WALNUT CREEK, CA--(Marketwire -02/21/12)- ARC (NYSE: ARC - News), the nation's leading document solutions company for the architecture, engineering, and construction (AEC) industry, today reported its financial results for the full year and fourth quarter ended December 31, 2011.
Business Highlights:
- Strong signs of a moderating revenue decline due to stabilizing AEC market, expansion into adjacent markets and other diversification efforts.
- Full-year adjusted earnings per share meets forecast of $(0.02) and includes $1.2 million or $0.015 in costs associated with the Company's CFO transition and certain facility closing costs.
- Full-year cash from operations was $49.2 million which equates to $1.08 per share for 2011.
- Full-year gross margin was 31.8%.
- New and undrawn senior secured credit facility effectively removes previous covenant restrictions.
- 2012 Fully diluted annual adjusted earnings per share outlook is $0.05 to $0.10; annual cash from operations for 2012 projected to be $40-50 million.
Financial Highlights:
Three Months Ended Twelve Months Ended
December 31 December 31
-------------------- --------------------
(All dollar figures in millions,
except EPS) 2011 2010 2011 2010
--------- --------- --------- ---------
Net Revenue $ 101.8 $ 105.0 $ 422.7 $ 441.6
Gross Margin 30.7% 29.5% 31.8% 32.2%
Net (Loss) Income attributable
to ARC (GAAP) $ (3.06) $ (4.75) $ (133.09) $ (27.50)
Adjusted Net (Loss) Income
attributable to ARC $ (0.16) $ (1.45) $ (0.97) $ 1.33
EPS (GAAP) $ (0.07) $ (0.10) $ (2.93) $ (0.61)
Adjusted EPS $ (0.00) $ (0.03) $ (0.02) $ 0.03
--------- --------- --------- ---------
Cash from Operations $ 19.7 $ 15.9 $ 49.2 $ 53.9
Capital Expenditures $ 3.6 $ 2.9 $ 15.6 $ 8.6
Debt & Capital Leases $ 226.3 $ 239.6 $ 226.3 $ 239.6
--------- --------- --------- ---------
Management Commentary:
"Our results for the full-year were in line with our expectations and once again provided ample evidence of our ability to perform in the midst of economic and industry uncertainty," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC. "While we were gratified to see what appears to be a mitigation of the construction industry's down cycle over the past three years, our efforts to diversify into adjacent and growing markets delivered results that were truly noteworthy. Large-format color revenue grew 10.3% year-over-year, largely from our Riot Creative Imaging business. The fourth quarter also saw growth of 13.5% in our FM/MPS service line, and our annual growth in this area exceeded 11%."
Mr. Suriyakumar continued, "By developing our MPS service line, we are simultaneously reducing our revenue exposure to the cyclical nature of construction activity and expanding our client service capabilities in our core AEC market. These companies must conduct their day-to-day business regardless of how many construction projects they have. Our MPS solution addresses those needs perfectly by improving efficiency and reducing the costs associated with document management and fulfillment. We believe this will better demonstrate the value and breadth of our document solutions, and strengthen our client relationships."
CFO John Toth commented, "In addition to diversifying our product offerings, we added tremendous flexibility to our capital structure by replacing our previous $50 million revolver with a far less restrictive, low-interest, non-monitored, asset-supported credit facility. Our cash from operations continued to remain very healthy at nearly $50 million for 2011 and has returned more than 16% of our current stock price. With regard to cost controls, our 'Stay Fit' plans removed more than $16 million from our cost structure in 2011. With these financial accomplishments and a powerful brand position thanks to our consolidation efforts over the past year, we are very well positioned for success in 2012."
Outlook:
ARC management expects a mitigated decline in private non-residential construction activity in 2012, incremental growth in MPS services, the addition of new Global Solutions accounts, and improvement in other non-AEC service lines less exposed to the cyclical nature of construction projects.
While these assumptions are subject to change as the year progresses, ARC anticipates 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 fourth quarter and fiscal year 2011. The conference call can be accessed by dialing 877-402-8179. The conference ID number is 45393925.
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 45393925. A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call's conclusion.
