed 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, and the timing and nature of any economic recovery; our ability to streamline operations and reduce and/or manage 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 take advantage of market opportunities and/or to complete acquisitions; our failure to manage 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; 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)


                                                   March 31,   December 31,
                                                  -----------  -----------
                                                      2011         2010
                                                  -----------  -----------
Assets
Current assets:
Cash and cash equivalents                         $    22,672  $    26,293
Accounts receivable, net                               60,791       52,619
Inventories, net                                       11,824       10,689
Deferred income taxes                                  13,721        7,157
Prepaid expenses and other current assets              14,322       10,944
                                                  -----------  -----------
Total current assets                                  123,330      107,702

Property and equipment, net                            57,862       59,036
Goodwill                                              294,759      294,759
Other intangible assets, net                           57,941       62,643
Deferred financing costs, net                           4,862        4,995
Deferred income taxes                                  28,816       37,835
Other assets                                            2,024        2,115
                                                  -----------  -----------
Total assets                                      $   569,594  $   569,085
                                                  ===========  ===========

Liabilities and Equity
Current liabilities:
Accounts payable                                  $    22,869  $    23,593
Accrued payroll and payroll-related expenses            9,801        7,980
Accrued expenses                                       24,121       30,134
Current portion of long-term debt and capital
 leases                                                33,356       23,608
                                                  -----------  -----------
Total current liabilities                              90,147       85,315

Long-term debt and capital leases                     214,485      216,016
Other long-term liabilities                             3,175        5,072
                                                  -----------  -----------
Total liabilities                                     307,807      306,403
                                                  -----------  -----------

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; 46,193,156 and 46,183,463
 shares issued and 45,745,502 and 45,735,809
 shares outstanding in 2011 and 2010, respectively         46           46
Additional paid-in capital                             97,795       96,251
Retained earnings                                     169,816      173,459
Accumulated other comprehensive loss                   (4,330)      (5,541)
                                                  -----------  -----------
                                                      263,327      264,215
Less cost of common stock in treasury, 447,654
 shares in 2011 and 2010                                7,709        7,709
                                                  -----------  -----------
Total American Reprographics Company
 stockholders' equity                                 255,618      256,506
Noncontrolling interest                                 6,169        6,176
                                                  -----------  -----------
Total equity                                          261,787      262,682
                                                  -----------  -----------
Total liabilities and equity                      $   569,594  $   569,085
                                                  ===========  ===========




American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------

Reprographics services                            $    70,022  $    76,257
Facilities management                                  24,203       22,403
Equipment and supplies sales                           12,279       13,501
                                                  -----------  -----------
Total net sales                                       106,504      112,161
Cost of sales                                          73,118       75,310
                                                  -----------  -----------
Gross profit                                           33,386       36,851
Selling, general and administrative expenses           27,832       27,131
Amortization of intangible assets                       4,744        2,636
                                                  -----------  -----------
Income from operations                                    810        7,084
Other income, net                                         (26)         (43)
Interest expense, net                                   8,167        5,888
                                                  -----------  -----------
(Loss) income before income tax (benefit)
 provision                                             (7,331)       1,239
Income tax (benefit) provision                         (3,649)         530
                                                  -----------  -----------
Net (loss) income                                      (3,682)         709
Loss attributable to the noncontrolling interest           39            8
                                                  -----------  -----------
Net (loss) income attributable to American
 Reprographics Company                            $    (3,643) $       717
                                                  ===========  =========== 

Earnings per share attributable to American
 Reprographics Company shareholders:
   Basic                                          $     (0.08) $      0.02
                                                  ===========  ===========
   Diluted                                        $     (0.08) $      0.02
                                                  ===========  ===========

Weighted average common shares outstanding:
   Basic                                           45,322,092   45,150,483
   Diluted                                         45,322,092   45,356,871




American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT,
EBITDA and Adjusted EBITDA
(Dollars in thousands)
(Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                  ------------------------
                                                      2011         2010
                                                  -----------  -----------


Cash flows provided by operating activities       $     4,589  $     9,468
  Changes in operating assets and liabilities           9,366        5,083
  Non-cash expenses, including depreciation
   and amortization                                   (17,637)     (13,842)
  Income tax (benefit) provision                       (3,649)         530
  Interest expense                                      8,167        5,888
  Net loss attributable to the noncontrolling
   interest                                                39            8
                                                  -----------  -----------
EBIT                                                      875        7,135
  Depreciation and amortization                        12,486       11,656
                                                  -----------  -----------
EBITDA                                                 13,361       18,791
  Stock-based compensation                              1,489        1,461
                                                  -----------  -----------
Adjusted EBITDA                                   $    14,850  $    20,252
                                                  ===========  ===========




American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited
adjusted net (loss) income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)


                                                      Three Months Ended
                                                           March 31,
                                                  -------------------------
                                                      2011         2010
                                                  -----------  ------------

Net (loss) income attributable to ARC             $    (3,643) $        717
  Change in trade name impact to amortization           2,369             -
  Amortization of derivative                            1,523             -
  Income tax provision, related to above items         (1,382)            -
  Tax discrete items                                     (978)
                                                  -----------  ------------
Unaudited adjusted net (loss) income attributable
 to ARC                                           $    (2,111) $        717
                                                  ===========  ============

