-- Adjusted EPS of $0.06 per share -- Cash from Operating Activities of $19.6 millionAmerican Reprographics Company (
American Reprographics Company Consolidated Balance Sheets (Dollars in thousands, except per share data) (Unaudited) September 30, December 31, ------------- ------------- 2009 2008 ------------- ------------- Assets Current assets: Cash and cash equivalents $ 59,179 $ 46,542 Accounts receivable, net 63,749 77,216 Inventories, net 11,672 11,097 Deferred income taxes 5,827 5,831 Prepaid expenses and other current assets 9,624 11,976 ------------- ------------- Total current assets 150,051 152,662 Property and equipment, net 78,169 89,712 Goodwill 330,665 366,513 Other intangible assets, net 76,846 85,967 Deferred financing costs, net 2,609 3,537 Deferred income taxes 25,981 25,404 Other assets 2,200 2,136 ------------- ------------- Total assets $ 666,521 $ 725,931 ============= ============= Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 23,159 $ 25,171 Accrued payroll and payroll-related expenses 11,572 13,587 Accrued expenses 23,171 24,913 Current portion of long-term debt and capital leases 79,064 59,193 ------------- ------------- Total current liabilities 136,966 122,864 Long-term debt and capital leases 238,521 301,847 Other long-term liabilities 10,465 13,318 ------------- ------------- Total liabilities 385,952 438,029 ------------- ------------- 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; 45,760,397 and 45,674,810 shares issued and 45,312,743 and 45,227,156 shares outstanding in 2009 and 2008, respectively 46 46 Additional paid-in capital 88,806 85,207 Deferred stock-based compensation - (195) Retained earnings 202,151 215,846 Accumulated other comprehensive loss (8,807) (11,414) ------------- ------------- 282,196 289,490 Less cost of common stock in treasury, 447,654 shares in 2009 and 2008 7,709 7,709 ------------- ------------- Total American Reprographics Company stockholders' equity 274,487 281,781 Noncontrolling interest 6,082 6,121 ------------- ------------- Total stockholders' equity 280,569 287,902 ------------- ------------- Total liabilities and stockholders' equity $ 666,521 $ 725,931 ============= ============= 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, ---------------------- ---------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- Reprographics services $ 81,989 $ 127,455 $ 274,663 $ 409,162 Facilities management 23,395 30,977 75,158 91,737 Equipment and supplies sales 13,966 16,153 40,066 46,070 ---------- ---------- ---------- ---------- Total net sales 119,350 174,585 389,887 546,969 Cost of sales 78,219 104,570 247,622 318,263 ---------- ---------- ---------- ---------- Gross profit 41,131 70,015 142,265 228,706 Selling, general and administrative expenses 27,330 38,800 88,335 117,820 Amortization of intangible assets 2,777 2,987 8,674 8,988 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - ---------- ---------- ---------- ---------- (Loss) income from operations (27,139) 28,228 7,093 101,898 Other income, net (41) (55) (138) (300) Interest expense, net 5,468 6,180 17,100 19,885 ---------- ---------- ---------- ---------- Income before income tax (benefit) provision (32,566) 22,103 (9,869) 82,313 Income tax (benefit) provision (4,989) 7,041 3,865 29,877 ---------- ---------- ---------- ---------- Net (loss) income (27,577) 15,062 (13,734) 52,436 Loss attributable to the noncontrolling interest 28 5 39 5 ---------- ---------- ---------- ---------- Net (loss) income attributable to American Reprographics Company $ (27,549) $ 15,067 $ (13,695) $ 52,441 ========== ========== ========== ========== Earnings per share attributable to American Reprographics Company shareholders: Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16 ========== ========== ========== ========== Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15 ========== ========== ========== ========== Weighted average common shares outstanding: Basic 45,138,446 45,066,654 45,115,059 45,054,425 Diluted 45,138,446 45,413,747 45,115,059 45,413,948 American Reprographics Company Non-GAAP Measures Reconciliation of cash