ARC (American Reprographics Company) is the nation's leading document solutions company providing business-to-business document management technology and services primarily to the architectural, engineering and construction, or 'AEC' industries. 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 technology products, a network of hundreds of service centers around the world and on-site at more than 5,500 customer locations. The Company's service centers 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
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, 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.
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
December 31, December 31,
------------- -------------
2011 2010
------------- -------------
Assets
Current assets:
Cash and cash equivalents $ 25,437 $ 26,293
Accounts receivable, net of allowances for
accounts receivable of $3,309 and $4,030 54,713 52,619
Inventories, net 12,107 10,689
Deferred income taxes - 7,157
Prepaid expenses 3,999 4,074
Other current assets 7,541 6,870
------------- -------------
Total current assets 103,797 107,702
Property and equipment, net of accumulated
depreciation of $191,598 and $211,875 55,084 59,036
Goodwill 229,315 294,759
Other intangible assets, net 45,127 62,643
Deferred financing costs, net 4,574 4,995
Deferred income taxes 1,368 37,835
Other assets 2,092 2,115
------------- -------------
Total assets $ 441,357 $ 569,085
============= =============
Liabilities and Equity
Current liabilities:
Accounts payable $ 21,787 $ 23,593
Accrued payroll and payroll-related expenses 7,292 7,980
Accrued expenses 19,308 30,134
Current portion of long-term debt and capital
leases 15,005 23,608
------------- -------------
Total current liabilities 63,392 85,315
Long-term debt and capital leases 211,259 216,016
Deferred income taxes 26,447 -
Other long-term liabilities 3,194 5,072
------------- -------------
Total liabilities 304,292 306,403
------------- -------------
Commitments and contingencies
Stockholders' equity:
American Reprographics Company stockholders'
equity:
Preferred stock, $0.001 par value, 25,000
shares authorized; 0 and 0 shares issued and
outstanding -- --
Common stock, $0.001 par value, 150,000 shares
authorized; 46,235 and 46,183 shares issued
and 46,235 and 45,735 shares outstanding 46 46
Additional paid-in capital 99,728 96,251
Retained earnings 32,663 173,459
Accumulated other comprehensive loss (1,760) (5,541)
------------- -------------
130,677 264,215
Less cost of common stock in treasury, 0 and
447 shares - 7,709
------------- -------------
Total American Reprographics Company
stockholders' equity 130,677 256,506
Noncontrolling interest 6,388 6,176
------------- -------------
Total equity 137,065 262,682
------------- -------------
Total liabilities and equity $ 441,357 $ 569,085
============= =============
American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Reprographics services $ 61,520 $ 67,136 $ 267,531 $ 294,555
Facilities management 25,378 22,362 100,682 89,994
Equipment and supplies sales 14,948 15,471 54,519 57,090
--------- --------- --------- ---------
Total net sales 101,846 104,969 422,732 441,639
Cost of sales 70,553 73,961 288,434 299,307
--------- --------- --------- ---------
Gross profit 31,293 31,008 134,298 142,332
Selling, general and
administrative expenses 23,146 25,832 101,315 107,744
Amortization of intangible
assets 4,596 3,998 18,715 11,657
Goodwill impairment - - 65,444 38,263
--------- --------- --------- ---------
Income (loss) from operations 3,551 1,178 (51,176) (15,332)
Other income, net (15) (27) (103) (156)
Interest expense, net 7,495 6,835 31,104 24,091
Loss on early extinguishment of
debt - 2,509 - 2,509
--------- --------- --------- ---------
Loss before income tax (benefit)
provision (3,929) (8,139) (82,177) (41,776)
Income tax (benefit) provision (941) (3,324) 50,931 (14,186)
--------- --------- --------- ---------
Net loss (2,988) (4,815) (133,108) (27,590)
(Income) loss attributable to
the noncontrolling interest (69) 61 21 88
--------- --------- --------- ---------
Net loss attributable to
American Reprographics Company $ (3,057) $ (4,754) $(133,087) $ (27,502)
========= ========= ========= =========
Loss per share attributable to
American Reprographics Company
shareholders:
Basic $ (0.07) $ (0.10) $ (2.93) $ (0.61)
========= ========= ========= =========
Diluted $ (0.07) $ (0.10) $ (2.93) $ (0.61)
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 45,505 45,278 45,401 45,213
