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:	November 4, 2020			
(Date of earliest event reported)	
ARC Document Solutions, Inc.	
(Exact name of registrant as specified in its charter)	
						
Delaware	001-32407	20-1700361	
(State or other jurisdiction
of incorporation)	(Commission File Number)	(IRS Employer
Identification Number)	
						
12657 Alcosta Blvd, Suite 200	 San Ramon	CA	94583	
(Address of principal executive offices)	(Zip Code)	
		(925)	949-5100			
(Registrant's telephone number, including area code)	
Not Applicable
(Former Name or Former Address, if changed since last report)	

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered	
Common Stock, par value $0.001 per share	ARC	The New York Stock Exchange	

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨ 

Item 2.02. Results of Operations and Financial Condition

On November 4, 2020, ARC Document Solutions, Inc. (the “Company”) issued a press release reporting its financial results for the third quarter of the fiscal year ending December 31, 2020. A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference herein.

The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Item 9.01. Financial Statements and Exhibits

(d) Exhibits
           
    99.1       Press Release of ARC Document Solutions, Inc. dated November 4, 2020

SIGNATURE

      Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

						
Dated: November 4, 2020	ARC DOCUMENT SOLUTIONS, INC.
By:  /s/ Jorge Avalos                    
     Jorge Avalos
     Chief Financial Officer	

									
Exhibit Index	
Exhibit No.		Description	
		
99.1	  	ARC Document Solutions, Inc. Press Release dated November 4, 2020.	

ARC Continues to Exceed Expectations in the Third Quarter with Year-Over-Year Increases in EBITDA, EPS and Cash Flow from Operations

SAN RAMON, CA – (November 4, 2020) – ARC Document Solutions, Inc. (NYSE: ARC), a leading document solutions provider to professionals in the design, marketing, commercial real estate, construction and related fields, today reported its financial results for the third quarter ended September 30, 2020.

Financial Highlights:						
	Three Months Ended		Nine Months Ended	
	September 30,		September 30,	
(All dollar amounts in millions, except EPS)	2020	2019		2020	2019	
Net sales	$	72.4 		$	94.1 			$	225.1 		$	290.1 		
Gross margin	33.4 	%	32.3 	%		32.1 	%	32.7 	%	
	
Net income attributable to ARC	$	2.8 		$	1.1 			$	4.9 		$	2.2 		
Adjusted net income attributable to ARC	$	2.9 		$	1.6 			$	5.3 		$	5.4 		
Earnings per share - Diluted	$	0.07 		$	0.02 			$	0.11 		$	0.05 		
Adjusted earnings per share - Diluted	$	0.07 		$	0.04 			$	0.12 		$	0.12 		
Cash provided by operating activities	$	12.8 		$	10.8 			$	39.0 		$	29.8 		
EBITDA	$	12.1 		$	11.1 			$	33.3 		$	35.6 		
Adjusted EBITDA	$	12.5 		$	12.1 			$	34.6 		$	37.7 		
Capital Expenditures	$	2.5 		$	2.4 			$	5.1 		$	8.4 		

Management Commentary:
“The continuing strength of our quarterly performance clearly speaks to the validity of our long-term plans,” said Suri Suriyakumar, Chairman, President and CEO of ARC. “As the economic and cultural landscape continues to evolve in the face of the pandemic, we are adapting to the opportunities it presents for both new business and for refining our cost structure.”

“As we noted last month, returning shareholder value remains a key corporate objective, and ensuring consistent performance to support it has been an important part of our efforts since March,” Mr. Suriyakumar continued. “We are confident in our ability to continue our dividend and share repurchase programs in the future, and anticipate a re-commencement of both programs before the end of the year.”

“As a result of our performance over the past two quarters, the strength and staying power of ARC under its new configuration is clear,” said Jorge Avalos, Chief Financial Officer of ARC. “Sales of $72.4 million were very strong in the face of the continuing pandemic, and our EBITDA for the quarter actually grew year-over-year despite lower sales. Earnings per share more than doubled sequentially. Cash flow from operations grew considerably at $12.8 million for the quarter and $39 million year to date. Combined with a strong capital structure that includes a year-to-date cash balance increase of more than $20 million, we believe our ability to support our shareholders and to weather the continuing uncertainties in the coming winter months is assured.”

