UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 |
Date of Report: April 26, 2018 (Date of earliest event reported) | ||||
ARC Document Solutions, Inc. (Exact name of registrant as specified in its charter) | ||||
Delaware (State or other jurisdiction of incorporation) | 001-32407 (Commission File Number) | 20-1700361 (IRS Employer Identification Number) | ||
1981 N. Broadway, Walnut Creek, CA (Address of principal executive offices) | 94596 (Zip Code) | |||
(925) 949-5100 (Registrant's telephone number, including area code) | ||||
Not Applicable (Former Name or Former Address, if changed since last report) |
For | Withheld | Broker Non-Votes | |||
Kumarakulasingam Suriyakumar | 27,977,462 | 1,109,917 | 7,849,237 | ||
Bradford L. Brooks | 28,031,880 | 1,055,499 | 7,849,237 | ||
Thomas J. Formolo | 27,964,849 | 1,122,530 | 7,849,237 | ||
John G. Freeland | 27,872,676 | 1,214,703 | 7,849,237 | ||
Dewitt Kerry McCluggage | 27,082,376 | 2,005,003 | 7,849,237 | ||
James F. McNulty | 27,854,922 | 1,232,457 | 7,849,237 | ||
Mark W. Mealy | 27,844,414 | 1,242,965 | 7,849,237 |
For | Against | Abstain | Broker Non-Votes | |||
36,732,037 | 75,888 | 128,691 | 0 |
For | Against | Abstain | Broker Non-Votes | |||
28,076,916 | 443,551 | 566,912 | 7,849,237 |
For | Against | Abstain | Broker Non-Votes | |||
26,385,976 | 2,659,607 | 41,796 | 7,849,237 |
Dated: May 1, 2018 | ARC DOCUMENT SOLUTIONS, INC. By: /s/ Jorge Avalos Jorge Avalos Chief Financial Officer |
Exhibit Index | ||
Exhibit No. | Description | |
Financial Highlights: | ||||||
Three Months Ended | ||||||
March 31, | ||||||
(All dollar amounts in millions, except EPS) | 2018 | 2017 | ||||
Net Sales | $ | 97.7 | $ | 98.7 | ||
Gross Margin | 30.9 | % | 31.2 | % | ||
Net income attributable to ARC | $ | 0.6 | $ | 1.8 | ||
Adjusted net income attributable to ARC | $ | 0.5 | $ | 1.9 | ||
Earnings per share - Diluted | $ | 0.01 | $ | 0.04 | ||
Adjusted earnings per share - Diluted | $ | 0.01 | $ | 0.04 | ||
Cash (used in) provided by operating activities | $ | (2.0 | ) | $ | 6.9 | |
EBITDA | $ | 10.2 | $ | 12.8 | ||
Adjusted EBITDA | $ | 10.9 | $ | 13.6 | ||
Capital Expenditures | $ | 2.9 | $ | 2.0 | ||
Debt & Capital Leases (including current), net of unamortized deferred financing fees | $ | 138.1 | $ | 154.3 |
Sales from Services and Product Lines as a Percentage of Net Sales | ||||
Three Months Ended | ||||
March 31, | ||||
Services and Product Line | 2018 | 2017 | ||
CDIM | 53.5 | % | 51.9 | % |
MPS | 32.2 | % | 32.9 | % |
AIM | 3.0 | % | 3.3 | % |
Equipment and supplies sales | 11.3 | % | 11.9 | % |
ARC Document Solutions, Inc. | ||||||
Consolidated Balance Sheets | ||||||
(In thousands, except per share data) | ||||||
(Unaudited) | ||||||
March 31, | December 31, | |||||
Current assets: | 2018 | 2017 | ||||
Cash and cash equivalents | $ | 13,968 | $ | 28,059 | ||
Accounts receivable, net of allowances for accounts receivable of $2,516 and $2,341 | 59,893 | 57,011 | ||||
Inventories, net | 19,577 | 19,937 | ||||
Prepaid expenses | 5,220 | 4,208 | ||||
Other current assets | 4,313 | 5,266 | ||||
Total current assets | 102,971 | 114,481 | ||||
Property and equipment, net of accumulated depreciation of $199,231 and $198,693 | 63,083 | 64,245 | ||||
Goodwill | 121,051 | 121,051 | ||||
Other intangible assets, net | 8,078 | 9,068 | ||||
Deferred income taxes | 28,043 | 28,029 | ||||
Other assets | 2,577 | 2,551 | ||||
Total assets | $ | 325,803 | $ | 339,425 | ||
Current liabilities: | ||||||
Accounts payable | $ | 20,850 | $ | 24,289 | ||
Accrued payroll and payroll-related expenses | 9,552 | 12,617 | ||||
Accrued expenses | 14,912 | 17,201 | ||||
Current portion of long-term debt and capital leases | 20,198 | 20,791 | ||||
Total current liabilities | 65,512 | 74,898 | ||||