Diluted 45,505 45,278 45,401 45,213
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 Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Cash flows provided by operating
activities $ 19,678 $ 15,916 $ 49,168 $ 53,924
Changes in operating assets
and liabilities, net of
business acquisitions (8,926) (6,488) 10,152 955
Non-cash expenses, including
depreciation and amortization (13,740) (14,243) (192,428) (82,469)
Income tax (benefit) provision (941) (3,324) 50,931 (14,186)
Interest expense 7,495 6,835 31,104 24,091
Net (income) loss attributable
to the noncontrolling
interest (69) 61 21 88
--------- --------- --------- ---------
EBIT 3,497 (1,243) (51,052) (17,597)
Depreciation and amortization 11,513 12,128 47,876 45,649
--------- --------- --------- ---------
EBITDA 15,010 10,885 (3,176) 28,052
Loss on early extinguishment
of debt - 2,509 - 2,509
Goodwill impairment - - 65,444 38,263
Stock-based compensation 496 1,551 4,271 5,922
--------- --------- --------- ---------
Adjusted EBITDA $ 15,506 $ 14,945 $ 66,539 $ 74,746
========= ========= ========= =========
American Reprographics Company
Non-GAAP Measures
Reconciliation of net loss attributable to ARC to unaudited adjusted net
(loss) income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Net loss attributable to ARC $ (3,057) $ (4,754) $(133,087) $ (27,502)
Goodwill impairment - - 65,444 38,263
Change in trade name impact to
amortization 2,369 1,579 9,475 1,579
Loss on early extinguishment
of debt - 2,509 - 2,509
Interest rate swap related
costs 1,322 1,091 5,691 1,241
Income tax provision, related
to above items (1,308) (1,878) (16,053) (14,758)
Deferred tax valuation
allowance and other discrete
tax items 516 - 67,556 -
--------- --------- --------- ---------
Unaudited adjusted net (loss)
income attributable to ARC $ (158) $ (1,453) $ (974) $ 1,332
========= ========= ========= =========
Actual:
Loss per share attributable to ARC
shareholders:
Basic $ (0.07) $ (0.10) $ (2.93) $ (0.61)
========= ========= ========= =========
Diluted $ (0.07) $ (0.10) $ (2.93) $ (0.61)
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 45,505 45,278 45,401 45,213
Diluted 45,505 45,278 45,401 45,213
Adjusted:
Loss per share attributable to ARC
shareholders:
Basic $ (0.00) $ (0.03) $ (0.02) $ 0.03
========= ========= ========= =========
Diluted $ (0.00) $ (0.03) $ (0.02) $ 0.03
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 45,505 45,278 45,401 45,213
Diluted 45,505 45,278 45,401 45,383
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 Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Net loss attributable to ARC $ (3,057) $ (4,754) $(133,087) $ (27,502)
Interest expense, net 7,495 6,835 31,104 24,091
Income tax (benefit) provision (941) (3,324) 50,931 (14,186)
--------- --------- --------- ---------
EBIT 3,497 (1,243) (51,052) (17,597)
Depreciation and amortization 11,513 12,128 47,876 45,649
--------- --------- --------- ---------
EBITDA 15,010 10,885 (3,176) 28,052
Loss on early extinguishment
of debt - 2,509 - 2,509
Goodwill impairment - - 65,444 38,263
Stock-based compensation 496 1,551 4,271 5,922
--------- --------- --------- ---------
Adjusted EBITDA $ 15,506 $ 14,945 $ 66,539 $ 74,746
========= ========= ========= =========
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 $0.5 million and $1.6 million of stock-based compensation expense recorded in selling, general and administrative expenses for the three months ended December 31, 2011 and 2010, respectively. Amortization does not include $4.3 million and $5.9 million of stock-based compensation expense recorded in selling, general and administrative expenses, for the twelve months ended December 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 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. 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 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 and twelve months ended December 31, 2011 and 2010 to reflect the exclusion of goodwill impairment charges, amortization impact related to the change in useful lives of our trade names, loss on early extinguishment of debt, certain interest rate swap related costs, the valuation allowance related to certain deferred tax assets and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the three and twelve months ended December 31, 2011 and 2010, respectively. We believe these charges were the result of the current macroeconomic environment, our capital restructuring, or other items which are not indicative of our actual operating performance.