2020 Third Quarter Supplemental Information:
Net sales were $72.4 million, a 23.1% decrease compared to the third quarter of 2019.
Cash & cash equivalents on the consolidated balance sheet in the third quarter 2020 were $50.3 million.
Days sales outstanding were 51 in Q3 2020 and 55 in Q3 2019.

Architectural, engineering, construction and building owner/operators (AEC/O) customers comprised approximately 70% of total net sales, while customers outside of construction made up approximately 30% of total net sales.

The number of MPS locations have remained relatively flat year over year at approximately 10,800 as of September 30, 2020.

Net Revenue

In millions	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
Total net revenue	$	72.4 		$	64.3 		$	88.4 		$	382.4 		$	92.3 		$	94.1 		
For the third quarter 2020, net revenue declined 23.1%, or $21.7 million, compared to the third quarter of 2019, largely due to reduced sales resulting from the COVID-19 pandemic. Our Chinese Equipment and Supplies division accounted for $3.5 million of the revenue drop in the third quarter 2020.
Revenue by Business Lines

In millions	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
CDIM	$	47.1 		$	41.1 		$	49.2 		$	205.5 		$	49.8 		$	50.5 		
MPS	$	17.6 		$	16.2 		$	27.3 		$	123.3 		$	30.2 		$	30.6 		
AIM	$	2.9 		$	2.7 		$	3.6 		$	14.1 		$	3.7 		$	3.5 		
Equipment and supplies	$	4.7 		$	4.4 		$	8.4 		$	39.5 		$	8.6 		$	9.5 		
For the third quarter 2020, construction document and information management (CDIM) sales declined 6.7% compared to prior year, primarily due to the effects of the COVID-19 pandemic. Declines in CDIM sales were driven by a lack of demand for traditional printing services, particularly in the construction space, offset partially by non-traditional printing services such as color imaging for health and safety signage, as well as retail, promotional and marketing projects.
For the third quarter 2020, managed print services (MPS) sales declined 42.3% compared to prior year. MPS sales declined due to decreases in office print volumes at existing customer accounts as employees followed shelter-at-home orders beginning late in March.
For the third quarter 2020, archiving and information management (AIM) sales decreased 17.2% compared to prior year. Sales decreases in AIM were driven by factors similar to our MPS line as office work declined in the face of shelter-at-home orders in response to the COVID-19 pandemic.
For the third quarter 2020, equipment and supplies sales declined 50.3% compared to prior year. Declines were driven primarily by constrained capital spending in China due to the early and prolonged effects of the pandemic and their effect on our Chinese joint venture.
Gross Profit

In millions unless otherwise indicated	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
Gross profit	$	24.2 		$	20.4 		$	27.6 		$	125.2 		$	30.2 		$	30.4 		
   Gross margin	33.4 	%	31.8 	%	31.2 	%	32.7 	%	32.8 	%	32.3 	%	
The year-over-year gross profit decline in the third quarter of 2020 was due to lower sales volume. Gross profit margin increased by 110 basis points year-over-year despite $21.7 million in overall sales declines. It was aided by the drop in low margin Equipment and Supplies sales in China and cost saving activities in connection with the restructuring plan we initiated in the third quarter of 2019, as well as cost savings initiated in response to the current COVID-19 pandemic. With the sequential increase in sales during the third quarter of 2020, coupled with our reduced cost structure, this resulted in the 110 basis points increase in gross margins in the third quarter of 2020 as compared to the same period in the prior year.

