EX-99.1 2 c71420exv99w1.htm EXHIBIT 99.1 Filed by Bowne Pure Compliance
 

Exhibit 99.1
AMERICAN REPROGRAPHICS COMPANY REPORTS
THIRD QUARTER 2007 RESULTS
~ Third Quarter Revenue $176.2 million; 15.5% Increase Over Q3 ’06 ~
~ Third Quarter EPS $0.35 ~
~ Annual Growth Forecast Reduced To Reflect Anticipated Near-Term Weakness; Revenue Of $682-$687,
EPS Of $1.42 — $1.46 ~
WALNUT CREEK, California (November 1, 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 September 30, 2007.
The Company reported net revenue for the third quarter of 2007 of $176.2 million, compared to $152.5 million in the third quarter of 2006, an increase of 15.5%. The Company’s gross margin for the third quarter was 41.2% compared to 43.9% in the same period in 2006, due largely to the temporary dilutive effects of three large acquisitions completed earlier in the year, and the lack of absorption in labor and overhead costs due to lower quarterly sales volume. Net income for the second quarter of 2007 was $15.9 million, or $0.35 per diluted share. This compares to net income for the third quarter of 2006 of $15.8 million, or $0.35 per diluted share.
Revenue for the first nine months of 2007 was $514.2 million, compared to $444.9 million for the same period in 2006. Net income for the first nine months of 2007 was $52.4 million, or $1.14 per diluted share, compared to net income of $38.6 million, or $0.85 per diluted share for the first nine months of 2006. Adjusted to exclude the Louis Frey litigation charge in 2006, net income for the first nine months of 2006 was $46.8 million.
“The company continues to make strong progress on several fronts and our fundamentals remain strong,” said K. “Suri” Suriyakumar, President and CEO of American Reprographics Company. “While our efforts to enhance sales are starting to show results they have not been adequate to counter the downturn on the residential front. Short-term results may be further aggravated by the recent fires in Southern California, the impact of which has yet to be determined. As a result, our growth will be less than anticipated for the rest of the year. Short-term concerns aside, our recently announced joint venture with Unisplendour in China, our marketing alliance with KIP, and the pace of our acquisition activity are just a few of the reasons I remain confident in our continued long-term growth.”
Jonathan Mather, Chief Financial Officer, said, “We remain committed to positioning the company for continued growth. The Company is also taking steps to refinance our current debt which, among other expected benefits, would ease restrictions on our ability to consider a stock repurchase. Our discussions with various lenders have been uniformly positive and we anticipate completing a refinancing agreement by the end of the year.”
2007 Outlook
American Reprographics Company is lowering its prior forecast for 2007 in anticipation of a weaker near-term construction market. Revenue is forecasted to be in the range of $682-$687 million. Earnings per share will be in the range of $1.42 — $1.46. The Company’s previous forecast called for revenues in the range of $690-$710 million and earnings per share 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 third quarter ended September 30, 2007. The conference call can be accessed by dialing 201-689-8562.

 

 


 

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 257452.
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 280 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 140,000 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:
    A downturn 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 complete acquisitions, or failure to manage our 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, 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, and June 30, 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 November 1, 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,     September 30,  
    2006     2007  
Assets
               
Current assets:
               
Cash and cash equivalents
  $ 11,642     $ 20,157  
Restricted cash
    8,491       8,802  
Accounts receivable, net
    85,277       103,737  
Inventories, net
    7,899       10,588  
Deferred income taxes
    10,963       10,969  
Prepaid expenses and other current assets
    6,796       7,473  
 
           
Total current assets
    131,068       161,726  
 
               
Property and equipment, net
    60,138       79,064  
Goodwill
    291,290       356,084  
Other intangible assets, net
    50,971       73,665  
Deferred financing costs, net
    895       970  
Deferred income taxes
    11,245       7,730  
Other assets
    1,974       2,135  
 
           
Total assets
  $ 547,581     $ 681,374  
 
           
 
               
Liabilities and Stockholders’ Equity
               
Current liabilities:
               
Accounts payable
  $ 33,447     $ 34,285  
Accrued payroll and payroll-related expenses
    15,666       16,880  
Accrued expenses
    25,810       19,117  
Accrued litigation charge
    13,947       14,358  
Current portion of long-term debt and capital leases
    21,048       107,615  
 
           
Total current liabilities
    109,918       192,255  
 
               
Long-term debt and capital leases
    252,097       244,280  
Other long-term liabilities
    1,322       2,380  
 
           
 
               
Total liabilities
    363,337       438,915  
 
           
 
               
Commitments and contingencies
               
 
               
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; 44,346,099 and 45,558,629 shares issued and outstanding
    45       46  
Additional paid-in capital
    75,465       80,328  
Deferred stock-based compensation
    (1,224 )     (789 )
Retained earnings
    109,955       162,357  
Accumulated other comprehensive income
    3       517  
 
           
Total stockholders’ equity
    184,244       242,459  
 
           
Total liabilities and stockholders’ equity
  $ 547,581     $ 681,374  
 
           

 

 


 

American Reprographics Company
Consolidated Statements of Income

(Dollars in thousands, except per share data)
(Unaudited)
                                 
    Three Months Ended     Nine Months Ended  
    September 30,     September 30,  
    2006     2007     2006     2007  
Reprographics services
  $ 111,176     $ 131,655     $ 330,652     $ 384,690  
Facilities management
    25,814       29,241       73,437       84,581  
Equipment and supplies sales
    15,548       15,316       40,778       44,937  
 
