ARC provides insight into Q1 results and announces further consolidation

Friday, April 15, 2011

Press release from the issuing company

ARC, the nation's leading provider of reprographics services and technology, today announced that March sales were consistent with sales in January and February, indicating first quarter revenues to be in the range of $105 to $107 million. While the quarterly sales figure was not unexpected, revenue from construction project printing in March was lackluster. Given that March is typically an indicator of annual revenue from the non-residential construction segment, management expects a difficult year for core business sales. As a result, ARC announced that it is further restructuring its operations and management to reduce costs and strengthen growing segments of its business.

"Revenue for the quarter was in line with our projections, but sales from construction project printing remain challenged," said K. "Suri" Suriyakumar, Chairman, President and CEO of ARC. "On the other hand we see exciting signs of growth in the Global Services and MPS segments of our business, and many of these AEC customers are beginning to hire. Our increased market share should drive our core business substantially as project work returns later in the year. With recent improvements in unemployment and vacancy rates, I think it is clear that an upturn is on its way."

Management announced that, given current market conditions, the Company is reducing the number of its branches in several local markets, while maintaining its extensive presence in major metropolitan areas, a feature of the Company that has been critical to its success. At the same time ARC's operational management is being restructured to address the decline in core business sales and the growth in new segments such as Global Services, MPS, Color and Technology Services. Company restructuring will continue throughout the second quarter, with anticipated annualized savings of more than $14 million.

Among the most significant management changes planned for the year is the consolidation of the corporate finance function into the Company's corporate headquarters in Walnut Creek, California. Since its inception, ARC's operations and finance offices have been decentralized in keeping with its historical management structure. The consolidation reflects the evolving centralization of ARC management and will foster a closer relationship between the finance and operations teams to address continuing economic challenges and an ongoing industry technology transition.

Jorge Avalos, ARC's Vice President and Corporate Controller, will be relocating to the Walnut Creek office and leading the consolidated financial accounting operations of the Company. Mr. Avalos has also been appointed Chief Accounting Officer of the Company. Mr. Avalos joined the Company in 2006 taking on increasing levels of responsibility throughout his career at ARC. Prior to joining the Company, Mr. Avalos was an Assurance Manager for PriceWaterhouseCoopers, and the Corporate Controller for Vendare Media (later merged with Epic Media Group), an online advertising network and social media company.

Jonathan Mather, ARC's CFO, has chosen not to relocate to Northern California and will instead retire from the Company to remain close to his family and community in the Los Angeles-area. Mr. Mather will assist the finance team in relocating to Walnut Creek, and assist Mr. Suriyakumar in the engagement of a new CFO.

"When Jonathan joined us in 2006 after his tenure at NETGEAR, one of the stipulations of his employment was that his offices would remain close to his home in Southern California. While recognizing the necessity of the corporate office consolidation, he has chosen to remain in Los Angeles and we respect his decision," said Mr. Suriyakumar. "Jonathan has been the driving force behind the success of the finance function here at ARC over the past four and a half years. We are happy to have his good counsel and guidance throughout the transition, and we wish him well in his future endeavors."

ARC management will maintain its traditional quiet period leading up to the formal announcement of its first quarter results on May 3, 2011.