Selling, General and Administrative Expenses

																					
In millions	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
Selling, general and administrative expenses	$	19.2 		$	17.3 		$	24.3 		$	107.3 		$	26.4 		$	26.0 		
Selling, general and administrative (SG&A) expenses in the third quarter 2020 declined by 26.3% year-over-year. The decrease was due to cost saving activities in connection with the restructuring plan we initiated in the third quarter of 2019, as well as cost savings initiated in response to the current pandemic.
Net Income and Earnings Per Share

In millions unless otherwise indicated	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
Net income attributable to ARC – GAAP	$	2.8 		$	1.5 		$	0.7 		$	3.0 		$	0.8 		$	1.1 		
Adjusted net income attributable to ARC	$	2.9 		$	1.2 		$	1.2 		$	6.8 		$	1.4 		$	1.6 		
							
Earnings per share attributable to ARC							
   Diluted EPS – GAAP	$	0.07 		$	0.03 		$	0.02 		$	0.07 		$	0.02 		$	0.02 		
   Adjusted diluted EPS	$	0.07 		$	0.03 		$	0.03 		$	0.15 		$	0.03 		$	0.04 		
Year-over-year increases in GAAP net income and adjusted net income attributable to ARC was driven by the increase in gross margin and the reduction in selling, general and administrative expenses noted above.
Cash Provided by Operating Activities

In millions	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
Cash provided by operating activities	$	12.8 		$	23.5 		$	2.8 		$	52.8 		$	23.0 		$	10.8 		
Cash provided by operating activities in the third quarter of 2020 increased by 18.1% year-over-year due to an increase in EBITDA, improved management of operating assets and liabilities, and aggressive cash management initiatives instituted in response to the COVID-19 pandemic.
EBITDA

In millions	3Q 2020	2Q 2020	1Q 2020	FYE 2019	4Q 2019	3Q 2019	
EBITDA	$	12.1 		$	10.3 		$	10.9 		$	45.9 		$	10.3 		$	11.1 		
Adjusted EBITDA	$	12.5 		$	10.7 		$	11.4 		$	49.4 		$	11.7 		$	12.1 		
Increases in EBITDA and adjusted EBITDA in the third quarter of 2020 were driven by significant declines in selling, general and administrative expenses as noted above.

	Three Months Ended	Nine Months Ended	
	September 30,	September 30,	
Sales from Services and Product Lines as a Percentage of Net Sales	2020	2019	2020	2019	
CDIM	65.1 	%	53.7 	%	61.0 	%	53.6 	%	
MPS	24.4 	%	32.5 	%	27.2 	%	32.1 	%	
AIM	4.0 	%	3.7 	%	4.1 	%	3.6 	%	
Equipment and supplies sales	6.5 	%	10.1 	%	7.7 	%	10.7 	%	

Outlook
Due to the economic uncertainty driven by the COVID-19 pandemic, ARC has withdrawn its forecast for 2020 until such time as more reliable indicators become available.
Teleconference and Webcast
ARC Document Solutions will hold a conference call with investors and analysts on Wednesday, November 4, 2020, at 2 P.M. Pacific Time (5 P.M. Eastern Time) to discuss results for the Company's 2020 third quarter. To access the live audio call, dial (833) 968-2212. International callers may join the conference by dialing (778) 560-2897. The conference code is 6392324 and will be required to dial in to the call. A live webcast will also be made available on the investor relations page of ARC Document Solution's website at http://ir.e-arc.com. A replay of the webcast will be available on the website following the call's conclusion.
About ARC Document Solutions (NYSE: ARC)
ARC provides a wide variety of document distribution and graphic production services to facilitate communication for professionals in the design, marketing, commercial real estate, construction and related fields. Follow ARC at www.e-arc.com.
Forward-Looking Statements
This press release contains forward-looking statements that are based on current opinions, estimates and assumptions of management regarding future events and the future financial performance of the Company, including forward-looking statements related to the impact of the COVID-19 pandemic on the Company’s operations. Words and phrases such as “we are adapting to the opportunities”, “we are confident in our ability”, “we believe our ability to support our shareholders and to weather the continuing uncertainties in the coming winter months is assured”, “anticipate”, and “assured”, and similar expressions identify forward-looking statements and all statements other than statements of historical fact, including, but not limited to, any projections regarding earnings, revenues and financial performance of the Company, could be deemed forward-looking statements. We caution you that such statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. In addition to matters affecting the construction, managed print services, document management or reprographics industries, or the economy generally, factors that could cause actual results to differ from expectations stated in forward-looking statements include, among others, the factors described in the caption entitled “Risk Factors” in Item 1A in ARC Document Solution's Annual Report on Form 10-K for the fiscal year ended December 31, 2019, Quarterly Reports on Form 10-Q, and other periodic filings and prospectuses. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.

