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WALNUT CREEK, CA -- (Marketwire) -- 11/05/09 -- American Reprographics Company (NYSE: ARP)
-- Adjusted EPS of $0.06 per share -- Cash from Operating Activities of $19.6 million
American Reprographics Company (NYSE: ARP) (the "Company" or "ARC"), the nation's leading provider of reprographic services and technology, today reported its financial results for the third quarter ended September 30, 2009.
"The Company continues to perform very well despite the ongoing challenges in the end market," said K. "Suri" Suriyakumar, Chairman, President and CEO. "At $19.6 million, our quarterly cash flow from operations remained extraordinarily healthy, and at 19.5%, our EBITDA margin reiterates our ability to remain flexible and available to pursue growth opportunities. We were also gratified to see a stabilizing trend in daily sales continue through the end of the quarter. Knowing how well positioned ARC is in the current environment, we will continue to focus on the future by putting the building blocks in place for new opportunities and new revenue streams as the economy recovers."
Net revenue for the third quarter of 2009 was $119.4 million and gross margin was 34.5%. ARC reported a net loss of income for the third quarter of 2009 of $27.6 million, or a loss of $0.61 per diluted share, which included a goodwill impairment charge of $37.4 million based on its annual goodwill impairment assessment conducted as of September 30, 2009 (see description below). Adjusted to exclude the period's goodwill impairment, an impairment of long-lived assets, and a possible one-time charge associated with our amended credit agreement, net income for the third quarter of 2009 was $2.9 million, or $0.06 per diluted share.
Net revenue for the nine-month period ended September 30, 2009 was $389.9 million and gross margin was 36.5%. ARC reported a net loss for the first nine months of 2009 of $13.7 million, or a loss of $0.30 per diluted share. Adjusted to exclude the impairments and possible one-time charge for the third quarter, net income for the first nine months of 2009 was $16.8 million, or $0.37 per diluted share.
Jonathan Mather, Chief Financial Officer, said, "Our capital structure is showing continual improvement as we make aggressive use of our positive cash flow to reduce our debt. To date, including the pre-payment of $36 million we made as a part of amending our credit agreement in early October, we have addressed more than $90 million of our debt obligations."
Impairment of Goodwill, Long-Lived Assets and Certain One-Time Charges
The Company assesses goodwill for impairment at least annually as of September 30, or more frequently if events and circumstances indicate that goodwill might be impaired. Based on our annual assessment, we recorded a $37.4 million impairment as of September 30, 2009. ARC also recorded an impairment charge of approximately $781,000 against certain of its long-lived assets. In addition, there is a possible one-time charge of $700,000 to $1.3 million related to the Company's interest swap transaction incurred in connection with the Company's amended credit agreement which may be recorded in the financial statements for third quarter of 2009. The Company will not be required to make any current or future cash expenditures as a result of the impairments. The impairments and any one-time charge will be reflected in the Company's unaudited financial statements included in the Company's Form 10-Q for the third quarter of 2009 to be filed with the U.S. Securities and Exchange Commission.
Outlook
The Company reaffirmed its revised annual earnings per share and cash flow from operations forecast for 2009, excluding any one-time financing charge arising from the amendment to its credit agreement in October 2009, and the impairments recorded in the third quarter of 2009. EPS for the full year of 2009 is forecast to be in the range of $0.27 to $0.33 on a fully-diluted basis. Cash flow from operations for the same period is projected to be 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 third quarter 2009 and business outlook. The conference call can be accessed by dialing 866-921-3926. The conference ID number is 34405657.
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 34405657.
