ARC Document Solutions, Inc.
Consolidated Balance Sheets
(In thousands, except per share data)
(Unaudited)
September 30, December 31,
Current assets: 2014 2013
------------- -------------
Cash and cash equivalents $ 24,835 $ 27,362
Accounts receivable, net of allowances for
accounts receivable of $2,507 and $2,517 64,056 56,328
Inventories, net 16,167 14,047
Deferred income taxes 347 356
Prepaid expenses 5,208 4,324
Other current assets 3,466 4,013
------------- -------------
Total current assets 114,079 106,430
Property and equipment, net of accumulated
depreciation of $215,606 and $206,636 59,515 56,181
Goodwill 212,608 212,608
Other intangible assets, net 24,682 27,856
Deferred financing fees, net 2,575 3,242
Deferred income taxes 976 1,186
Other assets 2,356 2,419
------------- -------------
Total assets $ 416,791 $ 409,922
============= =============
Current liabilities:
Accounts payable $ 25,427 $ 23,363
Accrued payroll and payroll-related expenses 14,733 11,497
Accrued expenses 23,369 21,365
Current portion of long-term debt and
capital leases 11,394 21,500
------------- -------------
Total current liabilities 74,923 77,725
Long-term debt and capital leases 194,238 198,228
Deferred income taxes 33,110 31,667
Other long-term liabilities 3,059 3,163
------------- -------------
Total liabilities 305,330 310,783
------------- -------------
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; 46,790 and 46,365 shares
issued and 46,721 and 46,320 shares
outstanding 46 46
Additional paid-in capital 109,690 105,806
Retained deficit (5,026) (14,628)
Accumulated other comprehensive income 229 634
------------- -------------
104,939 91,858
Less cost of common stock in treasury, 69
and 45 shares 319 168
------------- -------------
Total ARC Document Solutions, Inc.
stockholders' equity 104,620 91,690
Noncontrolling interest 6,841 7,449
------------- -------------
Total equity 111,461 99,139
------------- -------------
Total liabilities and equity $ 416,791 $ 409,922
============= =============
ARC Document Solutions, Inc.
Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- --------- ---------
Service sales $ 94,426 $ 88,830 $ 279,555 $ 268,258
Equipment and supplies sales 12,381 12,422 36,607 37,652
--------- --------- --------- ---------
Total net sales 106,807 101,252 316,162 305,910
Cost of sales 70,584 68,372 206,798 205,040
--------- --------- --------- ---------
Gross profit 36,223 32,880 109,364 100,870
Selling, general and
administrative expenses 26,331 24,019 80,720 72,683
Amortization of intangible
assets 1,497 1,610 4,498 5,056
Restructuring expense 11 657 765 1,765
--------- --------- --------- ---------
Income from operations 8,384 6,594 23,381 21,366
Other income (22) (25) (71) (86)
Loss on extinguishment of debt 347 262 347 262
Interest expense, net 3,780 5,895 11,637 18,012
--------- --------- --------- ---------
Income before income tax
provision 4,279 462 11,468 3,178
Income tax provision 659 790 1,930 1,946
--------- --------- --------- ---------
Net income (loss) 3,620 (328) 9,538 1,232
Loss (income) attributable to
noncontrolling interest 41 (122) 64 (545)
--------- --------- --------- ---------
Net income (loss) attributable
to ARC Document Solutions,
Inc. shareholders $ 3,661 $ (450) $ 9,602 $ 687
========= ========= ========= =========
Earnings (loss) per share
attributable to ARC Document
Solutions, Inc. shareholders:
Basic $ 0.08 $ (0.01) $ 0.21 $ 0.01
========= ========= ========= =========
Diluted $ 0.08 $ (0.01) $ 0.20 $ 0.01
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 46,338 45,976 46,195 45,880
Diluted 47,015 45,976 46,856 45,947
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT,
EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- --------- ---------
Cash flows provided by operating
activities (1) $ 15,311 $ 20,019 $ 37,049 $ 40,010
Changes in operating assets
and liabilities, net of
effect of business
acquisitions (1,174) (9,575) 3,985 (7,017)
Non-cash expenses, including
depreciation, amortization
and restructuring (10,517) (10,772) (31,496) (31,761)
Income tax provision 659 790 1,930 1,946
Interest expense, net 3,780 5,895 11,637 18,012
Loss (income) attributable to
the noncontrolling interest 41 (122) 64 (545)
--------- --------- --------- ---------
EBIT 8,100 6,235 23,169 20,645
Depreciation and amortization 8,536 8,669 25,561 26,090
--------- --------- --------- ---------
EBITDA 16,636 14,904 48,730 46,735
Loss on extinguishment of debt 347 262 347 262
Trade secret litigation costs
(2) 306 -- 2,787 --
Restructuring expense 11 657 765 1,765
Stock-based compensation 956 728 2,618 2,049
--------- --------- --------- ---------
Adjusted EBITDA $ 18,256 $ 16,551 $ 55,247 $ 50,811
========= ========= ========= =========
(1) Cash flows provided by operating activities for the three and nine
months ended September 30, 2013 includes cash payments related to
restructuring of $0.7 million and $3.3 million, respectively. Cash flows
provided by operating activities for the nine months ended September 30,
2013 includes an income tax refund of $3.8 million received in 2013
related to our 2009 consolidated federal income tax return. Cash flows
provided by operating activities for the three and nine months ended
September 30, 2014 includes cash payments for trade secret litigation
costs of $1.1 million and $2.6 million, respectively, and cash payments
related to restructuring of $0.6 million and $1.2 million, respectively.