Earnings per share attributable to ARC
 shareholders (actual):
  Basic                                           $     (0.08) $       0.02
                                                  ===========  ============
  Diluted                                         $     (0.08) $       0.02
                                                  ===========  ============

Weighted average common shares outstanding:
  Basic                                            45,322,092    45,150,483
  Diluted                                          45,322,092    45,356,871


Earnings per share attributable to ARC
 shareholders (adjusted):
  Basic                                           $     (0.05) $       0.02
                                                  ===========  ============
  Diluted                                         $     (0.05) $       0.02
                                                  ===========  ============

Weighted average common shares outstanding:
  Basic                                            45,322,092    45,150,483
  Diluted                                          45,322,092    45,356,871





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
                                                          March 31,
                                                  -------------------------
                                                      2011         2010
                                                  -----------  ------------

Net (loss) income attributable to ARC             $    (3,643) $        717
  Interest expense, net                                 8,167         5,888
  Income tax (benefit) provision                       (3,649)          530
                                                  -----------  ------------
EBIT                                                      875         7,135
  Depreciation and amortization                        12,486        11,656
                                                  -----------  ------------
EBITDA                                                 13,361        18,791
  Stock-based compensation                              1,489         1,461
                                                  ===========  ============
Adjusted EBITDA                                   $    14,850  $     20,252
                                                  ===========  ============

Non-GAAP Financial 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 $1.5 million of stock-based compensation expense recorded in selling, general and administrative expenses, for the three months ended March 31, 2011 and 2010, 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 operating segment 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 2011 first quarter report on Form 10-Q. Additionally, please refer to our 2010 Annual Report on Form 10-K.

Our presentation of adjusted net income and adjusted EBITDA over certain periods is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail, as required in the reconciliation tables above.

Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three months ended March 31, 2011 to reflect the exclusion of amortization impact related to the change in trade name, amortization of derivative and discrete tax items. We believe these charges were the result of our capital restructuring, or other items which have little bearing on our actual operating performance.

We present adjusted EBITDA for the three months ended March 31, 2011 and 2010 to exclude stock-based compensation expense. This presentation is consistent with the definition of EBITDA in our previous and current credit agreements.

American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)

                                                     Three Months Ended
                                                          March 31,
                                                      2011         2010
                                                  -----------  -----------
Cash flows from operating activities
Net (loss) income                                 $    (3,682) $       709
 Adjustments to reconcile net (loss) income to
  net cash provided by operating activities:
   Allowance for accounts receivable                      180          261
   Depreciation                                         7,742        9,020
   Amortization of intangible assets                    4,744        2,636
   Amortization of deferred financing costs               216          384
   Amortization of bond discount                          132            -
   Stock-based compensation                             1,489        1,461
   Excess tax benefit related to stock-based
    compensation                                           (8)          (3)
   Deferred income taxes                                2,318          274
   Amortization of derivative, net of tax effect          954            -
   Other noncash items, net                              (130)        (191)
   Changes in operating assets and liabilities,
    net of effect of business acquisitions:
     Accounts receivable                               (8,268)      (5,419)
     Inventory                                         (1,191)         156
     Prepaid expenses and other assets                 (3,228)      (2,515)
     Accounts payable and accrued expenses              3,321        2,695
                                                  -----------  -----------
Net cash provided by operating activities               4,589        9,468
                                                  -----------  -----------
Cash flows from investing activities
 Capital expenditures                                  (4,136)      (1,217)
 Payment for swap transaction                          (9,729)           -
 Other                                                    378          551
                                                  -----------  -----------
Net cash used in investing activities                 (13,487)        (666)
                                                  -----------  -----------
Cash flows from financing activities
 Proceeds from stock option exercises                      41           16
 Proceeds from issuance of common stock under
  Employee Stock Purchase Plan                             23            0
 Excess tax benefit related to stock-based
  compensation                                              8            3
 Payments on long-term debt agreements and
  capital leases                                       (7,540)     (11,202)
 Net borrowings (repayments) under revolving
  credit facility                                      12,800         (814)
 Payment of loan fees                                    (164)           -
                                                  -----------  -----------
Net cash provided by (used in) financing
 activities                                             5,168      (11,997)
                                                  -----------  -----------
Effect of foreign currency translation on cash
 balances                                                 109            1
                                                  -----------  -----------
Net change in cash and cash equivalents                (3,621)      (3,194)
Cash and cash equivalents at beginning of period       26,293       29,377
                                                  -----------  -----------
Cash and cash equivalents at end of period        $    22,672  $    26,183
                                                  ===========  ===========

 Supplemental disclosure of cash flow information
Noncash investing and financing activities
Noncash transactions include the following:
 Capital lease obligations incurred               $     2,461  $     1,930
 Net loss on derivative, net of tax effect        $         -  $      (313)


Contact Information

  • Contacts:
    David Stickney
    VP of Corporate Communications
    Phone: 925-949-5100
    Email: Email Contact

    Joseph Villalta
    The Ruth Group
    Phone: 646-536-7003
    Email: Email Contact