UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________________________ 
Form 10-K
  _______________________________________ 
(Mark One)

		
ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the Fiscal Year Ended December 31, 2014
or

		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	
For the transition period from                      to                     
Commission File Number: 001-32407
_______________________________________ 
ARC DOCUMENT SOLUTIONS, INC.
(Exact name of Registrant as specified in its Charter)
_______________________________________ 

		
Delaware	20-1700361	
(State or other jurisdiction of
incorporation or organization)	(I.R.S. Employer
Identification No.)	
1981 N. Broadway, Suite 385
Walnut Creek, California 94596
(925) 949-5100
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

	
			
Title of Each Class	 	Name of Each Exchange on Which Registered	
Common Stock, par value $0.001 per share	 	New York Stock Exchange	
Securities registered pursuant to Section 12(g) of the Act: NONE  
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     Yes   ¨     No   ý
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     Yes   ¨     No   ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ý     No   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ý     No   ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ý
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer ¨ Accelerated filer ý Non-accelerated filer ¨ Smaller reporting company ¨ (Do not check if a smaller reporting company)
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes   ¨     No   ý
Based on the closing price of $5.86 of the registrant’s Common Stock on the New York Stock Exchange on June 30, 2014 (the last business day of the registrant’s most recently completed second fiscal quarter), the aggregate market value of the voting common equity held by non-affiliates of the registrant on that date was approximately $243,838,415 .
As of February 27, 2015 , there were 46,836,307 shares of the Registrant’s common stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant’s definitive Proxy Statement on Form 14A for its 2015 Annual Meeting of Stockholders are incorporated by reference in this Annual Report on Form 10-K in Part III.

_______________________________________ 

ARC DOCUMENT SOLUTIONS, INC.
ANNUAL REPORT ON FORM 10-K
For the Fiscal Year Ended December 31, 2014
Table of Contents
 
Page

		
PART I	5	
Item 1. Business	5	
Item 1A. Risk Factors	10	
Item 1B. Unresolved Staff Comments	14	
Item 2. Properties	14	
Item 3. Legal Proceedings	14	
Item 4. Mine Safety Disclosures	14	
PART II	15	
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	15	
Item 6. Selected Financial Data	17	
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations	19	
Item 7A. Quantitative and Qualitative Disclosures About Market Risk	39	
Item 8. Financial Statements and Supplementary Data	39	
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39	
Item 9A. Controls and Procedures	39	
Item 9B. Other Information	42	
PART III	42	
Item 10. Directors, Executive Officers and Corporate Governance	42	
Item 11. Executive Compensation	42	
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	42	
Item 13. Certain Relationships and Related Transactions, and Director Independence	42	
Item 14. Principal Accountant Fees and Services	42	
PART IV	43	
Item 15. Exhibits and Financial Statement Schedules	43	
Signatures	50	
Exhibit 21.1	 	
Exhibit 23.1	 	
Exhibit 31.1	 	
Exhibit 31.2	 	
Exhibit 32.1	 	
Exhibit 32.2	 	
Exhibit 101 INS	 	
Exhibit 101 SCH	 	
Exhibit 101 CAL	 	
Exhibit 101 LAB	 	
Exhibit 101 PRE	 	

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ARC DOCUMENT SOLUTIONS, INC.
2014 ANNUAL REPORT ON FORM 10-K
In this Annual Report on Form 10-K, “ARC Document Solutions,” “ARC,” “the Company,” “we,” “us,” and “our” refer to ARC Document Solutions, Inc., a Delaware corporation, and its consolidated subsidiaries, unless the context otherwise dictates.
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Annual Report on Form 10-K, the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “target,” “likely,” “will,” “would,” “could,” and variations of such words and similar expressions as they relate to our management or to the Company are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated herein. We have described in Part I, Item 1A-“Risk Factors” a number of factors that could cause our actual results to differ from our projections or estimates. These factors and other risk factors described in this report are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.
Except where otherwise indicated, the statements made in this Annual Report on Form 10-K are made as of the date we filed this report with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We undertake no obligation, and specifically disclaim any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we make in future filings of our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, and Current Reports on Form 8-K, and any amendments thereto, as well as our proxy statements.
TRADEMARKS AND TRADE NAMES
We own or have rights to a number of trademarks, service marks, and trade names that we use in conjunction with the operation of our business, including the name and design mark “ARC Document Solutions,” “ARC American Reprographics Company ® ,” “PlanWell ® ,” “PlanWell PDS ® ,” “Riot Creative Imaging ® ,” and various design marks associated therewith. We have a service mark application pending for “SKYSITE” with the United States Patent and Trademark Office (USPTO). In addition, we own or have rights to various trademarks, service marks, and trade names that we use regionally in conjunction with our operations. This report also includes trademarks, service marks and trade names of other companies.