(2) 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
August 2014, we filed a Notice of Appeal. Legal fees associated with the
litigation totaled $0.3 million and $2.8 million for the three and nine
months ended September 30, 2014, respectively.
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net income (loss) attributable to ARC to unaudited
adjusted net income attributable to ARC
(In thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- --------------------
2014 2013 2014 2013
--------- --------- --------- ---------
Net income (loss) attributable
to ARC Document Solutions, Inc. $ 3,661 $ (450) $ 9,602 $ 687
Loss on extinguishment of debt 347 262 347 262
Restructuring expense 11 657 765 1,765
Trade secret litigation costs 306 -- 2,787 --
Income tax benefit related to
above items (258) (359) (1,519) (790)
Deferred tax valuation
allowance and other discrete
tax items (1,172) 685 (2,798) 1,073
--------- --------- --------- ---------
Unaudited adjusted net income
attributable to ARC Document
Solutions, Inc. $ 2,895 $ 795 $ 9,184 $ 2,997
========= ========= ========= =========
Actual:
Earnings (loss) per share
attributable to ARC Document
Solutions, Inc. shareholders:
Basic $ 0.08 $ (0.01) $ 0.21 $ 0.01
========= ========= ========= =========
Diluted $ 0.08 $ (0.01) $ 0.20 $ 0.01
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 46,338 45,976 46,195 45,880
Diluted 47,015 45,976 46,856 45,947
Adjusted:
Earnings per share attributable
to ARC Document Solutions, Inc.
shareholders:
Basic $ 0.06 $ 0.02 $ 0.20 $ 0.07
========= ========= ========= =========
Diluted $ 0.06 $ 0.02 $ 0.20 $ 0.07
========= ========= ========= =========
Weighted average common shares
outstanding:
Basic 46,338 45,976 46,195 45,880
Diluted 47,015 46,487 46,856 45,947
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net income (loss) attributable to ARC Document Solutions,
Inc. shareholders to EBIT, EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ----------------------
2014 2013 2014 2013
---------- --------- ---------- ----------
Net income (loss) attributable
to ARC Document Solutions,
Inc. shareholders $ 3,661 $ (450) $ 9,602 $ 687
Interest expense, net 3,780 5,895 11,637 18,012
Income tax provision 659 790 1,930 1,946
---------- --------- ---------- ----------
EBIT 8,100 6,235 23,169 20,645
Depreciation and
amortization 8,536 8,669 25,561 26,090
---------- --------- ---------- ----------
EBITDA 16,636 14,904 48,730 46,735
Loss on extinguishment of
debt 347 262 347 262
Trade secret litigation
costs 306 -- 2,787 --
Restructuring expense 11 657 765 1,765
Stock-based compensation 956 728 2,618 2,049
---------- --------- ---------- ----------
Adjusted EBITDA $ 18,256 $ 16,551 $ 55,247 $ 50,811
========== ========= ========== ==========
ARC Document Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2014 2013 2014 2013
---------- ---------- ---------- ----------
Service Sales
Onsite services(1) $ 34,950 $ 30,990 $ 100,442 $ 90,542
Traditional reprographics 28,196 28,907 86,702 88,981
Color 22,869 20,638 67,182 63,389
Digital 8,411 8,295 25,229 25,346
---------- ---------- ---------- ----------
Total services sales 94,426 88,830 279,555 268,258
Equipment and supplies sales 12,381 12,422 36,607 37,652
---------- ---------- ---------- ----------
Total net sales $ 106,807 $ 101,252 $ 316,162 $ 305,910
========== ========== ========== ==========
(1) Represents work done at our customer sites, which includes Facilities
Management ("FM") and Managed Print Services ("MPS").
ARC Document Solutions Reports Results for Third Quarter 2014
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