SOURCE: American Reprographics Company

February 22, 2011 16:05 ET

ARC Reports Results for Fourth Quarter and Fiscal Year 2010

WALNUT CREEK, CA--(Marketwire - February 22, 2011) - American Reprographics Company (NYSE: ARC)

--  Adjusted Annual EPS Fully Diluted: $0.03
--  Annual Cash from Operations: $53.9 million
--  2011 Annual Forecast EPS: $0.01 to $0.15
--  2011 Annual Forecast Cash from Operations: $40 million to $60 million

American Reprographics Company (NYSE: ARC) (the "Company"), the nation's leading provider of reprographic services and technology, today reported its financial results for the full year and fourth quarter ended December 31, 2010.

"Our focus for 2010 was to generate strong cash flows from operations, aggressively reduce costs, and maintain a healthy capital structure. We were successful on all fronts," said K. "Suri" Suriyakumar, Chairman, President and CEO of American Reprographics Company. "While revenue for the year was lower than expected, the economy continues to show signs of recovery and industry opinion seems clear that we are at the bottom of the cycle. However, non-residential construction continues to lag the general economy, and as recently as December, industry spending was at its lowest level in a decade. Therefore, we can expect the road to recovery to be bumpy, especially during the first half of 2011."

"Yet that recovery opens up tremendous opportunities for the company. With a dominant position in the industry, significant operating leverage, strong cash flows and a stable capital structure, we are well-positioned to take advantage of growth in our end markets. In addition, our industry-leading technology solutions combined with the lower cost base we currently enjoy will allow us to augment our EBITDA margins. I remain confident in the health and strength of ARC, and its ability to thrive as the U.S. economy comes back."

Revenue for the year ended December 31, 2010 was $441.6 million, compared to $501.5 million for the year ended December 31, 2009, an 11.9% decline year-over-year. The Company's gross margin for the year ended December 31, 2010 was 32.2%, compared to 35.5% for the year ended December 31, 2009. Adjusted net income for 2010 was $1.3 million, or $0.03 per diluted share, excluding the net effects of the Company's goodwill impairment charge, the amortization impact related to the change in trade name as we consolidate various brands across our operating footprint, and the loss on early extinguishment of debt and interest rate swap related costs. Adjusted net income for 2009 was $17.2 million, or $0.38 per diluted share excluding the net effect of charges related to the Company's 2009 goodwill impairment charge, an impairment of long-lived assets, and costs associated with the 2009 amendment to our then-existing credit agreement and interest rate swap transaction. Net cash from operating activities in 2010 was $53.9 million, compared to $97.4 million in 2009.

Net revenue for the fourth quarter of 2010 was $105 million, compared to $111.7 million for the fourth quarter of 2009, a decrease of 6%. Gross margin for the fourth quarter of 2010 was 29.5%, compared to 32.2% for the same period in 2009. The Company reported an adjusted net loss for the fourth quarter of 2010 of $1.5 million, or $0.03 per diluted share, which excluded accelerated trade name amortization, loss on early extinguishment of debt and interest rate swap related costs referenced above. This compares to adjusted net income for the fourth quarter of 2009 of $0.4 million, or $0.01 per diluted share, excluding the charges and costs in the fourth quarter of 2009, as noted above.

Outlook

"The past four years of construction declines have challenged us at every turn, but they have forced us to be more agile and prepared than we have ever been at any point in our history. As such, our forecast is conservative but realistic for 2011, and I remain very confident in our ability to ride out the peaks and valleys we are likely to experience as our economy recovers."

American Reprographics Company anticipates annual adjusted 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 to be 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 fourth quarter and full year 2010 and business outlook for the first quarter 2010. The conference call can be accessed by dialing 866-402-8179. The conference call ID number is 36167502.

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 call ID number to access the phone replay is 36167502.

