WALNUT CREEK, Calif.,
Feb. 27, 2018 /PRNewswire/ -- ARC Document Solutions, Inc.
(NYSE: ARC), a leading document solutions provider to design,
engineering, construction, and facilities management professionals,
today reported its financial results for the fourth quarter and
full year ended December 31, 2017.
Financial
Highlights:
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
(All dollar
amounts in millions, except EPS)
|
2017
|
2016
|
2017
|
2016
|
Net Sales
|
$
|
97.1
|
|
$
|
98.6
|
|
$
|
394.6
|
|
$
|
406.3
|
|
Gross
Margin
|
30.3
|
%
|
30.8
|
%
|
31.4
|
%
|
32.8
|
%
|
Net (loss) income
attributable to ARC
|
$
|
(12.2)
|
|
$
|
2.6
|
|
$
|
(21.5)
|
|
$
|
(47.9)
|
|
Adjusted net income
attributable to ARC
|
$
|
0.9
|
|
$
|
2.6
|
|
$
|
6.8
|
|
$
|
13.1
|
|
(Loss) earnings per
share - Diluted
|
$
|
(0.27)
|
|
$
|
0.06
|
|
$
|
(0.47)
|
|
$
|
(1.04)
|
|
Adjusted earnings per
share - Diluted
|
$
|
0.02
|
|
$
|
0.06
|
|
$
|
0.15
|
|
$
|
0.28
|
|
Cash provided by
operating activities
|
$
|
15.6
|
|
$
|
19.1
|
|
$
|
52.4
|
|
$
|
53.1
|
|
EBITDA
|
$
|
11.3
|
|
$
|
13.6
|
|
$
|
33.2
|
|
$
|
(14.5)
|
|
Adjusted
EBITDA
|
$
|
12.0
|
|
$
|
14.3
|
|
$
|
54.0
|
|
$
|
62.3
|
|
Capital
Expenditures
|
$
|
(1.9)
|
|
$
|
(4.5)
|
|
$
|
(9.1)
|
|
$
|
(12.1)
|
|
Debt & Capital
Leases (including current), net of unamortized deferred financing
fees
|
|
|
$
|
144.4
|
|
$
|
157.2
|
|
Management Commentary
"At the end of 2017, ARC was more than half way through the
transition we announced in 2016. While we still have our work cut
out for us, we've made significant progress in protecting our print
revenues while driving interest and growth in our technology
offerings," said K. "Suri" Suriyakumar, Chairman, President and CEO
of ARC Document Solutions. "In the fourth quarter, CDIM
declined just one percent year-over-year, and MPS sales were flat
for the same period. Both were welcome improvements, and gave us
reason to believe that we can counter the negative sales trends in
print for the foreseeable future with aggressive measures to gain
market share."
"Meanwhile, there has been significant interest and adoption in
our facilities management solution. As we announced earlier this
month, Facilities Executive magazine readers voted us the
best provider in the 'Facility Software/Reporting Tools' category
for our mobile facilities dashboards in their 25th annual Readers'
Choice Award Program," said Mr. Suriyakumar. "It is tremendously
exciting to disrupt such a huge market, but progress toward a
purchasing decision consistently requires more education and time
than we anticipated."
"While the remaining steps of our transition continue to present
both challenges and opportunities, it is critical that we manage
through them with a solid financial foundation. That's exactly what
we delivered in 2017," Mr. Suriyakumar continued. "Our performance
in 2017 was characterized by the strength of our cash flows. We
paid down more than $20 million of
our senior debt to maintain the strength of our capital structure;
we bought back $3.4 million worth of
our own stock in the fourth quarter; and we ended the year with
$28 million in cash on the balance
sheet. It's an indication of the continuing health of the Company
and the base from which we can build in 2018."
Management anticipates its
2018 diluted annual adjusted earnings per share to be in the
range of $0.10 to $0.16; annual cash provided by operating
activities is projected to be in the range of $44 million to $50
million; and annual adjusted EBITDA is forecast to be in the
range of $48 million to $54 million.
"We believe the investments we've made in both print and
technology will fuel our progress in the coming quarters," Mr.
