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Share Name | Share Symbol | Market | Type |
---|---|---|---|
ARC Document Solutions Inc | NYSE:ARC | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.07 | 2.61% | 2.75 | 2.80 | 2.68 | 2.71 | 147,550 | 21:00:10 |
ý
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
Delaware
|
20-1700361
|
(State or other jurisdiction of
incorporation or organization)
|
(I.R.S. Employer
Identification No.)
|
Large accelerated filer
|
¨
|
Accelerated filer
|
ý
|
|
|
|
|
Non-accelerated filer
|
¨
(Do not check if a smaller reporting company)
|
Smaller reporting company
|
¨
|
|
|
|
|
|
|
Emerging growth company
|
¨
|
PART I—FINANCIAL INFORMATION
|
|
Item 1. Condensed Consolidated Financial Statements
|
|
Condensed Consolidated Balance Sheets as of March 31, 2017 and December 31, 2016 (Unaudited)
|
|
Condensed Consolidated Statements of Operations for the three months ended March 31, 2017 and 2016 (Unaudited)
|
|
Condensed Consolidated Statements of Comprehensive Income for the three months ended March 31, 2017 and 2016 (Unaudited)
|
|
Condensed Consolidated Statements of Equity for the three months ended March 31, 2017 and 2016 (Unaudited)
|
|
Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2017 and 2016 (Unaudited)
|
|
Notes to Condensed Consolidated Financial Statements (Unaudited)
|
|
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
|
Item 3. Quantitative and Qualitative Disclosures About Market Risk
|
|
Item 4. Controls and Procedures
|
|
PART II—OTHER INFORMATION
|
|
Item 1. Legal Proceedings
|
|
Item 1A. Risk Factors
|
|
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
|
Item 6. Exhibits
|
|
Signatures
|
|
Exhibit Index
|
|
Exhibit 31.1
|
|
Exhibit 31.2
|
|
Exhibit 32.1
|
|
Exhibit 32.2
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
December 31,
|
||||
(In thousands, except per share data)
|
2017
|
|
2016
|
||||
Assets
|
|
|
|
||||
Current assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
19,669
|
|
|
$
|
25,239
|
|
Accounts receivable, net of allowances for accounts receivable of
$2,207
and $2,060
|
59,659
|
|
|
59,735
|
|
||
Inventories, net
|
19,755
|
|
|
18,184
|
|
||
Prepaid expenses
|
4,630
|
|
|
3,861
|
|
||
Other current assets
|
4,269
|
|
|
4,785
|
|
||
Total current assets
|
107,982
|
|
|
111,804
|
|
||
Property and equipment, net of accumulated depreciation of
$204,724
and $201,192
|
62,595
|
|
|
60,735
|
|
||
Goodwill
|
138,688
|
|
|
138,688
|
|
||
Other intangible assets, net
|
12,102
|
|
|
13,202
|
|
||
Deferred income taxes
|
41,727
|
|
|
42,667
|
|
||
Other assets
|
2,220
|
|
|
2,185
|
|
||
Total assets
|
$
|
365,314
|
|
|
$
|
369,281
|
|
Liabilities and Equity
|
|
|
|
||||
Current liabilities:
|
|
|
|
||||
Accounts payable
|
$
|
23,514
|
|
|
$
|
24,782
|
|
Accrued payroll and payroll-related expenses
|
8,838
|
|
|
12,219
|
|
||
Accrued expenses
|
16,284
|
|
|
16,138
|
|
||
Current portion of long-term debt and capital leases
|
14,680
|
|
|
13,773
|
|
||
Total current liabilities
|
63,316
|
|
|
66,912
|
|
||
Long-term debt and capital leases
|
139,660
|
|
|
143,400
|
|
||
Other long-term liabilities
|
2,214
|
|
|
2,148
|
|
||
Total liabilities
|
205,190
|
|
|
212,460
|
|
||
Commitments and contingencies (Note 6)
|
|
|
|
||||
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;
47,771
and 47,428 shares issued and
46,331
and 45,988 shares outstanding
|
47
|
|
|
47
|
|
||
Additional paid-in capital
|
118,619
|
|
|
117,749
|
|
||
Retained earnings
|
43,819
|
|
|
41,822
|
|
||
