EX-99.1 2 d348905dex991.htm EX-99.1 EX-99.1

Exhibit 99.1

ARC REPORTS RESULTS FOR FIRST QUARTER 2012

WALNUT CREEK, California (May 8, 2012) – ARC (NYSE:ARC), the nation’s leading document solutions company for the architecture, engineering, and construction (AEC) industry, today reported its financial results for the first quarter ended March 31, 2012.

Business Highlights:

 

   

Q1 cash from operations at $12.4 million more than doubled year-over year; equates to $0.27 per share for Q1.

 

   

Year-over-year growth of more than 10% in FM/MPS for the fourth quarter in a row.

 

   

Senior secured credit facility remains undrawn.

 

   

Q1 adjusted earnings per share of $0.00.

 

   

Company affirms 2012 fully diluted annual adjusted earnings per share outlook of $0.05 to $0.10; annual cash from operations for 2012 remains projected at $40-50 million.

Financial Highlights:

 

     Three Months Ended
March 31
 

(All dollar figures in millions, except EPS)

       2012             2011      

Net Revenue

   $ 103.6      $ 106.5   

Gross Margin

     30.8     31.3

Net (Loss) Income attributable to ARC (GAAP)

   $ (4.9   $ (3.6

Adjusted Net (Loss) Income attributable to ARC

   $ 0.01      $ (2.1

EPS (GAAP)

   $ (0.11   $ (0.08

Adjusted EPS

   $ 0.00      $ (0.05

Cash from Operations

   $ 12.4      $ 4.6   

Capital Expenditures

   $ 3.8      $ 4.1   

Debt & Capital Leases

   $ 226.5      $ 247.8   

Management Commentary:

“Our revenues are still being pressured by the lack of new projects in the construction market, but our MPS initiatives are in high gear. We have had double-digit growth for the fourth quarter in a row, which we see as strong validation for our decision to pursue this line of business,” said K. “Suri” Suriyakumar, Chairman, President and CEO of ARC. “Our aggressive efforts to drive sales across all lines of business are starting to show results. Not only have we seen significant gains in MPS, but we are also starting to see incremental growth in digital services thanks to our broad technology portfolio and the increasing adoption of technology by our customers. If these trends continue, we expect to see our growth rate increase later this year.”

“While our revenue in traditional services remains under pressure, our operating income margin showed strong year-over-year growth due to the actions taken by management over the past year to better match costs with our revenue,” said John Toth, ARC’s Chief Financial Officer. “Additionally, our cash position and cash flow remain strong, enhanced by access to our undrawn senior secured credit facility. We are also aggressively managing our capital expenditures – which are roughly flat year-over-year – even though our FM/MPS revenue is growing at double digits.”


Outlook:

ARC affirms annual adjusted earnings per share in 2012 to be in the range of $0.05 to $0.10 on a fully-diluted basis, and annual cash flow from operations to be in the range of $40 million to $50 million.

Teleconference and Webcast:

ARC 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 first quarter of 2012. The conference call can be accessed by dialing (877) 402-8179. The conference ID number is 76603383.

A live Webcast will also be made available on the investor relations page of ARC’s website at www.e-arc.com.

A replay will be available approximately one hour after the call for seven days following the call’s conclusion. To access the replay, dial (855) 859-2056. The conference ID number to access the replay is 76603383. A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call’s conclusion.

About ARC (NYSE:ARC)

ARC provides specialized document solutions to businesses of all types, with an emphasis on the non-residential segment of the architecture, engineering and construction (“AEC”) industry. The company’s products and services enhance our customers’ document workflow, reduce costs, shorten document processing and distribution time, improve the quality of document management tasks, and provide a secure, controlled environment in which to manage, distribute and produce documents. The company’s service centers are digitally connected and allow the provision of services both locally and nationally to more than 100,000 active customers. ARC is headquartered in California with service centers in 42 states in the US, three provinces in Canada, 12 locations in China and select locations in the U.K., Hong Kong, Australia and India. For more information, visit www.e-arc.com.

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 “expect,” “anticipates,” 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, current economic conditions and downturn in the architectural, engineering and construction (AEC) industries specifically, and the timing and nature of any economic recovery; our inability to mitigate revenue exposure to the cyclical nature of the AEC industries; our inability to streamline operations and reduce and/or manage costs; our failure to develop and introduce new services successfully, including expansion of client service capabilities in our core AEC market; 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 dependence on certain key vendors for equipment, maintenance services and supplies; and damage or disruption to our facilities, our technology centers, our vendors or a majority of our customers. 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.