Suriyakumar added. "As we continue to preserve our print revenue
and capture more facilities business toward the latter part of
2018, we anticipate these sales will begin to offset the shrinkage
in print volumes we've experienced over the past several years.
While our forecast for 2018 is conservative, we expect the progress
of our transition to be evident."
2017 Fourth Quarter Supplemental Information:
Net sales were $97.1 million, a
1.5% decrease compared to the fourth quarter of 2016.
Days sales outstanding in Q4 2017 were 53, compared to 55 days
in Q4 2016.
Architectural, engineering, construction and building
owner/operators (AEC/O) customers comprised approximately 78% of our total net sales, while customers
outside of construction made up approximately 22% of our total net sales.
Total number of MPS locations at the end of the fourth quarter
has grown to approximately 10,100, a net gain of approximately 700
locations over Q4 2016.
Adjusted EBITDA excludes loss on extinguishment and modification
of debt, goodwill impairment, stock-based compensation expense, and
restructuring expense.
Sales from
Services and Product Lines as a Percentage of Net
Sales
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Twelve Months
Ended
|
|
December
31,
|
|
December
31,
|
Services and Product
Line
|
2017
|
2016
|
|
2017
|
2016
|
CDIM
|
51.6
|
%
|
51.5
|
%
|
|
52.0
|
%
|
52.3
|
%
|
MPS
|
32.7
|
%
|
32.2
|
%
|
|
32.8
|
%
|
32.4
|
%
|
AIM
|
3.1
|
%
|
3.5
|
%
|
|
3.2
|
%
|
3.5
|
%
|
Equipment and
supplies sales
|
12.6
|
%
|
12.8
|
%
|
|
12.0
|
%
|
11.8
|
%
|
Outlook
ARC Document Solutions anticipates 2018 fully-diluted annual
adjusted earnings per share to be in the range of $0.10 to $0.16; 2018 annual cash provided by operating
activities is projected to be in the range of $44 million to $50
million; and 2018 annual adjusted EBITDA is forecast to be
in the range of $48 million to $54
million.
CEO Employment Agreement Amended
On February 22, 2018, ARC Document
Solutions, Inc. entered into an amended and restated executive
employment agreement with the Company's Chief Executive Officer and
President, Kumarakulasingam Suriyakumar, effective as of
February 9, 2018. The Employment Agreement was amended to
modify the terms under which Mr. Suriyakumar would be eligible
to receive an annual incentive bonus. Mr. Suriyakumar's annual
incentive bonus will be based on performance measures established
by the Company's Compensation Committee within the first ninety
days of the calendar year. The annual incentive bonus will not
exceed 100% of Mr. Suriyakumar's annual base salary, if the
performance targets are attained (but not exceeded), and will have
a maximum potential payment of 150% of his annual base salary, if
the performance targets are exceeded. He will only be entitled to
an annual incentive bonus if he remains continuously employed
through the last day of the fiscal year to which the bonus relates.
At the Compensation Committee's election, the incentive bonus may
be paid in cash, shares of the Company's common stock or a mix of
cash and stock. To the extent the incentive bonus is paid in shares
of the Company's common stock, the shares will vest in annual
installments over three years, unless the Committee determines
otherwise, subject to Mr. Suriyakumar's continued employment
through the applicable vesting date.
In addition, the Employment Agreement lowers Mr. Suriyakumar's
annual base salary from $950,000 to
$800,000. The remaining terms and
conditions of the Employment Agreement remain the same.
Teleconference and Webcast
ARC Document Solutions will hold a conference call with
investors and analysts on Tuesday, February
27, 2018, at 2 P.M. Pacific
Time (5 P.M. Eastern Time) to
discuss results for the Company's 2017 fourth quarter and fiscal
year. To access the live audio call, dial 800-263-0877.
International callers may join the conference by dialing
323-794-2094. The conference ID number is 2301326. A live webcast
will also be made available on the investor relations page of ARC
Document Solution's website at ir.e-arc.com. The webcast of the
call will be available at www.e-arc.com for approximately 90 days
following the call's conclusion.
