ARC announces amendment to credit agreement to provide covenant relief
Wednesday, October 07, 2009
WALNUT CREEK, CA -- American Reprographics Company, the nation's leading provider of reprographics services and technology, today announced the successful completion of an amendment to its senior secured credit agreement on October 5, 2009. The agreement includes a $35 million prepayment on the Company's term loans, and secures financial covenant relief and certain other adjustments that will provide ARC with greater flexibility to manage the Company through the current economic downturn. Adjusted terms more favorable to the Company include, but are not limited to:
* A higher maximum leverage ratio
* A higher maximum senior secured leverage ratio
* A lower minimum interest coverage ratio
* A lower minimum fixed charge coverage ratio
* An increase in permitted foreign subsidiary indebtedness
The above description of the amendment is qualified in its entirety by reference to the full text of the amendment included in the Company's Form 8-K filed with the U.S. Securities and Exchange Commission.
"As I have stated previously, we were always very confident of meeting our financial obligations, and that remains unchanged," said K. "Suri" Suriyakumar, Chairman, President and CEO of American Reprographics Company. "Due to lower revenues, however, we could have violated some of the covenants in our credit agreement, which would have resulted in substantial increases in interest charges. The recent improvement in the credit market combined with the excellent relationships we have with our banks allowed us to successfully renegotiate the agreement, and still retain a favorable debt structure."
The reduced interest expense resulting from the $35 million pre-payment noted above will be partially offset by an increase in the credit facility's applicable margin on ARC's term loans. Beginning in the fourth quarter of 2009, the Company expects interest payments on its term loans to increase by approximately $600,000 per quarter.
Annual Forecast Revision
The Company also announced today that it is lowering its annual earnings forecast for 2009 based on its preliminary sales figures for the second half of the year. The Company currently expects to see annual earnings per share in the range of $0.27-$0.33, excluding one-time charges of $0.05 to $0.07 for charges related to the amendment of the senior secured credit agreement as noted above. Previous estimates for earnings per share in 2009 were in the range of $0.50-$0.70. The annual forecast for cash from operations in 2009 remains unchanged at $70-$90 million.
Based on preliminary revenue results from the third quarter, the Company anticipates sales to be weaker in the second half of 2009. Management attributed the projected loss of revenue to the lack of commercial construction activity across the nation as credit markets remain tight and financing for new construction remains severely restrained. Net revenue for the third quarter of 2009 is currently expected to be in the range of $117 million to $119 million.
"The revenue slide in the second half of the year is unavoidable given the current market conditions," said Mr. Suriyakumar. "The task at hand is to stay focused on containing our costs, and continuing to generate a healthy cash flow. By doing so, we can manage through these difficult times while preparing the company for new opportunities when the market recovers. That remains our sole focus for now."
American Reprographics Company will host a conference call today, Tuesday, October 6 at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss the Company's amended senior secured credit agreement and its financial guidance update. The conference call can be accessed by dialing 866-921-3926. The conference ID number is 34404116. 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 800-642-1687. The account number to access the phone replay is 34404116.
American Reprographics Company will report its third quarter results on November 5, 2009, after the market close. Details of the earnings call will be issued in a future announcement.