                       
Total net sales
    152,538       176,212       444,867       514,208  
Cost of sales
    85,531       103,548       251,686       298,948  
 
                       
Gross profit
    67,007       72,664       193,181       215,260  
Selling, general and administrative expenses
    34,516       37,175       99,113       105,908  
Litigation reserve
    0       0       11,262       0  
Amortization of intangible assets
    1,574       2,423       3,227       6,619  
 
                       
Income from operations
    30,917       33,066       79,579       102,733  
Other (expense) income, net
    (358 )     0       442       0  
Interest expense, net
    5,810       6,872       17,270       18,675  
 
                       
Income before income tax provision
    24,749       26,194       62,751       84,058  
Income tax provision
    8,993       10,249       24,193       31,656  
 
                       
Net income
  $ 15,756     $ 15,945     $ 38,558     $ 52,402  
 
                       
 
                               
Earnings per share:
                               
Basic
  $ 0.35     $ 0.35     $ 0.86     $ 1.15  
 
                       
Diluted
  $ 0.35     $ 0.35     $ 0.85     $ 1.14  
 
                       
 
                               
Weighted average common shares outstanding:
                               
Basic
    45,177,627       45,486,012       44,923,884       45,429,238  
Diluted
    45,663,040       45,865,453       45,483,702       45,848,177  

 

 


 

American Reprographics Company
Non-GAAP Measures
Reconciliation of Net Income to EBIT and EBITDA
Reconciliation of Cash Flows provided by Operating Activities to EBIT and EBITDA

(Dollars in thousands)
(Unaudited)
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2006     2007     2006     2007  
    (Dollars in thousands)  
Net income
  $ 15,756     $ 15,945     $ 38,558     $ 52,402  
Interest expense, net
    5,810       6,872       17,270       18,675  
Income tax provision
    8,993       10,249       24,193       31,656  
 
                       
EBIT
  $ 30,559     $ 33,066     $ 80,021     $ 102,733  
Depreciation and amortization
    7,461       10,500       19,467       28,887  
 
                       
EBITDA
  $ 38,020     $ 43,566     $ 99,488     $ 131,620  
 
                       
                                 
    Three Months Ended September 30,     Nine Months Ended September 30,  
    2006     2007     2006     2007  
    (Dollars in thousands)  
Cash flows provided by operating activities
  $ 30,180     $ 25,754     $ 72,580     $ 71,120  
Changes in operating assets and liabilities
    (4,958 )     2,695       (3,783 )     14,817  
Non-cash (expenses) income, including depreciation and amortization
    (9,466 )     (12,504 )     (30,239 )     (33,535 )
Income tax provision
    8,993       10,249       24,193       31,656  
Interest expense
    5,810       6,872       17,270       18,675  
 
                       
EBIT
  $ 30,559     $ 33,066     $ 80,021     $ 102,733  
Depreciation and amortization
    7,461       10,500       19,467       28,887  
 
                       
EBITDA
  $ 38,020     $ 43,566     $ 99,488     $ 131,620  
 
                       
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)
                 
    Nine Months Ended  
    September 30,  
    2006     2007  
Cash flows from operating activities
               
Net income
  $ 38,558     $ 52,402  
Adjustments to reconcile net income to net cash provided by operating activities:
               
Depreciation
    16,240       22,268  
Amortization of intangible assets
    3,227       6,619  
Amortization of deferred financing costs
    294       357  
Stock-based compensation
    1,454       2,578  
Excess tax benefit related to stock options exercised
    (3,591 )     (1,541 )
Deferred income taxes
    (1,334 )     2,278  
Write-off of deferred financing costs
    117        
Litigation charge
    13,743       612  
Other noncash items, net
    89       364  
Changes in operating assets and liabilities, net of effect of business acquisitions:
               
Accounts receivable
    (13,755 )     (10,837 )
Inventory
    909       (488 )
Prepaid expenses and other assets
    507       654  
Income taxes payable
    9,851       (6,243 )
Accounts payable and accrued expenses
    6,271       2,097  
 
           
Net cash provided by operating activities
    72,580       71,120  
 
           
Cash flows from investing activities
               
Capital expenditures
    (6,043 )     (7,112 )
Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions
    (59,179 )     (97,831 )
Restricted cash
    (7,460 )      
Other
    (203 )     345  
 
           
Net cash used in investing activities
    (72,885 )     (104,598 )
 
           
Cash flows from financing activities
               
Proceeds from stock option exercises
    1,807       1,098  
Proceeds from issuance of common stock under Employee Stock Purchase Plan
    290       82  
Excess tax benefit related to stock options exercised
    3,591       1,541  
Proceeds from borrowings under debt agreements
    41,000       75,000  
Payments on debt agreements and capital leases
    (55,071 )     (35,525 )
Payment of loan fees
    (435 )     (433 )
 
           
Net cash (used in) provided by financing activities
    (8,818 )     41,763  
 
           
Effect of foreign currency translation on cash balances
          230  
 
           
Net change in cash and cash equivalents
    (9,123 )     8,515  
Cash and cash equivalents at beginning of period
    22,643       11,642  
 
           
Cash and cash equivalents at end of period
  $ 13,520     $ 20,157  
 
           
 
               
Supplemental disclosure of cash flow information
               
Noncash investing and financing activities
               
Noncash transactions include the following:
               
Capital lease obligations incurred
  $ 17,339     $ 28,738  
Issuance of subordinated notes in connection with the acquisition of businesses
  $ 11,432     $ 7,342  
Stock issued for acquisition
  $ 8,500     $  
Change in fair value of derivatives
  $ (100 )   $ (95 )