ARC Document Solutions, Inc.
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
December 31, December 31,
------------- -------------
Current assets: 2014 2013
------------- -------------
Cash and cash equivalents $ 22,636 $ 27,362
Accounts receivable, net of allowances for
accounts receivable of $2,413 and $2,517 62,045 56,328
Inventories, net 16,251 14,047
Deferred income taxes 278 356
Prepaid expenses 4,767 4,324
Other current assets 6,080 4,013
------------- -------------
Total current assets 112,057 106,430
Property and equipment, net of accumulated
depreciation of $214,697 and $206,636 59,520 56,181
Goodwill 212,608 212,608
Other intangible assets, net 23,841 27,856
Deferred financing fees, net 2,440 3,242
Deferred income taxes 1,110 1,186
Other assets 2,492 2,419
------------- -------------
Total assets $ 414,068 $ 409,922
============= =============
Current liabilities:
Accounts payable $ 26,866 $ 23,363
Accrued payroll and payroll-related expenses 13,765 11,497
Accrued expenses 22,793 21,365
Current portion of long-term debt and
capital leases 27,969 21,500
------------- -------------
Total current liabilities 91,393 77,725
Long-term debt and capital leases 175,916 198,228
Deferred income taxes 33,463 31,667
Other long-term liabilities 3,458 3,163
------------- -------------
Total liabilities 304,230 310,783
------------- -------------
Commitments and contingencies
Stockholders' equity:
ARC Document Solutions, Inc. stockholders'
equity:
Preferred stock, $0.001 par value, 25,000
shares authorized; 0 shares issued and
outstanding -- --
Common stock, $0.001 par value, 150,000
shares authorized; 46,800 and 46,365 shares
issued and 46,723 and 46,320 shares
outstanding 47 46
Additional paid-in capital 110,650 105,806
Retained deficit (7,353) (14,628)
Accumulated other comprehensive (loss)
income (161) 634
------------- -------------
103,183 91,858
Less cost of common stock in treasury, 77
and 45 shares 408 168
------------- -------------
Total ARC Document Solutions, Inc.
stockholders' equity 102,775 91,690
Noncontrolling interest 7,063 7,449
------------- -------------
Total equity 109,838 99,139
------------- -------------
Total liabilities and equity $ 414,068 $ 409,922
============= =============
ARC Document Solutions, Inc.
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- -------------------
2014 2013 2014 2013
--------- --------- --------- --------
Service sales $ 92,329 $ 87,100 $ 371,884 $355,358
Equipment and supplies sales 15,265 14,185 51,872 51,837
--------- --------- --------- --------
Total net sales 107,594 101,285 423,756 407,195
Cost of sales 72,680 67,818 279,478 272,858
--------- --------- --------- --------
Gross profit 34,914 33,467 144,278 134,337
Selling, general and
administrative expenses 26,952 24,117 107,672 96,800
Amortization of intangible assets 1,489 1,556 5,987 6,612
Restructuring expense 12 779 777 2,544
--------- --------- --------- --------
Income from operations 6,461 7,015 29,842 28,381
Other income, net (25) (20) (96) (106)
Loss on extinguishment of debt 5,252 16,077 5,599 16,339
Interest expense, net 2,923 5,725 14,560 23,737
--------- --------- --------- --------
(Loss) income before income
tax provision (1,689) (14,767) 9,779 (11,589)
Income tax provision 418 1,040 2,348 2,986
--------- --------- --------- --------
Net (loss) income (2,107) (15,807) 7,431 (14,575)
Income attributable to
noncontrolling interest (220) (203) (156) (748)
--------- --------- --------- --------
Net (loss) income
attributable to ARC Document
Solutions, Inc. shareholders $ (2,327) $ (16,010) $ 7,275 $(15,323)
========= ========= ========= ========
(Loss) income per share
attributable to ARC Document
Solutions, Inc. shareholders:
Basic $ (0.05) $ (0.35) $ 0.16 $ (0.33)
========= ========= ========= ========
Diluted $ (0.05) $ (0.35) $ 0.15 $ (0.33)
========= ========= ========= ========
Weighted average common shares
outstanding:
Basic 46,393 45,928 46,245 45,856
Diluted 46,393 45,928 47,088 45,856
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT,
EBITDA and Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- --------- ---------
Cash flows provided by operating
activities $ 12,963 $ 6,788 $ 50,012 $ 46,798
Changes in operating assets
and liabilities, net of
effect of business
acquisitions 453 4,629 4,438 (2,388)
Non-cash expenses, including
depreciation, amortization
and restructuring (15,523) (27,224) (47,019) (58,985)
Income tax provision 418 1,040 2,348 2,986
Interest expense, net 2,923 5,725 14,560 23,737
Income attributable to
noncontrolling interest (220) (203) (156) (748)
--------- --------- --------- ---------
EBIT 1,014 (9,245) 24,183 11,400
Depreciation and amortization 8,574 8,655 34,135 34,745
--------- --------- --------- ---------
EBITDA 9,588 (590) 58,318 46,145
Loss on extinguishment of debt 5,252 16,077 5,599 16,339
Trade secret litigation costs
(1) 979 -- 3,766 --
Restructuring expense 12 779 777 2,544
Stock-based compensation 1,184 1,158 3,802 3,207
--------- --------- --------- ---------
Adjusted EBITDA $ 17,015 $ 17,424 $ 72,262 $ 68,235
========= ========= ========= =========
(1) On February 1, 2013, we filed a civil complaint against a competitor and
a former employee in the Superior Court of California for Orange County,
which alleged, among other claims, the misappropriation of ARC trade
secrets; namely, proprietary customer lists that were used to
communicate with our customers in an attempt to unfairly acquire their
business. In prior litigation with the competitor based on related
facts, in 2007 the competitor entered into a settlement agreement and
stipulated judgment, which included an injunction. We instituted this
suit to stop the defendant from using similar unfair business practices
against us in the Southern California market. The case proceeded to
trial in May 2014, and a jury verdict was entered for the defendants. In
December 2014, the court awarded the defendant attorneys' fees related
to the case. In February 2015, ARC entered into a settlement with the
defendant with regards to attorneys' fees. Legal fees associated with
the litigation totaled $1.0 million and $3.8 million for the three and
twelve months ended December 31, 2014, respectively.