About ARC Document Solutions (NYSE: ARC)
ARC Document Solutions distributes Documents and Information to
facilitate communication for design, engineering and construction
professionals, real estate managers and developers, facilities
owners, and a variety of similar disciplines. The Company provides
cloud and mobile solutions, professional services, and hardware to
help its customers around the world reduce costs and increase
efficiency, improve information access and control, and communicate
faster, easier, and better. Follow ARC at www.e-arc.com.
Forward-Looking Statements
This press release contains forward-looking statements that are
based on current opinions, estimates and assumptions of management
regarding future events and the future financial performance of the
Company. Words and phrases such as "believe", "foreseeable future",
"indication", "continuing health", "forecast", "progress in the
coming quarters", "anticipate", and similar expressions identify
forward-looking statements and all statements other than statements
of historical fact, including, but not limited to, any projections
regarding earnings, revenues and financial performance of the
Company, could be deemed forward-looking statements. We caution you
that such statements are only predictions and are subject to
certain risks and uncertainties that could cause actual results to
differ materially from those contained in the forward-looking
statements. In addition to matters affecting the construction,
managed print services, document management or reprographics
industries, or the economy generally, factors that could cause
actual results to differ from expectations stated in
forward-looking statements include, among others, the factors
described in the caption entitled "Risk Factors" in Item 1A in ARC
Document Solution's Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, Quarterly Reports on Form 10-Q, and
other periodic filings and prospectuses. The Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events, or
otherwise, except as required by law.
ARC Document
Solutions, Inc.
|
|
|
Consolidated
Balance Sheets
|
|
|
(In thousands,
except per share data)
|
|
|
(Unaudited)
|
|
|
|
December
31,
|
December
31,
|
Current
assets:
|
2017
|
2016
|
Cash and cash
equivalents
|
$
|
28,059
|
|
$
|
25,239
|
|
Accounts receivable,
net of allowances for accounts receivable of $2,341 and
$2,060
|
57,011
|
|
59,735
|
|
Inventories,
net
|
19,937
|
|
18,184
|
|
Prepaid
expenses
|
4,208
|
|
3,861
|
|
Other current
assets
|
5,266
|
|
4,785
|
|
Total current
assets
|
114,481
|
|
111,804
|
|
Property and
equipment, net of accumulated depreciation of $198,693 and
$201,192
|
64,245
|
|
60,735
|
|
Goodwill
|
121,051
|
|
138,688
|
|
Other intangible
assets, net
|
9,068
|
|
13,202
|
|
Deferred income
taxes
|
28,029
|
|
42,667
|
|
Other
assets
|
2,551
|
|
2,185
|
|
Total
assets
|
$
|
339,425
|
|
$
|
369,281
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$
|
24,289
|
|
$
|
24,782
|
|
Accrued payroll and
payroll-related expenses
|
12,617
|
|
12,219
|
|
Accrued
expenses
|
17,201
|
|
16,138
|
|
Current portion of
long-term debt and capital leases
|
20,791
|
|
13,773
|
|
Total current
liabilities
|
74,898
|
|
66,912
|
|
Long-term debt and
capital leases
|
123,626
|
|
143,400
|
|
Other long-term
liabilities
|
3,290
|
|
2,148
|
|
Total
liabilities
|
201,814
|
|
212,460
|
|
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; 47,913 and 47,428
shares issued and 45,266 and 45,988 shares
outstanding
|
48
|
|
47
|
|
Additional paid-in
capital
|
120,953
|
|
117,749
|
|
Retained
earnings
|
20,524
|
|
41,822
|
|
Accumulated other
comprehensive loss
|
(1,998)
|
|
(3,793)
|
|
|
139,527
|
|
155,825
|
|
Less cost of common
stock in treasury, 2,647 and 1,440 shares
|
9,290
|
|
5,909
|
|
Total ARC Document
Solutions, Inc. stockholders' equity
|
130,237
|
|
149,916
|
|
Noncontrolling
interest
|
7,374
|
|
6,905
|
|
Total
equity
|
137,611
|
|
156,821
|
|
Total liabilities and
equity
|
$
|
339,425
|
|
$
|
369,281
|
|
ARC Document
Solutions, Inc.