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PART I
Item 1. Business
Our Company
ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC,” “we,” “us,” or “our”), a Delaware corporation, is a leading document solutions provider to businesses of all types, with an emphasis on the non-residential segment of the architecture, engineering and construction (“AEC”) industry. We help our customers reduce their costs and improve efficiency in the use of their documents, improve their access and control over documents, and offer a wide variety of ways to print, produce, distribute, collaborate on, and store documents.
Our offerings include:
Managed Print Services (“MPS”) – An onsite service where we install a complete document solution platform in our customers’ offices on an outsourced basis. We use our proprietary software, Abacus, to capture, control, manage, print, account for and store documents. We also supply, maintain, and manage entire office printing networks, including printing equipment. We bill for this service on a per-use basis and issue a single consolidated invoice.
Facilities Management (“FM”) – An onsite service where we install large-format print devices and other related equipment in our customers’ offices on an outsourced basis, primarily for construction-related project printing. We provide customers with complete cost recovery programs enabled by our proprietary software, Abacus, which allows our customers to capture and pass through their project expenses related to print. We bill for this service on a per-use basis and issue a single consolidated invoice.
Offsite Services – We operate 178 offsite service centers in major metropolitan markets in the U.S. and abroad which offer our MPS and FM customers flexibility and overflow capacity during peak workloads, as well as local support and maintenance staff. Our service centers also provide local customers with high-volume, project-related printing of construction documents, and increasingly support and enhance our customers’ scanning needs in archive and information management (“AIM”) services.
Archive and Information Management (“AIM”) –We enable our customers to store information and intellectual property in a cloud-based and searchable digital archive. We do this by scanning existing paper documents or importing digital documents, organizing them, and storing them in our proprietary content management software. We also offer the ability to add documents to the digital archive as they are printed.
Specialized Color Printing – We operate a nationwide network of production centers focused on color printing, finishing, and assembly of graphic materials for regional and national retailers, franchises, marketing departments, theme parks, and cultural institutions.
Web-Based Document Management Applications – We develop and offer proprietary tools to our customers that facilitate project collaboration, manage print networks, track equipment fleets, create and maintain project document archives, and other document and content management tasks.
Digital Shipping / Managed File Transfer – We enable our customers to “distribute-then-print” documents rather than printing locally and then shipping physical documents to their final destination. Using our cloud-based software, ishipdocs, we save our customers time, money, and support their “green” business practices by digitally transmitting document files closest to their delivery point, and then printing and delivering locally from an ARC service center or from one of our partner locations around the world.
Equipment and Supplies Sales – We sell equipment and supplies primarily to customers in the AEC industry and provide ancillary services such as service and maintenance.

The combination of our services allows us to provide a comprehensive document management ecosystem where any document, anywhere in the enterprise, can be captured, stored, managed, accessed, and distributed anywhere in the world.
Our online services are administered via a powerful cloud solution hosted by Amazon which provides best-in-class speed, reliability, scalability and security. In January 2015, we launched SKYSITE, an integrated cloud-based construction document management solution with automated mobile and desktop syncing capabilities.
We believe we are the largest document solutions provider to the AEC market in North America, and the only national provider offering onsite, offsite and cloud-based document management solutions for regional, national and global customers. We offer comprehensive services across geographical boundaries and frequently bill under a single monthly invoice, consolidating purchasing, vendor relations, and administration for companies seeking a unified document management platform.

