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8-K - FORM 8-K - ARC DOCUMENT SOLUTIONS, INC. | c16432e8vk.htm |
Exhibit 99.1
AMERICAN REPROGRAPHICS COMPANY REPORTS RESULTS FOR FIRST QUARTER 2011
WALNUT CREEK, California (May 3, 2011) ARC (NYSE: ARC) (the Company), the nations leading
provider of document management services and technology to the
architectural, engineering and construction industries, today reported its financial results for the
first quarter ended March 31, 2011.
First quarter results for 2011 were in line with our expectations, but March sales clearly show
that project-related activity, which was at its lowest point during the past several years, will
continue to remain a challenge for the rest of the year, said K. Suri Suriyakumar, Chairman,
President and CEO. However, we were extremely gratified to see the progress we are making in
some of our newer service offerings like managed print services (MPS), Global Services and our
color business. Together, they helped us offset the revenue decline we saw in project-related
printing, and we expect these segments of business to continue to grow through the rest of the
year.
Net revenue for the first quarter of 2011 was $106.5 million. The Companys gross margin was 31.2%.
ARC reported a loss in net income of $3.6 million for the first quarter of 2011, or $0.08 per
diluted share. Adjusted to exclude the previously announced accelerated amortization of trade
names, and interest rate swap-related items associated with our
previous debt agreement, the Companys
quarterly loss in net income was $2.1 million or $0.05 per diluted share. Cash from operating
activities was $4.6 million.
Management also noted that its restructuring plans are proceeding as previously announced,
including the addition of new infrastructure and staff to address the growth in Global Services,
MPS, color and Technology Services. The Company continues to restructure its outsourced
reprographics service centers, reducing its staff and its branch network related to traditional
revenue streams, including duplicate production facilities that were added to the Company in the
past through ARCs aggressive acquisition program. Additional
efficiencies will be achieved as a
result of the Companys newly unified brand, which consolidates ARCs strong footprint in major
metropolitan areas around the country. The Companys restructuring efforts are
expected to continue throughout the year with anticipated annualized savings of more than $14
million.
Outlook
The Company reaffirmed its forecast of annual 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 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 Companys first quarter 2011 and
business outlook. The conference call can be accessed by dialing
877-402-8179. The conference ID
number is 60057717.
A replay of this call will be available approximately one hour after the call for seven days
following the calls conclusion. To access the replay, dial 800-642-1687. The conference ID
number is 60057717.
A Web archive will be made available at http://www.e-arc.com for approximately 90 days
following the calls conclusion.
About ARC
ARC (American Reprographics Company) is the leader in business-to-business document management
technology and services to the architectural, engineering and construction, or AEC industries, in
the United States. The Company also provides document management services to companies in non-AEC
industries, such as technology, financial services, retail, entertainment, and food and
hospitality. ARC provides its services through its suite of reprographics technology products, a
network of hundreds of reprographics service centers around the world, and on-site at more than
5,500 customer locations. The Companys service centers 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 will, seems, 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.
Contacts: |
||
David Stickney
|
Joseph Villalta | |
VP of Corporate Communications
|
The Ruth Group | |
Phone: 925-949-5100
|
Phone: 646-536-7003 | |
Email: davidstickney@e-arc.com
|
Email: jvillalta@theruthgroup.com |
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
March 31, | December 31, | |||||||
2011 | 2010 | |||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 22,672 | $ | 26,293 | ||||
Accounts receivable, net |
60,791 | 52,619 | ||||||
Inventories, net |
11,824 | 10,689 | ||||||
Deferred income taxes |
13,721 | 7,157 | ||||||
Prepaid expenses and other current assets |
14,322 | 10,944 | ||||||
Total current assets |
123,330 | 107,702 | ||||||
Property and equipment, net |
57,862 | 59,036 | ||||||
Goodwill |
294,759 | 294,759 | ||||||
Other intangible assets, net |
57,941 | 62,643 | ||||||
Deferred financing costs, net |
4,862 | 4,995 | ||||||
Deferred income taxes |
28,816 | 37,835 | ||||||
Other assets |
2,024 | 2,115 | ||||||
Total assets |
$ | 569,594 | $ | 569,085 | ||||
Liabilities and Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ | 22,869 | $ | 23,593 | ||||
Accrued payroll and payroll-related expenses |
9,801 | 7,980 | ||||||
Accrued expenses |
24,121 | 30,134 | ||||||
Current portion of long-term debt and capital leases |
33,356 | 23,608 | ||||||
Total current liabilities |