flows provided by operating activities to EBIT and EBITDA (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Cash flows provided by operating activities $ 19,566 $ 33,778 $ 75,364 $ 95,263 Changes in operating assets and liabilities 1,306 1,086 (8,249) 7,905 Non-cash (expenses) income, including depreciation and amortization (48,449) (19,802) (80,849) (50,732) Income tax (benefit) provision (4,989) 7,041 3,865 29,877 Interest expense 5,468 6,180 17,100 19,885 Net loss attributable to the noncontrolling interest 28 5 39 5 --------- --------- --------- --------- EBIT (27,070) 28,288 7,270 102,203 Depreciation and amortization 12,185 12,848 37,651 37,181 --------- --------- --------- --------- EBITDA $ (14,885) $ 41,136 $ 44,921 $ 139,384 ========= ========= ========= ========= American Reprographics Company Non-GAAP Measures Reconciliation of net (loss) income attributable to ARC to unaudited adjusted net income attributable to ARC and earnings per share to adjusted earnings per share: (Dollars in thousands, except per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, ---------------------- ---------------------- 2009 2008 2009 2008 ---------- ----------- ---------- ----------- (Dollars in thousands, except share and per share data) Net (loss) income attributable to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - Income tax benefit (7,696) - (7,696) - Unaudited adjusted net income ---------- ----------- ---------- ----------- attributable to ARC $ 2,918 $ 15,067 $ 16,772 $ 52,441 ========== =========== ========== =========== Earnings per share attributable to ARC shareholders (actual): Basic $ (0.61) $ 0.33 $ (0.30) $ 1.16 ========== =========== ========== =========== Diluted $ (0.61) $ 0.33 $ (0.30) $ 1.15 ========== =========== ========== =========== Earnings per share attributable to ARC shareholders (adjusted): Basic $ 0.06 $ 0.33 $ 0.37 $ 1.16 ========== =========== ========== =========== Diluted $ 0.06 $ 0.33 $ 0.37 $ 1.15 ========== =========== ========== =========== Weighted average common shares outstanding: Basic 45,138,446 45,066,654 45,115,059 45,054,425 Diluted 45,138,446 45,413,747 45,115,059 45,413,948 American Reprographics Company Non-GAAP Measures Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and adjusted EBITDA (Dollars in thousands) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- ---------- --------- ---------- (Dollars in thousands) Net (loss) income attributable to ARC $ (27,549) $ 15,067 $ (13,695) $ 52,441 Interest expense, net 5,468 6,180 17,100 19,885 Income tax (benefit) provision (4,989) 7,041 3,865 29,877 --------- ---------- --------- ---------- EBIT (27,070) 28,288 7,270 102,203 Depreciation and amortization 12,185 12,848 37,651 37,181 --------- ---------- --------- ---------- EBITDA (14,885) 41,136 44,921 139,384 --------- ---------- --------- ---------- Special items: Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - --------- ---------- --------- ---------- Adjusted EBITDA $ 23,278 $ 41,136 $ 83,084 $ 139,384 ========= ========== ========= ==========
Non-GAAP 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 $1.4 million and $1.1 million of stock based compensation expense, for the three months ended September 30, 2009 and 2008, respectively, and $3.6 million and $3.1 million of stock based compensation expense, for the nine months ended September 30, 2009 and 2008, 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 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 operating segment-level compensation and 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 2009 third quarter report on Form 10-Q. Additionally, please refer to our 2008 Annual Report on Form 10-K. We have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and nine months ended September 30, 2009 and 2008 to reflect the exclusion of the goodwill and long-lived assets impairment charges. This presentation facilitates a meaningful comparison of our operating results for the three and nine months ended September 30, 2009 and 2008. We presented adjusted EBITDA in the three and nine months ended September 30, 2009 to exclude the