American Reprographics Company Reports Results for Second Quarter 2010

August 03, 2010

WALNUT CREEK, CA, Aug 03, 2010 (MARKETWIRE via COMTEX) --

American Reprographics Company (NYSE: ARP)

  • EPS of $0.04 per share
  • Quarterly Cash from Operating Activities of $18.3 million
  • Gross Margin of 34.3%
  • Company reaffirms annual 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, 2010.

"We continue to manage our business aggressively, knowing the market conditions are likely to remain difficult throughout the year," said Mr. K. "Suri" Suriyakumar, Chairman, President and CEO. "We are scrutinizing our infrastructure, eliminating additional overhead costs as required, and pursuing opportunities in the marketplace with expanded offerings and new initiatives. While the construction market has not experienced some of the incremental improvements we've seen in the general economy, this is an opportune time to be addressing the productivity and efficiency our customers can achieve by using our services and technology."

Net revenue for the second quarter of 2010 was $115.1 million. The Company's gross margin was 34.3% for the three-month period ending June 30, 2010. Net income for the second quarter of 2010 was $1.7 million or $0.04 per diluted share.

Net revenue for the first six months of 2010 was $227.3 million. The Company's gross margin was 33.6% for the six-month period ending June 30, 2010. Net income for the first six months of 2010 was $2.4 million, or $0.05 per diluted share.

Jonathan Mather, Chief Financial Officer, said, "We are seeing revenue stabilization in key service lines relative to the large quarterly declines we saw in 2009. For example, large-format black and white printing revenues have remained essentially flat from first to second quarter. We saw an encouraging portion of new business in the U.S. is coming from our sales efforts in color, and once again, China had a strong quarter in equipment and supplies sales. While equipment sales can have a dilutive effect on our gross margin, quarter two gross margin improved from the first quarter by 140 basis points."

Outlook

The Company reaffirmed its 2010 annual EPS forecast of $0.15 to $0.30 on a fully-diluted basis, projecting annual cash flow from operations in the range of $65 million to $80 million. Management noted, however, that the Company's annual performance is likely to be on the lower side of its forecast for both EPS and cash flow from operations.

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 2010 and business outlook. The conference call can be accessed by dialing 877-402-8179. The conference ID number is 88153097.

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 88153097.

