ARC Document Solutions Reports Results for Second Quarter 2016

(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 ARC 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 the first quarter of 2015, we entered into a settlement and paid the defendant. Legal fees associated with the litigation were recorded as selling, general and administrative expense.
(2) 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 and 2015 primarily consist of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.
                                                                            
                                                                            
                                                                            
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     Six Months Ended   
                                       June 30,              June 30,       
                                 --------------------  -------------------- 
                                    2016       2015       2016       2015   
                                 ---------  ---------  ---------  --------- 
Net (loss) income attributable                                              
 to ARC Document Solutions, Inc. $ (55,904) $   9,257  $ (53,330) $  13,693 
  Loss on extinguishment of debt        44         97         90         97 
  Goodwill impairment               73,920         --     73,920         -- 
  Restructuring expense                  5         11          7         85 
  Trade secret litigation costs         --         --         --         34 
  Income tax benefit related to                                             
   above items                     (13,350)       (42)   (13,369)       (84)
  Deferred tax valuation                                                    
   allowance and other discrete                                             
   tax items                                     95          (3,151)              203          (4,407)
                                                                  ---------    ---------    ---------    ---------  
Unaudited  adjusted  net  income                                                                                              
  attributable  to  ARC  Document                                                                                              
  Solutions,  Inc.                                  $      4,810    $      6,172    $      7,521    $      9,418  
                                                                  =========    =========    =========    =========  
                                                                                                                                                        
Actual:                                                                                                                                          
(Loss)  earnings  per  share                                                                                                      
  attributable  to  ARC  Document                                                                                              
  Solutions,  Inc.  shareholders:                                                                                            
    Basic                                                    $      (1.22)  $        0.20    $      (1.15)  $        0.29  
                                                                  =========    =========    =========    =========  
    Diluted                                                $      (1.22)  $        0.19    $      (1.15)  $        0.29  
                                                                  =========    =========    =========    =========  
Weighted  average  common  shares                                                                                            
  outstanding:                                                                                                                              
    Basic                                                          45,955          46,611          46,285          46,528  
    Diluted                                                      45,955          47,558          46,285          47,634  
                                                                                                                                                        
Adjusted:                                                                                                                                      
Earnings  per  share  attributable                                                                                          
  to  ARC  Document  Solutions,  Inc.                                                                                        
  shareholders:                                                                                                                            
    Basic                                                    $        0.10    $        0.13    $        0.16    $        0.20  
                                                                  =========    =========    =========    =========  
    Diluted                                                $        0.10    $        0.13    $        0.16    $        0.20  
                                                                  =========    =========    =========    =========  
Weighted  average  common  shares                                                                                            
  outstanding:                                                                                                                              
    Basic                                                          45,955          46,611          46,285          46,528  
    Diluted                                                      46,568          47,558          46,889          47,634  
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
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          Six  Months  Ended    
                                                                                June  30,                            June  30,            
                                                                  ---------------------  ---------------------
                                                                        2016              2015              2016              2015      
                                                                  ---------    ----------  ---------    ----------
Net  (loss)  income  attributable                                                                                            
  to  ARC  Document  Solutions,  Inc.                                                                                        
  shareholders                                        $  (55,904)  $        9,257  $  (53,330)  $      13,693
    Interest  expense,  net                            1,526              1,939          2,972              3,796
    Income  tax  (benefit)  provision      (10,015)                811        (8,046)            1,572
    Depreciation  and  amortization            7,890              8,520        15,880            17,075
                                                                  ---------    ----------  ---------    ----------
EBITDA                                                          (56,503)          20,527      (42,524)          36,136
    Loss  on  extinguishment  of  debt                44                    97                90                    97
    Goodwill  impairment                              73,920                    --        73,920                    --
    Trade  secret  litigation  costs                  --                    --                --                    34
    Restructuring  expense                                    5                    11                  7                    85
    Stock-based  compensation                          651                  921          1,423              2,004
                                                                  ---------    ----------  ---------    ----------
Adjusted  EBITDA                                    $    18,117    $      21,556  $    32,916    $      38,356
                                                                  =========    ==========  =========    ==========
                                                                                                                                                        
                                                                                                                                                        
                                                                                                                                                        
ARC  Document  Solutions,  Inc.                                                                                                
Net  Sales  by  Product  Line                                                                                                      
(In  thousands)                                                                                                                            
(Unaudited)                                                                                                                                  
                                                                                                                                                        
                                                                      Three  Months  Ended          Six  Months  Ended    
                                                                                June  30,                            June  30,            
                                                                  ---------------------  ---------------------
                                                                        2016              2015              2016              2015      
                                                                  ----------  ----------  ----------  ----------
Service  sales                                                                                                                              
CDIM                                                          $      54,860  $      58,835        108,525        113,477
MPS                                                                    34,055          37,134          67,286          73,011
AIM                                                                      3,666            3,367            7,405            6,173
                                                                  ----------  ----------  ----------  ----------
        Total  service  sales                            92,581          99,336        183,216        192,661
Equipment  and  supplies  sales                  11,189          14,053          24,104          25,047
                                                                  ----------  ----------  ----------  ----------
        Total  net  sales                            $    103,770  $    113,389  $    207,320  $    217,708
                                                                  ==========  ==========  ==========  ==========
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