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 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 pursue growth opportunities and/or to complete acquisitions, or our failure to manage our acquisitions, including our inability to integrate and merge the business operations of acquired companies or our 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) September 30, December 31, ------------- ------------- 2009 2008 ------------- ------------- Assets Current assets: Cash and cash equivalents $ 59,179 $ 46,542 Accounts receivable, net 63,749 77,216 Inventories, net 11,672 11,097 Deferred income taxes 5,827 5,831 Prepaid expenses and other current assets 9,624 11,976 ------------- ------------- Total current assets 150,051 152,662 Property and equipment, net 78,169 89,712 Goodwill 330,665 366,513 Other intangible assets, net 76,846 85,967 Deferred financing costs, net 2,609 3,537 Deferred income taxes 25,981 25,404 Other assets 2,200 2,136 ------------- ------------- Total assets $ 666,521 $ 725,931 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 23,159 $ 25,171 Accrued payroll and payroll-related expenses 11,572 13,587 Accrued expenses 23,171 24,913 Current portion of long-term debt and capital leases 79,064 59,193 ------------- ------------- Total current liabilities 136,966 122,864 Long-term debt and capital leases 238,521 301,847 Other long-term liabilities 10,465 13,318 ------------- ------------- Total liabilities 385,952 438,029 ------------- ------------- 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; 45,760,397 and 45,674,810 shares issued and 45,312,743 and 45,227,156 shares outstanding in 2009 and 2008, respectively 46 46 Additional paid-in capital 88,806 85,207 Deferred stock-based compensation - (195) Retained earnings 202,151 215,846 Accumulated other comprehensive loss (8,807) (11,414) ------------- ------------- 282,196 289,490 Less cost of common stock in treasury, 447,654 shares in 2009 and 2008 7,709 7,709 ------------- ------------- Total American Reprographics Company stockholders' equity 274,487 281,781 Noncontrolling interest 6,082 6,121 ------------- ------------- Total stockholders' equity 280,569 287,902 ------------- ------------- Total liabilities and stockholders' equity $ 666,521 $ 725,931 ============= ============= American Reprographics Company Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- Reprographics services $ 81,989 $ 127,455 $ 274,663 $ 409,162 Facilities management 23,395 30,977 75,158 91,737 Equipment and supplies sales 13,966 16,153 40,066 46,070 ---------- ---------- ---------- ---------- Total net sales 119,350 174,585 389,887 546,969 Cost of sales 78,219 104,570 247,622 318,263 ---------- ---------- ---------- ---------- Gross profit 41,131 70,015 142,265 228,706 Selling, general and administrative expenses 27,330 38,800 88,335 117,820 Amortization of intangible assets 2,777 2,987 8,674 8,988 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - ---------- ---------- ---------- ---------- (Loss) income from operations (27,139) 28,228 7,093 101,898 Other income, net (41) (55) (138) (300) Interest expense, net 5,468 6,180 17,100 19,885 ---------- ---------- ---------- ---------- Income before income tax (benefit) provision (32,566) 22,103 (9,869) 82,313 Income tax (benefit) provision (4,989) 7,041 3,865 29,877 ---------- ---------- ---------- ---------- Net (loss) income (27,577) 15,062 (13,734) 52,436 Loss attributable to the noncontrolling interest 28 5 39 5 ---------- ---------- ---------- ---------- Net (loss) income attributable to American Reprographics Company $ (27,549) $ 15,067 $ (13,695) $ 52,441 ========== ========== ========== ========== Earnings per share attributable to American Reprographics Company shareholders: Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16 ========== ========== ========== ========== Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15 ========== ========== ========== ========== Weighted average common shares outstanding: Basic 45,138,446 45,066,654 45,115,059 45,054,425 Diluted 45,138,446 45,413,747 45,115,059 45,413,948 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 Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Cash flows provided by operating activities $ 19,566 $ 33,778 $ 75,364 $ 95,263 Changes in operating assets and liabilities 1,306 1,086 (8,249) 7,905 Non-cash (expenses) income, including depreciation and amortization (48,449) (19,802) (80,849) (50,732) Income tax (benefit) provision (4,989) 7,041 3,865 29,877 Interest expense 5,468 6,180 17,100 19,885 Net loss attributable to the noncontrolling interest 28 5 39 5 --------- --------- --------- --------- EBIT (27,070) 28,288 7,270 102,203 Depreciation and amortization 12,185 12,848 37,651 37,181 --------- --------- --------- --------- EBITDA $ (14,885) $ 41,136 $ 44,921 $ 139,384 ========= ========= ========= ========= American Reprographics Company Non-GAAP Measures Reconciliation of net (loss) income attributable to ARC to unaudited adjusted net income attributable to ARC and earnings per share to adjusted earnings per share: (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 ---------- ----------- ---------- ----------- (Dollars in thousands, except share and per share data) Net (loss) income attributable to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - Income tax benefit (7,696) - (7,696) - Unaudited adjusted net income ---------- ----------- ---------- ----------- attributable to ARC $ 2,918 $ 15,067 $ 16,772 $ 52,441 ========== =========== ========== =========== Earnings per share attributable to ARC shareholders (actual): Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16 ========== =========== ========== =========== Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15 ========== =========== ========== =========== Earnings per share attributable to ARC shareholders (adjusted): Basic $ 0.06 $ 0.33 $ 0.37 $ 1.16 ========== =========== ========== =========== Diluted $ 0.06 $ 0.33 $ 0.37 $ 1.15 ========== =========== ========== =========== Weighted average common shares outstanding: Basic 45,138,446 45,066,654 45,115,059 45,054,425 Diluted 45,138,446 45,413,747 45,115,059 45,413,948 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 Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- ---------- --------- ---------- (Dollars in thousands) Net (loss) income attributable to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441 Interest expense, net 5,468 6,180 17,100 19,885 Income tax (benefit) provision (4,989) 7,041 3,865 29,877 --------- ---------- --------- ---------- EBIT (27,070) 28,288 7,270 102,203 Depreciation and amortization 12,185 12,848 37,651 37,181 --------- ---------- --------- ---------- EBITDA (14,885) 41,136 44,921 139,384 --------- ---------- --------- ---------- Special items: Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - --------- ---------- --------- ---------- Adjusted EBITDA $ 23,278 $ 41,136 $ 83,084 $ 139,384 ========= ========== ========= ========== American Reprographics Company Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Cash flows from operating activities Net (loss) income $ (27,577) $ 15,062 $ (13,734) $ 52,436 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for accounts receivable 299 1,255 2,842 3,164 Depreciation 9,408 9,861 28,977 28,193 Amortization of intangible assets 2,777 2,987 8,674 8,988 Amortization of deferred financing costs 317 336 972 936 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - Stock-based compensation 1,403 1,114 3,564 3,143 Excess tax benefit related to stock options exercised (13) (48) (18) (102) Deferred income taxes (3,942) 4,259 (2,271) 6,498 Write-off of deferred financing costs - - - 313 Litigation charge (gain) - - - - Other noncash items, net 37 38 (54) (401) Changes in operating assets and liabilities, net of effect of business acquisitions: Accounts receivable 5,503 6,988 11,237 1,900 Inventory (563) 525 355 1,251 Prepaid expenses and other assets (1,918) (3,808) 3,236 (4,795) Litigation settlement payment - - - - Accounts payable and accrued expenses (4,328) (4,791) (6,579) (6,261) --------- --------- --------- --------- Net cash provided by operating activities 19,566 33,778 75,364 95,263 --------- --------- --------- --------- Cash flows from investing activities Capital expenditures (1,928) (2,027) (5,852) (6,359) Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions (1,102) (12,738) (2,023) (18,216) Restricted cash - 11,590 - (1,022) Other 274 161 716 946 --------- --------- --------- --------- Net cash used in investing activities (2,756) (3,014) (7,159) (24,651) --------- --------- --------- --------- Cash flows from financing activities Proceeds from stock option exercises 46 107 63 177 Proceeds from issuance of common stock under Employee Stock Purchase Plan 70 2 116 27 Treasury stock repurchase - - - - Excess tax benefit related to stock options exercised 13 48 18 102 Proceeds from borrowings under debt agreements - - - - Payments on long-term debt agreements and capital leases (14,632) (13,253) (55,838) (38,507) Net repayments under revolving credit facility - - - (22,000) Payment of loan fees - - (44) (726) --------- --------- --------- --------- Net cash used in financing activities (14,503) (13,096) (55,685) (60,927) --------- --------- --------- --------- Effect of foreign currency translation on cash balances (14) 179 117 142 --------- --------- --------- --------- Net change in cash and cash equivalents 2,293 17,847 12,637 9,827 Cash and cash equivalents at beginning of period 56,886 16,782 46,542 24,802 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 59,179 $ 34,629 $ 59,179 $ 34,629 ========= ========= ========= ========= Supplemental disclosure of cash flow information Noncash investing and financing activities Noncash transactions include the following: Capital lease obligations incurred $ 2,411 $ 8,258 $ 12,134 $ 26,611 Issuance of subordinated notes in connection with the acquisition of businesses $ - $ 5,836 $ 246 $ 7,653 Accrued liabilities in connection with acquisition of businesses $ (500) $ - $ - $ - Stock issued for acquisition $ - $ - $ - $ - Accrued liabilities in connection with deferred financing fees $ - $ - $ - $ - Change in fair value of derivative, net of tax effects $ (312) $ (777) $ 1,875 $ (780) Contribution from noncontrolling interest $ - $ 6,062 $ - $ 6,062
Contacts:
David Stickney
American Reprographics Company
Phone: 925-949-5100
Joseph Villalta
The Ruth Group
Phone: 646-536-7003