Contact:

David Stickney

Vice President, Corporate Communications

925-949-5114

Email: david.stickney@e-arc.com


American Reprographics Company

Consolidated Balance Sheets

(Dollars in thousands, except per share data)

(Unaudited)

 

     March 31,     December 31,  
     2012     2011  

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 29,814      $ 25,437   

Accounts receivable, net of allowances for accounts receivable of $3,412 and $3,309

     60,216        54,713   

Inventories, net

     12,542        12,107   

Prepaid expenses

     4,922        3,999   

Other current assets

     6,909        7,541   
  

 

 

   

 

 

 

Total current assets

     114,403        103,797   

Property and equipment, net of accumulated depreciation of $196,140 and $191,598

     55,775        55,084   

Goodwill

     229,315        229,315   

Other intangible assets, net

     40,644        45,127   

Deferred financing costs, net

     4,936        4,574   

Deferred income taxes

     1,320        1,368   

Other assets

     2,059        2,092   
  

 

 

   

 

 

 

Total assets

   $ 448,452      $ 441,357   
  

 

 

   

 

 

 

Liabilities and Equity

    

Current liabilities:

    

Accounts payable

   $ 21,254      $ 21,787   

Accrued payroll and payroll-related expenses

     9,461        7,292   

Accrued expenses

     26,208        19,308   

Current portion of long-term debt and capital leases

     14,602        15,005   
  

 

 

   

 

 

 

Total current liabilities

     71,525        63,392   

Long-term debt and capital leases

     211,862        211,259   

Deferred income taxes

     27,336        26,447   

Other long-term liabilities

     3,306        3,194   
  

 

 

   

 

 

 

Total liabilities

     314,029        304,292   
  

 

 

   

 

 

 

Commitments and contingencies

    

Stockholders’ equity:

    

American Reprographics Company stockholders’ equity:

    

Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding

     —          —     

Common stock, $0.001 par value, 150,000 shares authorized; 46,230 and 46,235 shares issued and 46,230 and 46,235 shares outstanding

     46        46   

Additional paid-in capital

     100,870        99,728   

Retained earnings

     27,756        32,663   

Accumulated other comprehensive loss

     (696     (1,760
  

 

 

   

 

 

 

Total American Reprographics Company stockholders’ equity

     127,976        130,677   

Noncontrolling interest

     6,447        6,388   
  

 

 

   

 

 

 

Total equity

     134,423        137,065   
  

 

 

   

 

 

 

Total liabilities and equity

   $ 448,452      $ 441,357   
  

 

 

   

 

 

 


American Reprographics Company

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Reprographics services

   $ 63,016      $ 70,022   

Facilities management

     26,656        24,203   

Equipment and supplies sales

     13,901        12,279   
  

 

 

   

 

 

 

Total net sales

     103,573        106,504   

Cost of sales

     71,695        73,118   
  

 

 

   

 

 

 

Gross profit

     31,878        33,386   

Selling, general and administrative expenses

     23,457        27,832   

Amortization of intangible assets

     4,593        4,744   
  

 

 

   

 

 

 

Income from operations

     3,828        810   

Other income, net

     (30     (26

Interest expense, net

     7,438        8,167   
  

 

 

   

 

 

 

Loss before income tax provision (benefit)

     (3,580     (7,331

Income tax provision (benefit)

     1,310        (3,649
  

 

 

   

 

 

 

Net loss

     (4,890     (3,682

(Income) loss attributable to the noncontrolling interest

     (17     39   
  

 

 

   

 

 

 

Net loss attributable to American Reprographics Company

   $ (4,907   $ (3,643
  

 

 

   

 

 

 

Loss per share attributable to American Reprographics Company shareholders:

    

Basic

   $ (0.11   $ (0.08
  

 

 

   

 

 

 

Diluted

   $ (0.11   $ (0.08
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     45,541        45,322   

Diluted

     45,541        45,322   


American Reprographics Company

Non-GAAP Measures

Reconciliation of cash flows provided by operating activities to EBIT, EBITDA and Adjusted EBITDA

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended March 31,  
     2012     2011  

Cash flows provided by operating activities

   $ 12,395      $ 4,589   

Changes in operating assets and liabilities, net of business acquisitions

     (2,145     9,366   

Non-cash expenses, including depreciation and amortization

     (15,140     (17,637

Income tax provision (benefit)

     1,310        (3,649

Interest expense

     7,438        8,167   

Net (income) loss attributable to the noncontrolling interest

     (17     39   
  

 

 

   

 

 

 

EBIT

     3,841        875   

Depreciation and amortization

     11,655        12,486   
  

 

 

   

 

 

 

EBITDA

     15,496        13,361   

Stock-based compensation

     444        1,489   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,940      $ 14,850   
  

 

 

   

 

 

 


American Reprographics Company

Non-GAAP Measures

Reconciliation of net loss attributable to ARC to unaudited adjusted net income (loss) attributable to ARC

(Dollars in thousands, except per share data)

(Unaudited)

 

     Three Months Ended March 31,  
     2012     2011  

Net loss attributable to ARC

   $ (4,907   $ (3,643

Change in trade name impact to amortization

     2,369        2,369   

Interest rate swap related costs

     1,255        1,523   

Income tax provision, related to above items

     (1,355     (1,382

Deferred tax valuation allowance and other discrete tax items

     2,645        (978
  

 

 

   

 

 

 

