ARC Document Solutions, Inc. Consolidated Balance Sheets (In thousands, except per share data) (Unaudited) June 30, December 31, Current assets: 2016 2015 ------------ ------------ Cash and cash equivalents $ 20,452 $ 23,963 Accounts receivable, net of allowances for accounts receivable of $1,850 and $2,094 60,933 60,085 Inventories, net 19,570 16,972 Prepaid expenses 4,766 4,555 Other current assets 4,347 4,131 ------------ ------------ Total current assets 110,068 109,706 Property and equipment, net of accumulated depreciation of $206,584 and $202,457 57,754 57,590 Goodwill 138,688 212,608 Other intangible assets, net 15,580 17,946 Deferred income taxes 76,019 74,196 Other assets 2,372 2,492 ------------ ------------ Total assets $ 400,481 $ 474,538 ============ ============ Current liabilities: Accounts payable $ 22,148 $ 23,989 Accrued payroll and payroll-related expenses 11,811 12,118 Accrued expenses 18,023 19,194 Current portion of long-term debt and capital leases 14,863 14,374 ------------ ------------ Total current liabilities 66,845 69,675 Long-term debt and capital leases 150,059 157,018 Deferred income taxes 29,412 35,933 Other long-term liabilities 2,623 2,778 ------------ ------------ Total liabilities 248,939 265,404 ------------ ------------ 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; 47,390 and 47,130 shares issued and 46,008 and 47,029 shares outstanding 47 47 Additional paid-in capital 116,494 115,089 Retained earnings 36,357 89,687 Accumulated other comprehensive loss (2,653) (2,097) ------------ ------------ 150,245 202,726 Less cost of common stock in treasury, 1,382 and 101 shares 5,709 612 ------------ ------------ Total ARC Document Solutions, Inc. stockholders' equity 144,536 202,114 Noncontrolling interest 7,006 7,020 ------------ ------------ Total equity 151,542 209,134 ------------ ------------ Total liabilities and equity $ 400,481 $ 474,538 ============ ============ ARC Document Solutions, Inc. Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ -------------------- 2016 2015 2016 2015 -------- -------- --------- --------- Service sales $ 92,581 $ 99,336 $ 183,216 $ 192,661 Equipment and supplies sales 11,189 14,053 24,104 25,047 -------- -------- --------- --------- Total net sales 103,770 113,389 207,320 217,708 Cost of sales 67,378 72,530 137,191 140,828 -------- -------- --------- --------- Gross profit 36,392 40,859 70,129 76,880 Selling, general and administrative expenses 25,503 27,132 51,859 54,587 Amortization of intangible assets 1,232 1,442 2,545 2,931 Goodwill impairment 73,920 -- 73,920 -- Restructuring expense 5 11 7 85 -------- -------- --------- --------- (Loss) income from operations (64,268) 12,274 (58,202) 19,277 Other income, net (15) (30) (38) (56) Loss on extinguishment of debt 44 97 90 97 Interest expense, net 1,526 1,939 2,972 3,796 -------- -------- --------- --------- (Loss) income before income tax (benefit) provision (65,823) 10,268 (61,226) 15,440 Income tax (benefit) provision (10,015) 811 (8,046) 1,572 -------- -------- --------- --------- Net (loss) income (55,808) 9,457 (53,180) 13,868 Income attributable to the noncontrolling interest (96) (200) (150) (175) -------- -------- --------- --------- Net (loss) income attributable to ARC Document Solutions, Inc. shareholders $(55,904) $ 9,257 $ (53,330) $ 13,693 ======== ======== ========= ========= (Loss) earnings per share attributable to ARC Document Solutions, Inc. shareholders: Basic $ (1.22) $ 0.20 $ (1.15) $ 0.29 ======== ======== ========= ========= Diluted $ (1.22) $ 0.19 $ (1.15) $ 0.29 ======== ======== ========= ========= Weighted average common shares outstanding: Basic 45,955 46,611 46,285 46,528 Diluted 45,955 47,558 46,285 47,634 ARC Document Solutions, Inc. Non-GAAP Measures Reconciliation of cash flows provided by operating activities to EBITDA and Adjusted EBITDA (In thousands) (Unaudited) Three Months Ended Six Months Ended June 30, June 30, ------------------ ------------------ 2016 2015 2016 2015 -------- -------- -------- -------- Cash flows provided by operating activities $ 16,580 $ 16,864 $ 21,883 $ 22,152 Changes in operating assets and liabilities, net of effect of business acquisitions 209 2,928 8,018 12,344 Non-cash expenses, including depreciation, amortization and goodwill impairment (72,597) (10,335) (83,081) (20,628) Income tax (benefit) provision (10,015) 811 (8,046) 1,572 Interest expense, net 1,526 1,939 2,972 3,796 Income attributable to the noncontrolling interest (96) (200) (150) (175) Depreciation and amortization 7,890 8,520 15,880 17,075 -------- -------- -------- -------- EBITDA (56,503) 20,527 (42,524) 36,136 Loss on extinguishment of debt 44 97 90 97 Goodwill impairment 73,920 -- 73,920 -- Trade secret litigation costs(1) -- -- -- 34 Restructuring expense(2) 5 11 7 85 Stock-based compensation 651 921 1,423 2,004 -------- -------- -------- -------- Adjusted EBITDA $ 18,117 $ 21,556 $ 32,916 $ 38,356 ======== ======== ======== ========