-- Fourth Quarter Revenue: $174.1 million; 18.5% increase over Q4 '06
-- Fourth Quarter EPS Fully Diluted: $0.37
-- Annual Revenue: $688.4 million; 16.3% increase over 2006
-- Annual EPS Fully Diluted: $1.51
-- 2008 Revenue Forecast of $ 720.0 Million to $ 760.0 million; EPS of
$1.52 to $1.60
American Reprographics Company (
-- The current residential downturn or a future general 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 reports on Form 10-Q for
the quarters ended March 31, 2007, June 30, 2007, and September 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 February 12, 2008, and except as required by law, the
Company undertakes no obligation to update or revise any forward-looking
statements.
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
December 31, December 31,
----------- -----------
2006 2007
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 11,642 $ 24,802
Restricted cash 8,491 937
Accounts receivable, net 85,277 97,934
Inventories, net 7,899 11,233
Deferred income taxes 10,963 5,791
Prepaid expenses and other current assets 6,796 10,234
----------- -----------
Total current assets 131,068 150,931
Property and equipment, net 60,138 84,634
Goodwill 291,290 382,519
Other intangible assets, net 50,971 86,349
Deferred financing costs, net 895 5,170
Deferred income taxes 11,245 10,710
Other assets 1,974 2,298
----------- -----------
Total assets $ 547,581 $ 722,611
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 33,447 $ 35,659
Accrued payroll and payroll-related expenses 15,666 19,293
Accrued expenses 25,810 23,165
Accrued litigation charge 13,947 -
Current portion of long-term debt and capital
leases 21,048 69,254
----------- -----------
Total current liabilities 109,918 147,371
Long-term debt and capital leases 252,097 321,013
Other long-term liabilities 1,322 2,576
----------- -----------
Total liabilities 363,337 470,960
----------- -----------
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; 45,346,099 and 45,561,773
shares issued and outstanding 45 46
Additional paid-in capital 75,465 81,153
Deferred stock-based compensation (1,224) (673)
Retained earnings 109,955 179,092
Accumulated other comprehensive income 3 (258)
----------- -----------
184,244 259,360
Less cost of common stock in treasury, 447,654
shares in 2007 - 7,709
----------- -----------
Total stockholders' equity 184,244 251,651
----------- -----------
Total liabilities and stockholders' equity $ 547,581 $ 722,611
=========== ===========
American Reprographics Company
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- -----------------------
2006 2007 2006 2007
---------- ---------- ----------- ----------
Reprographics services $ 107,723 $ 128,940 $ 438,375 $ 513,630
Facilities management 26,721 29,267 100,158 113,848
Equipment and supplies
sales 12,527 15,939 53,305 60,876
---------- ---------- ----------- ----------
Total net sales 146,971 174,146 591,838 688,354
Cost of sales 85,823 102,368 337,509 401,317
---------- ---------- ----------- ----------
Gross profit 61,148 71,778 254,329 287,037
Selling, general and
administrative expenses 32,630 37,902 131,743 143,811
Litigation reserve 0 (2,897) 11,262 (2,897)
Amortization of intangible
assets 1,828 2,463 5,055 9,083
---------- ---------- ----------- ----------
Income from operations 26,690 34,310 106,269 137,040
Other (expense) income, net (143) 0 299 0
Interest expense, net 5,922 5,699 23,192 24,373
Loss on early
extinguishment of debt 0 1,327 0 1,327
---------- ---------- ----------- ----------
Income before income tax
provision 20,625 27,284 83,376 111,340
Income tax provision 7,789 10,547 31,982 42,203
---------- ---------- ----------- ----------
Net income $ 12,836 $ 16,737 $ 51,394 $ 69,137
========== ========== =========== ==========
Earnings per share:
Basic $ 0.28 $ 0.37 $ 1.14 $ 1.52
========== ========== =========== ==========
Diluted $ 0.28 $ 0.37 $ 1.13 $ 1.51
========== ========== =========== ==========
Weighted average common
shares outstanding:
Basic 45,284,525 45,397,441 45,014,786 45,421,498
Diluted 45,798,267 45,715,483 45,594,950 45,829,010
American Reprographics Company
Non-GAAP Measures
Reconciliation of Net Income to EBIT, EBITDA, and Adjusted Net Income
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2006 2007 2006 2007
---------- ---------- ---------- ----------
Net income $ 12,836 $ 16,737 $ 51,394 $ 69,137
Interest expense, net $ 5,922 $ 5,699 23,192 24,373
Loss on early
extinguishment of debt - 1,327 - 1,327
Income tax provision $ 7,789 $ 10,547 31,982 42,203
---------- ---------- ---------- ----------
EBIT 26,547 34,310 106,568 137,040
Depreciation and
amortization 8,282 10,557 27,749 39,445
