American Reprographics Company Reports Results for Fourth Quarter and Fiscal Year 2009

February 23, 2010
WALNUT CREEK, CA, Feb 23, 2010 (MARKETWIRE via COMTEX) -- American Reprographics Company (NYSE: ARP)
  • Adjusted Annual EPS Fully Diluted: $0.38
  • Annual Cash from Operations: $97.4 million
  • 2010 Annual Forecast EPS: $0.15 to $0.30
  • 2010 Annual Forecast Cash from Operations: $65 million to $80 million

American Reprographics Company (NYSE: ARP) (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, 2009.

"We are glad to put 2009 behind us. In spite of the challenging conditions the company performed well," said K. "Suri" Suriyakumar, Chairman, President and CEO. "The extraordinary efforts we made to right size the company and contain costs in late 2008 and early 2009 allowed us to battle through a very difficult year and come out of it vigorous and healthy. We were able to meet our financial obligations comfortably, make investments in several new products and services to enhance our revenue stream, and reduce our debt obligations by more than $85 million despite a decline in annual sales of more than 28%."

Jonathan Mather, Chief Financial Officer, said, "While we did not see an upturn in construction-related business during the fourth quarter, we were happy to see slightly stronger sales than we anticipated. Aggressively managing the company to control costs provided us the flexibility and focus to ensure we made the most of every bit of activity in the market."

Revenue for the year ended December 31, 2009 was $501.6 million, compared to $701.0 million for the year ended December 31, 2008, a 28.5% decline year-over-year. The Company's gross margin for the year ended December 31, 2009 was 35.5%, compared to 40.7% for the year ended December 31, 2008. Adjusted net income for 2009 was $17.2 million, or $0.38 per diluted share, excluding the effects of previously disclosed one-time charges related to the Company's annual goodwill impairment assessment, an impairment of long-lived assets, and costs associated with an amendment to our credit agreement and interest rate swap transaction. Adjusted net income for 2008 was $59.0 million, or $1.30 per diluted share excluding the goodwill impairment charge in the fourth quarter of 2008. Net cash from operating activities in 2009 was $97.4 million, compared to $127.3 million in 2008.

Net revenue for the fourth quarter of 2009 was $111.7 million, compared to $154.0 million for the fourth quarter of 2008, a decrease of 27.5%. The Company's gross margin for the fourth quarter of 2009 was 32.2%, compared to 36.7% for the same period in 2008. Adjusted net income for the fourth quarter of 2009 was $0.4 million, or $0.01 per diluted share, adjusted to exclude one-time charges noted above. This compares to adjusted net income for the fourth quarter of 2008 of $6.5 million, or $0.14 per diluted share, excluding the goodwill impairment charge in the fourth quarter of 2008, as noted above.

Outlook

American Reprographics Company anticipates annual earnings per share in 2010 to be in the range of $0.15 to $0.30 on a fully-diluted basis, and annual cash flow from operations in the range of $65 million to $80 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 2009 and business outlook for the first quarter 2010. The conference call can be accessed by dialing 866-921-3926. The conference call ID number is 53459422.

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 53459422.

