-- Revenue of $187.4 Million; Growth of 17.0% -- Reports Net Income of $18.5 Million, or Fully Diluted EPS of $0.41 -- Reaffirms Full-Year Forecast: Revenue of $720-$760 million, EPS of $1.52-$1.60American 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, 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 May 8, 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) March 31, December 31, ----------- ----------- 2008 2007 ----------- ----------- Assets Current assets: Cash and cash equivalents $ 16,796 $ 24,802 Restricted cash - 937 Accounts receivable, net 106,894 97,934 Inventories, net 11,146 11,233 Deferred income taxes 5,792 5,791 Prepaid expenses and other current assets 10,346 10,234 ----------- ----------- Total current assets 150,974 150,931 Property and equipment, net 86,881 84,634 Goodwill 386,657 382,519 Other intangible assets, net 84,471 86,349 Deferred financing costs, net 4,764 5,170 Deferred income taxes 12,261 10,710 Other assets 2,267 2,298 ----------- ----------- Total assets $ 728,275 $ 722,611 =========== =========== Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 33,955 $ 35,659 Accrued payroll and payroll-related expenses 16,417 19,293 Accrued expenses 23,431 22,030 Current portion of long-term debt and capital leases 62,128 69,254 ----------- ----------- Total current liabilities 135,931 146,236 Long-term debt and capital leases 316,906 321,013 Other long-term liabilities 10,024 3,711 ----------- ----------- Total liabilities 462,861 470,960 ----------- ----------- 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; 45,562,724 and 45,561,773 shares issued and outstanding 46 46 Additional paid-in capital 81,962 81,153 Deferred stock-based compensation (556) (673) Retained earnings 197,590 179,092 Accumulated other comprehensive income (5,919) (258) ----------- ----------- 273,123 259,360 Less cost of common stock in treasury, 447,654 shares in 2007 7,709 7,709 ----------- ----------- Total stockholders' equity 265,414 251,651 ----------- ----------- Total liabilities and stockholders' equity $ 728,275 $ 722,611 =========== =========== American Reprographics Company Consolidated Statements of Income (Dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2008 2007 ----------- ------------ Reprographics services $ 142,496 $ 119,779 Facilities management 29,551 26,356 Equipment and supplies sales 15,396 14,079 ----------- ------------ Total net sales 187,443 160,214 Cost of sales 107,840 92,435 ----------- ------------ Gross profit 79,603 67,779 Selling, general and administrative expenses 39,521 34,234 Amortization of intangible assets 3,188 1,745 ----------- ------------ Income from operations 36,894 31,800 Other income (202) - Interest expense, net 7,146 5,161 ----------- ------------ Income before income tax provision 29,950 26,639 Income tax provision 11,452 9,795 ----------- ------------ Net income $ 18,498 $ 16,844 =========== ============ Earnings per share: Basic $ 0.41 $ 0.37 =========== ============ Diluted $ 0.41 $ 0.37 =========== ============ Weighted average common shares outstanding: Basic 45,045,038 45,344,317 Diluted 45,390,827 45,790,548 American Reprographics Company Non-GAAP Measures Reconciliation of Net Income to EBIT and EBITDA (Dollars in thousands, except per share data) (Unaudited) Three Months Ended March 31, 2008 2007 ----------- ----------- Net income $ 18,498 $ 16,844 Interest expense, net 7,146 5,161 Income tax provision 11,452 9,795 ----------- ----------- EBIT 37,096 31,800 Depreciation and amortization 12,117 8,358 ----------- ----------- EBITDA $ 49,213 $ 40,158 =========== =========== Three Months Ended March 31, 2008 2007 ----------- ----------- Cash flows provided by operating activities $ 20,348 $ 11,406 Changes in operating assets and liabilities 12,915 14,833 Non-cash (expenses) income, including depreciation and amortization (14,765) (9,395) Income tax provision 11,452 9,795 Interest expense 7,146 5,161 ----------- ----------- EBIT 37,096 31,800 Depreciation and amortization 12,117 8,358 ----------- ----------- EBITDA $ 49,213 $ 40,158 =========== ===========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. Amortization does not include $0.9 million and $0.6 million of amortization of stock based compensation, for the three months ended March 31, 2008 and 2007, 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 and 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 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 operating 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 approximately 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, 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 and EBITDA only as supplements. For more information, see our consolidated financial statements and related notes elsewhere in this report. Additionally, please refer to our 2007 Annual Report on Form 10-K.
American Reprographics Company Consolidated Statements of Cash Flows (Dollars in thousands) (Unaudited) Three Months Ended March 31, ------------------------ 2008 2007 ----------- ----------- Cash flows from operating activities Net income $ 18,498 $ 16,844 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 8,929 6,613 Amortization of intangible assets 3,188 1,745 Amortization of deferred financing costs 260 89 Stock-based compensation 912 572 Excess tax benefit related to stock options exercised - (1,138) Deferred income taxes 613 1,329 Other noncash items, net 863 185 Changes in operating assets and liabilities, net of effect of business acquisitions: Accounts receivable (9,478) (7,308) Inventory 438 (261) Prepaid expenses and other assets 1,426 217 Accounts payable and accrued expenses (5,301) (7,481) ----------- ----------- Net cash provided by operating activities 20,348 11,406 ----------- ----------- Cash flows from investing activities Capital expenditures (2,301) (2,128) Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions (4,831) (22,044) Restricted cash 940 - Other 554 98 ----------- ----------- Net cash used in investing activities (5,638) (24,074) ----------- ----------- Cash flows from financing activities Proceeds from stock option exercises - 592 Proceeds from issuance of common stock under Employee Stock Purchase Plan 13 11 Excess tax benefit related to stock options exercised - 1,138 Payments on long-term debt agreements (12,115) (6,052) Net (repayments) borrowings under revolving credit facility (10,000) 18,000 Payment of loan fees (632) - ----------- ----------- Net cash (used in) provided by financing activities (22,734) 13,689 ----------- ----------- Effect of foreign currency translation on cash balances 18 - ----------- ----------- Net change in cash and cash equivalents (8,006) 1,021 Cash and cash equivalents at beginning of period 24,802 11,642 ----------- ----------- Cash and cash equivalents at end of period $ 16,796 $ 12,663 =========== =========== Supplemental disclosure of cash flow information Noncash investing and financing activities Noncash transactions include the following: Capital lease obligations incurred $ 9,184 $ 7,056 Issuance of subordinated notes in connection with the acquisition of businesses $ 1,660 $ - Change in fair value of derivatives $ (5,421) $ (41)
Contact Information: Contacts: David Stickney VP of Corporate Communications Phone: 925-949-5100 Email: Tyler Wilson The Ruth Group Phone: 646-536-7018 Email:twilson@theruthgroup.com