Accumulated other comprehensive loss
|
(3,375
|
)
|
|
(3,793
|
)
|
||
|
159,110
|
|
|
155,825
|
|
||
Less cost of common stock in treasury,
1,440
shares
|
5,909
|
|
|
5,909
|
|
||
Total ARC Document Solutions, Inc. stockholders’ equity
|
153,201
|
|
|
149,916
|
|
||
Noncontrolling interest
|
6,923
|
|
|
6,905
|
|
||
Total equity
|
160,124
|
|
|
156,821
|
|
||
Total liabilities and equity
|
$
|
365,314
|
|
|
$
|
369,281
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands, except per share data)
|
2017
|
|
2016
|
||||
Service sales
|
$
|
86,964
|
|
|
$
|
90,635
|
|
Equipment and supplies sales
|
11,767
|
|
|
12,915
|
|
||
Total net sales
|
98,731
|
|
|
103,550
|
|
||
Cost of sales
|
67,893
|
|
|
69,813
|
|
||
Gross profit
|
30,838
|
|
|
33,737
|
|
||
Selling, general and administrative expenses
|
25,147
|
|
|
26,356
|
|
||
Amortization of intangible assets
|
1,115
|
|
|
1,313
|
|
||
Restructuring expense
|
—
|
|
|
2
|
|
||
Income from operations
|
4,576
|
|
|
6,066
|
|
||
Other income, net
|
(19
|
)
|
|
(23
|
)
|
||
Loss on extinguishment of debt
|
66
|
|
|
46
|
|
||
Interest expense, net
|
1,555
|
|
|
1,446
|
|
||
Income before income tax provision
|
2,974
|
|
|
4,597
|
|
||
Income tax provision
|
1,226
|
|
|
1,969
|
|
||
Net income
|
1,748
|
|
|
2,628
|
|
||
Loss (income) attributable to the noncontrolling interest
|
36
|
|
|
(54
|
)
|
||
Net income attributable to ARC Document Solutions, Inc. shareholders
|
$
|
1,784
|
|
|
$
|
2,574
|
|
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:
|
|
|
|
||||
Basic
|
$
|
0.04
|
|
|
$
|
0.06
|
|
Diluted
|
$
|
0.04
|
|
|
$
|
0.05
|
|
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
45,639
|
|
|
46,608
|
|
||
Diluted
|
46,382
|
|
|
47,203
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2017
|
|
2016
|
||||
Net income
|
$
|
1,748
|
|
|
$
|
2,628
|
|
Other comprehensive income, net of tax
|
|
|
|
||||
Foreign currency translation adjustments, net of tax
|
431
|
|
|
312
|
|
||
Fair value adjustment of derivatives, net of tax
|
41
|
|
|
(95
|
)
|
||
Other comprehensive income, net of tax
|
472
|
|
|
217
|
|
||
Comprehensive income
|
2,220
|
|
|
2,845
|
|
||
Comprehensive income attributable to noncontrolling interest
|
18
|
|
|
102
|
|
||
Comprehensive income attributable to ARC Document Solutions, Inc. shareholders
|
$
|
2,202
|
|
|
$
|
2,743
|
|
|
ARC Document Solutions, Inc. Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||||||||
(In thousands, except per share data)
|
Shares
|
|
Par
Value
|
|
Additional Paid-in
Capital
|
|
Retained Earnings
|
|
Other Comprehensive
Loss
|
|
Common Stock in
Treasury
|
|
Noncontrolling
Interest
|
|
Total
|
|||||||||||||||
Balance at December 31, 2015
|
47,130
|
|
|
$
|
47
|
|
|
$
|
115,089
|
|
|
$
|
89,687
|
|
|
$
|
(2,097
|
)
|
|
$
|
(612
|
)
|
|
$
|
7,020
|
|
|
$
|
209,134
|
|
Stock-based compensation
|
130
|
|
|
—
|
|
|
772
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
772
|
|
|||||||
Issuance of common stock under Employee Stock Purchase Plan
|
10
|
|
|
—
|
|
|
39
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
39
|
|
|||||||
Stock options exercised
|
5
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
11
|
|
|||||||
Tax deficiency from stock-based compensation
|
|
|
|
|
|
|
(69
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(69
|
)
|
|||||||
Treasury shares
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2,733
|
)
|
|
—
|
|
|
(2,733
|
)
|
|||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
2,574
|
|
|
—
|
|
|
—
|
|
|
54
|
|
|
2,628