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 5,600 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 138,000 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; 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,
                                                ------------  ------------
                                                    2009          2008
                                                ------------  ------------
Assets
Current assets:
Cash and cash equivalents                       $     29,377  $     46,542
Accounts receivable, net                              53,919        77,216
Inventories, net                                      10,605        11,097
Deferred income taxes                                  5,568         5,831
Prepaid expenses and other current assets              7,011        11,976
                                                ------------  ------------
Total current assets                                 106,480       152,662
Property and equipment, net                           74,568        89,712
Goodwill                                             332,518       366,513
Other intangible assets, net                          74,208        85,967
Deferred financing costs, net                          4,082         3,537
Deferred income taxes                                 26,987        25,404
Other assets                                           2,111         2,136
                                                ------------  ------------
Total assets                                    $    620,954  $    725,931
                                                ============  ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                $     23,355  $     25,171
Accrued payroll and payroll-related expenses           8,804        13,587
Accrued expenses                                      24,540        24,913
Current portion of long-term debt and capital
 leases                                               53,520        59,193
                                                ------------  ------------
Total current liabilities                            110,219       122,864
Long-term debt and capital leases                    220,711       301,847
Other long-term liabilities                            8,000        13,318
                                                ------------  ------------
Total liabilities                                    338,930       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; 46,112,653 and 45,674,810
 shares issued and 45,664,999 and 45,227,156
 shares outstanding in 2009 and 2008, respectively        46            46
Additional paid-in capital                            89,982        85,207
Deferred stock-based compensation                          -          (195)
Retained earnings                                    200,961       215,846
Accumulated other comprehensive loss                  (7,273)      (11,414)
                                                ------------  ------------
                                                     283,716       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                                276,007       281,781
Noncontrolling interest                                6,017         6,121
                                                ------------  ------------
Total stockholders' equity                           282,024       287,902
                                                ------------  ------------
Total liabilities and stockholders' equity      $    620,954  $    725,931
                                                ============  ============
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,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
Reprographics services      $   75,828  $  108,900  $  350,491  $  518,062
Facilities management           22,243      29,246      97,401     120,983
Equipment and supplies
 sales                          13,591      15,872      53,657      61,942
                            ----------  ----------  ----------  ----------
Total net sales                111,662     154,018     501,549     700,987
Cost of sales                   75,738      97,452     323,360     415,715
                            ----------  ----------  ----------  ----------
Gross profit                    35,924      56,566     178,189     285,272
Selling, general and
 administrative expenses        26,685      36,908     115,020     154,728
Amortization of intangible
 assets                          2,693       3,016      11,367      12,004
Goodwill impairment                  -      35,154      37,382      35,154
Impairment of long-lived
 assets                              -           -         781           -
                            ----------  ----------  ----------  ----------
Income (loss) from
 operations                      6,546     (18,512)     13,639      83,386
Other income, net                  (33)       (217)       (171)       (517)
Interest expense, net            7,721       6,005      25,781      25,890
                            ----------  ----------  ----------  ----------
Income before income tax
 (benefit) provision            (1,142)    (24,300)    (11,971)     58,013
Income tax (benefit)
 provision                        (502)     (8,677)      3,018      21,200
                            ----------  ----------  ----------  ----------
Net (loss) income                 (640)    (15,623)    (14,989)     36,813
