ARC Reports Results for Fourth Quarter and Fiscal Year 2010

February 22, 2011

WALNUT CREEK, CA, Feb 22, 2011 (MARKETWIRE via COMTEX) --e

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 
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 

SOURCE: American Reprographics Company