Long-term debt and capital leases | 117,888 | 123,626 | ||||
Other long-term liabilities | 3,279 | 3,290 | ||||
Total liabilities | 186,679 | 201,814 | ||||
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; 47,936 and 47,913 shares issued and 45,262 and 45,266 shares outstanding | 48 | 48 | ||||
Additional paid-in capital | 121,650 | 120,953 | ||||
Retained earnings | 21,152 | 20,524 | ||||
Accumulated other comprehensive loss | (1,954 | ) | (1,998 | ) | ||
140,896 | 139,527 | |||||
Less cost of common stock in treasury, 2,674 and 2,647 shares | 9,350 | 9,290 | ||||
Total ARC Document Solutions, Inc. stockholders’ equity | 131,546 | 130,237 | ||||
Noncontrolling interest | 7,578 | 7,374 | ||||
Total equity | 139,124 | 137,611 | ||||
Total liabilities and equity | $ | 325,803 | $ | 339,425 |
ARC Document Solutions, Inc. | ||||||
Consolidated Statements of Operations | ||||||
(In thousands, except per share data) | ||||||
(Unaudited) | Three Months Ended | |||||
March 31, | ||||||
2018 | 2017 | |||||
Service sales | $ | 86,710 | $ | 86,964 | ||
Equipment and supplies sales | 10,998 | 11,767 | ||||
Total net sales | 97,708 | 98,731 | ||||
Cost of sales | 67,523 | 67,893 | ||||
Gross profit | 30,185 | 30,838 | ||||
Selling, general and administrative expenses | 27,301 | 25,147 | ||||
Amortization of intangible assets | 1,008 | 1,115 | ||||
Income from operations | 1,876 | 4,576 | ||||
Other income, net | (81 | ) | (19 | ) | ||
Loss on extinguishment and modification of debt | — | 66 | ||||
Interest expense, net | 1,442 | 1,555 | ||||
Income before income tax provision | 515 | 2,974 | ||||
Income tax provision | 39 | 1,226 | ||||
Net income | 476 | 1,748 | ||||
Loss attributable to the noncontrolling interest | 152 | 36 | ||||
Net income attributable to ARC Document Solutions, Inc. shareholders | $ | 628 | $ | 1,784 | ||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||
Basic | $ | 0.01 | $ | 0.04 | ||
Diluted | $ | 0.01 | $ | 0.04 | ||
Weighted average common shares outstanding: | ||||||
Basic | 44,741 | 45,639 | ||||
Diluted | 44,855 | 46,382 |
ARC Document Solutions, Inc. Consolidated Statements of Cash Flows (In thousands) (Unaudited) | Three Months Ended | |||||
March 31, | ||||||
2018 | 2017 | |||||
Cash flows from operating activities | ||||||
Net income | $ | 476 | $ | 1,748 | ||
Adjustments to reconcile net income to net cash (used in) provided by operating activities: | ||||||
Allowance for accounts receivable | 327 | 208 | ||||
Depreciation | 7,129 | 7,139 | ||||
Amortization of intangible assets | 1,008 | 1,115 | ||||
Amortization of deferred financing costs | 60 | 94 | ||||
Stock-based compensation | 653 | 737 | ||||
Deferred income taxes | (92 | ) | 1,177 | |||
Deferred tax valuation allowance | 57 | (11 | ) | |||
Loss on extinguishment and modification of debt | — | 66 | ||||
Other non-cash items, net | (44 | ) | 27 | |||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (2,913 | ) | (53 | ) | ||
Inventory | 524 | (1,534 | ) | |||
Prepaid expenses and other assets | (150 | ) | (202 | ) | ||
Accounts payable and accrued expenses | (9,014 | ) | (3,569 | ) | ||
Net cash (used in) provided by operating activities | (1,979 | ) | 6,942 | |||
Cash flows from investing activities | ||||||
Capital expenditures | (2,892 | ) | (2,012 | ) | ||
Other | 380 | 132 | ||||
Net cash used in investing activities | (2,512 | ) | (1,880 | ) | ||
Cash flows from financing activities | ||||||
Proceeds from stock option exercises | — | 68 | ||||
Proceeds from issuance of common stock under Employee Stock Purchase Plan | 44 | 36 | ||||
Share repurchases | (60 | ) | — | |||
Contingent consideration on prior acquisitions | (53 | ) | (70 | ) | ||
Early extinguishment of long-term debt | — | (8,500 | ) | |||