We presented adjusted EBITDA in 2011 and 2010 to exclude stock-based compensation expense, loss on early extinguishment of debt and the non-cash impairment charges. The exclusion of these items is consistent with the definition of adjusted EBITDA in our previous and current credit agreements; therefore, we believe this information is useful to investors in assessing our ability to meet our debt covenants.
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2011 2010 2011 2010
--------- --------- --------- ---------
Cash flows from operating
activities
Net loss $ (2,988) $ (4,815) $(133,108) $ (27,590)
Adjustments to reconcile net
loss to net cash provided by
operating activities:
Allowance for accounts
receivable 288 368 1,034 966
Depreciation 6,917 8,130 29,161 33,992
Amortization of intangible
assets 4,596 3,998 18,715 11,657
Amortization of deferred
financing costs 225 332 887 1,491
Amortization of bond
discount 142 44 549 44
Goodwill impairment - - 65,444 38,263
Stock-based compensation 496 1,551 4,271 5,922
Excess tax benefit related
to stock-based compensation 31 (20) - (58)
Deferred income taxes (2,833) (2,907) 673 (12,657)
Deferred tax valuation
allowance 2,827 - 68,546 -
Loss on early extinguishment
of debt - 2,509 - 2,509
Amortization of derivative,
net of tax effect 828 - 3,565 -
Other noncash items, net 223 238 (417) 340
Changes in operating assets
and liabilities, net of
effect of business
acquisitions:
Accounts receivable 5,917 5,502 (2,582) 469
Inventory (1,206) 464 (1,170) 8
Prepaid expenses and other
assets 12,652 1,418 (453) (4,098)
Accounts payable and
accrued expenses (8,437) (896) (5,947) 2,666
--------- --------- --------- ---------
Net cash provided by operating
activities 19,678 15,916 49,168 53,924
--------- --------- --------- ---------
Cash flows from investing
activities
Capital expenditures (3,615) (2,938) (15,553) (8,634)
Payments for businesses
acquired, net of cash
acquired and including other
cash payments associated with
the acquisitions (823) (370) (823) (870)
Payment for swap transaction - - (9,729) -
Other (2) 248 923 1,002
--------- --------- --------- ---------
Net cash used in investing
activities (4,440) (3,060) (25,182) (8,502)
--------- --------- --------- ---------
Cash flows from financing
activities
Proceeds from stock option
exercises - 117 108 242
Proceeds from issuance of
common stock under Employee
Stock Purchase Plan 31 14 62 51
Excess tax benefit related to
stock-based compensation (31) 20 - 58
Proceeds from bond issuance - 195,648 - 195,648
Payments on long-term debt
agreements and capital leases (5,460) (206,786) (25,179) (238,989)
Net (repayments) borrowings
under revolving credit
facilities (10,121) (1,086) 701 (1,536)
Payment of deferred financing
fees (131) (4,473) (799) (4,473)
--------- --------- --------- ---------
Net cash used in financing
activities (15,712) (16,546) (25,107) (48,999)
--------- --------- --------- ---------
Effect of foreign currency
translation on cash balances (43) 228 265 493
--------- --------- --------- ---------
Net change in cash and cash
equivalents (517) (3,462) (856) (3,084)
Cash and cash equivalents at
beginning of period 25,954 29,755 26,293 29,377
--------- --------- --------- ---------
Cash and cash equivalents at end
of period $ 25,437 $ 26,293 $ 25,437 $ 26,293
========= ========= ========= =========
Supplemental disclosure of cash
flow information
Noncash investing and financing
activities
Noncash transactions include the
following:
Capital lease obligations
incurred $ 3,202 $ 3,503 $ 10,678 $ 10,305
Liabilities in connection with
acquisition of businesses $ 548 $ 231 $ 548 $ 231
Liabilities in connection with
deferred financing fees $ 107 $ 440 $ 107 $ 440
Net gain on derivative, net of
tax effect $ - $ 1,244 $ - $ 1,125
