SOURCE: American Reprographics Company

August 06, 2009 16:05 ET

American Reprographics Company Reports Results for Second Quarter 2009

WALNUT CREEK, CA--(Marketwire - August 6, 2009) - American Reprographics Company (NYSE: ARP)

--  EPS of $0.14 per share
--  Quarterly Cash from Operating Activities of $33.5 million
--  Gross Margin of 37.5%
--  Company reaffirms forecast
    

American Reprographics Company (NYSE: ARP) (the "Company"), the nation's leading provider of reprographic services and technology, today reported its financial results for the second quarter ended June 30, 2009.

"Our performance was very strong under extraordinary economic circumstances," said K. "Suri" Suriyakumar, Chairman, President and CEO. "We protected our profits and cash flow despite the obvious challenges we encountered during the period, and I remain confident in our ability to protect them in the future. Over the past nine months, we've made significant changes to improve sales management, eliminate overhead, reduce our labor costs, and streamline reporting and administrative functions to keep the management team tightly focused on both the opportunities and challenges we face on a day-to-day basis. Those efforts are clearly paying off as demonstrated by our improvement in gross margins and the continuing strength of our cash position."

Net revenue for the second quarter of 2009 was $131.1 million. The Company's gross margin was 37.5% for the three-month period ending June 30, 2009. Net income for the second quarter of 2009 was $6.3 million, or $0.14 per diluted share.

Net revenue for the first six months of 2009 was $270.5 million. The Company's gross margin was 37.4% for the six-month period ending June 30, 2009. Net income for the first six months of 2009 was $13.8 million, or $0.31 per diluted share.

Jonathan Mather, Chief Financial Officer, said, "While we saw a continuing slide in revenues during the period, the decrease was not as steep as the two previous quarters, and our gross margins continue to show incremental improvement despite the difficult sales environment. We made additional progress in our cost savings programs and eliminated an additional $8.6 million in costs for 2009, and also exercised our strong cash flow by paying down at the Company's discretion, an additional $10.7 million of capital lease debt during the period. In addition, I'm happy to report that the environment for amending our debt agreements is more favorable today than we've seen in the recent past. In order to increase our flexibility regarding the financial covenants associated with our credit facility, we have begun discussions with our banks to review our present requirements."

Outlook

The Company reaffirmed its EPS forecast of $0.50 to $0.75 on a fully-diluted basis, projecting cash flow from operations in the range of $70 million to $90 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 second quarter 2009 and business outlook. The conference call can be accessed by dialing 866-921-3926. The conference ID number is 19388648.

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 19388648.

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 technology and 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 hundreds of locally-branded reprographics service centers across the U.S., Canada and the U.K, on-site at more than 5,000 customer locations, and through UDS, a joint-venture company headquartered in Beijing, China. 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 160,000 active customers.

Forward-Looking Statements

This press release contains forward-looking statements that are based on current opinions and estimates of management regarding future events and the future financial performance of the Company. Words such as "forecast," "outlook," "will," and similar expressions identify 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; our ability to successfully restructure our credit facilities; our ability to streamline operations and 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 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; 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)


                                                    June 30,   December 31,
                                                  -----------  -----------
                                                      2009         2008
                                                  -----------  -----------
Assets
Current assets:
Cash and cash equivalents                         $    56,886  $    46,542
Accounts receivable, net                               69,181       77,216
Inventories, net                                       10,241       11,097
Deferred income taxes                                   5,829        5,831
Prepaid expenses and other current assets               7,629       11,976
                                                  -----------  -----------
Total current assets                                  149,766      152,662

Property and equipment, net                            83,071       89,712
Goodwill                                              367,786      366,513
Other intangible assets, net                           80,305       85,967
Deferred financing costs, net                           2,926        3,537
Deferred income taxes                                  21,878       25,404
Other assets                                            2,216        2,136
                                                  -----------  -----------
Total assets                                      $   707,948  $   725,931
                                                  ===========  ===========

Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                  $    22,730  $    25,171
Accrued payroll and payroll-related expenses           14,424       13,587
Accrued expenses                                       24,168       24,913
Current portion of long-term debt and capital
 leases                                                71,580       59,193
                                                  -----------  -----------
Total current liabilities                             132,902      122,864