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to adjusted
cash flows provided by operating activities
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- --------------------
2014 2013 2014 2013
---------- ---------- ---------- ---------
Cash flows provided by operating
activities $ 12,963 $ 6,788 $ 50,012 $ 46,798
Payments related to trade
secret litigation costs 130 -- 2,744 --
Payments related to
restructuring expenses 9 980 1,203 4,304
Receipt of federal income tax
refund(1) -- -- -- (3,762)
---------- ---------- ---------- ---------
Adjusted cash flows provided by
operating activities $ 13,102 $ 7,768 $ 53,959 $ 47,340
========== ========== ========== =========
(1) In 2013, ARC received a federal income tax refund of $3.8 million
related to its 2009 consolidated federal income tax return.
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited
adjusted net income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- --------- ---------
Net (loss) income attributable
to ARC Document Solutions, Inc. $ (2,327) $ (16,010) $ 7,275 $ (15,323)
Loss on extinguishment of debt 5,252 16,077 5,599 16,339
Restructuring expense 12 779 777 2,544
Trade secret litigation costs 979 -- 3,766 --
Income tax benefit related to
above items (2,434) (6,877) (3,953) (7,667)
Deferred tax valuation
allowance and other discrete
tax items 1,141 7,172 (1,657) 8,245
--------- --------- --------- ---------
Unaudited adjusted net income
attributable to ARC Document
Solutions, Inc. $ 2,623 $ 1,141 $ 11,807 $ 4,138
========= ========= ========= =========
Actual:
(Loss) income per share
attributable to ARC Document
Solutions, Inc. shareholders:
Basic $ (0.05) $ (0.35) $ 0.16 $ (0.33)
========= ========= ========= =========
Diluted $ (0.05) $ (0.35) $ 0.15 $ (0.33)
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 46,393 45,928 46,245 45,856
Diluted 46,393 45,928 47,088 45,856
Adjusted:
Earnings per share attributable
to ARC Document Solutions, Inc.
shareholders:
Basic $ 0.06 $ 0.02 $ 0.26 $ 0.09
========= ========= ========= =========
Diluted $ 0.06 $ 0.02 $ 0.25 $ 0.09
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 46,393 45,928 46,245 45,856
Diluted 47,595 46,682 47,088 46,157
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and
Adjusted EBITDA
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- ---------- ---------
Net (loss) income attributable
to ARC Document Solutions, Inc. $ (2,327) $ (16,010) $ 7,275 $ (15,323)
Interest expense, net 2,923 5,725 14,560 23,737
Income tax provision 418 1,040 2,348 2,986
--------- --------- ---------- ---------
EBIT 1,014 (9,245) 24,183 11,400
Depreciation and amortization 8,574 8,655 34,135 34,745
--------- --------- ---------- ---------
EBITDA 9,588 (590) 58,318 46,145
Loss on extinguishment of debt 5,252 16,077 5,599 16,339
Trade secret litigation costs 979 -- 3,766 --
Restructuring expense 12 779 777 2,544
Stock-based compensation 1,184 1,158 3,802 3,207
--------- --------- ---------- ---------
Adjusted EBITDA $ 17,015 $ 17,424 $ 72,262 $ 68,235
========= ========= ========== =========
ARC Document Solutions, Inc.
Net Sales by Product Line
(Dollars in thousands)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31, December 31,
--------------------- ---------------------
2014 2013 2014 2013
---------- ---------- ---------- ----------
Service Sales
Onsite services(1) $ 34,578 $ 31,008 $ 135,020 $ 121,550
Traditional reprographics 26,477 27,693 113,179 116,673
Color 23,128 20,212 90,310 83,601
Digital 8,146 8,187 33,375 33,534
---------- ---------- ---------- ----------
Total services sales 92,329 87,100 371,884 355,358
Equipment and supplies sales 15,265 14,185 51,872 51,837
---------- ---------- ---------- ----------
Total net sales $ 107,594 $ 101,285 $ 423,756 $ 407,195
========== ========== ========== ==========
(1) Represents work done at our customer sites, which includes Facilities
Management ("FM") and Managed Print Services ("MPS").
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ARC Document Solutions Reports Results for Fourth Quarter and Full Year 2014
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