ARC Document Solutions Reports Results for Fourth Quarter and Full Year 2014

                                                                            
                                                                            
ARC Document Solutions, Inc.                                                
Consolidated Balance Sheets                                                 
(Dollars in thousands, except per share data)                               
(Unaudited)                                                                 
                                                December 31,   December 31, 
                                               -------------  ------------- 
Current assets:                                     2014           2013     
                                               -------------  ------------- 
  Cash and cash equivalents                    $      22,636  $      27,362 
  Accounts receivable, net of allowances for                                
   accounts receivable of $2,413 and $2,517           62,045         56,328 
  Inventories, net                                    16,251         14,047 
  Deferred income taxes                                  278            356 
  Prepaid expenses                                     4,767          4,324 
  Other current assets                                 6,080          4,013 
                                               -------------  ------------- 
    Total current assets                             112,057        106,430 
Property and equipment, net of accumulated                                  
 depreciation of $214,697 and $206,636                59,520         56,181 
Goodwill                                             212,608        212,608 
Other intangible assets, net                          23,841         27,856 
Deferred financing fees, net                           2,440          3,242 
Deferred income taxes                                  1,110          1,186 
Other assets                                           2,492          2,419 
                                               -------------  ------------- 
    Total assets                               $     414,068  $     409,922 
                                               =============  ============= 
Current liabilities:                                                        
  Accounts payable                                         $            26,866    $            23,363  
    Accrued  payroll  and  payroll-related  expenses                13,765                  11,497  
    Accrued  expenses                                                                        22,793                  21,365  
    Current  portion  of  long-term  debt  and                                                                          
      capital  leases                                                                          27,969                  21,500  
                                                                                              -------------    -------------  
        Total  current  liabilities                                                  91,393                  77,725  
Long-term  debt  and  capital  leases                                        175,916                198,228  
Deferred  income  taxes                                                                  33,463                  31,667  
Other  long-term  liabilities                                                        3,458                    3,163  
                                                                                              -------------    -------------  
        Total  liabilities                                                                304,230                310,783  
                                                                                              -------------    -------------  
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;  46,800  and  46,365  shares                                                            
      issued  and  46,723  and  46,320  shares                                                                            
      outstanding                                                                                        47                          46  
    Additional  paid-in  capital                                                  110,650                105,806  
    Retained  deficit                                                                        (7,353)              (14,628)
    Accumulated  other  comprehensive  (loss)                                                                        
      income                                                                                              (161)                      634  
                                                                                              -------------    -------------  
                                                                                                          103,183                  91,858  
    Less  cost  of  common  stock  in  treasury,  77                                                                  
      and  45  shares                                                                                  408                        168  
                                                                                              -------------    -------------  
        Total  ARC  Document  Solutions,  Inc.                                                                            
          stockholders'  equity                                                        102,775                  91,690  
Noncontrolling  interest                                                                7,063                    7,449  
                                                                                              -------------    -------------  
        Total  equity                                                                          109,838                  99,139  
                                                                                              -------------    -------------  
        Total  liabilities  and  equity                              $          414,068    $          409,922  
                                                                                              =============    =============  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Consolidated  Statements  of  Operations                                                                              
(Dollars  in  thousands,  except  per  share  data)                                                              
(Unaudited)                                                                                                                                  
                                                                      Three  Months  Ended      Twelve  Months  Ended  
                                                                            December  31,                    December  31,        
                                                                    --------------------    -------------------  
                                                                          2014              2013              2014            2013      
                                                                    ---------    ---------    ---------    --------  
Service  sales                                          $    92,329    $    87,100    $  371,884    $355,358  
Equipment  and  supplies  sales                  15,265          14,185          51,872        51,837  
                                                                    ---------    ---------    ---------    --------  
        Total  net  sales                                  107,594        101,285        423,756      407,195  
Cost  of  sales                                                72,680          67,818        279,478      272,858  
                                                                    ---------    ---------    ---------    --------  
        Gross  profit                                          34,914          33,467        144,278      134,337  
Selling,  general  and                                                                                                                
  administrative  expenses                          26,952          24,117        107,672        96,800  
Amortization  of  intangible  assets          1,489            1,556            5,987          6,612  
Restructuring  expense                                        12                779                777          2,544  
                                                                    ---------    ---------    ---------    --------  
        Income  from  operations                        6,461            7,015          29,842        28,381  
Other  income,  net                                              (25)              (20)              (96)          (106)
Loss  on  extinguishment  of  debt                5,252          16,077            5,599        16,339  
Interest  expense,  net                                  2,923            5,725          14,560        23,737  
                                                                    ---------    ---------    ---------    --------  
        (Loss)  income  before  income                                                                                          
          tax  provision                                      (1,689)      (14,767)          9,779      (11,589)
Income  tax  provision                                        418            1,040            2,348          2,986  
                                                                    ---------    ---------    ---------    --------  
        Net  (loss)  income                                (2,107)      (15,807)          7,431      (14,575)
Income  attributable  to                                                                                                            
  noncontrolling  interest                              (220)            (203)            (156)          (748)
                                                                    ---------    ---------    ---------    --------  
        Net  (loss)  income                                                                                                              
          attributable  to  ARC  Document                                                                                      
          Solutions,  Inc.  shareholders  $    (2,327)  $  (16,010)  $      7,275    $(15,323)
                                                                    =========    =========    =========    ========  
(Loss)  income  per  share                                                                                                          
  attributable  to  ARC  Document                                                                                              
  Solutions,  Inc.  shareholders:                                                                                            
        Basic                                                  $      (0.05)  $      (0.35)  $        0.16    $    (0.33)
                                                                    =========    =========    =========    ========  
        Diluted                                              $      (0.05)  $      (0.35)  $        0.15    $    (0.33)
                                                                    =========    =========    =========    ========  
Weighted  average  common  shares                                                                                            
  outstanding:                                                                                                                              
        Basic                                                        46,393          45,928          46,245        45,856  
        Diluted                                                    46,393          45,928          47,088        45,856  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Non-GAAP  Measures                                                                                                                      
Reconciliation  of  cash  flows  provided  by  operating  activities  to  EBIT,            
  EBITDA  and  Adjusted  EBITDA                                                                                                  
(Dollars  in  thousands)                                                                                                            
(Unaudited)                                                                                                                                  
                                                                                                                                                        