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We serve our clients' onsite in their offices in approximately 8,500 locations, and offsite or virtually through a combination of 178 service centers globally, a variety of web-based applications and software, and a global network of service partners. We operate in major metropolitan markets across the U.S., with meaningful operations in China, Canada, and the United Kingdom.
Our origins lie in the reprographics industry and we still maintain robust reprographics operations. We believe that we are the largest reprographics company in the United States as measured by revenue, number of customers, and number of service centers.
Our base of more than 90,000 customers includes most of the largest AEC firms in North America, and many of the top design and construction companies in the world. Our legacy as the largest reprographics company in the U.S. has allowed us to leverage our relationships, domain expertise, and national presence as we have evolved into a technology-enabled document solutions company.
Our largest customers are served by a corporate sales force called Global Solutions. This sales force is focused on large regional and national customers. Our diverse customer base results in no individual customer accounting for more than 4% of our overall revenue.

ARC was organized as a limited liability company under the name American Reprographics Holdings L.L.C. (“Holdings”) in 1997. In 2005, we reorganized as a Delaware corporation in connection with our initial public offering. While our service centers historically marketed their offerings under local brand names, we consolidated our operations under a single brand, “ARC,” in 2011 in order to highlight the scope and scale of our business, and to generate synergies in our overall national marketing efforts to the consolidating AEC market. At the end of 2012 we formally changed our corporate name to “ARC Document Solutions, Inc.,” leaving our New York Stock Exchange ticker symbol “ARC” unchanged. We conduct our operations through our wholly-owned subsidiary, ARC Document Solutions, LLC, a Texas limited liability company, and its affiliates.

Principal Products and Services
We report revenues from our service and product offerings under the following categories:
Onsite Services consists of MPS and FM service offerings.
Digital Services consists of digital document management services of all kinds, including AIM, “digital shipping” and managed file transfer, software licensing, and technology consulting services.
Color Services consists of specialized digital color printing and finishing services for our non-AEC and traditional AEC customer base. This includes services provided under our Riot Creative Imaging brand.
Traditional Reprographics consists of the management, distribution and print-on-demand of black and white construction drawings (frequently referred to as “blueprints”) and specification books, with the majority of revenue reported from the sale of large- and small-format black and white printing. These services are provided "off customer site" at our service centers.
Equipment and Supplies consists of reselling printing, imaging, and related equipment, as well as supplies to customers primarily in the AEC industry.
Operations
Our products and services are available from any of our 178 service centers around the world, and nearly all of our services can be made available in our customers’ offices. Our geographic presence is concentrated in the U.S., with additional service centers in Canada, China, and the United Kingdom. Our corporate headquarters are located in Walnut Creek, California.
Historically, our business grew through acquisitions to expand our share of the reprographics market and enhance our geographic footprint to serve our larger customers. Since our inception we have acquired more than 140 companies. As we have consolidated, diversified our service offerings, and optimized our operations during the past several years, we have limited recent acquisition activity in order to focus on organic sales growth. Our origin as a company was in California, and our early acquisition activity was concentrated there. We still derive approximately 30% of our total revenue from California.
We operate a technology center in Silicon Valley with approximately 20 employees who develop, maintain, and support our software. We operate a similar facility in Kolkata, India, with approximately 140 employees who, in addition to supporting our efforts of our Silicon Valley team, also support our research and development efforts. All of our production facilities are connected via a high-performance, dedicated, wide-area network, to facilitate data transmissions to and from our customers, our operating facilities and our cloud hosted by Amazon. We employ a combination of proprietary and industry-leading technologies to provide redundancy, backup and security of all data in our systems.

