EX-99.1 2 c70960exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
 

Exhibit 99.1
AMERICAN REPROGRAPHICS COMPANY REPORTS
SECOND QUARTER 2007 RESULTS
~ Second Quarter Revenue $177.8 million; 17.3% increase from Q2 ’06 ~
~ Second Quarter EPS $0.43 ~
~ Company Reaffirms Full-Year Forecast: Revenue of $690-$710, EPS of $1.58-$1.62 ~
WALNUT CREEK, California (August 8, 2007) — American Reprographics Company (NYSE: ARP), the nation’s leading provider of reprographics services and technology today announced financial results for the three months ended June 30, 2007.
The Company reported net revenue for the second quarter of 2007 of $177.8 million, compared to $151.5 million in the second quarter of 2006, an increase of 17.3%. The Company’s gross margin for the second quarter was 42.1% compared to 43.4% in the same period in 2006. Net income for the second quarter of 2007 was $19.6 million, or $0.43 per diluted share. This compares to net income for the second quarter of 2006 of $8.4 million, or $0.18 per diluted share, which includes the one-time Louis Frey litigation charges of $13.3 million pre-tax.
Revenue for the first six months of 2007 was $338 million, compared to $292.3 million for the same period in 2006. Net income for the first six months of 2007 was $36.5 million, or $0.80 per diluted share, compared to net income of $22.8 million, or $0.50 per diluted share, which also includes the one-time Louis Frey litigation charges.
K. “Suri” Suriyakumar, Chief Executive Officer, stated, “Our second quarter results clearly demonstrate that the Company is on solid footing and our business is fundamentally strong. We also delivered excellent EPS performance thanks to a robust and growing commercial construction market, and continuing strength in the non-AEC segment of our business. This performance offset some revenue erosion attributable to the current downturn in the residential building market, which affects approximately 15% of our revenues. Other positives for the quarter include the early fulfillment of our annual acquisition plan, and continued strength in our acquisition pipeline. Overall, we remain very confident in our forecast for the year.”
Jonathan Mather, Chief Financial Officer, said, “The fundamentals of our business remained steady, with net revenue in the second quarter 2007 up more than 17% from the same period in 2006. Gross margin was in-line with expectations given the large and generally dilutive acquisitions we completed. The accelerated acquisition activity, however, did increase depreciation, amortization and interest, which amounted to $3.2 million in added pre-tax costs, or an after tax EPS of $0.04 compared to the prior quarter. This was partially offset by settlement of litigation, a portion of which was the reimbursement of costs relating to prior periods. We estimate that this benefited SG&A expenses by $2.2 million in this quarter, which computes to an after tax EPS of $0.03.”
The Company also announced that its Board of Directors authorized management to negotiate with the Company’s lenders to seek to remove share repurchase restrictions from its current debt agreement.
2007 Outlook
American Reprographics Company is reaffirming its prior forecast for 2007. Revenue is forecasted to be in the range of $690-$710 million. Earnings per share will be in the range of $1.58-$1.62
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 financial results for the second quarter ended June 30, 2007. The conference call can be accessed by dialing 201-689-8471.
A replay of this call will be available approximately one hour after the call for seven days following the conclusion of the call. This replay can be accessed by dialing 201-612-7415. The account number to access the phone replay is 3055 and the Conference ID number is 247838.

 

 


 

A Web archive will be made available at: http://www.e-arc.com for approximately 90 days following end of the call.
About American Reprographics Company
American Reprographics Company is the leading reprographics company in the United States providing business-to-business document management 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 more than 260 locally-branded reprographics service centers across the U.S., and on-site at their customers’ locations. 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 100,000 active customers.
Forward-Looking Statements Disclaimer
This press release contains forward-looking statements that fall within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 regarding future events and the future financial performance of the Company. Words such as “forecast,” “will,” and similar expressions also identify forward-looking statements. We wish to caution you that such statements are only predictions and actual results may differ materially as a result of risks and uncertainties that pertain to our business. These risks and uncertainties include, among others:
    Future downturns in the architectural, engineering and construction industries could diminish demand for our products and services
    Competition in our industry and innovation by our competitors may hinder our ability to execute our business strategy and maintain our profitability
    Failure to anticipate and adapt to future changes in our industry could harm our competitive position
    Failure to manage our acquisitions, including our inability to integrate and merge the business operations of the acquired companies, and failure to retain key personnel and customers of acquired companies could have a negative effect on our future performance, results of operations and financial condition
    Dependence on certain key vendors for equipment, maintenance services and supplies, could make us vulnerable to supply shortages and price fluctuations
    Damage or disruption to our facilities, our technology centers, our vendors or a majority of our customers could impair our ability to effectively provide our services and may have a significant impact on our revenues, expenses and financial condition
    If we fail to continue to develop and introduce new services successfully, our competitive positioning and our ability to grow our business could be harmed.
The foregoing list of risks and uncertainties is illustrative but is by no means exhaustive. For more information on factors that may affect future performance, please review our SEC filings, specifically our annual report on Form 10-K for the year ended December 31, 2006, our final prospectus supplement dated March 8, 2007, and our quarterly report on Form 10-Q for the quarter ended March 31, 2007. These documents contain important risk factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. These forward-looking statements are based on information as of August 8, 2007, and except as required by law, the Company undertakes no obligation to update or revise any forward-looking statements.