Unaudited adjusted net income (loss) attributable to ARC

   $ 7      $ (2,111
  

 

 

   

 

 

 

Actual:

    

Loss per share attributable to ARC shareholders:

    

Basic

   $ (0.11   $ (0.08
  

 

 

   

 

 

 

Diluted

   $ (0.11   $ (0.08
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     45,541        45,322   

Diluted

     45,541        45,322   

Adjusted:

    

Earnings (loss) per share attributable to ARC shareholders:

    

Basic

   $ 0.00      $ (0.05
  

 

 

   

 

 

 

Diluted

   $ 0.00      $ (0.05
  

 

 

   

 

 

 

Weighted average common shares outstanding:

    

Basic

     45,541        45,322   

Diluted

     45,587        45,322   


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 March 31,  
     2012     2011  

Net loss attributable to ARC

   $ (4,907   $ (3,643

Interest expense, net

     7,438        8,167   

Income tax provision (benefit)

     1,310        (3,649
  

 

 

   

 

 

 

EBIT

     3,841        875   

Depreciation and amortization

     11,655        12,486   
  

 

 

   

 

 

 

EBITDA

     15,496        13,361   

Stock-based compensation

     444        1,489   
  

 

 

   

 

 

 

Adjusted EBITDA

   $ 15,940      $ 14,850   
  

 

 

   

 

 

 


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. 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 debt and taxation which are managed at the corporate level for U.S. operating segments. As a result, we believe EBIT is the best measure of operating segment 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. In addition, we use EBIT and EBITDA to evaluate potential acquisitions and potential capital expenditures.

EBIT, EBITDA and related ratios have limitations as analytical tools, and should not be considered 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. For more information, see our interim Condensed Consolidated Financial Statements and related notes on our 2012 first quarter report on Form 10-Q. Additionally, please refer to our 2011 Annual Report on Form 10-K.

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 in the reconciliation tables above.

Specifically, we have presented adjusted net income (loss) attributable to ARC and adjusted earnings (loss) per share attributable to ARC shareholders for the three months ended March 31, 2012 and 2011 to reflect the exclusion of the amortization impact related specifically to the change in useful lives of trade names, interest rate swap related costs, and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the months ended March 31, 2012 and 2011. We believe these charges were the result of our capital restructuring, or other items which are not indicative of our actual operating performance.

We presented adjusted EBITDA in the three months ended March 31, 2012 and 2011 to exclude stock-based compensation expense of $0.4 million and $1.5 million, respectively. This presentation is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.


American Reprographics Company

Consolidated Statements of Cash Flows

(Dollars in thousands)

(Unaudited)

 

     Three Months Ended
March 31,
 
     2012     2011  

Cash flows from operating activities

    

Net loss

   $ (4,890   $ (3,682

Adjustments to reconcile net loss to net cash provided by operating activities:

    

Allowance for accounts receivable

     240        180   

Depreciation

     7,062        7,742   

Amortization of intangible assets

     4,593        4,744   

Amortization of deferred financing costs

     255        216   

Amortization of bond discount

     147        132   

Stock-based compensation

     444        1,489   

Excess tax benefit related to stock-based compensation

     —          (8

Deferred income taxes

     (325     2,318   

Deferred tax valuation allowance

     1,968        —     

Amortization of derivative, net of tax effect

     786        954   

Other noncash items, net

     (30     (130

Changes in operating assets and liabilities, net of effect of business acquisitions:

    

Accounts receivable

     (5,634     (8,268

Inventory

     (521     (1,191

Prepaid expenses and other assets

     (266     (3,228

Accounts payable and accrued expenses

     8,566        3,321   
  

 

 

   

 

 

 

Net cash provided by operating activities

     12,395        4,589   
  

 

 

   

 

 

 

Cash flows from investing activities

    

Capital expenditures

     (3,805     (4,136

Payment for swap transaction

     —          (9,729

Other

     191        378   
  

 

 

   

 

 

 

Net cash used in investing activities

     (3,614     (13,487
  

 

 

   

 

 

 

Cash flows from financing activities

    

Proceeds from stock option exercises

     —          41   

Proceeds from issuance of common stock under Employee Stock Purchase Plan

     21        23   

Excess tax benefit related to stock-based compensation

     —          8   

Payments on long-term debt agreements and capital leases

     (4,388     (7,540

Net borrowings under revolving credit facilities

     552        12,800   

Payment of deferred financing fees

     (712     (164
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (4,527     5,168   
  

 

 

   

 

 

 

Effect of foreign currency translation on cash balances

     123        109   
  

 

 

   

 

 

 

Net change in cash and cash equivalents

     4,377        (3,621

Cash and cash equivalents at beginning of period

     25,437        26,293   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 29,814      $ 22,672   
  

 

 

   

 

 

 
     —          —     

Supplemental disclosure of cash flow information

    

Noncash investing and financing activities

    

Noncash transactions include the following:

    

Capital lease obligations incurred

   $ 3,846      $ 2,461