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Historically, the majority of our revenue has been derived from customers engaged in the seasonal, non-residential construction market. While our Traditional Reprographics business is still influenced by the non-residential seasonality and building cycles, our other offerings are less so. Onsite Services are driven by the generation of office documents and our customers' desire to improve business processes and reduce print-related costs. Color Services are affected by retail marketing calendars, advertising campaigns, as well as the marketing needs of our architectural and real estate development clients. Our Digital Services are influenced primarily by the desire for document workflow improvements and our ability to market our technology-based solutions. Equipment and Supplies Sales are driven by purchasing cycles of individual customers, as well as by new features and advancements by manufacturers.
As of December 31, 2014 , the company employed approximately 2,600 employees.
Our Customers and Markets
We serve both the enterprise and project content management needs of companies primarily within the AEC industry. Our customers include senior management teams, IT and procurement departments, project architects, engineers, general contractors, and others.
The mix of services demanded by the AEC industry continues to shift toward document management for a wide variety of document types provided at customer locations (represented primarily by our Onsite Services revenues), and away from its historical emphasis on printing of large-format black and white construction drawings in our service centers (represented primarily by our Traditional Reprographics revenue line). We believe the market forces of the recent recession and its aftermath are causing our customers in the construction industry to emphasize efficiency in their production and distribution of printed documents, to reduce their dependence on print as it relates to construction projects, and to improve access and control over all the documents related to their business. We also believe that consolidation in the AEC industry is contributing to this trend as companies seek to reduce costs, eliminate redundant business practices, and procure products and services from vendors who can centrally serve their business with a comprehensive offering.
We believe that these trends are advantageous to us for four reasons: first, we are well-positioned to provide our customers with web applications and cloud-based offerings to meet their demand for technology-enabled content management services; second, our diversification into services such as MPS allow us to capture long-term contracted revenue streams that are less exposed to the volatility and cyclicality of project-related printing; third, as our customers merge, consolidate, and grow larger, we believe ARC becomes a more compelling choice because of our extensive geographic reach and ability to act as a single-source supplier of document solutions; and fourth, our market-leading presence as a traditional reprographer in major metropolitan areas allows us to capture large-format printing and document management work associated with local building projects.
In addition to the AEC industry, we also provide document management and printing services to customers in the retail, technology, entertainment, and healthcare industries, among others. A significant portion of our non-AEC revenues are derived from supplying Color Services to customers with short-run, high quality, frequently updated promotional, advertising and marketing materials. We market these services under a separate brand known as Riot Creative Imaging. Likewise, our Digital Services appeal to companies outside of the construction industry, but with similar document management needs, including manufacturers, airlines, and healthcare/hospital companies.
In general, we address customers based on size and geographic reach. Local markets tend to be highly fragmented with a wide variety of specialized, geographically differentiated business practices. We serve smaller customers in these markets with service offerings aligned with local market expectations. Larger regional, national and international customers often consolidate purchasing and the acquisition of services through a single corporate department, and seek centralized management of document solutions. We serve these customers with a corporate sales force called Global Solutions.
Competition
The level of competition varies in each of the areas in which we provide services. Further, we believe we are unique; that no other company provides the complete portfolio of services and products we provide. We compete with different firms in our different business lines who can provide a portion of our services. However, we do not know of any other firm that can provide a full suite of physical and digital content management services similar to our offering. We believe service levels, breadth of offering, terms and conditions, price, quality, responsiveness, and convenience to the customer are competitive elements in each of the industry segments in which we compete.
In addressing larger local and regional customers, there are several companies that provide onsite and reprographic print services, but in general these companies cannot provide or integrate software or technology that enables the digital management of documents and centralized cost control management that we provide. More specifically, in our local onsite services, we often compete against print equipment resellers. These resellers are limited to enabling customers’ print needs by selling or leasing print