90,147 | 85,315 | ||||||
Long-term debt and capital leases |
214,485 | 216,016 | ||||||
Other long-term liabilities |
3,175 | 5,072 | ||||||
Total liabilities |
307,807 | 306,403 | ||||||
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;
46,193,156 and 46,183,463 shares issued and 45,745,502 and
45,735,809 shares outstanding in 2011 and 2010, respectively |
46 | 46 | ||||||
Additional paid-in capital |
97,795 | 96,251 | ||||||
Retained earnings |
169,816 | 173,459 | ||||||
Accumulated other comprehensive loss |
(4,330 | ) | (5,541 | ) | ||||
263,327 | 264,215 | |||||||
Less cost of common stock in treasury, 447,654 shares in 2011 and 2010 |
7,709 | 7,709 | ||||||
Total American Reprographics Company stockholders equity |
255,618 | 256,506 | ||||||
Noncontrolling interest |
6,169 | 6,176 | ||||||
Total equity |
261,787 | 262,682 | ||||||
Total liabilities and equity |
$ | 569,594 | $ | 569,085 | ||||
American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Reprographics services |
$ | 70,022 | $ | 76,257 | ||||
Facilities management |
24,203 | 22,403 | ||||||
Equipment and supplies sales |
12,279 | 13,501 | ||||||
Total net sales |
106,504 | 112,161 | ||||||
Cost of sales |
73,118 | 75,310 | ||||||
Gross profit |
33,386 | 36,851 | ||||||
Selling, general and administrative expenses |
27,832 | 27,131 | ||||||
Amortization of intangible assets |
4,744 | 2,636 | ||||||
Income from operations |
810 | 7,084 | ||||||
Other income, net |
(26 | ) | (43 | ) | ||||
Interest expense, net |
8,167 | 5,888 | ||||||
(Loss) income before income tax (benefit) provision |
(7,331 | ) | 1,239 | |||||
Income tax (benefit) provision |
(3,649 | ) | 530 | |||||
Net (loss) income |
(3,682 | ) | 709 | |||||
Loss attributable to the noncontrolling interest |
39 | 8 | ||||||
Net (loss) income attributable to American Reprographics
Company |
$ | (3,643 | ) | $ | 717 | |||
Earnings per share attributable to American Reprographics
Company shareholders: |
||||||||
Basic |
$ | (0.08 | ) | $ | 0.02 | |||
Diluted |
$ | (0.08 | ) | $ | 0.02 | |||
Weighted average common shares outstanding: |
||||||||
Basic |
45,322,092 | 45,150,483 | ||||||
Diluted |
45,322,092 | 45,356,871 |
American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT, EBITDA and Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
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, | ||||||||
2011 | 2010 | |||||||
Cash flows provided by operating activities |
$ | 4,589 | $ | 9,468 | ||||
Changes in operating assets and liabilities |
9,366 | 5,083 | ||||||
Non-cash expenses, including depreciation
and amortization |
(17,637 | ) | (13,842 | ) | ||||
Income tax (benefit) provision |
(3,649 | ) | 530 | |||||
Interest expense |
8,167 | 5,888 | ||||||
Net loss attributable to the noncontrolling
interest |
39 | 8 | ||||||
EBIT |
875 | 7,135 | ||||||
Depreciation and amortization |
12,486 | 11,656 | ||||||
EBITDA |
13,361 | 18,791 | ||||||
Stock-based compensation |
1,489 | 1,461 | ||||||
Adjusted EBITDA |
$ | 14,850 | $ | 20,252 | ||||
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited adjusted net (loss) income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited adjusted net (loss) income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net (loss) income attributable to ARC |
$ | (3,643 | ) | $ | 717 | |||
Change in trade name
impact to amortization |
2,369 | | ||||||
Amortization of derivative |
1,523 | | ||||||
Income tax provision, related
to above items |
(1,382 | ) | | |||||
Tax discrete items |
(978 | ) | ||||||
Unaudited adjusted net (loss) income
attributable to ARC |
$ | (2,111 | ) | $ | 717 | |||
Earnings per share attributable to ARC shareholders (actual): |
||||||||
Basic |
$ | (0.08 | ) | $ | 0.02 | |||
Diluted |
$ | (0.08 | ) | $ | 0.02 | |||
Weighted average common shares
outstanding: |
||||||||
Basic |
45,322,092 | 45,150,483 | ||||||
Diluted |
45,322,092 | 45,356,871 | ||||||
Earnings per share attributable to ARC shareholders (adjusted): |
||||||||
Basic |
$ | (0.05 | ) | $ | 0.02 | |||
Diluted |
$ | (0.05 | ) | $ | 0.02 | |||
Weighted average common shares
outstanding: |
||||||||
Basic |
45,322,092 | 45,150,483 | ||||||
Diluted |
45,322,092 | 45,356,871 |
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended March 31, | ||||||||
2011 | 2010 | |||||||
Net (loss) income attributable to ARC |
$ | (3,643 | ) | $ | 717 | |||
Interest expense, net |
8,167 | 5,888 | ||||||
Income tax (benefit) provision |
(3,649 | ) | 530 | |||||
EBIT |
875 | 7,135 | ||||||
Depreciation and amortization |
12,486 | 11,656 | ||||||
EBITDA |
13,361 | 18,791 | ||||||
Stock-based compensation |
1,489 | 1,461 | ||||||
Adjusted EBITDA |
$ | 14,850 | $ | 20,252 | ||||
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 $1.5 million of stock-based
compensation expense recorded in selling, general and administrative expenses, for the three months
ended March 31, 2011 and 2010, 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 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. 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. For more information, see our interim Condensed
Consolidated Financial Statements and related notes on our 2011 first quarter report on Form 10-Q.