Loss (income) attributable
 to noncontrolling interest         65         (64)        104         (59)
                            ----------  ----------  ----------  ----------
Net (loss) income
 attributable to American
 Reprographics Company      $     (575) $  (15,687) $  (14,885) $   36,754
                            ==========  ==========  ==========  ==========
Earnings per share
 attributable to American
 Reprographics
 Company shareholders:
  Basic                     $    (0.01) $    (0.35) $    (0.33) $     0.82
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.01) $    (0.35) $    (0.33) $     0.81
                            ==========  ==========  ==========  ==========
Weighted average common
 shares outstanding:
  Basic                     45,393,929  45,078,554  45,185,350  45,060,482
  Diluted                   45,393,929  45,078,554  45,185,350  45,398,086
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,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Cash flows provided by
 operating activities           $  22,061  $  32,003  $  97,425  $ 127,266
  Changes in operating assets
   and liabilities                (11,068)   (12,734)   (19,919)    (4,829)
  Non-cash (expenses) income,
   including depreciation and
   amortization                   (11,633)   (34,892)   (92,495)   (85,624)
  Income tax (benefit) provision     (502)    (8,677)     3,018     21,200
  Interest expense                  7,721      6,005     25,781     25,890
  Net loss attributable to the
   noncontrolling interest             65        (64)       104        (59)
                                ---------  ---------  ---------  ---------
EBIT                                6,644    (18,359)    13,914     83,844
  Depreciation and amortization    11,892     12,940     49,543     50,121
                                ---------  ---------  ---------  ---------
EBITDA                          $  18,536  $  (5,419) $  63,457  $ 133,965
                                =========  =========  =========  =========
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited
adjusted net income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
                              Three Months Ended      Twelve Months Ended
                                 December 31,            December 31,
                            ----------------------  ----------------------
                               2009        2008        2009        2008
                            ----------  ----------  ----------  ----------
                              (Dollars in thousands, except share and per
                                              share data)
Net (loss) income
 attributable to ARC        $     (575) $  (15,687) $  (14,885) $   36,754
  Goodwill impairment                -      35,154      37,382      35,154
  Impairment of long-lived
   assets                            -           -         781           -
  Amended Credit Agreement
   and Swap
    Transaction costs            1,672           -       2,632           -
  Income tax benefit,
   related to above items         (669)    (12,932)     (8,748)    (12,932)
Unaudited adjusted net
 income attributable
 to ARC                     ----------  ----------  ----------  ----------
                            $      428  $    6,535  $   17,162  $   58,976
                            ==========  ==========  ==========  ==========
Earnings per share
 attributable to ARC
 shareholders (actual):
  Basic                     $    (0.01) $    (0.35) $    (0.33) $     0.82
                            ==========  ==========  ==========  ==========
  Diluted                   $    (0.01) $    (0.35) $    (0.33) $     0.81
                            ==========  ==========  ==========  ==========
Earnings per share
 attributable to ARC
 shareholders (adjusted):
  Basic                     $     0.01  $     0.14  $     0.38  $     1.31
                            ==========  ==========  ==========  ==========
  Diluted                   $     0.01  $     0.14  $     0.38  $     1.30
                            ==========  ==========  ==========  ==========
Weighted average common
 shares outstanding (adjusted):
  Basic                     45,393,929  45,078,554  45,185,350  45,060,482
  Diluted                   45,524,283  45,353,789  45,328,550  45,398,086
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   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ----------
Net (loss) income attributable
 to ARC                         $    (575) $ (15,687) $ (14,885) $   36,754
  Interest expense, net             7,721      6,005     25,781      25,890
  Income tax (benefit) provision     (502)    (8,677)     3,018      21,200
                                ---------  ---------  ---------  ----------
EBIT                                6,644    (18,359)    13,914      83,844
 Depreciation and amortization     11,892     12,940     49,543      50,121
                                ---------  ---------  ---------  ----------
EBITDA                             18,536     (5,419)    63,457     133,965
Special items:
  Goodwill impairment                   -     35,154     37,382      35,154
  Impairment of long-lived
   assets                               -          -        781           -
                                ---------  ---------  ---------  ----------
Adjusted EBITDA                 $  18,536  $  29,735  $ 101,620  $  169,119
                                =========  =========  =========  ==========