Payments on long-term debt agreements and capital leases | (5,751 | ) | (3,808 | ) | ||
Borrowings under revolving credit facilities | 2,000 | 1,500 | ||||
Payments under revolving credit facilities | (5,875 | ) | (125 | ) | ||
Net cash used in financing activities | (9,695 | ) | (10,899 | ) | ||
Effect of foreign currency translation on cash balances | 95 | 267 | ||||
Net change in cash and cash equivalents | (14,091 | ) | (5,570 | ) | ||
Cash and cash equivalents at beginning of period | 28,059 | 25,239 | ||||
Cash and cash equivalents at end of period | $ | 13,968 | $ | 19,669 | ||
Supplemental disclosure of cash flow information | ||||||
Noncash investing and financing activities | ||||||
Capital lease obligations incurred | $ | 3,275 | $ | 7,920 |
ARC Document Solutions, Inc. Net Sales by Product Line (In thousands) (Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Service sales | ||||||
CDIM | $ | 52,320 | $ | 51,258 | ||
MPS | 31,467 | 32,494 | ||||
AIM | 2,923 | 3,212 | ||||
Total service sales | 86,710 | 86,964 | ||||
Equipment and supplies sales | 10,998 | 11,767 | ||||
Total net sales | $ | 97,708 | $ | 98,731 |
ARC Document Solutions, Inc. Non-GAAP Measures Reconciliation of cash flows (used in) provided by operating activities to EBITDA and Adjusted EBITDA (In thousands) (Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Cash flows (used in) provided by operating activities | $ | (1,979 | ) | $ | 6,942 | |
Changes in operating assets and liabilities | 11,553 | 5,358 | ||||
Non-cash expenses, including depreciation and amortization | (9,098 | ) | (10,552 | ) | ||
Income tax provision | 39 | 1,226 | ||||
Interest expense, net | 1,442 | 1,555 | ||||
Loss attributable to the noncontrolling interest | 152 | 36 | ||||
Depreciation and amortization | 8,137 | 8,254 | ||||
EBITDA | 10,246 | 12,819 | ||||
Loss on extinguishment and modification of debt | — | 66 | ||||
Stock-based compensation | 653 | 737 | ||||
Adjusted EBITDA | $ | 10,899 | $ | 13,622 |
ARC Document Solutions, Inc. Non-GAAP Measures Reconciliation of net income attributable to ARC Document Solutions, Inc. to EBITDA and Adjusted EBITDA (In thousands) (Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Net income attributable to ARC Document Solutions, Inc. | $ | 628 | $ | 1,784 | ||
Interest expense, net | 1,442 | 1,555 | ||||
Income tax provision | 39 | 1,226 | ||||
Depreciation and amortization | 8,137 | 8,254 | ||||
EBITDA | 10,246 | 12,819 | ||||
Loss on extinguishment and modification of debt | — | 66 | ||||
Stock-based compensation | 653 | 737 | ||||
Adjusted EBITDA | $ | 10,899 | $ | 13,622 |
ARC Document Solutions, Inc. Non-GAAP Measures Reconciliation of net income attributable to ARC to unaudited adjusted net income attributable to ARC (In thousands, except per share data) (Unaudited) | ||||||
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Net income attributable to ARC Document Solutions, Inc. | $ | 628 | $ | 1,784 | ||
Loss on extinguishment and modification of debt | — | 66 | ||||
Income tax benefit related to above items | — | (26 | ) | |||
Deferred tax valuation allowance and other discrete tax items | (149 | ) | 28 | |||
Adjusted net income attributable to ARC Document Solutions, Inc. | $ | 479 | $ | 1,852 | ||
Actual: | ||||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||
Basic | $ | 0.01 | $ | 0.04 | ||
Diluted | $ | 0.01 | $ | 0.04 | ||
Weighted average common shares outstanding: | ||||||
Basic | 44,741 | 45,639 | ||||
Diluted | 44,855 | 46,382 | ||||
Adjusted: | ||||||
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||||||
Basic | $ | 0.01 | $ | 0.04 | ||
Diluted | $ | 0.01 | $ | 0.04 | ||
Weighted average common shares outstanding: | ||||||
Basic | 44,741 | 45,639 | ||||
Diluted | 44,855 | 46,382 |
• | 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. |