|
|
|||||||
Foreign currency translation adjustments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
264
|
|
|
—
|
|
|
48
|
|
|
312
|
|
|||||||
Fair value adjustment of derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|
—
|
|
|
—
|
|
|
(95
|
)
|
|||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,845
|
|
||||||||||||||
Balance at March 31, 2016
|
47,275
|
|
|
$
|
47
|
|
|
$
|
115,842
|
|
|
$
|
92,261
|
|
|
$
|
(1,928
|
)
|
|
$
|
(3,345
|
)
|
|
$
|
7,122
|
|
|
$
|
209,999
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
ARC Document Solutions, Inc. Shareholders
|
|
|
|
|
|||||||||||||||||||||||||
|
Common Stock
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|||||||||||||||||
(In thousands, except per share data)
|
Shares
|
|
Par
Value
|
|
Additional Paid-in
Capital
|
|
Retained
Earnings
|
|
Other Comprehensive
Loss
|
|
Common Stock in
Treasury
|
|
Noncontrolling
Interest
|
|
Total
|
|||||||||||||||
Balance at December 31, 2016
|
47,428
|
|
|
$
|
47
|
|
|
$
|
117,749
|
|
|
$
|
41,822
|
|
|
$
|
(3,793
|
)
|
|
$
|
(5,909
|
)
|
|
$
|
6,905
|
|
|
$
|
156,821
|
|
Stock-based compensation
|
306
|
|
|
—
|
|
|
737
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
737
|
|
|||||||
ASU 2016-09 adoption adjustment
|
—
|
|
|
—
|
|
|
29
|
|
|
213
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
242
|
|
|||||||
Issuance of common stock under Employee Stock Purchase Plan
|
12
|
|
|
—
|
|
|
36
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
36
|
|
|||||||
Stock options exercised
|
25
|
|
|
—
|
|
|
68
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
68
|
|
|||||||
Comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net income (loss)
|
—
|
|
|
—
|
|
|
—
|
|
|
1,784
|
|
|
—
|
|
|
—
|
|
|
(36
|
)
|
|
1,748
|
|
|||||||
Foreign currency translation adjustments, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
377
|
|
|
—
|
|
|
54
|
|
|
431
|
|
|||||||
Fair value adjustment of derivatives, net of tax
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|
—
|
|
|
—
|
|
|
41
|
|
|||||||
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,220
|
|
||||||||||||||
Balance at March 31, 2017
|
47,771
|
|
|
$
|
47
|
|
|
$
|
118,619
|
|
|
$
|
43,819
|
|
|
$
|
(3,375
|
)
|
|
$
|
(5,909
|
)
|
|
$
|
6,923
|
|
|
$
|
160,124
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2017
|
|
2016
|
||||
Cash flows from operating activities
|
|
|
|
||||
Net income
|
$
|
1,748
|
|
|
$
|
2,628
|
|
Adjustments to reconcile net income to net cash provided by operating activities:
|
|
|
|
||||
Allowance for accounts receivable
|
208
|
|
|
71
|
|
||
Depreciation
|
7,139
|
|
|
6,677
|
|
||
Amortization of intangible assets
|
1,115
|
|
|
1,313
|
|
||
Amortization of deferred financing costs
|
94
|
|
|
118
|
|
||
Stock-based compensation
|
737
|
|
|
772
|
|
||
Deferred income taxes
|
1,177
|
|
|
1,749
|
|
||
Deferred tax valuation allowance
|
(11
|
)
|
|
72
|
|
||
Loss on early extinguishment of debt
|
66
|
|
|
46
|
|
||
Other non-cash items, net
|
27
|
|
|
(334
|
)
|
||
Changes in operating assets and liabilities:
|
|
|
|
||||
Accounts receivable
|
(53
|
)
|
|
(1,264
|
)
|
||
Inventory
|
(1,534
|
)
|
|
(1,568
|
)
|
||
Prepaid expenses and other assets
|
(202
|
)
|
|
397
|
|
||
Accounts payable and accrued expenses
|
(3,569
|
)
|
|
(5,374
|
)
|
||
Net cash provided by operating activities
|
6,942
|
|
|
5,303
|
|
||
Cash flows from investing activities
|
|
|
|
||||
Capital expenditures
|
(2,012
|
)
|
|
(2,505
|
)
|
||
Other
|
132
|
|
|
226
|
|
||
