ARC Document Solutions Reports Results for Third Quarter 2017

Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and nine months ended September 30, 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. This presentation facilitates a meaningful comparison of our operating results for the three and nine months ended September 30, 2017 and 2016. We believe these charges were the result of our capital restructuring, or other items which are not indicative of our actual operating performance.

We have presented adjusted EBITDA for the three and nine months ended September 30, 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.

ARC Document Solutions, Inc.
Consolidated Statements of Cash Flows  
(In thousands)

(Unaudited)

Three Months Ended

Nine Months Ended

 

September 30,

September 30,

 

2017

2016

2017

2016

Cash flows from operating activities

       

Net (loss) income

$

(14,767)

 

$

2,902

 

$

(9,299)

 

$

(50,278)

 

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

       

Allowance for accounts receivable

306

 

324

 

867

 

644

 

Depreciation

7,377

 

6,697

 

21,787

 

20,032

 

Amortization of intangible assets

1,053

 

1,160

 

3,250

 

3,705

 

Amortization of deferred financing costs

69

 

111

 

246

 

344

 

Goodwill impairment

17,637

 

 

17,637

 

73,920

 

Stock-based compensation

699

 

650

 

2,251

 

2,073

 

Deferred income taxes

(2,380)

 

2,299

 

1,045

 

(6,018)

 

Deferred tax valuation allowance

454

 

(1)

 

488

 

(16)

 

Loss on extinguishment and modification of debt

124

 

66

 

230

 

156

 

Other non-cash items, net

(205)

 

(87)

 

(340)

 

(540)

 

Changes in operating assets and liabilities:

       

Accounts receivable

554

 

(897)

 

406

 

(2,285)

 

Inventory

(142)

 

(429)

 

(650)

 

(3,196)

 

Prepaid expenses and other assets

1,029

 

1,179

 

(1,129)

 

513

 

Accounts payable and accrued expenses

(482)

 

(1,811)

 

(33)

 

(5,008)

 

Net cash provided by operating activities

11,326

 

12,163

 

36,756

 

34,046

 

Cash flows from investing activities

       

Capital expenditures

(2,335)

 

(2,430)

 

(7,246)

 

(7,580)

 

Other

72

 

135

 

466

 

842

 

Net cash used in investing activities

(2,263)

 

(2,295)

 

(6,780)

 

(6,738)

 

Cash flows from financing activities

       

Proceeds from stock option exercises

2

 

46

 

73

 

76

 

Proceeds from issuance of common stock under Employee Stock Purchase Plan

37

 

26

 

103

 

96

 

Share repurchases

 

(200)

 

 

(5,297)

 

Contingent consideration on prior acquisitions

(63)

 

(86)

 

(214)

 

(453)

 

Early extinguishment of long-term debt

 

(7,000)

 

(14,150)

 

(16,000)

 

Payments on long-term debt agreements and capital leases

(52,146)

 

(3,310)

 

(60,060)

 

(9,651)

 

Borrowings under revolving credit facilities

52,350

 

 

54,850

 

 

Payments under revolving credit facilities

(9,375)

 

 

(9,675)

 

 

Payment of deferred financing costs

(270)

 

(76)

 

(270)

 

(106)

 

Net cash used in financing activities

(9,465)

 

(10,600)

 

(29,343)

 

(31,335)

 

Effect of foreign currency translation on cash balances

161

 

(80)

 

491

 

(296)

 

Net change in cash and cash equivalents

(241)

 

(812)

 

1,124

 

(4,323)

 

Cash and cash equivalents at beginning of period

26,604

 

20,452

 

25,239

 

23,963

 

Cash and cash equivalents at end of period

$

26,363

 

$

19,640

 

$

26,363

 

$

19,640

 

Supplemental disclosure of cash flow information

       

Noncash investing and financing activities

       

Capital lease obligations incurred

$

6,404

 

$

3,738

 

$

20,714

 

$

12,345

 

Contingent liabilities in connection with acquisition of businesses

$

 

$

 

$

27

 

$

85

 

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