Long-term debt and capital leases                     257,963      301,847
Other long-term liabilities                            10,496       13,318
                                                  -----------  -----------
Total liabilities                                     401,361      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; 45,747,854 and 45,674,810
 shares issued and 45,300,200 and 45,227,156
 shares outstanding in 2009 and 2008, respectively         46           46
Additional paid-in capital                             87,331       85,207
Deferred stock-based compensation                         (19)        (195)
Retained earnings                                     229,700      215,846
Accumulated other comprehensive loss                   (8,872)     (11,414)
                                                  -----------  -----------
                                                      308,186      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                                 300,477      281,781
Noncontrolling interest                                 6,110        6,121
                                                  -----------  -----------
Total stockholders' equity                            306,587      287,902
                                                  -----------  -----------
Total liabilities and stockholders' equity        $   707,948  $   725,931
                                                  ===========  ===========



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

                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Reprographics services      $   92,905  $  139,211  $  192,674  $  281,707
Facilities management           24,898      31,209      51,763      60,760
Equipment and supplies
 sales                          13,251      14,521      26,100      29,917
                            ----------  ----------  ----------  ----------
Total net sales                131,054     184,941     270,537     372,384
Cost of sales                   81,899     105,853     169,403     213,693
                            ----------  ----------  ----------  ----------
Gross profit                    49,155      79,088     101,134     158,691
Selling, general and
 administrative expenses        30,039      39,499      61,005      79,020
Amortization of intangible
 assets                          2,914       2,813       5,897       6,001
                            ----------  ----------  ----------  ----------
Income from operations          16,202      36,776      34,232      73,670
Other income, net                  (38)        (43)        (97)       (245)
Interest expense, net            5,836       6,559      11,632      13,705
                            ----------  ----------  ----------  ----------
Income before income tax
 provision                      10,404      30,260      22,697      60,210
Income tax provision             4,096      11,384       8,854      22,836
                            ----------  ----------  ----------  ----------
Net income                       6,308      18,876      13,843      37,374
(Income) loss attributable
 to the noncontrolling
 interest                           (1)          -          11           -
                            ----------  ----------  ----------  ----------
Net income attributable to
 American Reprographics
 Company                    $    6,307  $   18,876  $   13,854  $   37,374
                            ==========  ==========  ==========  ==========

Earnings per share
 attributable to American
 Reprographics Company
 shareholders:
  Basic                     $     0.14  $     0.42  $     0.31  $     0.83
                            ==========  ==========  ==========  ==========
  Diluted                   $     0.14  $     0.42  $     0.31  $     0.82
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding:
  Basic                     45,116,358  45,051,449  45,103,150  45,048,244
  Diluted                   45,243,171  45,441,766  45,157,874  45,407,309



American Reprographics Company
Non-GAAP Measures
Reconciliation of Net Income Attributable to ARC to EBIT and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)


                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------

Net income attributable to ARC      $  6,307  $ 18,876  $ 13,854  $ 37,374
  Interest expense, net                5,836     6,559    11,632    13,705
  Income tax provision                 4,096    11,384     8,854    22,836

                                    --------  --------  --------  --------
EBIT                                  16,239    36,819    34,340    73,915
  Depreciation and amortization       12,751    12,216    25,466    24,333
                                    --------  --------  --------  --------

EBITDA                              $ 28,990  $ 49,035  $ 59,806  $ 98,248
                                    ========  ========  ========  ========


                                    Three Months Ended  Six Months Ended
                                         June 30,           June 30,
                                    ------------------  ------------------
                                      2009      2008      2009     2008
                                    --------  --------  --------  --------

Cash flows provided by operating
 activities                         $ 33,522  $ 41,137  $ 55,798  $ 61,485
  Changes in operating assets and
   liabilities                       (11,477)   (6,096)   (9,555)    6,819
  Non-cash (expenses) income,
   including depreciation and
   amortization                      (15,737)  (16,165)  (32,400)  (30,930)
  Income tax provision                 4,096    11,384     8,854    22,836
  Interest expense                     5,836     6,559    11,632    13,705
  Net (income) loss attributable to
   the noncontrolling
   interest                               (1)        -        11         -

                                    --------  --------  --------  --------
EBIT                                  16,239    36,819    34,340    73,915
  Depreciation and amortization       12,751    12,216    25,466    24,333
                                    --------  --------  --------  --------

EBITDA                              $ 28,990  $ 49,035  $ 59,806  $ 98,248
                                    ========  ========  ========  ========

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 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 $1.2 million and $1.1 million of stock based compensation expense, for the three months ended June 30, 2009 and 2008, respectively, and $2.2 million and $2.0 million of stock based compensation expense, for the six months ended June 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 division-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 second quarter report on Form 10-Q. Additionally, please refer to our 2008 Annual Report on Form 10-K.