Contact Information:
David Stickney
VP Corporate Communications & Investor Relations
925-949-5114

									
ARC Document Solutions, Inc.			
Consolidated Balance Sheets			
(In thousands, except per share data)			
(Unaudited)			
	September 30,	December 31,	
Current assets:	2020	2019	
Cash and cash equivalents	$	50,342 		$	29,425 		
Accounts receivable, net of allowances for accounts receivable of $2,305 and $2,099	41,322 		51,432 		
Inventory	10,502 		13,936 		
	
Prepaid expenses	4,663 		4,783 		
Other current assets	4,051 		6,807 		
Total current assets	110,880 		106,383 		
Property and equipment, net of accumulated depreciation of $223,197 and $210,849	62,971 		70,334 		
Right-of-use assets from operating leases	37,743 		41,238 		
Goodwill	121,051 		121,051 		
Other intangible assets, net	641 		1,996 		
Deferred income taxes	17,287 		19,755 		
Other assets	2,127 		2,400 		
Total assets	$	352,700 		$	363,157 		
Current liabilities:			
Accounts payable	$	19,317 		$	23,231 		
Accrued payroll and payroll-related expenses	10,798 		14,569 		
Accrued expenses	17,167 		20,440 		
Current operating lease liabilities	11,779 		11,060 		
Current portion of finance leases	18,748 		17,075 		
Total current liabilities	77,809 		86,375 		
Long-term operating lease liabilities	34,082 		37,260 		
Long-term debt and finance leases	87,374 		89,082 		
	
Other long-term liabilities	500 		400 		
Total liabilities	199,765 		213,117 		
Commitments and contingencies	  	  	
Shareholders’ equity:			
ARC Document Solutions, Inc. shareholders’ 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; 49,911 and 49,189 shares issued and 43,863 and 45,228 shares outstanding	50 		49 		
Additional paid-in capital	127,505 		126,117 		
Retained earnings	36,477 		31,969 		
Accumulated other comprehensive loss	(3,611)		(3,357)		
	160,421 		154,778 		
Less cost of common stock in treasury, 6,048 and 3,960 shares	13,842 		11,410 		
Total ARC Document Solutions, Inc. shareholders’ equity	146,579 		143,368 		
Noncontrolling interest	6,356 		6,672 		
Total equity	152,935 		150,040 		
Total liabilities and equity	$	352,700 		$	363,157 		

															
ARC Document Solutions, Inc.					
Consolidated Statements of Operations					
(In thousands, except per share data)					
(Unaudited)	Three Months Ended	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	

Net sales	$	72,379 		$	94,104 		$	225,123 		$	290,099 		
Cost of sales	48,186 		63,702 		152,888 		195,174 		
Gross profit	24,193 		30,402 		72,235 		94,925 		
Selling, general and administrative expenses	19,186 		26,025 		60,816 		80,881 		
Amortization of intangible assets	285 		718 		1,353 		2,480 		
	
Restructuring expense	— 		311 		— 		311 		
Income from operations	4,722 		3,348 		10,066 		11,253 		
Other income, net	(11)		(17)		(44)		(53)		
	
Interest expense, net	871 		1,264 		3,111 		4,066 		
Income before income tax provision	3,862 		2,101 		6,999 		7,240 		
Income tax provision	1,234 		1,042 		2,489 		5,222 		
Net income	2,628 		1,059 		4,510 		2,018 		
Loss attributable to the noncontrolling interest	163 		16 		425 		173 		
Net income attributable to ARC Document Solutions, Inc. shareholders	$	2,791 		$	1,075 		$	4,935 		$	2,191 		
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:					
Basic	$	0.07 		$	0.02 		$	0.11 		$	0.05 		
Diluted	$	0.07 		$	0.02 		$	0.11 		$	0.05 		
Weighted average common shares outstanding:					
Basic	42,747 		44,978 		43,017 		45,107 		
Diluted	42,918 		44,992 		43,160 		45,213 		