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 (ARC)

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. ARC 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 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 "anticipates," "projects," "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)

                                                December 31,  December 31,
                                                ------------  ------------
                                                    2010          2009
                                                ------------  ------------
Assets
Current assets:
  Cash and cash equivalents                     $     26,293  $     29,377
  Accounts receivable, net                            52,619        53,919
  Inventories, net                                    10,689        10,605
  Deferred income taxes                                7,157         5,568
  Prepaid expenses and other current assets           10,944         7,011
                                                ------------  ------------
    Total current assets                             107,702       106,480

Property and equipment, net                           59,036        74,568
Goodwill                                             294,759       332,518
Other intangible assets, net                          62,643        74,208
Deferred financing costs, net                          4,995         4,082
Deferred income taxes                                 37,835        26,987
Other assets                                           2,115         2,111
                                                ------------  ------------
    Total assets                                $    569,085  $    620,954
                                                ============  ============

Liabilities and Equity
Current liabilities:
  Accounts payable                              $     23,593  $     23,355
  Accrued payroll and payroll-related expenses         7,980         8,804
  Accrued expenses                                    30,134        24,540
  Current portion of long-term debt and capital
   leases                                             23,608        53,520
                                                ------------  ------------
    Total current liabilities                         85,315       110,219

Long-term debt and capital leases                    216,016       220,711
Other long-term liabilities                            5,072         8,000
                                                ------------  ------------
    Total liabilities                                306,403       338,930
                                                ------------  ------------

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;
   46,183,463 and 46,112,653 shares issued and
   45,735,809 and 45,664,999 shares outstanding
   in 2010 and 2009, respectively                         46            46
  Additional paid-in capital                          96,251        89,982
  Retained earnings                                  173,459       200,961
  Accumulated other comprehensive loss                (5,541)       (7,273)
                                                ------------  ------------
                                                     264,215       283,716
Less cost of common stock in treasury, 447,654
 shares in 2010 and 2009                               7,709         7,709
                                                ------------  ------------
  Total American Reprographics Company
   stockholders' equity                              256,506       276,007
Noncontrolling interest                                6,176         6,017
                                                ------------  ------------
    Total equity                                     262,682       282,024
                                                ------------  ------------
    Total liabilities and equity                $    569,085  $    620,954
                                                ============  ============





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

                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------

Reprographics services      $   67,136  $   75,828  $  294,555  $  350,491
Facilities management           22,362      22,243      89,994      97,401
Equipment and supplies
 sales                          15,471      13,591      57,090      53,657
                            ----------  ----------  ----------  ----------
  Total net sales              104,969     111,662     441,639     501,549
Cost of sales                   73,961      75,738     299,307     323,360
                            ----------  ----------  ----------  ----------
  Gross profit                  31,008      35,924     142,332     178,189
Selling, general and
 administrative expenses        25,832      26,685     107,744     115,020
Amortization of intangible
 assets                          3,998       2,693      11,657      11,367
Goodwill impairment                  -           -      38,263      37,382
Impairment of long-lived
 assets                              -           -           -         781
                            ----------  ----------  ----------  ----------
  Income (loss) from
   operations                    1,178       6,546     (15,332)     13,639
Other income, net                  (27)        (33)       (156)       (171)
Interest expense, net            6,835       7,721      24,091      25,781
Loss on early
 extinguishment of debt          2,509           -       2,509           -
                            ----------  ----------  ----------  ----------
  Income before income tax
   (benefit) provision          (8,139)     (1,142)    (41,776)    (11,971)
Income tax (benefit)
 provision                      (3,324)       (502)    (14,186)      3,018
                            ----------  ----------  ----------  ----------
  Net loss                      (4,815)       (640)    (27,590)    (14,989)
Loss attributable to
 noncontrolling interest            61          65          88         104
                            ----------  ----------  ----------  ----------
  Net loss attributable to
   American Reprographics
   Company                  $   (4,754) $     (575) $  (27,502) $  (14,885)
                            ==========  ==========  ==========  ==========

(Loss) earnings per share
 attributable to American
 Reprographics Company
 shareholders:
  Basic                     $    (0.10) $    (0.01) $    (0.61) $    (0.33)
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.10) $    (0.01) $    (0.61) $    (0.33)
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding:
  Basic                     45,278,195  45,147,000  45,212,724  45,123,110
  Diluted                   45,278,195  45,147,000  45,212,724  45,123,110






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

                                   Three Months Ended  Twelve Months Ended
                                      December 31,        December 31,
                                   ------------------  -------------------
                                     2010      2009      2010       2009
                                   --------  --------  --------  ---------


Cash flows provided by operating
 activities                        $ 15,916  $ 22,061  $ 53,924  $  97,425
  Changes in operating assets and
   liabilities                       (6,488)  (11,068)      955    (19,919)
  Non-cash (expenses) income,
   including depreciation and
   amortization                     (14,243)  (11,633)  (82,469)   (92,495)
  Income tax (benefit) provision     (3,324)     (502)  (14,186)     3,018
  Interest expense                    6,835     7,721    24,091     25,781
  Loss on early extinguishment of
   debt                               2,509         -     2,509          -
  Net loss attributable to
   noncontrolling interest               61        65        88        104