Additionally, please refer to our 2010 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, 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 three months ended March 31, 2011 to reflect the
exclusion of amortization impact related to the change in trade name, amortization of derivative
and discrete tax items. We believe these charges were the result of our capital restructuring, or
other items which have little bearing on our actual operating performance.
We present adjusted EBITDA for the three months ended March 31, 2011 and 2010 to exclude
stock-based compensation expense. This presentation is consistent with the definition of EBITDA in
our previous and current credit agreements.
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Cash flows from operating activities |
||||||||
Net (loss) income |
$ | (3,682 | ) | $ | 709 | |||
Adjustments to reconcile net (loss) income to net cash provided by operating activities: |
||||||||
Allowance for accounts receivable |
180 | 261 | ||||||
Depreciation |
7,742 | 9,020 | ||||||
Amortization of intangible assets |
4,744 | 2,636 | ||||||
Amortization of deferred financing costs |
216 | 384 | ||||||
Amortization of bond discount |
132 | | ||||||
Stock-based compensation |
1,489 | 1,461 | ||||||
Excess tax benefit related to stock-based compensation |
(8 | ) | (3 | ) | ||||
Deferred income taxes |
2,318 | 274 | ||||||
Amortization of derivative, net of tax effect |
954 | | ||||||
Other noncash items, net |
(130 | ) | (191 | ) | ||||
Changes in operating assets and liabilities, net of effect of business acquisitions: |
||||||||
Accounts receivable |
(8,268 | ) | (5,419 | ) | ||||
Inventory |
(1,191 | ) | 156 | |||||
Prepaid expenses and other assets |
(3,228 | ) | (2,515 | ) | ||||
Accounts payable and accrued expenses |
3,321 | 2,695 | ||||||
Net cash provided by operating activities |
4,589 | 9,468 | ||||||
Cash flows from investing activities |
||||||||
Capital expenditures |
(4,136 | ) | (1,217 | ) | ||||
Payment for swap transaction |
(9,729 | ) | | |||||
Other |
378 | 551 | ||||||
Net cash used in investing activities |
(13,487 | ) | (666 | ) | ||||
Cash flows from financing activities |
||||||||
Proceeds from stock option exercises |
41 | 16 | ||||||
Proceeds from issuance of common stock under Employee Stock Purchase Plan |
23 | 0 | ||||||
Excess tax benefit related to stock-based compensation |
8 | 3 | ||||||
Payments on long-term debt agreements and capital leases |
(7,540 | ) | (11,202 | ) | ||||
Net borrowings (repayments) under revolving credit facility |
12,800 | (814 | ) | |||||
Payment of loan fees |
(164 | ) | | |||||
Net cash provided by (used in) financing activities |
5,168 | (11,997 | ) | |||||
Effect of foreign currency translation on cash balances |
109 | 1 | ||||||
Net change in cash and cash equivalents |
(3,621 | ) | (3,194 | ) | ||||
Cash and cash equivalents at beginning of period |
26,293 | 29,377 | ||||||
Cash and cash equivalents at end of period |
$ | 22,672 | $ | 26,183 | ||||
Supplemental disclosure of cash flow information |
||||||||
Noncash investing and financing activities |
||||||||
Noncash transactions include the following: |
||||||||
Capital lease obligations incurred |
$ | 2,461 | $ | 1,930 | ||||
Net loss on derivative, net of tax effect |
$ | | $ | (313 | ) |