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 138,000 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,
                                                  -----------  -----------
                                                      2010         2009
                                                  -----------  -----------
Assets
Current assets:
Cash and cash equivalents                         $    33,673  $    29,377
Accounts receivable, net                               59,376       53,919
Inventories, net                                       11,840       10,605
Deferred income taxes                                   5,640        5,568
Prepaid expenses and other current assets               8,984        7,011
                                                  -----------  -----------
Total current assets                                  119,513      106,480
Property and equipment, net                            63,313       74,568
Goodwill                                              333,024      332,518
Other intangible assets, net                           69,022       74,208
Deferred financing costs, net                           3,312        4,082
Deferred income taxes                                  26,897       26,987
Other assets                                            1,966        2,111
                                                  -----------  -----------
Total assets                                      $   617,047  $   620,954
                                                  ===========  ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable                                  $    24,296  $    23,355
Accrued payroll and payroll-related expenses           14,510        8,804
Accrued expenses                                       24,420       24,540
Current portion of long-term debt and capital
 leases                                                61,344       53,520
                                                  -----------  -----------
Total current liabilities                             124,570      110,219
Long-term debt and capital leases                     195,385      220,711
Other long-term liabilities                             9,650        8,000
                                                  -----------  -----------
Total liabilities                                     329,605      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; 46,169,859 and 46,112,653
 shares issued and 45,722,205 and 45,664,999
 shares outstanding in 2010 and 2009, respectively         46           46
Additional paid-in capital                             93,082       89,982
Retained earnings                                     203,357      200,961
Accumulated other comprehensive loss                   (7,397)      (7,273)
                                                  -----------  -----------
                                                      289,088      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                                 281,379      276,007
Noncontrolling interest                                 6,063        6,017
                                                  -----------  -----------
Total stockholders' equity                            287,442      282,024
                                                  -----------  -----------
Total liabilities and stockholders' equity        $   617,047  $   620,954
                                                  ===========  ===========
American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
                              Three Months Ended       Six Months Ended
                                   June 30,                June 30,
                            ----------------------  ----------------------
                               2010        2009        2010        2009
                            ----------  ----------  ----------  ----------
Reprographics services      $   78,453  $   92,905  $  154,710  $  192,674
Facilities management           22,627      24,898      45,030      51,763
Equipment and supplies
 sales                          14,008      13,251      27,509      26,100
                            ----------  ----------  ----------  ----------
Total net sales                115,088     131,054     227,249     270,537
Cost of sales                   75,633      81,899     150,943     169,403
                            ----------  ----------  ----------  ----------
Gross profit                    39,455      49,155      76,306     101,134
Selling, general and
 administrative expenses        28,169      30,039      55,300      61,005
Amortization of intangible
 assets                          2,557       2,914       5,193       5,897
                            ----------  ----------  ----------  ----------
Income from operations           8,729      16,202      15,813      34,232
Other income, net                  (34)        (38)        (77)        (97)
Interest expense, net            5,754       5,836      11,642      11,632
                            ----------  ----------  ----------  ----------
Income before income tax
 provision                       3,009      10,404       4,248      22,697
Income tax provision             1,276       4,096       1,806       8,854
                            ----------  ----------  ----------  ----------
Net income                       1,733       6,308       2,442      13,843
(Income) loss attributable
 to the noncontrolling
 interest                          (54)         (1)        (46)         11
                            ----------  ----------  ----------  ----------
Net income attributable to
 American Reprographics
 Company                    $    1,679  $    6,307  $    2,396  $   13,854
                            ==========  ==========  ==========  ==========
Earnings per share
 attributable to American
 Reprographics Company
 shareholders:
  Basic                     $     0.04  $     0.14  $     0.05  $     0.31
                            ==========  ==========  ==========  ==========
  Diluted                   $     0.04  $     0.14  $     0.05  $     0.31
                            ==========  ==========  ==========  ==========
Weighted average common
 shares outstanding:
  Basic                     45,196,318  45,116,358  45,173,527  45,103,150
  Diluted                   45,511,579  45,243,171  45,422,029  45,157,874
American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT
and EBITDA
(Dollars in thousands)
(Unaudited)
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Cash flows provided by operating
 activities                         $ 18,278  $ 33,522  $ 27,746  $ 55,798
  Changes in operating assets and
   liabilities                        (3,806)  (11,477)    1,277    (9,555)
  Non-cash (expenses) income,
   including depreciation and
   amortization                      (12,739)  (15,737)  (26,581)  (32,400)
