Friday, March 18, 2011

American Reprographics (ARC) releases updated (March 2011) Investor Presentation file

On Tuesday March 15, 2011, ARC (NYSE: ARC) attended and participated in (meaning, ARC gave a presentation at) Credit Suisse’s Global Services Conference held in Scottsdale, AZ.

In conjunction with that conference, ARC updated its “Investor Presentation” file. You can access that Investor Presentation file on ARC’s web-site (at, or you can access that file by clicking on the link I’ve placed immediately below. (If you click on the link below, give the file some time to load!)

Now, for a few comments about ARC’s most recent Presentation file:

The purpose of ARC’s attendance at, and participation in, a financial services company’s conference, such as Credit Suisse’s Global Services Conference, is to spark interest in acquiring ARC shares. The higher the demand for ARC shares, the higher ARC’s share price will go! (Well, at least theoretically!

1) – On the subject of “acquisitions”, these two sentences appear in the presentation file, “U.S. acquisitions are currently on hold while (the) economy recovers.” (ARC is) “exploring international acquisitions”

During the last “earnings call,” Suri (Chairman & CEO of ARC) was asked a question about ARC’s use of cash flow going forward, and Suri mentioned acquisitions in his response:

Suri Suriyakumar

“Yes. The way we view it, Michael (Michael Terwilliger is a financial analyst with Bank of America), is that we are not thinking in those terms yet, but obviously to answer that is what I was going to say – if we do end up hoarding cash meaning if the market is strong in the first – second half – or second quarter and third quarter and we start generating that kind of cash, that is a good problem to have. Of course, I hope I have that problem – then, obviously, we will be looking at various other options of how we can use that cash. Obviously, if that is the case it is likely that the market is coming back and if the market is coming back, we can think about acquisitions, that’s one option. Secondly, there is a fair amount of investment that we can make in order to go after the new segments of the business. So that’s expanding the existing market is another opportunity and of course then we can look at options such as paying dividends or buy back stock or all those things. They are all options available to us but I think our objective now is to make sure – keep the company healthy and strong until the market comes back and when the market comes back, then we’ll have a lot of options.”

So, for those of you (and, here, I’m speaking about reprographers) who might be considering executing your “exit strategy”, if economic conditions show progress this year, ARC may be interested in buying your company.

2) – I was quite surprised to see that ARC did not put much emphasis on its “Riot Color” initiative. Most of the presentation, about ARC’s services, was devoted to ARC’s A/E/C business.

3) – I was also surprised to see that ARC did not put much emphasis on its “BIM” initiatives. ARC acquired RCMS Group, a BIM services company, in the fall of 2009, but, since then, I’ve not heard much mention of that segment of ARC’s business in recent ARC investor presentations or during recent “earnings calls.”

4) – One of the most interesting parts of the presentation file was the part where ARC suggests its ability to grow revenues, going forward, over the next 3 to 5 years. Here’s what ARC says about its “Recovery Potential 3 to 5 years”:

“Organic growth” - $200 million

“Acquisition” - $200 million

“MPS / Color” - $200 million

ARC’s 2010 Sales came in at $441.6 million. Since ARC’s presentation used the words “recovery potential”, I’m not sure if ARC is saying that 3 to 5 years from now its Sales might be $600 million or if ARC is saying that i3 to 5 years from now its Sales might be $$1.042 billion (i.e., $441.6 million PLUS $600 million.) I think ARC means the latter rather than the former.

And, all I have to say about that “possibility” is, “WOW”, that would be very cool to see a reprographics company go over $1 billion in annual sales.

But in order for ARC to get to $1.042 billion in Sales in 5 years time, ARC’s annual growth rate would have to average 18.7% per year on a compounded basis. Achieving that kind of growth rate would be incredible. But, certainly, not impossible.

ARC could “easily” add around $273 million to it sales - - in one fell swoop – by acquiring Service Point Solutions! Or, maybe over the next 3 to 5 years, ARC will convince Medi Falsafi to sell ABC Imaging to ARC, and/or convince the Thomas family to sell Thomas Reprographics to ARC, and/or convince the family that owns National Reprographics (NRI) to sell NRI to ARC!

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