Net cash used in investing activities
|
(1,880
|
)
|
|
(2,279
|
)
|
||
Cash flows from financing activities
|
|
|
|
||||
Proceeds from stock option exercises
|
68
|
|
|
11
|
|
||
Proceeds from issuance of common stock under Employee Stock Purchase Plan
|
36
|
|
|
39
|
|
||
Share repurchases
|
—
|
|
|
(2,733
|
)
|
||
Contingent consideration on prior acquisitions
|
(70
|
)
|
|
(65
|
)
|
||
Early extinguishment of long-term debt
|
(8,500
|
)
|
|
(4,400
|
)
|
||
Payments on long-term debt agreements and capital leases
|
(3,808
|
)
|
|
(3,121
|
)
|
||
Borrowings under revolving credit facilities
|
1,500
|
|
|
—
|
|
||
Payments under revolving credit facilities
|
(125
|
)
|
|
—
|
|
||
Payment of deferred financing costs
|
—
|
|
|
(30
|
)
|
||
Net cash used in financing activities
|
(10,899
|
)
|
|
(10,299
|
)
|
||
Effect of foreign currency translation on cash balances
|
267
|
|
|
105
|
|
||
Net change in cash and cash equivalents
|
(5,570
|
)
|
|
(7,170
|
)
|
||
Cash and cash equivalents at beginning of period
|
25,239
|
|
|
23,963
|
|
||
Cash and cash equivalents at end of period
|
$
|
19,669
|
|
|
$
|
16,793
|
|
Supplemental disclosure of cash flow information
|
|
|
|
||||
Noncash investing and financing activities
|
|
|
|
||||
Capital lease obligations incurred
|
$
|
7,920
|
|
|
$
|
2,865
|
|
Contingent liabilities in connection with acquisition of businesses
|
$
|
—
|
|
|
$
|
104
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Service Sales
|
|
|
|
||||
CDIM
|
$
|
51,258
|
|
|
$
|
53,665
|
|
MPS
|
32,494
|
|
|
33,231
|
|
||
AIM
|
3,212
|
|
|
3,739
|
|
||
Total service sales
|
86,964
|
|
|
90,635
|
|
||
Equipment and supplies sales
|
11,767
|
|
|
12,915
|
|
||
Total net sales
|
$
|
98,731
|
|
|
$
|
103,550
|
|
|
Three Months Ended
March 31, |
||||
|
2017
|
|
2016
|
||
Weighted average common shares outstanding during the period—basic
|
45,639
|
|
|
46,608
|
|
Effect of dilutive stock options
|
743
|
|
|
595
|
|
Weighted average common shares outstanding during the period—diluted
|
46,382
|
|
|
47,203
|
|
|
Gross
Goodwill |
|
Accumulated
Impairment Loss |
|
Net
Carrying Amount |
||||||
|
|
|
|
|
|
||||||
January 1, 2016
|
$
|
405,558
|
|
|
$
|
192,950
|
|
|
$
|
212,608
|
|
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|||
Goodwill impairment
|
—
|
|
|
73,920
|
|
|
(73,920
|
)
|
|||
December 31, 2016
|
405,558
|
|
|
266,870
|
|
|
138,688
|
|
|||
Additions
|
—
|
|
|
—
|
|
|
—
|
|
|||
Goodwill impairment
|
—
|
|
|
—
|
|
|
—
|
|
|||
March 31, 2017
|
$
|
405,558
|
|
|
$
|
266,870
|
|
|
$
|
138,688
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
|
Gross
Carrying
Amount
|
|
Accumulated
Amortization
|
|
Net
Carrying
Amount
|
||||||||||||
Amortizable other intangible assets
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Customer relationships
|
$
|
99,140
|
|
|
$
|
87,437
|
|
|
$
|
11,703
|
|
|
$
|
99,104
|
|
|
$
|
86,305
|
|
|
$
|
12,799
|
|
Trade names and trademarks
|
20,288
|
|
|
19,889
|
|
|
399
|
|
|
20,281
|
|
|
19,878
|
|
|
403
|
|
||||||
|
$
|
119,428
|
|
|
$
|
107,326
|
|
|
$
|
12,102
|
|
|
$
|
119,385
|
|
|
$
|
106,183
|
|
|
$
|
13,202
|
|
2017 (excluding the three months ended March 31, 2017)
|
$
|
3,145
|
|
2018
|
3,847
|
|
|
2019
|
3,125
|
|
|
2020
|
1,516
|
|
|
2021
|
167
|
|
|
Thereafter
|
302
|
|
|
|
$
|
12,102
|
|
•
|
Future reversals of existing taxable temporary differences;
|
•
|
Future taxable income exclusive of reversing temporary differences and carryforwards;
|
•
|
Taxable income in prior carryback years; and
|
•
|
Tax-planning strategies.