---------- ---------- ---------- ----------
EBITDA $ 34,829 $ 44,867 $ 134,317 $ 176,485
========== ========== ========== ==========
Three Months Ended Twelve Months Ended
December 31, December 31,
---------------------- ----------------------
2006 2007 2006 2007
---------- ---------- ---------- ----------
Net income $ 12,836 $ 16,737 $ 51,394 $ 69,137
Litigation reserve - (2,898) 11,262 (2,898)
Interest expense due to
litigation reserve 204 (1,029) 2,685 (417)
One time loss on early
extinguishment of debt 0 1,327 0 1,327
Income tax impact (82) 988 (5,579) 755
---------- ---------- ---------- ----------
Unaudited adjusted net
income $ 12,958 $ 15,125 $ 59,762 $ 67,904
========== ========== ========== ==========
Earning Per Share (Actual):
Basic $ 0.28 $ 0.37 $ 1.14 $ 1.52
========== ========== ========== ==========
Diluted $ 0.28 $ 0.37 $ 1.13 $ 1.51
========== ========== ========== ==========
Earning Per Share
(Adjusted):
Basic $ 0.29 $ 0.33 $ 1.33 $ 1.49
========== ========== ========== ==========
Diluted $ 0.28 $ 0.33 $ 1.31 $ 1.48
========== ========== ========== ==========
Weighted average common
shares outstanding:
Basic 45,284,525 45,397,441 45,014,786 45,421,498
Diluted 45,798,267 45,715,483 45,594,950 45,829,010
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.
We have presented adjusted net income and adjusted earnings per share for
the three and twelve months ended December 31, 2007 to reflect the
exclusion of the one-time litigation related to the Louis Frey bankruptcy
litigation and the loss on the early extinguishment of debt. This
presentation facilitates a meaningful comparison of the Company's operating
results for the three and twelve months ended December 31, 2007 to the same
period in 2006.
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Year Ended
December 31
------------------
2006 2007
-------- --------
Cash flows from operating activities
Net income $ 51,394 $ 69,137
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 22,694 30,362
Amortization of intangible assets 5,055 9,083
Amortization of deferred financing costs 364 515
Stock-based compensation 2,215 3,469
Excess tax benefit related to stock options
exercised (4,051) (1,563)
Deferred income taxes (3,934) 5,318
Write-off of deferred financing costs and interest
rate collar 208 1,327
Litigation charge 13,947 (3,315)
Other noncash items, net 324 909
Changes in operating assets and liabilities, net of
effect of business acquisitions:
Accounts receivable (5,769) (446)
Inventory 949 694
Prepaid expenses and other assets (5) 44
Income taxes payable 8,587 (7,691)
Litigation Settlement Payment - (10,500)
Accounts payable and accrued expenses 6,376 4,043
-------- --------
Net cash provided by operating activities 98,354 101,386
-------- --------
Cash flows from investing activities
Capital expenditures (7,391) (8,303)
Payments for businesses acquired, net of cash acquired
and including other cash payments associated with the
acquisitions (62,225) (132,739)
Restricted cash (8,360) 7,911
Other 488 443
-------- --------
Net cash used in investing activities (77,488) (132,688)
-------- --------
Cash flows from financing activities
Proceeds from stock option exercises 2,103 1,108
Proceeds from issuance of common stock under Employee
Stock Purchase Plan 290 100
Treasury Stock Repurchase - (7,709)
Excess tax benefit related to stock options exercised 4,051 1,563
Proceeds from borrowings under debt agreements 44,000 386,000
Payments on debt agreements and capital leases (81,767) (331,685)
Payment of loan fees (544) (5,024)
-------- --------
Net cash (used in) provided by financing activities (31,867) 44,353
-------- --------
Effect of foreign currency translation on cash balances - 109
-------- --------
Net change in cash and cash equivalents (11,001) 13,160
Cash and cash equivalents at beginning of period 22,643 11,642
-------- --------
Cash and cash equivalents at end of period $ 11,642 $ 24,802
======== ========
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Noncash transactions include the following:
Capital lease obligations incurred $ 22,477 $ 35,263
Issuance of subordinated notes in connection with the
acquisition of businesses $ 13,086 $ 23,758
Accrued Liabilities in connection with the
acquisition of businesses $ 4,300 $ 570
Stock issued for acquisition $ 8,500 $ -
Change in fair value of derivatives $ (101) $ (937)
Issuance of common stock in connection with
settlement of accrued bonuses $ 2,160 $ -
Contact Information: Contacts: David Stickney VP of Corporate Communications Phone: 925-949-5100 Email: Tyler Wilson The Ruth Group Phone: 646-536-7018 Email:dpasquale@theruthgroup.com