Exhibit 99.1
AMERICAN REPROGRAPHICS COMPANY REPORTS RESULTS FOR SECOND QUARTER 2010
• | EPS of $0.04 per share |
• | Quarterly Cash from Operating Activities of $18.3 million |
• | Gross Margin of 34.3% |
• | Company reaffirms annual forecast |
WALNUT CREEK, California (August 3, 2010) – 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.”
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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 athttp://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.
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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, general economic conditions 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.
Contacts: | ||
David Stickney | Joseph Villalta | |
American Reprographics Company | The Ruth Group | |
Phone: 925-949-5100 | Phone: 646-536-7003 |
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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 | ||||
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 |
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT and EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended 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 | ||||||||
Non-GAAP Measures
Reconciliation of net income attributable to ARC to EBIT and EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended June 30, | Six Months Ended 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 | ||||||||
• | 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. |
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 |