|
|
|
|
Consolidated
Statements of Operations
|
|
|
|
(In thousands,
except per share data)
|
|
|
|
(Unaudited)
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Service
sales
|
$
|
84,867
|
|
$
|
85,947
|
|
$
|
347,326
|
|
$
|
358,341
|
|
Equipment and
supplies sales
|
12,243
|
|
12,611
|
|
47,253
|
|
47,980
|
|
Total net
sales
|
97,110
|
|
98,558
|
|
394,579
|
|
406,321
|
|
Cost of
sales
|
67,638
|
|
68,174
|
|
270,556
|
|
273,078
|
|
Gross
profit
|
29,472
|
|
30,384
|
|
124,023
|
|
133,243
|
|
Selling, general and
administrative expenses
|
25,349
|
|
23,462
|
|
101,889
|
|
100,214
|
|
Amortization of
intangible assets
|
1,030
|
|
1,128
|
|
4,280
|
|
4,833
|
|
Goodwill
impairment
|
—
|
|
—
|
|
17,637
|
|
73,920
|
|
Restructuring
expense
|
—
|
|
—
|
|
—
|
|
7
|
|
Income (loss) from
operations
|
3,093
|
|
5,794
|
|
217
|
|
(45,731)
|
|
Other income,
net
|
(21)
|
|
(18)
|
|
(81)
|
|
(72)
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
52
|
|
230
|
|
208
|
|
Interest expense,
net
|
1,500
|
|
1,461
|
|
6,179
|
|
5,996
|
|
Income (loss) before
income tax provision (benefit)
|
1,614
|
|
4,299
|
|
(6,111)
|
|
(51,863)
|
|
Income tax provision
(benefit)
|
13,670
|
|
1,520
|
|
15,244
|
|
(4,364)
|
|
Net (loss)
income
|
(12,056)
|
|
2,779
|
|
(21,355)
|
|
(47,499)
|
|
Income attributable to noncontrolling
interest
|
(101)
|
|
(155)
|
|
(156)
|
|
(366)
|
|
Net (loss) income
attributable to ARC Document Solutions, Inc.
shareholders
|
$
|
(12,157)
|
|
$
|
2,624
|
|
$
|
(21,511)
|
|
$
|
(47,865)
|
|
(Loss) earnings per
share attributable to ARC Document Solutions, Inc.
shareholders:
|
|
|
|
|
Basic
|
$
|
(0.27)
|
|
$
|
0.06
|
|
$
|
(0.47)
|
|
$
|
(1.04)
|
|
Diluted
|
$
|
(0.27)
|
|
$
|
0.06
|
|
$
|
(0.47)
|
|
$
|
(1.04)
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
45,414
|
|
45,567
|
|
45,669
|
|
45,932
|
|
Diluted
|
45,414
|
|
46,274
|
|
45,669
|
|
45,932
|
|
ARC Document
Solutions
Consolidated Statements of Cash Flows
|
Three Months
Ended
|
Twelve Months
Ended
|
(In thousands)
(Unaudited)
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Cash flows from
operating activities
|
|
|
|
|
Net (loss)
income
|
$
|
(12,056)
|
|
$
|
2,779
|
|
$
|
(21,355)
|
|
$
|
(47,499)
|
|
Adjustments to
reconcile net (loss) income to net cash provided by operating
activities:
|
|
|
|
|
Allowance for
accounts receivable
|
382
|
|
274
|
|
1,249
|
|
918
|
|
Depreciation
|
7,256
|
|
6,886
|
|
29,043
|
|
26,918
|
|
Amortization of
intangible assets
|
1,030
|
|
1,128
|
|
4,280
|
|
4,833
|
|
Amortization of
deferred financing costs
|
60
|
|
101
|
|
306
|
|
445
|
|
Goodwill
impairment
|
—
|
|
—
|
|
17,637
|
|
73,920
|
|
Stock-based
compensation
|
696
|
|
620
|
|
2,947
|
|
2,693
|
|
Deferred income
taxes
|
12,757
|
|
1,307
|
|
13,802
|
|
(4,711)
|
|
Deferred tax
valuation allowance
|
543
|
|
67
|
|
1,031
|
|
51
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