															
ARC Document Solutions, Inc.					
Consolidated Statements of Cash Flows					
(In thousands)					
(Unaudited)	Three Months Ended	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	
Cash flows from operating activities					
Net income	$	2,628 		$	1,059 		$	4,510 		$	2,018 		
Adjustments to reconcile net income to net cash provided by operating activities:					
Allowance for accounts receivable	189 		76 		706 		430 		
Depreciation	6,938 		7,030 		21,402 		21,600 		
Amortization of intangible assets	285 		718 		1,353 		2,480 		
Amortization of deferred financing costs	16 		52 		48 		162 		

Stock-based compensation	413 		622 		1,333 		1,854 		
Deferred income taxes	1,175 		782 		2,419 		4,684 		
Deferred tax valuation allowance	50 		89 		22 		115 		
Restructuring expense, non-cash portion	— 		46 		— 		46 		

Other non-cash items, net	258 		(120)		226 		(209)		
Changes in operating assets and liabilities:					
Accounts receivable, net	1,144 		1,836 		9,310 		(258)		
Inventory	1,527 		1,011 		3,469 		1,242 		
Prepaid expenses and other assets	3,754 		3,113 		10,765 		7,094 		
Accounts payable and accrued expenses	(5,617)		(5,507)		(16,548)		(11,464)		
Net cash provided by operating activities	12,760 		10,807 		39,015 		29,794 		
Cash flows from investing activities					
Capital expenditures	(2,472)		(2,401)		(5,053)		(8,406)		
	
Other	170 		41 		250 		342 		
Net cash used in investing activities	(2,302)		(2,360)		(4,803)		(8,064)		
Cash flows from financing activities					
	
Proceeds from issuance of common stock under Employee Stock Purchase Plan	15 		28 		55 		109 		
Share repurchases	— 		(319)		(2,432)		(1,186)		
Contingent consideration on prior acquisitions	— 		— 		— 		(3)		

	
Payments on finance leases and long-term debt agreements	(3,936)		(6,105)		(10,236)		(17,551)		
Borrowings under revolving credit facilities	5,000 		6,500 		45,000 		19,750 		
Payments under revolving credit facilities	(20,000)		(10,000)		(45,000)		(31,000)		

Dividends paid	— 		— 		(870)		— 		
Net cash used in financing activities	(18,921)		(9,896)		(13,483)		(29,881)		
Effect of foreign currency translation on cash balances	374 		511 		188 		(479)		
Net change in cash and cash equivalents	(8,089)		(938)		20,917 		(8,630)		
Cash and cash equivalents at beginning of period	58,431 		21,741 		29,425 		29,433 		
Cash and cash equivalents at end of period	$	50,342 		$	20,803 		$	50,342 		$	20,803 		
Supplemental disclosure of cash flow information					
Noncash investing and financing activities					
Finance lease obligations incurred	$	1,546 		$	4,193 		$	9,624 		$	13,010 		
Operating lease obligations incurred	$	938 		$	898 		$	4,582 		$	3,257 		

	

															
ARC Document Solutions, Inc.
Net Sales by Product Line
(In thousands)
(Unaudited)					
	 Three Months Ended	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	
	
CDIM	$	47,107 		$	50,502 		$	137,337 		$	155,701 		
MPS	17,648 		30,607 		61,189 		93,092 		
AIM	2,910 		3,516 		9,163 		10,380 		
	
Equipment and supplies sales	4,714 		9,479 		17,434 		30,926 		
Net sales	$	72,379 		$	94,104 		$	225,123 		$	290,099 		

