ARC , one of the nation's leading document solutions companies, today reported its financial results for the third quarter ended September 30, 2011.
"As we expected, the U.S. economy remained sluggish through the third quarter. In spite of a year-over-year sales drop of $4.6 million, we maintained a strong gross margin and generated healthy cash flow," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC. "Meanwhile our efforts to grow sales in adjacent areas are starting to show meaningful results. Substantial MPS growth in the quarter, primarily from our Global Solutions customers, drove a 12.8% increase in our FM revenue category compared to the third quarter of 2010. It is also important to note that at the end of October we paid down to zero the outstanding balance on our revolving debt facility."
Net revenue for the third quarter of 2011 was $104.8 million. ARC's net loss for the third quarter was $41.8 million, or a loss of $0.92 per diluted share, primarily due to the recording of a goodwill impairment charge in the amount of $42.1 million. Excluding this and other non-cash charges, including the previously-disclosed accelerated amortization related to trade names and interest rate swap-related costs, adjusted net income for the second quarter was $1.1 million, or $0.02 per diluted share. The Company's third quarter gross margin was 32.4%. Quarterly cash from operating activities for the period ending September 30, 2011 was $17.6 million.
Net revenue for the first nine months of 2011 was $320.9 million. The Company's gross margin was 32.1% for the same period. ARC's net loss for the first nine months of 2011 was $130.0 million, or a loss of $2.87 per diluted share, caused primarily by the non-cash charges mentioned above. Excluding these non-cash charges, ARC's adjusted net loss for the first nine months of 2011 was $0.8 million, or a loss of $0.02 per diluted share. Cash from operating activities for the same period was $29.5 million.
Goodwill Impairment In the third quarter, ARC recorded a goodwill impairment charge of $42.1 million. The main factor driving this goodwill impairment charge was an increase in the Company's reporting units' weighted average cost of capital (WACC). This change in WACC was due, in part, to increased uncertainty in the overall economy and a decline in the price of our bonds (resulting in a higher yield) during the third quarter of this fiscal year. The Company will not be required to make any current or future cash expenditures as a result of the impairment.
Outlook The Company reaffirmed its 2011 annual adjusted EPS forecast of $(0.02) to $0.05 on a fully-diluted basis and projected annual cash flow from operating activities in the range of $35 million to $50 million.
Teleconference and Webcast ARC 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 third quarter 2011. The conference call can be accessed by dialing 877-402-8179. The conference ID number is 18695685.
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 855-859-2056. The conference ID number is 18695685.
A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call's conclusion.