non-cash goodwill and long-lived assets impairment total charges of $38.2 million as we believe this was a result of the current macroeconomic environment and not indicative of our operations. The exclusion of the goodwill and long-lived assets impairment charges to arrive at adjusted EBITDA is consistent with the definition of adjusted EBITDA in the amendment to the Credit Agreement, 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 Nine Months Ended September 30, September 30, -------------------- -------------------- 2009 2008 2009 2008 --------- --------- --------- --------- Cash flows from operating activities Net (loss) income $ (27,577) $ 15,062 $ (13,734) $ 52,436 Adjustments to reconcile net income to net cash provided by operating activities: Allowance for accounts receivable 299 1,255 2,842 3,164 Depreciation 9,408 9,861 28,977 28,193 Amortization of intangible assets 2,777 2,987 8,674 8,988 Amortization of deferred financing costs 317 336 972 936 Goodwill impairment 37,382 - 37,382 - Impairment of long-lived assets 781 - 781 - Stock-based compensation 1,403 1,114 3,564 3,143 Excess tax benefit related to stock options exercised (13) (48) (18) (102) Deferred income taxes (3,942) 4,259 (2,271) 6,498 Write-off of deferred financing costs - - - 313 Litigation charge (gain) - - - - Other noncash items, net 37 38 (54) (401) Changes in operating assets and liabilities, net of effect of business acquisitions: Accounts receivable 5,503 6,988 11,237 1,900 Inventory (563) 525 355 1,251 Prepaid expenses and other assets (1,918) (3,808) 3,236 (4,795) Litigation settlement payment - - - - Accounts payable and accrued expenses (4,328) (4,791) (6,579) (6,261) --------- --------- --------- --------- Net cash provided by operating activities 19,566 33,778 75,364 95,263 --------- --------- --------- --------- Cash flows from investing activities Capital expenditures (1,928) (2,027) (5,852) (6,359) Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions (1,102) (12,738) (2,023) (18,216) Restricted cash - 11,590 - (1,022) Other 274 161 716 946 --------- --------- --------- --------- Net cash used in investing activities (2,756) (3,014) (7,159) (24,651) --------- --------- --------- --------- Cash flows from financing activities Proceeds from stock option exercises 46 107 63 177 Proceeds from issuance of common stock under Employee Stock Purchase Plan 70 2 116 27 Treasury stock repurchase - - - - Excess tax benefit related to stock options exercised 13 48 18 102 Proceeds from borrowings under debt agreements - - - - Payments on long-term debt agreements and capital leases (14,632) (13,253) (55,838) (38,507) Net repayments under revolving credit facility - - - (22,000) Payment of loan fees - - (44) (726) --------- --------- --------- --------- Net cash used in financing activities (14,503) (13,096) (55,685) (60,927) --------- --------- --------- --------- Effect of foreign currency translation on cash balances (14) 179 117 142 --------- --------- --------- --------- Net change in cash and cash equivalents 2,293 17,847 12,637 9,827 Cash and cash equivalents at beginning of period 56,886 16,782 46,542 24,802 --------- --------- --------- --------- Cash and cash equivalents at end of period $ 59,179 $ 34,629 $ 59,179 $ 34,629 ========= ========= ========= ========= Supplemental disclosure of cash flow information Noncash investing and financing activities Noncash transactions include the following: Capital lease obligations incurred $ 2,411 $ 8,258 $ 12,134 $ 26,611 Issuance of subordinated notes in connection with the acquisition of businesses $ - $ 5,836 $ 246 $ 7,653 Accrued liabilities in connection with acquisition of businesses $ (500) $ - $ - $ - Stock issued for acquisition $ - $ - $ - $ - Accrued liabilities in connection with deferred financing fees $ - $ - $ - $ - Change in fair value of derivative, net of tax effects $ (312) $ (777) $ 1,875 $ (780) Contribution from noncontrolling interest $ - $ 6,062 $ - $ 6,062
Contact Information: Contacts: David Stickney American Reprographics Company Phone: 925-949-5100 Joseph Villalta The Ruth Group Phone: 646-536-7003