                                                                    Three  Months  Ended        Twelve  Months  Ended  
                                                                          December  31,                    December  31,          
                                                                  --------------------    --------------------  
                                                                        2014              2013              2014              2013      
                                                                  ---------    ---------    ---------    ---------  
Cash  flows  provided  by  operating                                                                                        
  activities                                            $    12,963    $      6,788    $    50,012    $    46,798  
    Changes  in  operating  assets                                                                                              
      and  liabilities,  net  of                                                                                                    
      effect  of  business                                                                                                              
      acquisitions                                                453            4,629            4,438          (2,388)
    Non-cash  expenses,  including                                                                                            
      depreciation,  amortization                                                                                              
      and  restructuring                              (15,523)      (27,224)      (47,019)      (58,985)
    Income  tax  provision                                  418            1,040            2,348            2,986  
    Interest  expense,  net                            2,923            5,725          14,560          23,737  
    Income  attributable  to                                                                                                        
      noncontrolling  interest                        (220)            (203)            (156)            (748)
                                                                  ---------    ---------    ---------    ---------  
EBIT                                                                  1,014          (9,245)        24,183          11,400  
    Depreciation  and  amortization            8,574            8,655          34,135          34,745  
                                                                  ---------    ---------    ---------    ---------  
EBITDA                                                              9,588              (590)        58,318          46,145  
    Loss  on  extinguishment  of  debt          5,252          16,077            5,599          16,339  
    Trade  secret  litigation  costs                                                                                          
      (1)                                                                  979                  --            3,766                  --  
    Restructuring  expense                                  12                779                777            2,544  
    Stock-based  compensation                      1,184            1,158            3,802            3,207  
                                                                  ---------    ---------    ---------    ---------  
Adjusted  EBITDA                                    $    17,015    $    17,424    $    72,262    $    68,235  
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
(1)  On  February  1,  2013,  we  filed  a  civil  complaint  against  a  competitor  and
        a  former  employee  in  the  Superior  Court  of  California  for  Orange  County,
        which  alleged,  among  other  claims,  the  misappropriation  of  ARC  trade        
        secrets;  namely,  proprietary  customer  lists  that  were  used  to                      
        communicate  with  our  customers  in  an  attempt  to  unfairly  acquire  their    
        business.  In  prior  litigation  with  the  competitor  based  on  related            
        facts,  in  2007  the  competitor  entered  into  a  settlement  agreement  and      
        stipulated  judgment,  which  included  an  injunction.  We  instituted  this      
        suit  to  stop  the  defendant  from  using  similar  unfair  business  practices  
        against  us  in  the  Southern  California  market.  The  case  proceeded  to          
        trial  in  May  2014,  and  a  jury  verdict  was  entered  for  the  defendants.  In
        December  2014,  the  court  awarded  the  defendant  attorneys'  fees  related    
        to  the  case.  In  February  2015,  ARC  entered  into  a  settlement  with  the      
        defendant  with  regards  to  attorneys'  fees.  Legal  fees  associated  with      
        the  litigation  totaled  $1.0  million  and  $3.8  million  for  the  three  and    
        twelve  months  ended  December  31,  2014,  respectively.                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Non-GAAP  Measures                                                                                                                      
Reconciliation  of  cash  flows  provided  by  operating  activities  to  adjusted      
  cash  flows  provided  by  operating  activities                                                                
(Dollars  in  thousands)                                                                                                            
(Unaudited)                                                                                                                                  
                                                                      Three  Months  Ended      Twelve  Months  Ended  
                                                                            December  31,                  December  31,          
                                                                  ---------------------  --------------------  
                                                                        2014              2013              2014              2013      
                                                                  ----------  ----------  ----------  ---------  
Cash  flows  provided  by  operating                                                                                        
  activities                                            $      12,963  $        6,788  $      50,012  $    46,798  
    Payments  related  to  trade                                                                                                  
      secret  litigation  costs                            130                  --            2,744                --  
    Payments  related  to                                                                                                              
      restructuring  expenses                                  9                980            1,203          4,304  
    Receipt  of  federal  income  tax                                                                                          
      refund(1)                                                          --                  --                  --        (3,762)
                                                                  ----------  ----------  ----------  ---------  
Adjusted  cash  flows  provided  by                                                                                          
  operating  activities                        $      13,102  $        7,768  $      53,959  $    47,340  
                                                                  ==========  ==========  ==========  =========  
                                                                                                                                                        