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 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 $4.9 million, $4.3 million and $3.5 million of stock based compensation expense recorded in selling, general and administrative expenses, for the years ended December 31, 2009, 2008 and 2007, respectively. EBIT margin is a non-GAAP measure calculated by dividing EBIT by net sales. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.

We present EBIT, 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 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 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.

We have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the years ended December 31, 2009 and 2008 to reflect the exclusion of the goodwill impairment charge, long-lived assets impairment charge and costs related to the 2009 amendments to the Credit Agreement and Swap Transaction. This presentation facilitates a meaningful comparison of our operating results for the years ended December 31, 2009 and 2008. We presented adjusted EBITDA in 2009 and 2008 to exclude the non-cash impairment charges of $38.2 million and $35.2 million, respectively, as we believe this was a result of the current macroeconomic environment and not indicative of our operations. The exclusion of the goodwill impairment charges and long-lived assets impairment charge, and costs related to the 2009 amendments to the Credit Agreement and Swap Transaction to arrive at adjusted EBITDA is consistent with the definition of adjusted EBITDA in the amendment to the Credit Agreement, therefore we believe this information is useful to investors in assessing our ability to meet our debt covenants.

American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
                                 Three Months Ended   Twelve Months Ended
                                    December 31,          December 31,
                                --------------------  --------------------
                                  2009       2008       2009       2008
                                ---------  ---------  ---------  ---------
Cash flows from operating
 activities
Net (loss) income               $    (640) $ (15,623) $ (14,989) $  36,813
Adjustments to reconcile net
 (loss) income to net cash
 provided by operating
 activities:
   Allowance for accounts
    receivable                        202      1,802      3,044      4,966
   Depreciation                     9,199      9,924     38,176     38,117
   Amortization of intangible
    assets                          2,693      3,016     11,367     12,004
   Amortization of deferred
    financing costs                   385        331      1,357      1,267
   Goodwill impairment                  -     35,154     37,382     35,154
   Impairment of long-lived
    assets                              -          -        781          -
   Stock-based compensation         1,328      1,146      4,892      4,289
   Excess tax benefit related
    to stock-based compensation         -         72        (18)       (30)
   Deferred income taxes           (2,219)   (16,670)    (4,477)   (10,172)
   Write-off of deferred
    financing costs                   190          -        190        313
   Other noncash items, net          (145)       117       (199)      (284)
   Changes in operating assets
    and liabilities, net of
    effect of business
    acquisitions:
     Accounts receivable            9,862     19,656     21,099     21,556
     Inventory                        989      1,883      1,344      3,134
     Prepaid expenses and other
      assets                        2,627      3,694      6,302     (1,101)
     Accounts payable and
      accrued expenses             (2,410)   (12,499)    (8,826)   (18,760)
                                ---------  ---------  ---------  ---------
Net cash provided by operating
 activities                        22,061     32,003     97,425    127,266
                                ---------  ---------  ---------  ---------
Cash flows from investing
 activities
Capital expenditures               (1,654)    (2,674)    (7,506)    (9,033)
Payments for businesses
 acquired, net of cash acquired
 and including other cash
 payments associated with
 the acquisitions                  (1,504)    (5,700)    (3,527)   (23,916)
Restricted cash                         -      1,959          -        937
Other                                 968        259      1,684      1,205
                                ---------  ---------  ---------  ---------
Net cash used in investing
 activities                        (2,190)    (6,156)    (9,349)   (30,807)
                                ---------  ---------  ---------  ---------
Cash flows from financing
 activities
Proceeds from stock option
 exercises                              -          -         63        177
Proceeds from issuance of
 common stock under Employee
 Stock Purchase Plan                   48          8        164         35
Excess tax benefit related to
 stock-based compensation               -        (72)        18         30
Payments on long-term debt
 agreements and capital leases    (49,170)   (13,343)  (105,008)   (51,850)
Net repayments under revolving
 credit facility                    1,523          -      1,523    (22,000)
Payment of loan fees               (2,048)         -     (2,092)      (726)
                                ---------  ---------  ---------  ---------
Net cash used in financing
 activities                       (49,647)   (13,407)  (105,332)   (74,334)
                                ---------  ---------  ---------  ---------
Effect of foreign currency
 translation on cash balances         (26)      (527)        91       (385)
                                ---------  ---------  ---------  ---------
Net change in cash and cash
 equivalents                      (29,802)    11,913    (17,165)    21,740
Cash and cash equivalents at
 beginning of period               59,179     34,629     46,542     24,802
                                ---------  ---------  ---------  ---------
Cash and cash equivalents at
 end of period                  $  29,377  $  46,542  $  29,377  $  46,542
                                =========  =========  =========  =========
 Supplemental disclosure of
  cash flow information
Noncash investing and financing
 activities
Noncash transactions include
 the following:
 Capital lease obligations
  incurred                      $   4,047  $   7,950  $  16,181  $  34,561
 Issuance of subordinated notes
  in connection with the
  acquisition of businesses     $     220  $   2,761  $     466  $  10,414
 Accrued liabilities in
  connection with acquisition
  of businesses                 $       -  $     100  $       -  $     100
 Net gain (loss) on derivative,
  net of tax effect             $     842  $  (8,387) $   3,318  $  (9,167)
 Contribution from
  noncontrolling interest       $       -  $       -  $       -  $   6,062

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

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

SOURCE: American Reprographics Company

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