ARC Document Solutions Reports Results for Third Quarter 2014
(firmenpresse) - WALNUT CREEK, CA -- (Marketwired) -- 11/06/14 -- ARC Document Solutions, Inc. (NYSE: ARC), the nation's leading document solutions provider for the architecture, engineering, and construction (AEC) industry, today reported its financial results for the third quarter ended September 30, 2014.
Q3 Adjusted earnings per share of $0.06 vs. $0.02 in Q3 2013
Q3 Gross margin of 33.9%; year-over-year increase of 140 basis points
Q3 cash flow from operations was $15.3 million and included cash payments for trade secret litigation and quarterly interest payments on senior debt
Revises 2014 fully-diluted annual adjusted earnings per share outlook from $0.19 to $0.23 to be in the range of $0.24 to $0.27, narrows the outlook for 2014 annual cash provided by operating activities from $51 million to $56 million to be in the range of $52 to $54 million, and revises the outlook for annual adjusted EBITDA from $69 million to $73 million to be in the range of $71 million to $74 million
"It was an excellent quarter and our performance clearly highlighted the difference between the document solutions provider we are today, the reprographics company we were prior to the recession, and the role we'll play in the future distributing documents and information from the cloud with secure mobile access. Our customers are asking us to find new ways to meet their needs, work with them in the cloud, and create new solutions for them to interact with the massive amounts of information they generate," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC Document Solutions. "It's a different ballgame."
"We achieved double digit growth in managed print services and color, we saw more growth in archiving and information management and our construction document hyperlinking services, and there was great interest and new placements around the country for our PlanWell SmartScreens," Mr. Suriyakumar continued. "Our robust margin expansion led to strong earnings performance, and strong cash generation provided the means to aggressively reduce our senior debt in the same fashion we established in the first two quarters of the year, improving both our capital structure and our debt ratios."
The Company also announced that it has entered into a commitment letter with Wells Fargo Bank to refinance the Company's existing line of credit and its current "Term B" loan facility with a new secured credit facility containing "tranche A" revolving loans and "Term A" loans expected to be syndicated primarily to commercial banking institutions active in the "pro rata" bank market. The closing of the new loan facility is subject to the satisfaction of various conditions, including the receipt of commitments from the proposed lenders and the negotiation of definitive documentation. The Company expects the interest rate of the new five-year Term A facility to be at or near LIBOR plus 250 basis points. The Company expects to close the new loan facility before the end of the fourth quarter.
Net sales were $106.8 million, a 5.5% increase compared to the third quarter of 2013.
Days sales outstanding in Q3 2014 were 54, compared to 52 days in Q3 2013.
AEC customers comprised approximately 77% of our total net sales, while non-AEC customers made up approximately 23% of our total net sales.
Total number of Onsite Services contracts at the end of the third quarter was approximately 8,330, an increase of nearly 630 contracts from the beginning of the year.
Adjusted EBITDA is EBITDA net of the impact of loss on extinguishment of debt, trade secret litigation costs, stock-based compensation expense, and restructuring expense.
ARC Document Solutions has revised its outlook upward for annual adjusted earnings per share in 2014 from $0.19 to $0.23 to be in the range of $0.24 to $0.27 on a fully diluted basis. The outlook for annual cash flow from operations has been narrowed from $51 million to $56 million to be in the range of $52 million to $54 million. The outlook for annual adjusted EBITDA has been revised upward from $69 million to $73 million to be in the range of $71 million to $74 million.
ARC Document Solutions 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 of 2014. To access the live audio call, dial 888-461-2024. International callers may join the conference by dialing 719-325-2144. The conference ID number is 1208767. A live webcast will also be made available on the investor relations page of ARC Document Solutions' website at .
A replay of the call will be available for five days after the call's conclusion. To access the replay, dial 888-203-1112. International callers may access the replay by dialing 719-457-0820. The conference ID number is 1208767. The webcast will also be made available at for approximately 90 days following the call's conclusion.
(NYSE: ARC)
ARC Document Solutions is a leading document solutions company serving businesses of all types, with an emphasis on the non-residential segment of the architecture, engineering and construction industries. The Company helps more than 90,000 customers reduce costs and increase efficiency in the use of their documents, improve document access and control, and offers a wide variety of ways to print, produce, and store documents. ARC provides its solutions onsite in more than 8,000 of its customers' offices, offsite in service centers around the world, and digitally in the form of proprietary software and web applications. For more information please visit .
This press release contains forward-looking statements that are based on current opinions, estimates and assumptions of management regarding future events and the future financial performance of the Company. Words such as "expect," "confident," "assume," "intent," and similar expressions identify forward-looking statements and all statements other than statements of historical fact, including, but not limited to, any projections regarding earnings, revenues and financial performance of the Company, could be deemed forward-looking statements. We caution you that such statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. In addition to matters affecting the construction, managed print services, document management or reprographics industries, or the economy generally, factors that could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the caption entitled "Risk Factors" in Item 1A in ARC Document Solution's Annual Report on Form 10-K for the fiscal year ended December 31, 2013, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
EBIT, EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with accounting principles generally accepted in the United States of America ("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 flows 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. 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, 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 and EBITDA to measure and compare the performance of our operating segments. Our operating segments' financial performance includes all of the operating activities except debt and taxation which are managed at the corporate level for U.S. operating segments. As a result, we believe EBIT is the best measure of operating segment 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 segment-level compensation and we use EBITDA to measure performance for determining consolidated-level compensation. In addition, we use EBIT and EBITDA to evaluate potential acquisitions and potential capital expenditures.
EBIT, EBITDA and related ratios have limitations as analytical tools, and should not be considered 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, EBITDA and related ratios only as supplements. For more information, see our interim Condensed Consolidated Financial Statements and related notes on our 2014 third quarter report on Form 10-Q. Additionally, please refer to our 2013 Annual Report on Form 10-K.
Our presentation of adjusted net income and adjusted EBITDA over certain periods is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail in the reconciliation tables above.
Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and nine months ended September 30, 2014 and 2013 to reflect the exclusion of loss on extinguishment of debt, restructuring expense, trade secret litigation costs, and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the three and nine months ended September 30, 2014 and 2013. We believe these charges were the result of the current macroeconomic environment, our capital restructuring, or other items which are not indicative of our actual operating performance.
We presented adjusted EBITDA in the three and nine months ended September 30, 2014 and 2013 to exclude loss on extinguishment of debt, trade secret litigation costs, stock-based compensation expense, and restructuring expense. The adjustment of EBITDA for non-cash adjustments is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.
David Stickney
VP Corporate Communications
925-949-5114
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