(1)  In  2013,  ARC  received  a  federal  income  tax  refund  of  $3.8  million              
        related  to  its  2009  consolidated  federal  income  tax  return.                          
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Non-GAAP  Measures                                                                                                                      
Reconciliation  of  net  (loss)  income  attributable  to  ARC  to  unaudited                
  adjusted  net  income  attributable  to  ARC                                                                        
(Dollars  in  thousands,  except  per  share  data)                                                              
(Unaudited)                                                                                                                                  
                                                                                                                                                        
                                                                    Three  Months  Ended        Twelve  Months  Ended  
                                                                          December  31,                    December  31,          
                                                                  --------------------    --------------------  
                                                                        2014              2013              2014              2013      
                                                                  ---------    ---------    ---------    ---------  
Net  (loss)  income  attributable                                                                                            
  to  ARC  Document  Solutions,  Inc.  $    (2,327)  $  (16,010)  $      7,275    $  (15,323)
    Loss  on  extinguishment  of  debt          5,252          16,077            5,599          16,339  
    Restructuring  expense                                  12                779                777            2,544  
    Trade  secret  litigation  costs                979                  --            3,766                  --  
    Income  tax  benefit  related  to                                                                                          
      above  items                                            (2,434)        (6,877)        (3,953)        (7,667)
    Deferred  tax  valuation                                                                                                        
      allowance  and  other  discrete                                                                                          
      tax  items                                                  1,141            7,172          (1,657)          8,245  
                                                                  ---------    ---------    ---------    ---------  
Unaudited  adjusted  net  income                                                                                              
  attributable  to  ARC  Document                                                                                              
  Solutions,  Inc.                                  $      2,623    $      1,141    $    11,807    $      4,138  
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
Actual:                                                                                                                                          
(Loss)  income  per  share                                                                                                          
  attributable  to  ARC  Document                                                                                              
  Solutions,  Inc.  shareholders:                                                                                            
    Basic                                                    $      (0.05)  $      (0.35)  $        0.16    $      (0.33)
                                                                  =========    =========    =========    =========  
    Diluted                                                $      (0.05)  $      (0.35)  $        0.15    $      (0.33)
                                                                  =========    =========    =========    =========  
Weighted  average  common  shares                                                                                            
  outstanding:                                                                                                                              
    Basic                                                          46,393          45,928          46,245          45,856  
    Diluted                                                      46,393          45,928          47,088          45,856  
                                                                                                                                                        