|
•
|
Nature, frequency, and severity of recent losses;
|
•
|
Duration of statutory carryforward periods;
|
•
|
Historical experience with tax attributes expiring unused; and
|
•
|
Near- and medium-term financial outlook.
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Term A loan facility maturing 2019 net of deferred financing fees of
$879
and $1,039;
3.06%
and 2.86% interest rate at March 31, 2017 and December 31, 2016
|
|
$
|
111,621
|
|
|
$
|
119,961
|
|
Borrowings from revolving loan facility under the Term A Credit Agreement;
2.92%
and 2.64% interest rate at March 31, 2017 and December 31, 2016
|
|
2,325
|
|
|
950
|
|
||
Various capital leases; weighted average interest rate of
5.6%
at March 31, 2017 and December 31, 2016; principal and interest payable monthly through March 2022
|
|
40,366
|
|
|
36,231
|
|
||
Various other notes payable with a weighted average interest rate of
10.7%
at March 31, 2017 and December 31, 2016; principal and interest payable monthly through November 2019
|
|
28
|
|
|
31
|
|
||
|
|
154,340
|
|
|
157,173
|
|
||
Less current portion
|
|
(14,680
|
)
|
|
(13,773
|
)
|
||
|
|
$
|
139,660
|
|
|
$
|
143,400
|
|
|
|
|
Fair Value
|
||||||
|
Balance Sheet Classification
|
|
March 31, 2017
|
|
December 31, 2016
|
||||
Derivative designated as hedging instrument under ASC 815
|
|
|
|
|
|
||||
Interest rate cap contracts - current portion
|
Other current assets
|
|
$
|
40
|
|
|
$
|
39
|
|
Interest rate cap contracts - long-term portion
|
Other assets
|
|
—
|
|
|
—
|
|
||
Total derivatives designated as hedging instruments
|
|
|
$
|
40
|
|
|
$
|
39
|
|
|
|
Amount of Income (Loss) Recognized in AOCL on Derivative
|
||||||
|
|
Three Months Ended
March 31, |
||||||
|
|
2017
|
|
2016
|
||||
Derivative in ASC 815 Cash Flow Hedging Relationship
|
|
|
|
|
||||
Interest rate cap contracts, net of tax
|
|
$
|
41
|
|
|
$
|
(95
|
)
|
|
|
Amount of Loss Reclassified from AOCL into Income
|
||||||||||||||
|
|
Three Months Ended
March 31, |
||||||||||||||
|
|
2017
|
|
2016
|
||||||||||||
|
|
Effective Portion
|
|
Ineffective Portion
|
|
Effective Portion
|
|
Ineffective Portion
|
||||||||
Location of Loss Reclassified from AOCL into Income
|
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
|
$
|
70
|
|
|
$
|
—
|
|
|
$
|
21
|
|
|
$
|
—
|
|
|
|
|
Significant Other Unobservable Inputs
|
||||||||||||||||||||||
|
|
|
March 31, 2017
|
|
December 31, 2016
|
||||||||||||||||||||
|
|
|
Level 2
|
|
Level 3
|
|
Total Losses
|
|
Level 2
|
|
Level 3
|
|
Total Losses
|
||||||||||||
Recurring Fair Value Measure
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Interest rate cap contracts
|
|
$
|
40
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
39
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Contingent purchase price consideration for acquired businesses
|
|
$
|
—
|
|
|
$
|
350
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
402
|
|
|
$
|
—
|
|
|
Three Months Ended
March 31, |
||||||
|
2017
|
|
2016
|
||||
Beginning balance
|
$
|
402
|
|
|
$
|
1,059
|
|
Additions related to acquisitions
|
—
|
|
|
104
|
|
||
Payments
|
(70
|
)
|
|
(65
|
)
|
||
Adjustments included in earnings
|
12
|
|
|
(222
|
)
|
||
Foreign currency translation adjustments
|
6
|
|
|
(8
|
)
|
||
Ending balance
|
$
|
350
|
|
|
$
|
868
|
|
•
|
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.