 

 


 

Contacts:
     
David Stickney
  David Pasquale
VP of Corporate Communications
  EVP of The Ruth Group
Phone: 925-949-5100
  Phone: 646-536-7006
Email: dstickney@e-arc.com
  Email:dpasquale@theruthgroup.com

 

 


 

American Reprographics Company
Consolidated Balance Sheets

(Dollars in thousands, except per share data)
(Unaudited)
                 
    December 31,     June 30,  
    2006     2007  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 11,642     $ 16,426  
Restricted cash
    8,491       8,697  
Accounts receivable, net
    85,277       102,491  
Inventories, net
    7,899       10,354  
Deferred income taxes
    10,963       10,967  
Prepaid expenses and other current assets
    6,796       9,946  
 
           
Total current assets
    131,068       158,881  
 
               
Property and equipment, net
    60,138       75,704  
Goodwill
    291,290       351,848  
Other intangible assets, net
    50,971       73,663  
Deferred financing costs, net
    895       1,108  
Deferred income taxes
    11,245       6,748  
Other assets
    1,974       2,100  
 
           
Total assets
  $ 547,581     $ 670,052  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 33,447     $ 33,814  
Accrued payroll and payroll-related expenses
    15,666       19,471  
Accrued expenses
    25,810       25,789  
Accrued litigation charge
    13,947       14,154  
Current portion of long-term debt and capital leases
    21,048       40,332  
 
           
Total current liabilities
    109,918       133,560  
 
               
Long-term debt and capital leases
    252,097       308,798  
Other long-term liabilities
    1,322       2,477  
 
           
 
               
Total liabilities
    363,337       444,835  
 
           
 
               
Commitments and contingencies
               
 
               
Stockholders’ equity:
               
Preferred stock, $.001 par value, 25,000,000 shares authorized; zero and zero shares issued and outstanding
           
Common stock, $.001 par value, 150,000,000 shares authorized; 44,346,099and 45,544,202 shares issued and outstanding
    45       45  
Additional paid-in capital
    75,465       79,381  
Deferred stock-based compensation
    (1,224 )     (905 )
Retained earnings
    109,955       146,412  
Accumulated other comprehensive income
    3       284  
 
           
Total stockholders’ equity
    184,244       225,217  
 
           
Total liabilities and stockholders’ equity
  $ 547,581     $ 670,052  
 
           

 

 


 

American Reprographics Company
Consolidated Statements of Income

(Dollars in thousands, except per
share data)
(Unaudited)
                                 
    Three Months Ended     Six Months Ended  
    June 30,     June 30,  
    2006     2007     2006     2007  
 
                               
Reprographics services
  $ 114,658     $ 133,257     $ 219,475     $ 253,035  
Facilities management
    24,691       28,984       47,623       55,340  
Equipment and supplies sales
    12,178       15,542       25,231       29,621  
 
                       
Total net sales
    151,527       177,783       292,329       337,996  
Cost of sales
    85,713       102,967       166,156       195,401  
 
                       
Gross profit
    65,814       74,816       126,173       142,595  
Selling, general and administrative expenses
    33,112       34,499       64,598       68,733  
Litigation Reserve
    11,262       0       11,262       0  
Amortization of intangible assets
    867       2,451       1,652       4,196  
 
                       
Income from operations
    20,573       37,866       48,661       69,666  
Other income, net
    472       0       801       0  
Interest expense, net
    (7,001 )     (6,642 )     (11,460 )     (11,802 )
 
                       
Income before income tax provision
    14,044       31,224       38,002       57,864  
Income tax provision
    5,617       11,612       15,200       21,407  
 
                       
Net income
  $ 8,427     $ 19,612     $ 22,802     $ 36,457  
 
                       
 
                               
Earnings per share:
                               