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

                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2009      2008      2009      2008
                                    --------  --------  --------  --------
Cash flows from operating
 activities
Net income                          $  6,308  $ 18,876  $ 13,843  $ 37,374
Adjustments to reconcile net income
 to net cash provided by operating
 activities:
   Allowance for accounts
    receivable                         1,294       831     2,543     1,909
   Depreciation                        9,837     9,403    19,569    18,332
   Amortization of intangible
    assets                             2,914     2,813     5,897     6,001
   Amortization of deferred
    financing costs                      324       340       655       600
   Stock-based compensation            1,228     1,117     2,161     2,029
   Excess tax benefit related to
    stock options exercised               (5)      (54)       (5)      (54)
   Deferred income taxes                 259     1,626     1,671     2,239
   Write-off of deferred financing
    costs                                  -       313         -       313
   Other noncash items, net             (114)     (224)      (91)     (439)
   Changes in operating assets and
    liabilities, net of effect of
    business acquisitions:
      Accounts receivable              8,159     4,390     5,734    (5,088)
      Inventory                          232       288       918       726
      Prepaid expenses and other
       assets                          1,579    (2,413)    5,154      (987)
      Accounts payable and accrued
       expenses                        1,507     3,831    (2,251)   (1,470)
                                    --------  --------  --------  --------
Net cash provided by operating
 activities                           33,522    41,137    55,798    61,485
                                    --------  --------  --------  --------
Cash flows from investing
 activities
Capital expenditures                  (1,945)   (2,031)   (3,924)   (4,332)
Payments for businesses acquired,
 net of cash acquired and including
 other cash payments associated with
 the acquisitions                       (333)     (647)     (921)   (5,478)
Restricted cash                            -   (13,552)        -   (12,612)
Other                                    279       231       442       785
                                    --------  --------  --------  --------
Net cash used in investing
 activities                           (1,999)  (15,999)   (4,403)  (21,637)
                                    --------  --------  --------  --------
Cash flows from financing
 activities
Proceeds from stock option
 exercises                                17        70        17        70
Proceeds from issuance of common
 stock under Employee Stock
 Purchase Plan                            46        12        46        25
Excess tax benefit related to stock
 options exercised                         5        54         5        54
Payments on long-term debt
 agreements and capital leases       (25,328)  (13,139)  (41,206)  (25,254)
Net repayments under revolving
 credit facility                           -   (12,000)        -   (22,000)
Payment of loan fees                       -       (94)      (44)     (726)
                                    --------  --------  --------  --------
Net cash used in financing
 activities                          (25,260)  (25,097)  (41,182)  (47,831)
                                    --------  --------  --------  --------
Effect of foreign currency
 translation on cash balances            147       (55)      131       (37)
                                    --------  --------  --------  --------
Net change in cash and cash
 equivalents                           6,410       (14)   10,344    (8,020)
Cash and cash equivalents at
 beginning of period                  50,476    16,796    46,542    24,802
                                    --------  --------  --------  --------
Cash and cash equivalents at end of
 period                             $ 56,886  $ 16,782  $ 56,886  $ 16,782
                                    ========  ========  ========  ========

Supplemental disclosure of cash
 flow information
Noncash investing and financing
 activities
Noncash transactions include the
 following:
  Capital lease obligations
   incurred                         $  4,470  $  9,169  $  9,723  $ 18,353
  Issuance of subordinated notes in
   connection with the
   acquisition of businesses        $      -  $    157  $    246  $  1,817
  Accrued liabilities in connection
   with acquisition of businesses   $    167  $      -  $    500  $      -
  Change in fair value of
   derivative, net of tax effects   $  1,752  $  5,418  $  2,187  $     (3)

Contact Information

  • Contacts:
    David Stickney
    American Reprographics Company
    Phone: 925-949-5100

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