  Income tax provision                 1,276     4,096     1,806     8,854
  Interest expense                     5,754     5,836    11,642    11,632
  Net (income) loss attributable to
   the noncontrolling interest           (54)       (1)      (46)       11
                                    --------  --------  --------  --------
EBIT                                   8,709    16,239    15,844    34,340
  Depreciation and amortization       11,108    12,751    22,764    25,466
  Stock-based compensation             1,457     1,228     2,918     2,161
                                    --------  --------  --------  --------
EBITDA                              $ 21,274  $ 30,218  $ 41,526  $ 61,967
                                    ========  ========  ========  ========
American Reprographics Company
Non-GAAP Measures
Reconciliation of net income attributable to ARC to EBIT and EBITDA
(Dollars in thousands)
(Unaudited)
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------- -------------------
                                      2010      2009      2010      2009
                                    --------- --------- --------- ---------
Net income attributable to ARC      $   1,679 $   6,307 $   2,396 $  13,854
  Interest expense, net                 5,754     5,836    11,642    11,632
  Income tax provision                  1,276     4,096     1,806     8,854
                                    --------- --------- --------- ---------
EBIT                                    8,709    16,239    15,844    34,340
  Depreciation and amortization        11,108    12,751    22,764    25,466
  Stock-based compensation              1,457     1,228     2,918     2,161
                                    --------- --------- --------- ---------
EBITDA                              $  21,274 $  30,218 $  41,526 $  61,967
                                    ========= ========= ========= =========
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
                                    Three Months Ended   Six Months Ended
                                         June 30,            June 30,
                                    ------------------  ------------------
                                      2010      2009      2010      2009
                                    --------  --------  --------  --------
Cash flows from operating
 activities
Net income                          $  1,733  $  6,308  $  2,442  $ 13,843
Adjustments to reconcile net income
 to net cash provided by operating
 activities:
   Allowance for accounts
    receivable                            56     1,294       317     2,543
   Depreciation                        8,551     9,837    17,571    19,569
   Amortization of intangible
    assets                             2,557     2,914     5,193     5,897
   Amortization of deferred
    financing costs                      386       324       770       655
   Stock-based compensation            1,457     1,228     2,918     2,161
   Excess tax benefit related to
    stock-based compensation             (35)       (5)      (38)       (5)
   Deferred income taxes                (110)      259       164     1,671
   Other noncash items, net             (123)     (114)     (314)      (91)
   Changes in operating assets and
    liabilities, net of effect of
    business acquisitions:
     Accounts receivable                (365)    8,159    (5,784)    5,734
     Inventory                        (1,441)      232    (1,285)      918
     Prepaid expenses and other
      assets                             581     1,579    (1,934)    5,154
     Accounts payable and accrued
      expenses                         5,031     1,507     7,726    (2,251)
                                    --------  --------  --------  --------
Net cash provided by operating
 activities                           18,278    33,522    27,746    55,798
                                    --------  --------  --------  --------
Cash flows from investing
 activities
Capital expenditures                  (1,560)   (1,945)   (2,777)   (3,924)
Payments for businesses acquired,
 net of cash acquired
 and including other cash payments
 associated with the acquisitions          -      (333)        -      (921)
Other                                    294       279       845       442
                                    --------  --------  --------  --------
Net cash used in investing
 activities                           (1,266)   (1,999)   (1,932)   (4,403)
                                    --------  --------  --------  --------
Cash flows from financing
 activities
Proceeds from stock option
 exercises                               109        17       125        17
Proceeds from issuance of common
 stock under Employee Stock
 Purchase Plan                            16        46        16        46
Excess tax benefit related to
 stock-based compensation                 35         5        38         5
Payments on long-term debt
 agreements and capital leases       (10,394)  (25,328)  (21,596)  (41,206)
Net borrowings (repayments) under
 revolving credit facility               691         -      (123)        -
Payment of loan fees                       -         -         -       (44)
                                    --------  --------  --------  --------
Net cash used in financing
 activities                           (9,543)  (25,260)  (21,540)  (41,182)
                                    --------  --------  --------  --------
Effect of foreign currency
 translation on cash balances             21       147        22       131
                                    --------  --------  --------  --------
Net change in cash and cash
 equivalents                           7,490     6,410     4,296    10,344
Cash and cash equivalents at
 beginning of period                  26,183    50,476    29,377    46,542
                                    --------  --------  --------  --------
Cash and cash equivalents at end of
 period                             $ 33,673  $ 56,886  $ 33,673  $ 56,886
                                    ========  ========  ========  ========
Supplemental disclosure of cash
 flow information
Noncash investing and financing
 activities
Noncash transactions include the
 following:
  Capital lease obligations
   incurred                         $  2,464  $  4,470  $  4,394  $  9,723
  Issuance of subordinated notes in
   connection with the
   acquisition of businesses        $      -  $      -  $      -  $    246
  Accrued liabilities in connection
   with acquisition of businesses   $    500  $    167  $    500  $    500
  Net gain (loss) on derivative     $    139  $  1,752  $   (174) $  2,187

Contacts: David Stickney American Reprographics Company Phone: 925-949-5100 Joseph Villalta The Ruth Group Phone: 646-536-7003 SOURCE: American Reprographics Company