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2017
|
|
2016
|
||||
Cash flows provided by operating activities
|
$
|
6,942
|
|
|
$
|
5,303
|
|
Changes in operating assets and liabilities, net of effect of business acquisitions
|
5,358
|
|
|
7,809
|
|
||
Non-cash expenses, including depreciation and amortization
|
(10,552
|
)
|
|
(10,484
|
)
|
||
Income tax provision
|
1,226
|
|
|
1,969
|
|
||
Interest expense, net
|
1,555
|
|
|
1,446
|
|
||
Loss (income) attributable to the noncontrolling interest
|
36
|
|
|
(54
|
)
|
||
Depreciation and amortization
|
8,254
|
|
|
7,990
|
|
||
EBITDA
|
12,819
|
|
|
13,979
|
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2017
|
|
2016
|
||||
Net income attributable to ARC Document Solutions, Inc.
|
$
|
1,784
|
|
|
$
|
2,574
|
|
Interest expense, net
|
1,555
|
|
|
1,446
|
|
||
Income tax provision
|
1,226
|
|
|
1,969
|
|
||
Depreciation and amortization
|
8,254
|
|
|
7,990
|
|
||
EBITDA
|
12,819
|
|
|
13,979
|
|
||
Loss on extinguishment of debt
|
66
|
|
|
46
|
|
||
Restructuring expense
(1)
|
—
|
|
|
2
|
|
||
Stock-based compensation
|
737
|
|
|
772
|
|
||
Adjusted EBITDA
|
$
|
13,622
|
|
|
$
|
14,799
|
|
(1)
|
In October 2012, we initiated a restructuring plan which included the closure or downsizing of the Company's service center locations, as well as a reduction in headcount. Restructuring expenses in 2016 primarily consist of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.
|
|
Three Months Ended
March 31, |
||||
|
2017
|
|
2016 (1)
|
||
Net income margin attributable to ARC
|
1.8
|
%
|
|
2.5
|
%
|
Interest expense, net
|
1.6
|
|
|
1.4
|
|
Income tax provision
|
1.2
|
|
|
1.9
|
|
Depreciation and amortization
|
8.4
|
|
|
7.7
|
|
EBITDA margin
|
13.0
|
|
|
13.5
|
|
Loss on extinguishment of debt
|
0.1
|
|
|
—
|
|
Restructuring expense
|
—
|
|
|
—
|
|
Stock-based compensation
|
0.7
|
|
|
0.7
|
|
Adjusted EBITDA margin
|
13.8
|
%
|
|
14.3
|
%
|
(1)
|
Column does not foot due to rounding
|
|
Three Months Ended
March 31, |
||||||
(In thousands, except per share amounts)
|
2017
|
|
2016
|
||||
Net income attributable to ARC Document Solutions, Inc.
|
$
|
1,784
|
|
|
$
|
2,574
|
|
Loss on extinguishment of debt
|
66
|
|
|
46
|
|
||
Restructuring expense
|
—
|
|
|
2
|
|
||
Income tax benefit related to above items
|
(26
|
)
|
|
(19
|
)
|
||
Deferred tax valuation allowance and other discrete tax items
|
28
|
|
|
108
|
|
||
Unaudited adjusted net income attributable to ARC Document Solutions, Inc.