52
|
|
230
|
|
208
|
|
Other non-cash items,
net
|
284
|
|
(176)
|
|
(56)
|
|
(716)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
Accounts
receivable
|
1,752
|
|
991
|
|
2,158
|
|
(1,294)
|
|
Inventory
|
(689)
|
|
1,606
|
|
(1,339)
|
|
(1,590)
|
|
Prepaid expenses and
other assets
|
573
|
|
(404)
|
|
(556)
|
|
109
|
|
Accounts payable and
accrued expenses
|
3,026
|
|
3,865
|
|
2,993
|
|
(1,143)
|
|
Net cash provided by
operating activities
|
15,614
|
|
19,096
|
|
52,370
|
|
53,142
|
|
Cash flows from
investing activities
|
|
|
|
|
Capital
expenditures
|
(1,860)
|
|
(4,517)
|
|
(9,106)
|
|
(12,097)
|
|
Other
|
278
|
|
259
|
|
744
|
|
1,101
|
|
Net cash used in
investing activities
|
(1,582)
|
|
(4,258)
|
|
(8,362)
|
|
(10,996)
|
|
Cash flows from
financing activities
|
|
|
|
|
Proceeds from stock
option exercises
|
22
|
|
22
|
|
96
|
|
98
|
|
Proceeds from
issuance of common stock under Employee Stock Purchase
Plan
|
30
|
|
24
|
|
133
|
|
120
|
|
Share
repurchases
|
(3,381)
|
|
—
|
|
(3,381)
|
|
(5,297)
|
|
Contingent
consideration on prior acquisitions
|
(60)
|
|
(118)
|
|
(275)
|
|
(571)
|
|
Early extinguishment
of long-term debt
|
—
|
|
(6,000)
|
|
(14,150)
|
|
(22,000)
|
|
Payments on long-term
debt agreements and capital leases
|
(5,456)
|
|
(3,339)
|
|
(65,516)
|
|
(12,990)
|
|
Borrowings under
revolving credit facilities
|
8,250
|
|
1,000
|
|
63,100
|
|
1,000
|
|
Payments under
revolving credit facilities
|
(12,125)
|
|
(50)
|
|
(21,800)
|
|
(50)
|
|
Payment of deferred
financing costs
|
—
|
|
—
|
|
(270)
|
|
(106)
|
|
Net cash used in
financing activities
|
(12,720)
|
|
(8,461)
|
|
(42,063)
|
|
(39,796)
|
|
Effect of foreign
currency translation on cash balances
|
384
|
|
(778)
|
|
875
|
|
(1,074)
|
|
Net change in cash
and cash equivalents
|
1,696
|
|
5,599
|
|
2,820
|
|
1,276
|
|
Cash and cash
equivalents at beginning of period
|
26,363
|
|
19,640
|
|
25,239
|
|
23,963
|
|
Cash and cash
equivalents at end of period
|
$
|
28,059
|
|
$
|
25,239
|
|
$
|
28,059
|
|
$
|
25,239
|
|
Supplemental
disclosure of cash flow information:
|
|
|
|
|
Noncash financing
activities:
|
|
|
|
|
Capital lease
obligations incurred
|
$
|
4,478
|
|
$
|
6,603
|
|
$
|
25,192
|
|
$
|
18,948
|
|
Contingent
liabilities in connection with the acquisition of
businesses
|
$
|
—
|
|
$
|
—
|
|
$
|
27
|
|
$
|
75
|
|
ARC Document
Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)
|
|
|
|
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Service
Sales
|
|
|
|
|
CDIM
|
$
|
50,052
|
|
$
|
50,758
|
|
$
|
205,083
|
|
$
|
212,511
|
|
MPS
|
31,782
|
|
31,729
|
|
129,479
|
|
131,811
|
|
AIM
|
3,033
|
|
3,460
|
|
12,764
|
|
14,019
|
|
Total services
sales
|
84,867
|
|
85,947
|
|
347,326
|
|
358,341
|
|
Equipment and
supplies sales
|
12,243
|
|
12,611
|
|
47,253
|
|
47,980
|
|
Total net
sales
|
$
|
97,110
|
|
$
|
98,558
|
|
$
|
394,579
|
|
$
|
406,321
|
|
