Business News

ARC Document Solutions Reports Results for Fourth Quarter and Fiscal Year 2012

Friday 01. March 2013 - ARC Document Solutions, Inc. (NYSE: ARC), the nation's leading document solutions company for the architecture, engineering, and construction (AEC) industry, today reported its financial results for the fourth quarter and full year ended December 31, 2012.

Business Highlights:
Annual cash from operations was $37.6 million
Annual gross margin was 30.4%
Restructuring activity drove 180 bps expansion in adjusted EBITDA margin from 13.1% in the third quarter to 14.9% in the fourth quarter
Eight percent annual increase in Onsite Services sales is led by MPS
Annual adjusted earnings per share was ($0.04)
2013 Annual adjusted earnings per share outlook is $0.03 to $0.07; annual cash from operations outlook for 2013 is $38-45 million
Financial Highlights:
               Three Months Ended  Twelve Months Ended   December 31  December 31 (All dollar figures in millions, except EPS) 2012  2011  2012  2011 Net Sales $96.9  $101.8  $406.1  $422.7 Gross Margin  29.6%  30.7%  30.4%  31.8%Net Loss attributable to ARC $(5.9) $(3.1) $(32.0) $(133.1)Adjusted Net Loss attributable to ARC $(0.8) $(0.2) $(1.7) $(1.0)EPS $(0.13) $(0.07) $(0.70) $(2.93)Adjusted EPS $(0.02) $0.00  $(0.04) $(0.02)                 Cash from Operations $6.7  $19.7  $37.6  $49.2 Capital Expenditures $6.2  $3.6  $20.3  $15.6                  Debt & Capital Leases (including current) $222.5  $226.3  $222.5  $226.3                                   
Management Commentary:
“The aggressive and ambitious restructuring plan we announced in November helped us avoid what could have been a significantly depressed earnings per share and cash performance in the fourth quarter of 2012,” said K. “Suri” Suriyakumar, Chairman, President and CEO of ARC Document Solutions. “A timely response was critical to transition the company in line with the dramatic changes we observed in our customers’ behavior.”
“While our organization continues to strengthen its position as a leading document solutions provider, I am pleased with the speed and efficiency with which we implemented our restructuring plan,” added Mr. Suriyakumar. ” It not only provided a strong finish for the year, but our improved cost structure certainly will allow us to deliver significantly better performance in 2013 even without a full recovery in the AEC industry.”
CFO John Toth commented, “Throughout 2012 we maintained our strong cash flow and balance sheet. We absorbed the costs of the restructuring without drawing on our revolver, and we ended the year with our highest amount of cash since 2009. And in the fourth quarter, we took critical steps to improve the quality of our earnings through diversification across product lines and importantly, refining our cost structure to support and grow margin from multiple service lines. This fundamental improvement in our value proposition — and in the quality of our earnings — can be seen in the expansion of our adjusted EBITDA margin which increased almost 200 basis points between Q3 and Q4, bucking the historic trends of margin contraction between Q3 and Q4.”
Sales Reporting Presentation:
The company announced that beginning with its annual filing on Form 10-K, ARC Document Solutions’ statement of operations will reflect net sales reporting under two categories — “Service sales” and “Equipment and supplies sales” — replacing the historical revenue categories of “Reprographics services,” “Facilities management,” and “Equipment and supplies sales.” The broader categories of “Service sales” and “Equipment and supplies sales” will allow the company to better assign and report distinct sales recognized from its traditional reprographics services, onsite services, color printing services, digital services, and equipment and supplies sales. Under its previous revenue reporting structure, traditional reprographics, color, and digital services were blended in “Reprographics services.”
Restructuring Charge
ARC Document Solutions management recorded a restructuring charge of $3.3 million as a result of reducing its service center footprint and headcount during October and November of 2012. The charges pertain primarily to property lease exit costs and severance payments related to headcount reductions.
Outlook:
ARC anticipates annual adjusted earnings per share in 2013 to be in the range of $0.03 to $0.07 on a fully-diluted basis, and annual cash flow from operations to be in the range of $38 million to $45 million.