|
$
|
1,852
|
|
|
$
|
2,711
|
|
|
|
|
|
||||
Actual:
|
|
|
|
||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:
|
|
|
|
||||
Basic
|
$
|
0.04
|
|
|
$
|
0.06
|
|
Diluted
|
$
|
0.04
|
|
|
$
|
0.05
|
|
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
45,639
|
|
|
46,608
|
|
||
Diluted
|
46,382
|
|
|
47,203
|
|
||
Adjusted:
|
|
|
|
||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:
|
|
|
|
||||
Basic
|
$
|
0.04
|
|
|
$
|
0.06
|
|
Diluted
|
$
|
0.04
|
|
|
$
|
0.06
|
|
Weighted average common shares outstanding:
|
|
|
|
||||
Basic
|
45,639
|
|
|
46,608
|
|
||
Diluted
|
46,382
|
|
|
47,203
|
|
|
Three Months Ended March 31,
|
|
Increase (decrease)
|
|||||||||||
(In millions, except percentages)
|
2017 (1)
|
|
2016 (1)
|
|
$
|
|
%
|
|||||||
CDIM
|
$
|
51.3
|
|
|
$
|
53.7
|
|
|
$
|
(2.4
|
)
|
|
(4.5
|
)%
|
MPS
|
32.5
|
|
|
33.2
|
|
|
(0.7
|
)
|
|
(2.2
|
)%
|
|||
AIM
|
3.2
|
|
|
3.7
|
|
|
(0.5
|
)
|
|
(14.1
|
)%
|
|||
Total service sales
|
87.0
|
|
|
90.6
|
|
|
(3.7
|
)
|
|
(4.1
|
)%
|
|||
Equipment and supplies sales
|
11.8
|
|
|
12.9
|
|
|
(1.1
|
)
|
|
(8.9
|
)%
|
|||
Total net sales
|
$
|
98.7
|
|
|
$
|
103.6
|
|
|
$
|
(4.8
|
)
|
|
(4.7
|
)%
|
|
|
|
|
|
|
|
|
|||||||
Gross profit
|
$
|
30.8
|
|
|
$
|
33.7
|
|
|
$
|
(2.9
|
)
|
|
(8.6
|
)%
|
Selling, general and administrative expenses
|
$
|
25.1
|
|
|
$
|
26.4
|
|
|
$
|
(1.2
|
)
|
|
(4.6
|
)%
|
Amortization of intangibles
|
$
|
1.1
|
|
|
$
|
1.3
|
|
|
$
|
(0.2
|
)
|
|
(15.1
|
)%
|
Restructuring expense
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
—
|
%
|
Loss on extinguishment of debt
|
$
|
0.1
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
43.5
|
%
|
Interest expense, net
|
$
|
1.6
|
|
|
$
|
1.4
|
|
|
$
|
0.1
|
|
|
7.5
|
%
|
Income tax provision
|
$
|
1.2
|
|
|
$
|
2.0
|
|
|
$
|
(0.7
|
)
|
|
(37.7
|
)%
|
Net income attributable to ARC
|
$
|
1.8
|
|
|
$
|
2.6
|
|
|
$
|
(0.8
|
)
|
|
(30.7
|
)%
|
Adjusted net income attributable to ARC
|
$
|
1.9
|
|
|
$
|
2.7
|
|
|
$
|
(0.9
|
)
|
|
(31.7
|
)%
|
EBITDA
|
$
|
12.8
|
|
|
$
|
14.0
|
|
|
$
|
(1.2
|
)
|
|
(8.3
|
)%
|
Adjusted EBITDA
|
$
|
13.6
|
|
|
$
|
14.8
|
|
|
$
|
(1.2
|
)
|
|
(8.0
|
)%
|
(1)
|
Column does not foot due to rounding
|
|
As Percentage of Net Sales
|
||||
|
Three Months Ended March 31,
|
||||
|
2017 (1)
|
|
2016 (1)
|
||
Net Sales
|
100.0
|
%
|
|
100.0
|
%
|
Cost of sales
|
68.8
|
|
|
67.4
|
|
Gross profit
|
31.2
|
|
|
32.6
|
|
Selling, general and administrative expenses
|
25.5
|
|
|
25.5
|
|
Amortization of intangibles
|
1.1
|
|
|
1.3
|
|
Restructuring expense
|
—
|
|
|
—
|
|
Income from operations
|
4.6
|
|
|
5.9
|
|
Loss on extinguishment of debt
|
0.1
|
|
|
—
|
|
Interest expense, net
|
1.6
|
|
|
1.4
|
|
Income before income tax provision
|
3.0
|
|
|
4.4
|
|
Income tax provision
|
1.2
|
|
|
1.9
|
|
Net income
|
1.8
|
|
|
2.5
|
|
Loss (income) attributable to the noncontrolling interest
|
—
|
|
|
(0.1
|
)
|
Net income attributable to ARC
|
1.8
|
%
|
|
2.5
|
%
|
EBITDA
|
13.0
|
%
|
|
13.5
|
%
|
Adjusted EBITDA
|
13.8
|
%
|
|
14.3
|
%
|
(1)
|
Column does not foot due to rounding
|
|
Three Months Ended
March 31, |
||||||
(In thousands)
|
2017
|
|
2016
|
||||
Net cash provided by operating activities
|
$
|
6,942
|
|
|
$
|
5,303
|
|
Net cash used in investing activities
|
$
|
(1,880
|
)
|
|
$
|
(2,279
|
)
|
Net cash used in financing activities
|
$
|
(10,899
|
)
|
|
$
|
(10,299
|
)
|
(In thousands)
|
March 31, 2017
|
|