Adjusted:                                                                                                                                      
Earnings  per  share  attributable                                                                                          
  to  ARC  Document  Solutions,  Inc.                                                                                        
  shareholders:                                                                                                                            
    Basic                                                    $        0.06    $        0.02    $        0.26    $        0.09  
                                                                  =========    =========    =========    =========  
    Diluted                                                $        0.06    $        0.02    $        0.25    $        0.09  
                                                                  =========    =========    =========    =========  
Weighted  average  common  shares                                                                                            
  outstanding:                                                                                                                              
    Basic                                                          46,393          45,928          46,245          45,856  
    Diluted                                                      47,595          46,682          47,088          46,157  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Non-GAAP  Measures                                                                                                                      
Reconciliation  of  net  (loss)  income  attributable  to  ARC  to  EBIT,  EBITDA  and  
  Adjusted  EBITDA                                                                                                                        
(Dollars  in  thousands)                                                                                                            
(Unaudited)                                                                                                                                  
                                                                    Three  Months  Ended        Twelve  Months  Ended  
                                                                          December  31,                    December  31,          
                                                                  --------------------    --------------------  
                                                                        2014              2013              2014              2013      
                                                                  ---------    ---------    ----------  ---------  
Net  (loss)  income  attributable                                                                                            
  to  ARC  Document  Solutions,  Inc.  $    (2,327)  $  (16,010)  $        7,275  $  (15,323)
    Interest  expense,  net                            2,923            5,725            14,560        23,737  
    Income  tax  provision                                  418            1,040              2,348          2,986  
                                                                  ---------    ---------    ----------  ---------  
EBIT                                                                  1,014          (9,245)          24,183        11,400  
    Depreciation  and  amortization            8,574            8,655            34,135        34,745  
                                                                  ---------    ---------    ----------  ---------  
EBITDA                                                              9,588              (590)          58,318        46,145  
    Loss  on  extinguishment  of  debt          5,252          16,077              5,599        16,339  
    Trade  secret  litigation  costs                979                  --              3,766                --  
    Restructuring  expense                                  12                779                  777          2,544  
    Stock-based  compensation                      1,184            1,158              3,802          3,207  
                                                                  ---------    ---------    ----------  ---------  
Adjusted  EBITDA                                    $    17,015    $    17,424    $      72,262  $    68,235  
                                                                  =========    =========    ==========  =========  
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Net  Sales  by  Product  Line                                                                                                      
(Dollars  in  thousands)                                                                                                            
(Unaudited)                                                                                                                                  
                                                                      Three  Months  Ended      Twelve  Months  Ended  
                                                                            December  31,                    December  31,        
                                                                  ---------------------  ---------------------
                                                                        2014              2013              2014              2013      
                                                                  ----------  ----------  ----------  ----------
Service  Sales                                                                                                                              
Onsite  services(1)                              $      34,578  $      31,008  $    135,020  $    121,550
Traditional  reprographics                        26,477          27,693        113,179        116,673
Color                                                                23,128          20,212          90,310          83,601
Digital                                                              8,146            8,187          33,375          33,534
                                                                  ----------  ----------  ----------  ----------
    Total  services  sales                              92,329          87,100        371,884        355,358
Equipment  and  supplies  sales                  15,265          14,185          51,872          51,837
                                                                  ----------  ----------  ----------  ----------
    Total  net  sales                                $    107,594  $    101,285  $    423,756  $    407,195
                                                                  ==========  ==========  ==========  ==========
                                                                                                                                                        
(1)  Represents  work  done  at  our  customer  sites,  which  includes  Facilities      
        Management  ("FM")  and  Managed  Print  Services  ("MPS").                                      
                                                                                                                                                        
 

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