American Reprographics 11.6% Decrease in Revenue
Tuesday, February 24, 2009
Press release from the issuing companyAmerican Reprographics Company, the nation's leading provider of reprographic services and technology, today reported its financial results for the full year and fourth quarter ended December 31, 2008.
"The Company continues to perform well in light of the continuing economic deterioration," said K. "Suri" Suriyakumar, Chairman, President and CEO. "Strong financial discipline combined with a healthy cash flow allows us to operate successfully during difficult economic circumstances like these. We finished the year with more than $127 million in cash flow from operations, a significant increase over our original internal target of $100 million."
Mr. Suriyakumar continued, "Looking ahead, challenges remain given the state of the economy and the effects of a frail credit market on our customers. We continue to focus, however, on right sizing the Company for the current business environment, keeping the balance sheet healthy with strong cash flow generation, and driving sales hard to acquire greater market share. Being the dominant player in a fragmented industry certainly has its advantages during times like these. While we've trimmed our labor force by approximately 20% in 2008, our decentralized operating model allows us to downsize our production facilities without compromising service to our customers."
Jonathan Mather, Chief Financial Officer, said, "The 25% increase in our cash flow from operations year over year is clear evidence of our ability to operate successfully in a down market. In a market where credit is so severely depressed, generating cash at this level gives us tremendous confidence in our ability to weather the current economic storm. During the last quarter of 2008 and in the early part of 2009, we've also aggressively reduced our production expenses and decreased SG&A. These changes and others have been accomplished quickly and we are already seeing them bear fruit."
Revenue for the full year ended December 31, 2008 was $701 million, compared to $688.4 million for the full year ended December 31, 2007, a 1.8% increase year-over-year. The Company's gross margin for the full year ended December 31, 2008 was 40.7%, compared to 41.7% for the full year ended December 31, 2007. Net income for 2008 was $59 million, or $1.30 per diluted share. Net income for 2007 was $69.1 million, or $1.51 per diluted share. Adjusted to exclude the previously disclosed settlement of the Louis Frey litigation and the after-tax charge for early extinguishment of debt related to the Company's refinancing activities in December 2007, net income for 2007 was $67.9 million, or $1.48 per diluted share. Net cash provided by operating activities in 2008 was $127.2 million, compared to $101.4 million in 2007.
Net revenue for the fourth quarter of 2008 was $154 million, compared to $174.1 million for the fourth quarter of 2007, a decrease of 11.6%. The Company's gross margin for the fourth quarter of 2008 was 36.7%, compared to 41.2% for the same period in 2007. Net income for the fourth quarter of 2008 was $6.5 million, or $0.14 per diluted share, compared to net income for the fourth quarter of 2007 of $16.7 million, or $0.37 per diluted share. Adjusted to exclude the settlement of the Louis Frey litigation and the after-tax charge for early extinguishment of debt, both as noted above, net income for the fourth quarter of 2007 was $15.1 million, or $0.33 per diluted share.
The financial results for the fourth quarter and full year ended December 31, 2008 do not include a non-cash goodwill impairment charge that the Company has determined it will incur for the fourth quarter of fiscal year 2008. The Company currently estimates the impairment charge to be within a range of $27.6 million to $40.5 million. Due to the precipitous decline in the market, this non-cash impairment charge results from an interim test for impairment under Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," prompted by a significant decline in the Company's market capitalization during the fourth quarter of fiscal year 2008. The impairment charge will be reflected in the Company's financial statements as of and for the fourth quarter and fiscal year ended December 31, 2008.
"Given the current uncertainty of the construction market, attempting to forecast an annual revenue range with any accuracy is likely to be a futile effort," said Mr. Suriyakumar. "Rather than foregoing the exercise entirely as many other companies have done, we have decided to offer an annual EPS forecast of $0.50 to $0.75 on a fully diluted basis, and to project cash flow from operations in the range of $70 million to $90 million."
*Excludes effects of the expected non-cash goodwill impairment charge as noted above.
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 results for the Company's fourth quarter and full year 2008 and business outlook. 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 call's conclusion. To access the replay, dial 201-612-7415. The account number to access the phone replay is 3055 and the conference ID number is 310418.
A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call's conclusion.
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