ARC Document Solutions Meets or Exceeds Revised Financial Guidance for Full Year 2016

Our presentation of adjusted net income and adjusted EBITDA over certain periods is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail in the reconciliation tables above. For more information, see our 2015 Annual Report on Form 10-K.

Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and twelve months ended December 31, 2016 and 2015 to reflect the exclusion of loss on extinguishment of debt, goodwill impairment, restructuring expense, trade secret litigation costs, and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the three and twelve months ended December 31, 2016 and 2015. We believe these charges were the result of the then current macroeconomic environment, our capital restructuring, or other items which are not indicative of our actual operating performance.

We have presented adjusted EBITDA for the three and twelve months ended December 31, 2016 and 2015 to exclude loss on extinguishment of debt, goodwill impairment, trade secret litigation costs, restructuring expense, and stock-based compensation expense. The adjustment of EBITDA for these items is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.

ARC Document Solutions
Consolidated Statements of Cash Flows
(In thousands) (Unaudited)

Three Months Ended

December 31,

Twelve Months Ended

December 31,

 

2016

2015

2016

2015

Cash flows from operating activities

       

Net income (loss)

$

2,779

 

$

3,184

 

$

(47,499)

 

$

97,388

 

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

       

Allowance for accounts receivable

274

 

48

 

918

 

340

 

Depreciation

6,886

 

6,835

 

26,918

 

28,019

 

Amortization of intangible assets

1,128

 

1,336

 

4,833

 

5,642

 

Amortization of deferred financing costs

101

 

129

 

445

 

589

 

Goodwill impairment

 

 

73,920

 

 

Stock-based compensation

620

 

773

 

2,693

 

3,512

 

Deferred income taxes

1,307

 

1,952

 

(4,711)

 

10,173

 

Deferred tax valuation allowance

67

 

213

 

51

 

(80,669)

 

Loss on early extinguishment of debt

52

 

89

 

208

 

282

 

Other non-cash items, net

(176)

 

(33)

 

(716)

 

(390)

 

Changes in operating assets and liabilities, net of effect of business acquisitions:

       

Accounts receivable

991

 

4,366

 

(1,294)

 

729

 

Inventory

1,606

 

808

 

(1,590)

 

(967)

 

Prepaid expenses and other assets

(404)

 

(645)

 

109

 

2,296

 

Accounts payable and accrued expenses

3,865

 

(2,191)

 

(1,143)

 

(6,963)

 

Net cash provided by operating activities

19,096

 

16,864

 

53,142

 

59,981

 

Cash flows from investing activities

       

Capital expenditures

(4,517)

 

(2,728)

 

(12,097)

 

(14,245)

 

Other

259

 

75

 

1,101

 

589

 

Net cash used in investing activities

(4,258)

 

(2,653)

 

(10,996)

 

(13,656)

 

Cash flows from financing activities

       

Proceeds from stock option exercises

22

 

112

 

98

 

673

 

Proceeds from issuance of common stock under Employee Stock Purchase Plan

24

 

28

 

120

 

111

 

Share repurchases

 

 

(5,297)

 

(204)

 

Contingent consideration on prior acquisitions

(118)

 

(54)

 

(571)

 

(413)

 

Early extinguishment of long-term debt

(6,000)

 

(3,625)

 

(22,000)

 

(14,500)

 

Payments on long-term debt agreements and capital leases

(3,339)

 

(7,287)

 

(12,990)

 

(27,329)

 

Net borrowings (repayments) under revolving credit facilities

950

 

 

950

 

(1,888)

 

Payment of deferred financing costs

 

 

(106)

 

(25)

 

Payment of hedge premium

 

 

 

(632)

 

Net cash used in financing activities

(8,461)

 

(10,826)

 

(39,796)

 

(44,207)

 

Effect of foreign currency translation on cash balances

(778)

 

(246)

 

(1,074)

 

(791)

 

Net change in cash and cash equivalents

5,599

 

3,139

 

1,276

 

1,327

 

Cash and cash equivalents at beginning of period

19,640

 

20,824

 

23,963

 

22,636

 

Cash and cash equivalents at end of period

$

25,239

 

$

23,963

 

$

25,239

 

$

23,963

 

Supplemental disclosure of cash flow information:

       

Noncash financing activities:

       

Capital lease obligations incurred

$

6,603

 

$

3,490

 

$

18,948

 

$

13,157

 

Contingent liabilities in connection with the acquisition of businesses

$

 

$

 

$

75

 

$

 

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