Basic
  $ 0.19     $ 0.43     $ 0.51     $ 0.80  
 
                       
Diluted
  $ 0.18     $ 0.43     $ 0.50     $ 0.80  
 
                       
 
                               
Weighted average common shares outstanding:
                               
Basic
    44,932,873       45,455,828       44,779,662       45,400,380  
Diluted
    45,510,158       45,880,187       45,312,592       45,832,024  

 

 


 

American Reprographics Company
Non-GAAP Measures
Reconciliation of Net Income to EBIT and EBITDA

(Dollars in thousands)
(Unaudited)
                                 
    Three Months Ended June 30,     Six Months Ended June 30,  
    2006     2007     2006     2007  
    (Dollars in thousands)  
 
                               
Net income
  $ 8,427     $ 19,612     $ 22,802     $ 36,457  
Interest expense, net
    7,001       6,642       11,460       11,802  
Income tax provision
    5,617       11,612       15,200       21,407  
 
                       
EBIT
  $ 21,045     $ 37,866       49,462       69,666  
Depreciation and amortization
    6,371       10,029       12,006       18,387  
 
                       
EBITDA
  $ 27,416     $ 47,895     $ 61,468     $ 88,053  
 
                       
See Note 1 for additional information regarding non-GAAP measures.

 

 


 

Note 1. Non -GAAP Measures
EBIT and EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with 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 flow 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.
We present EBIT and EBITDA 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 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. 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 division-level compensation and use EBITDA to measure performance for determining consolidated-level compensation. We also use EBITDA as a metric to manage cash flow from our operating segments to the corporate level and to determine the financial health of each operating segment. As noted above, since debt and taxation are managed at the corporate level the cash flow from each operating segment should be equal to the corresponding EBITDA of each operating segment, assuming no other changes to an operating segment’s balance sheet. As a result, we reconcile EBITDA to cash flow monthly as one of our key internal controls. We also use EBIT and EBITDA to evaluate potential acquisitions and to evaluate whether to incur capital expenditures.
EBIT, and EBITDA 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 and EBITDA 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 and EBITDA only as supplements.

 

 


 

American Reprographics Company
Consolidated Statements of Cash Flows

(Dollars in thousands)
(Unaudited)
                 
    Six Months Ended  
    June 30,  
    2006     2007  
Cash flows from operating activities
               
Net income
  $ 22,802     $ 36,457  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    10,354       14,191  
Amortization of intangible assets
    1,652       4,196  
Amortization of deferred financing costs
    151       215  
Stock-based compensation
    1,025       1,569  
Excess tax benefit related to stock options exercised
    (3,353 )     (1,534 )
Deferred income taxes
    (3,315 )     1,840  
Write-off of deferred financing costs
    57        
Litigation Charge
    13,539       407  
Other non-cash items, net
    663       146  
Changes in operating assets and liabilities, net of effect of business acquisitions:
               
Accounts receivable
    (12,675 )     (9,775 )
Inventory
    (25 )     (362 )
Prepaid expenses and other assets
    570       (2,583 )
Income Taxes Payable
    3,756       (5,464 )
Accounts payable and accrued expenses
    7,199       6,062  
 
           
Net cash provided by operating activities
    42,400       45,365  
 
           
Cash flows from investing activities
               
Capital expenditures
    (3,808 )     (5,232 )
Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions
    (16,106 )     (86,546 )
Other
    (202 )     283  
 
           
Net cash used in investing activities
    (20,116 )     (91,495 )
 
           
Cash flows from financing activities
               
Proceeds from stock option exercises
    1,665       1,080  
Proceeds from issuance of common stock under Employee Stock Purchase Plan
    238       52  
Excess tax benefit related to stock options exercised
    3,353       1,534  
Proceeds from borrowings under debt agreements
    5,000       70,000  
Payments on debt agreements and capital leases
    (31,943 )     (21,323 )
Payment of loan fees
    (141 )     (429 )
 
           
Net cash (used in) provided by financing activities
    (21,828 )     50,914  
 
           
Net change in cash and cash equivalents
    456       4,784  
Cash and cash equivalents at beginning of period
    22,643       11,642  
 
           
Cash and cash equivalents at end of period
  $ 23,099     $ 16,426  
 
           
 
               
Supplemental disclosure of cash flow information
               
Noncash investing and financing activities
               
Noncash transactions include the following:
               
Capital lease obligations incurred
  $ 12,222     $ 19,589  
Issuance of subordinated notes in connection with the acquisition of businesses
  $ 8,815     $ 4,550  
Change in fair value of derivatives
  $ 281     $ 66