Feb. 12 2008 - American Reprographics Company, the nation's leading provider of reprographic services and technology, today reported its financial results for the fourth quarter, and year ended December 31, 2007.
Net revenue for the fourth quarter of 2007 was $174.1 million compared to $147 million in the fourth quarter of 2006, an increase of 18.5%. The Company's gross margin in the fourth quarter of 2007 was 41.2%, compared to 41.6% for the same period in 2006. Net income for the fourth quarter of 2007 was $16.7 million, or $0.37 per diluted share, compared to net income for the fourth quarter of 2006 of $12.8 million, or $0.28 per diluted share. Adjusted to exclude the 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 the fourth quarter of 2007 was $15.1 million or $0.33 per diluted share (please see reconciliation table).
Revenue for the full year ended December 31, 2007, was $688.4 million, compared to $591.8 million for 2006, a 16.3% increase year-over-year. The Company's gross margin for the full year ended December 31, 2007, was 41.7%, compared to 43% for the 12 months ended December 31, 2006. Net income for 2007 was $69.1 million, or $1.51 per diluted share. Net income for 2006 was $51.4 million, or $1.13 per diluted share. Adjusted to exclude the settlement of the Louis Frey litigation and the charge for early extinguishment of debt noted above, net income for 2007 was $67.9 million or $1.48 per diluted share. Net cash provided by operating activities in 2007 was $101.4 million, compared to $98.4 million in 2006.
"We experienced a challenging year in 2007," said K. "Suri" Suriyakumar, President and Chief Executive Officer. "The residential downturn had a larger than expected impact on our business, and with the general economic fallout surrounding the sub-prime meltdown, investors turned skittish about construction-related stocks. Regardless of market sentiment, however, we remained focused on growing our business and achieved significant gains in the quarter. We dramatically expanded our footprint to 308 locations including the addition of 19 new companies. This represents more acquisitions than any other year in the company's history. We refinanced our debt with excellent terms in an extremely tough credit market. We also forged significant new customer relationships in the non-AEC market place, and implemented a seamless management transition at the highest level in the company. In addition, we signed a partnership with one of the most prestigious technology companies in China, and signed a software licensing partnership with a significant vendor, both of which will significantly benefit the company in the long term."
"What is equally noteworthy," Mr. Suriyakumar continued, "is that in deteriorating market conditions, management was able to quickly implement significant controls within the company during the latter, and traditionally slower, part of the year to improve both sales and margins. The result of these efforts was one of the company's best fourth quarters."
Jonathan Mather, Chief Financial Officer, said, "ARC ended its year in excellent fiscal condition, and with tremendous flexibility in its capital structure. Refinancing our debt in December provided better terms than our previous overall package, as well as an expanded revolver component that can sustain our dynamic acquisition activity. It is worth noting that the refinancing agreement resulted in an after-tax charge of $800,000 related to the extinguishment of our previous debt, which had a $0.02 impact on our annual and quarterly EPS. Overall, however, the company is well-positioned to pursue its growth targets in 2008 and beyond."
"We remain cautiously optimistic about 2008," said Mr. Suriyakumar. "While there is every indication in the marketplace that the economy will slow down we are confident that our position in the industry and our strength in technology will allow us to provide our current and new customers a wider array of services that gives us a significant edge over the competition. As evidenced in the last downturn we are very capable of operating our business successfully even in challenging environments. In addition, with strong free cash flow and a debt structure which supports our acquisition strategy we will have the ability to expand opportunistically through a downturn."
With this as a framework for the company's forecast, and in consideration of key industry and economic indicators, American Reprographics Company expects that full year 2008 revenue will be in the range of $720 million to $760 million and that earnings per share will be in the range of $1.52 to $1.60 on a fully diluted basis.
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