                                   --------  --------  --------  ---------
EBIT                                  1,266     6,644   (15,088)    13,914
  Depreciation and amortization      12,128    11,892    45,649     49,543
                                   --------  --------  --------  ---------
EBITDA                             $ 13,394  $ 18,536  $ 30,561  $  63,457
                                   ========  ========  ========  =========





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


                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------

Net loss attributable
 to ARC                     $   (4,754) $     (575) $  (27,502) $  (14,885)
  Goodwill impairment                -           -      38,263      37,382
  Impairment of long-lived
   assets                            -           -           -         781
  Change in trade name
   impact to amortization        1,579           -       1,579           -
  Loss on early
   extinguishment of debt        2,509           -       2,509           -
  Amended Credit Agreement
   and Swap related costs        1,091       1,672       1,241       2,632
  Income tax benefit,
   related to above items       (1,885)       (669)    (14,758)     (8,748)
Unaudited adjusted net
 (loss) income              ----------  ----------  ----------  ----------
 attributable to ARC        $   (1,460) $      428  $    1,332  $   17,162
                            ==========  ==========  ==========  ==========

(Loss) earnings per share
 attributable to ARC
 shareholders (actual):
  Basic                     $    (0.10) $    (0.01) $    (0.61) $    (0.33)
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.10) $    (0.01) $    (0.61) $    (0.33)
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding:
  Basic                     45,278,195  45,147,000  45,212,724  45,123,110
  Diluted                   45,278,195  45,147,000  45,212,724  45,123,110

(Loss) earnings per share
 attributable to ARC
 shareholders (adjusted):
  Basic                     $    (0.03) $     0.01  $     0.03  $     0.38
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.03) $     0.01  $     0.03  $     0.38
                            ==========  ==========  ==========  ==========

Weighted average common
 shares outstanding:
  Basic                     45,278,195  45,147,000  45,212,724  45,123,110
  Diluted                   45,278,195  45,277,354  45,382,542  45,266,310





American Reprographics Company
Non-GAAP Measures
Reconciliation of net loss attributable to ARC to EBIT, EBITDA and adjusted
EBITDA
(Dollars in thousands)
(Unaudited)


                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------

Net loss attributable to ARC    $  (4,754) $    (575) $ (27,502) $ (14,885)
  Loss on early extinguishment
   of debt                          2,509          -      2,509          -
  Interest expense, net             6,835      7,721     24,091     25,781
  Income tax (benefit) provision   (3,324)      (502)   (14,186)     3,018
                                ---------  ---------  ---------  ---------
EBIT                                1,266      6,644    (15,088)    13,914
  Depreciation and amortization    12,128     11,892     45,649     49,543
                                ---------  ---------  ---------  ---------
EBITDA                             13,394     18,536     30,561     63,457
  Stock-based compensation          1,551      1,328      5,922      4,892
  Goodwill impairment                   -          -     38,263     37,382
  Impairment of long-lived
   assets                               -          -          -        781
                                ---------  ---------  ---------  ---------
Adjusted EBITDA                 $  14,945  $  19,864  $  74,746  $ 106,512
                                =========  =========  =========  =========

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 $5.9 million and $4.9 million of stock-based compensation expense recorded in selling, general and administrative expenses, for the years ended December 31, 2010 and 2009, respectively. EBIT margin is a non- GAAP measure calculated by dividing EBIT by net sales. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.

We present EBIT, EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.

We use EBIT and EBITDA to measure and compare the performance of our operating segments. Our operating segments' financial performance includes all of the operating activities except for debt and taxation which are managed at the corporate level for U.S. operating segments. As a result, EBIT is the best measure of divisional profitability and the most useful metric by which to measure and compare the performance of our operating segments. We also use EBIT to measure performance for determining operating segment-level compensation and 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.

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 years ended December 31, 2010 and 2009 to reflect the exclusion of the goodwill impairment charge, long-lived assets impairment charge, amortization impact related to the change in trade name, loss on early extinguishment of debt and interest rate swap related costs, and 2009 amendments to our credit agreement and swap transaction. We believe these charges were the result of valuations dependent on the stock market and the result of our capital restructuring, which have little bearing on our actual operating performance.