December 31, 2016
|
||||
Cash and cash equivalents
|
$
|
19,669
|
|
|
$
|
25,239
|
|
Working capital
|
$
|
44,666
|
|
|
$
|
44,892
|
|
|
|
|
|
||||
Borrowings from term loan facility
(1) (2)
|
$
|
113,946
|
|
|
$
|
120,911
|
|
Other debt obligations
|
40,394
|
|
|
36,262
|
|
||
Total debt obligations
|
$
|
154,340
|
|
|
$
|
157,173
|
|
(Dollars in thousands)
|
Number of
Reporting
Units
|
|
Representing
Goodwill of
|
|||
No goodwill balance
|
5
|
|
|
$
|
—
|
|
Reporting unit failing step one that continues to carry a goodwill balance
|
1
|
|
|
17,637
|
|
|
Fair value of reporting units exceeds their carrying values by more than 100%
|
2
|
|
|
121,051
|
|
|
|
8
|
|
|
$
|
138,688
|
|
•
|
Future reversals of existing taxable temporary differences;
|
•
|
Future taxable income exclusive of reversing temporary differences and carryforwards;
|
•
|
Taxable income in prior carryback years; and
|
•
|
Tax-planning strategies.
|
•
|
Nature, frequency, and severity of recent losses;
|
•
|
Duration of statutory carryforward periods;
|
•
|
Historical experience with tax attributes expiring unused; and
|
•
|
Near- and medium-term financial outlook.
|
(In thousands, except for price per share)
|
|
(a) Total Number of
Shares Purchased (1) |
|
(b) Average Price Paid per Share ($)
|
|
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
|
(d) Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (1)
|
||||||
Period
|
|
|
|
|
|
|
|
|
||||||
January 1, 2017—January 31, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
9,636
|
|
February 1, 2017—February 28, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
9,636
|
|
March 1, 2017—March 31, 2017
|
|
2
|
|
|
$
|
2.94
|
|
|
2
|
|
|
$
|
9,629
|
|
Total
|
|
2
|
|
|
|
|
|
2
|
|
|
|
(1)
|
On February 8, 2016, we announced that the Company's Board of Directors approved a stock repurchase program that authorizes the Company to purchase up to $15.0 million of the Company's outstanding common stock through December 31, 2017.
|
Exhibit
Number
|
|
Description
|
|
|
|
31.1
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.2
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
101.INS
|
|
XBRL Instance Document *
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema *
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase *
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase *
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase *
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase *
|
*
|
Filed herewith
|
ARC DOCUMENT SOLUTIONS, INC.
|
|
/s/ KUMARAKULASINGAM SURIYAKUMAR
|
Kumarakulasingam Suriyakumar
|
Chairman, President and Chief Executive Officer
|
|
/s/ JORGE AVALOS
|
Jorge Avalos
|
Chief Financial Officer
|
Exhibit
Number
|
|
Description
|
|
|
|
31.1
|
|
Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
31.2
|
|
Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.1
|
|
Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
32.2
|
|
Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
|
|
|
|
101.INS
|
|
XBRL Instance Document *
|
|
|
|
101.SCH
|
|
XBRL Taxonomy Extension Schema *
|
|
|
|
101.CAL
|
|
XBRL Taxonomy Extension Calculation Linkbase *
|
|
|
|
101.DEF
|
|
XBRL Taxonomy Extension Definition Linkbase *
|
|
|
|
101.LAB
|
|
XBRL Taxonomy Extension Label Linkbase *
|
|
|
|
101.PRE
|
|
XBRL Taxonomy Extension Presentation Linkbase *
|
*
|
Filed herewith
|
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