Business News

ARC Reports Results for Third Quarter 2012

Tuesday 06. November 2012 - ARC (NYSE: ARC), the nation's leading document solutions company for the architecture, engineering, and construction (AEC) industry, today reported its financial results for the third quarter ended September 30, 2012.

Business Highlights:
Cash from operations was $30.9 million for the nine months ended September 30, 2012 vs. $29.5 million for the same period last year
ARC accelerates shedding of costs associated with traditional reprographics as project-related document management trends emerge in third quarter
Number of service centers and headcount reduced by more than 10% in October
Q3 adjusted earnings per share of $(0.04) vs. $0.02 for Q3 2011; gross margin for the third quarter was 29.4%
Company maintains 2012 fully-diluted annual adjusted earnings per share forecast to be in the range ($0.03) to $0.03, and projected 2012 annual cash from operating activities to be in the range of $35 million to $45 million
Financial Highlights:

Three Months Ended Nine Months Ended
September 30 September 30
(All dollar figures in millions, except EPS) 2012 2011 2012 2011
Net Revenue $ 99.4 $ 104.8 $ 309.2 $ 320.9
Gross Margin 29.4 % 32.4 % 30.7 % 32.1 %
Net Loss attributable to ARC $ (20.1 ) $ (41.8 ) $ (26.1 ) $ (130.0 )
Adjusted Net Income (Loss) attributable to ARC $ (1.7 ) $ 1.1 $ (0.9 ) $ (0.8 )
EPS $ (0.44 ) $ (0.92 ) $ (0.57 ) $ (2.87 )
Adjusted EPS $ (0.04 ) $ 0.02 $ (0.02 ) $ (0.02 )

Cash from Operations $ 14.0 $ 17.6 $ 30.9 $ 29.5
Capital Expenditures $ 4.9 $ 4.3 $ 14.2 $ 11.9

Debt & Capital Leases (including current) $ 224.2 $ 238.6

Management Commentary:
“While the AEC market in the U.S. did not experience a significant recovery in the third quarter, some larger bellwether projects emerged that offered a view into future trends in project-related document printing,” said K. “Suri” Suriyakumar, Chairman, President and CEO of ARC. “Digital document management practices appear to be growing quickly in larger firms, and also in small to mid-size companies where such practices have been slow to gain traction in the past.”
“This evolving customer behavior has prompted us to accelerate our plans to shed costs associated with declining sales trends in project-related printing. We have reduced our footprint by approximately 30 service centers, reduced headcount in production and middle management, streamlined our upper management team, and allocated more resources into growing sales categories such as MPS, color and digital services,” Mr. Suriyakumar continued. “None of these actions were unexpected, we simply moved faster and made changes of greater magnitude as these customer trends became clearer.”
“These changes address the dramatic expansion of Global Services MPS contracts with AECOM, HKS and Swinerton in the third quarter, as well as new contracts with AEC giants such as Parsons Brinckerhoff and two other multi-billion dollar firms,” said Mr. Suriyakumar.
CFO John Toth commented, “While our income statement results for the third quarter were disappointing, our balance sheet remains strong with our senior revolver remaining untapped. In addition, our cash increased from $23.3 million at the end of the second quarter, to $30.5 million at the end of the third quarter, and our cash flow from operations is $30.9 million year to date vs. $29.5 million for the same period last year in spite of the decline in sales. We continue to generate cash and manage our capital availability as we transform our business. The initiatives we have executed in October are anticipated to add considerably to our margins.”
Goodwill Impairment:
In the third quarter, ARC recorded a goodwill impairment charge of $16.7 million.
On September 30, 2012, the Company performed its annual goodwill impairment analysis. The results of the Company’s analysis indicated that seven of its reporting units, six in the United States and one in Canada, had a goodwill impairment, and the Company recorded a pretax, non-cash charge for the three and nine months ended September 30, 2012 to reduce the carrying value of goodwill by $16.7 million.
Outlook:
The company has maintained its projection of adjusted earnings per share for 2012 to be in the range of $(0.03) to $0.03. ARC’s projection of annual cash flow from operating activities remains in the range of $35 million to $45 million.