We presented adjusted EBITDA in 2010 and 2009 to exclude stock-based compensation expense and the non-cash impairment charges. This presentation is consistent with the definition of EBITDA in our previous and current credit agreements. We believe these excluded charges are a result of the current economic environment, and not indicative of our continuing operations.



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

                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                  2010       2009       2010       2009
                                ---------  ---------  ---------  ---------
Cash flows from operating
 activities
Net loss                        $  (4,815) $    (640) $ (27,590) $ (14,989)
  Adjustments to reconcile net
   loss to net cash provided by
   operating activities:
    Allowance for accounts
     receivable                       368        202        966      3,044
    Depreciation                    8,130      9,199     33,992     38,176
    Amortization of intangible
     assets                         3,998      2,693     11,657     11,367
    Amortization of deferred
     financing costs                  332        385      1,491      1,357
    Amortization of bond
     discount                          44          -         44          -
    Goodwill impairment                 -          -     38,263     37,382
    Impairment of long-lived
     assets                             -          -          -        781
    Stock-based compensation        1,551      1,328      5,922      4,892
    Excess tax benefit related
     to stock-based compensation      (20)         -        (58)       (18)
    Deferred income taxes          (2,907)    (2,219)   (12,657)    (4,477)
    Loss on early extinguishment
     of debt                        2,509          -      2,509          -
    Write-off of deferred
     financing costs                    -        190          -        190
    Other noncash items, net          238       (145)       340       (199)
    Changes in operating assets
     and liabilities, net of
     effect of business
     acquisitions:
      Accounts receivable           5,502      9,862        469     21,099
      Inventory                       464        989          8      1,344
      Prepaid expenses and
       other assets                 1,418      2,627     (4,098)     6,302
      Accounts payable and
       accrued expenses              (896)    (2,410)     2,666     (8,826)
                                ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                        15,916     22,061     53,924     97,425
                                ---------  ---------  ---------  ---------
Cash flows from investing
 activities
  Capital expenditures            (2,938)    (1,654)    (8,634)    (7,506)
  Payments for businesses
   acquired, net of cash
   acquired and including
   other cash payments
   associated with the
   acquisitions                      (370)    (1,504)      (870)    (3,527)
  Other                               248        968      1,002      1,684
                                ---------  ---------  ---------  ---------
Net cash used in investing
 activities                        (3,060)    (2,190)    (8,502)    (9,349)
                                ---------  ---------  ---------  ---------
Cash flows from financing
 activities
  Proceeds from stock option
   exercises                          117          -        242         63
  Proceeds from issuance of
   common stock under Employee
   Stock Purchase Plan                 14         48         51        164
  Excess tax benefit related to
   stock-based compensation            20          -         58         18
  Proceeds from bond issuance     195,648          -    195,648          -
  Payments on long-term debt
   agreements and capital
   leases                        (206,786)   (49,170)  (238,989)  (105,008)
  Net repayments under revolving
   credit facility                 (1,086)     1,523     (1,536)     1,523
  Payment of loan fees             (4,473)    (2,048)    (4,473)    (2,092)
                                ---------  ---------  ---------  ---------
Net cash used in financing
 activities                       (16,546)   (49,647)   (48,999)  (105,332)
                                ---------  ---------  ---------  ---------
Effect of foreign currency
 translation on cash balances         228        (26)       493         91
                                ---------  ---------  ---------  ---------
Net change in cash and cash
 equivalents                       (3,462)   (29,802)    (3,084)   (17,165)
Cash and cash equivalents at
 beginning of period               29,755     59,179     29,377     46,542
                                ---------  ---------  ---------  ---------
Cash and cash equivalents at
 end of period                  $  26,293  $  29,377  $  26,293  $  29,377
                                =========  =========  =========  =========

Supplemental disclosure of
 cash flow information
Noncash investing and financing
 activities
Noncash transactions include
 the following:
  Capital lease obligations
   incurred                         3,503  $   4,047  $  10,305  $  16,181
  Issuance of subordinated notes
   in connection with the
   acquisition of businesses          231  $     220  $     231  $     466
  Accrued liabilities in
   connection with deferred
   financing fees                     440  $       -  $     440  $       -
  Net gain on derivative, net of
   tax effect                       1,244  $     842  $   1,125  $   3,318

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