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
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Cash flows provided
by operating activities
|
$
|
15,614
|
|
$
|
19,096
|
|
$
|
52,370
|
|
$
|
53,142
|
|
Changes in operating
assets and liabilities
|
(4,662)
|
|
(6,058)
|
|
(3,256)
|
|
3,918
|
|
Non-cash expenses,
including goodwill impairment
|
(14,722)
|
|
(2,245)
|
|
(37,146)
|
|
(72,808)
|
|
Income tax provision
(benefit)
|
13,670
|
|
1,520
|
|
15,244
|
|
(4,364)
|
|
Interest expense,
net
|
1,500
|
|
1,461
|
|
6,179
|
|
5,996
|
|
Income attributable to noncontrolling
interest
|
(101)
|
|
(155)
|
|
(156)
|
|
(366)
|
|
EBITDA
|
11,299
|
|
13,619
|
|
33,235
|
|
(14,482)
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
52
|
|
230
|
|
208
|
|
Goodwill
impairment
|
—
|
|
—
|
|
17,637
|
|
73,920
|
|
Restructuring
expense
|
—
|
|
—
|
|
—
|
|
7
|
|
Stock-based
compensation
|
696
|
|
620
|
|
2,947
|
|
2,693
|
|
Adjusted
EBITDA
|
$
|
11,995
|
|
$
|
14,291
|
|
$
|
54,049
|
|
$
|
62,346
|
|
|
See Non-GAAP
Financial Measures discussion below.
|
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC Document
Solutions, Inc. shareholders to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Net (loss) income
attributable to ARC Document Solutions, Inc.
shareholders
|
$
|
(12,157)
|
|
$
|
2,624
|
|
$
|
(21,511)
|
|
$
|
(47,865)
|
|
Interest expense,
net
|
1,500
|
|
1,461
|
|
6,179
|
|
5,996
|
|
Income tax provision
(benefit)
|
13,670
|
|
1,520
|
|
15,244
|
|
(4,364)
|
|
Depreciation and
amortization
|
8,286
|
|
8,014
|
|
33,323
|
|
31,751
|
|
EBITDA
|
11,299
|
|
13,619
|
|
33,235
|
|
(14,482)
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
52
|
|
230
|
|
208
|
|
Goodwill
impairment
|
—
|
|
—
|
|
17,637
|
|
73,920
|
|
Restructuring
expense
|
—
|
|
—
|
|
—
|
|
7
|
|
Stock-based
compensation
|
696
|
|
620
|
|
2,947
|
|
2,693
|
|
Adjusted
EBITDA
|
$
|
11,995
|
|
$
|
14,291
|
|
$
|
54,049
|
|
$
|
62,346
|
|
|
See Non-GAAP
Financial Measures discussion below.
|
ARC Document
Solutions, Inc.
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to
unaudited adjusted net income attributable to ARC
(In thousands, except per share data)
(Unaudited)
|
|
Three Months
Ended
|
Twelve Months
Ended
|
|
December
31,
|
December
31,
|
|
2017
|
2016
|
2017
|
2016
|
Net (loss) income
attributable to ARC Document Solutions, Inc.
shareholders
|
$
|
(12,157)
|
|
$
|
2,624
|
|
$
|
(21,511)
|
|
$
|
(47,865)
|
|
Loss on
extinguishment and modification of debt
|
—
|
|
52
|
|
230
|
|
208
|
|
Goodwill
impairment
|
—
|
|
—
|
|
17,637
|
|
73,920
|
|
Restructuring
expense
|
—
|
|
—
|
|
—
|
|
7
|
|
Income tax benefit
related to above items
|
—
|
|
(24)
|
|
(3,194)
|
|
(13,419)
|
|
Deferred tax impact
due to new tax laws, valuation allowance and other discrete tax
items
|
13,069
|
|
(94)
|
|
13,663
|
|
247
|
|
Unaudited adjusted
net income attributable to ARC Document Solutions, Inc.