															
ARC Document Solutions, Inc.
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBITDA and Adjusted EBITDA
(In thousands)
(Unaudited)			
	Three Months Ended	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	
Cash flows provided by operating activities	$	12,760 		$	10,807 		$	39,015 		$	29,794 		
Changes in operating assets and liabilities	(808)		(453)		(6,996)		3,386 		
Non-cash expenses, including depreciation and amortization	(9,324)		(9,295)		(27,509)		(31,162)		
Income tax provision	1,234 		1,042 		2,489 		5,222 		
Interest expense, net	871 		1,264 		3,111 		4,066 		
Loss attributable to the noncontrolling interest	163 		16 		425 		173 		
	
Depreciation and amortization	7,223 		7,748 		22,755 		24,080 		
EBITDA	12,119 		11,129 		33,290 		35,559 		

	
Restructuring expense	— 		311 		— 		311 		
Stock-based compensation	413 		622 		1,333 		1,854 		
Adjusted EBITDA	$	12,532 		$	12,062 		$	34,623 		$	37,724 		

See Non-GAAP Financial Measures discussion below.

															

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	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	
Net income attributable to ARC Document Solutions, Inc.	$	2,791 		$	1,075 		$	4,935 		$	2,191 		
Interest expense, net	871 		1,264 		3,111 		4,066 		
Income tax provision	1,234 		1,042 		2,489 		5,222 		
	
Depreciation and amortization	7,223 		7,748 		22,755 		24,080 		
EBITDA	12,119 		11,129 		33,290 		35,559 		

	
Restructuring expense	— 		311 		— 		311 		
Stock-based compensation	413 		622 		1,333 		1,854 		
Adjusted EBITDA	$	12,532 		$	12,062 		$	34,623 		$	37,724 		
See Non-GAAP Financial Measures discussion below.

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	Nine Months Ended	
	September 30,	September 30,	
	2020	2019	2020	2019	
Net income attributable to ARC Document Solutions, Inc.	$	2,791 		$	1,075 		$	4,935 		$	2,191 		

Restructuring expense	— 		311 		— 		311 		

	
Income tax benefit related to above items	— 		(81)		— 		(81)		
Deferred tax valuation allowance and other discrete tax items	99 		321 		358 		2,939 		
Adjusted net income attributable to ARC Document Solutions, Inc.	$	2,890 		$	1,626 		$	5,293 		$	5,360 		
					
Actual:					
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:					
Basic	$	0.07 		$	0.02 		$	0.11 		$	0.05 		
Diluted	$	0.07 		$	0.02 		$	0.11 		$	0.05 		
Weighted average common shares outstanding:					
Basic	42,747 		44,978 		43,017 		45,107 		
Diluted	42,918 		44,992 		43,160 		45,213 		
					
Adjusted:					
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:					
Basic	$	0.07 		$	0.04 		$	0.12 		$	0.12 		
Diluted	$	0.07 		$	0.04 		$	0.12 		$	0.12 		
Weighted average common shares outstanding:					
Basic	42,747 		44,978 		43,017 		45,107 		
Diluted	42,918 		44,992 		43,160 		45,213 		
See Non-GAAP Financial Measures discussion below.

Non-GAAP Financial Measures
EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating, investing or financing activities as a measure of our liquidity.
EBITDA represents net income before interest, taxes, depreciation and amortization.
We have presented EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.
We use EBITDA to measure and compare the performance of our operating segments. Our operating segments’ financial performance includes all of the operating activities except debt and taxation which are managed at the corporate level for U.S. operating segments. We use EBITDA to compare the performance of our operating segments and to measure performance for determining consolidated-level compensation. In addition, we use EBITDA to evaluate potential acquisitions and potential capital expenditures.
EBITDA and related ratios have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:
•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.
Because of these limitations, EBITDA and related ratios should not be considered as measures of discretionary cash available to us to invest in business growth or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and related ratios only as supplements.
Our presentation of adjusted net income and adjusted EBITDA is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail in the reconciliation tables above.
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, 2020 and 2019 to exclude restructuring expense and to reflect the exclusion of 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, 2020 and 2019.
We have presented adjusted EBITDA for the three and nine months ended September 30, 2020 and 2019 to exclude stock-based compensation expense and restructuring expense. The adjustment of EBITDA 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.