|
$
|
912
|
|
$
|
2,558
|
|
$
|
6,825
|
|
$
|
13,098
|
|
|
|
|
|
|
Actual:
|
|
|
|
|
(Loss) earnings per
share attributable to ARC Document Solutions, Inc.
shareholders:
|
|
|
|
|
Basic
|
$
|
(0.27)
|
|
$
|
0.06
|
|
$
|
(0.47)
|
|
$
|
(1.04)
|
|
Diluted
|
$
|
(0.27)
|
|
$
|
0.06
|
|
$
|
(0.47)
|
|
$
|
(1.04)
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
45,414
|
|
45,567
|
|
45,669
|
|
45,932
|
|
Diluted
|
45,414
|
|
46,274
|
|
45,669
|
|
45,932
|
|
|
|
|
|
|
Adjusted:
|
|
|
|
|
Earnings per
share attributable to ARC Document Solutions, Inc.
shareholders:
|
|
|
|
|
Basic
|
$
|
0.02
|
|
$
|
0.06
|
|
$
|
0.15
|
|
$
|
0.29
|
|
Diluted
|
$
|
0.02
|
|
$
|
0.06
|
|
$
|
0.15
|
|
$
|
0.28
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
Basic
|
45,414
|
|
45,567
|
|
45,669
|
|
45,932
|
|
Diluted
|
45,804
|
|
46,274
|
|
46,207
|
|
46,561
|
|
|
See Non-GAAP
Financial Measures discussion below.
|
Non-GAAP Financial Measures
EBITDA and related ratios presented in this report are
supplemental measures of our performance that are not required by
or presented in accordance with accounting principles generally
accepted in the United States of
America ("GAAP"). These measures are not measurements of our
financial performance under GAAP and should not be considered as
alternatives to net income, income from operations, or any other
performance measures derived in accordance with GAAP or as an
alternative to cash flows from operating, investing or financing
activities as a measure of our liquidity.
EBITDA represents net income before interest, taxes,
depreciation and amortization. EBITDA margin is a non-GAAP measure
calculated by dividing EBITDA by net sales.
We have presented EBITDA and related ratios because we consider
them important supplemental measures of our performance and
liquidity. We believe investors may also find these measures
meaningful, given how our management makes use of them. The
following is a discussion of our use of these measures.
We use EBITDA to measure and compare the performance of our
operating segments. Our operating segments' financial performance
includes all of the operating activities except debt and taxation
which are managed at the corporate level for U.S. operating
segments. We use EBITDA to compare the performance of our operating
segments and to measure performance for determining
consolidated-level compensation. In addition, we use EBITDA to
evaluate potential acquisitions and potential capital
expenditures.
EBITDA and related ratios have limitations as analytical tools,
and should not be considered in isolation, or as a substitute for
analysis of our results as reported under GAAP. Some of these
limitations are as follows:
- They do not reflect our cash expenditures, or future
requirements for capital expenditures and contractual
commitments;
- They do not reflect changes in, or cash requirements for, our
working capital needs;
- They do not reflect the significant interest expense, or the
cash requirements necessary, to service interest or principal
payments on our debt;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future, and EBITDA does not reflect any cash
requirements for such replacements; and
- Other companies, including companies in our industry, may
calculate these measures differently than we do, limiting their
usefulness as comparative measures.
Because of these limitations, EBITDA and related ratios should
not be considered as measures of discretionary cash available to us
to invest in business growth or to reduce our indebtedness. We
compensate for these limitations by relying primarily on our GAAP
results and using EBITDA and related ratios only as
supplements.
Our presentation of adjusted net income and adjusted EBITDA 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.
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, 2017 and 2016 to reflect the exclusion of loss on
extinguishment and modification of debt, goodwill impairment,
restructuring expense, and changes in the valuation allowances
related to certain deferred tax assets and other discrete tax
items, including the impact of new tax laws enacted in 2017. This
presentation facilitates a meaningful comparison of our operating
results for the three and twelve months ended December 31,
2017 and 2016.
We have presented adjusted EBITDA for the three and twelve
months ended December 31, 2017 and 2016 to exclude loss on
extinguishment and modification of debt, goodwill impairment,
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.
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SOURCE ARC Document Solutions, Inc.