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equipment to the customer and the customer thereby incurs a fixed cost. In comparison, our customers pay per use and take advantage of our print recovery and document management software, Abacus and PlanWell. In our Traditional Reprographics and Color Services businesses, local copy shops and self-serve franchises are often aggressive competitors for printing business, but rarely offer the breadth of document management and logistics services we do.
With regard to large national and international customers, there are no other document solutions companies in the U.S. with the national presence and global reach that we have established, but we often compete against equipment manufacturers and business suppliers who offer some of the same products and services we do. Related services are offered by large printing/multifunctional device manufacturers such as Xerox, Canon, Konica Minolta, Ricoh, and Sharp, but most offerings from these companies are focused on selling equipment as opposed to ARC’s offering of comprehensive document management services for both project and enterprise documents. Further, our deep knowledge of the AEC industry document workflows, which is incorporated into our software, provides us an advantage against local printers and national equipment manufacturers.
We believe that we have a strong competitive position in the marketplace for the following reasons:
Strong domain expertise : No other national vendor/service provider possesses the document management and technology expertise that we have in the AEC market. Construction professionals have highly specialized needs in document capture, short-term storage, management, fulfillment, distribution, and archival services. We believe our domain expertise is unmatched thanks to our legacy in reprographics and software development.
Customer relationships in AEC industry : Our relationships with our local customers frequently span generations, and we do business with nearly all of the top 100 AEC companies in the U.S. In addition, our Global Solutions sales force has established long-term contract relationships with 22 of the largest 50 AEC firms. We believe this provides a competitive advantage by leveraging our success through referrals.
Service center footprint : We possess an extensive national network of service centers creating an extraordinary distribution and customer service solution that can cater to both large and small customers. We operate service centers in more than 140 cities in the U.S., and in 37 states. We also have a significant market presence in Canada and China, and growing operations in India and the U.K. We are not aware of any other provider of MPS that has as extensive a network to supplement their onsite services and provide overflow and remote document management and printing capabilities.
Equipment agnostic : We are not required to sell or use any particular brands of equipment, nor do we manufacture equipment. We are free to place the products best suited for the required task in our own service centers or in our customers’ offices, regardless of manufacturer. Additionally, with respect to our Onsite Services, as our customers' document management needs evolve over their respective contract terms, we have the ability to replace the equipment previously deployed to ensure that the equipment placed at our customers' sites are best suited for the required tasks. This, combined with the competitive market for printing and imaging products, provides us with an advantage relative to onsite service providers owned by equipment manufacturers.
Capabilities in a wide variety of formats : Several equipment manufacturers who also market managed print services do not produce the full range of large- and small-format equipment demanded by the AEC, manufacturing, and building industries. In addition, we are not aware of any manufacturers that provide the breadth of services and technology related to large- and small-format document production that we possess.
Unique combination of Onsite, Offsite, and Cloud-based offerings: We are the only national company that integrates (1) document production at customer sites (Onsite), (2) document production at company service centers (Offsite), and (3) digital management of documents in the cloud. We have proprietary technology built by our own development team that interacts with our production machines. We believe we are the only company that both develops document management software and manages the equipment that produces documents.
Suppliers and Vendors
We purchase or lease equipment for use in our production facilities and at our customers’ sites. We also purchase paper, toner and other consumables for the operation of our and our customers’ production equipment. As a high-volume purchaser, we believe we receive favorable prices as compared to other service providers, and price increases have been historically passed on to customers.
Our primary vendors of equipment, maintenance services, and reprographics supplies include Canon Solutions America (Océ), Azerty, and Veritiv, formerly Xpedx. Purchases from these vendors during 2014 comprised approximately 33% of our total purchases of inventory and supplies. Although there are a limited number of suppliers that could supply our inventory, we believe any shortfalls from existing suppliers would be absorbed from other suppliers on comparable terms.
Research and Development

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We conduct research and development to support the design and testing of new technology or enhancements and maintenance to existing technology. Such costs are expensed as incurred primarily recorded to cost of sales. In total, research and development costs amounted to $6.3 million , $5.5 million , and $5.4 million during the fiscal years ended December 31, 2014 , 2013 , and 2012 , respectively.
Proprietary Rights
We rely on a combination of copyright, trademark and trade secret laws, license agreements, nondisclosure and non-competition agreements, reseller agreements, customer contracts, and technical measures to establish and protect our rights in our proprietary technology. We also rely on a variety of technologies that are licensed from third parties to perform key functions.

We have registered “ARC Document Solutions,” as well as our historical name and logo, “ARC American Reprographics Company,” as service marks in the U.S. with the United States Patent and Trademark Office (USPTO). We have a service mark application, pending registration, for “SKYSITE” with the USPTO, and we have registered “PlanWell,” “PlanWell PDS” and "Riot Creative Imaging" as trademarks with the USPTO and in other countries. We do not own any other registered trademarks or service marks, or any patents, that are material to our business.
For a discussion of the risks associated with our proprietary rights, see Item 1A — “Risk Factors — Our failure to adequately protect the proprietary aspects of our technology, including SKYSITE, PlanWell, and Abacus, may cause us to lose market share.”
Executive Officers of the Registrant
The following sets forth certain information regarding all of our executive officers as of March 3, 2015:

	
					
Name	 	Age	 	Position	
Kumarakulasingam Suriyakumar	 	61	 	Chairman, President and Chief Executive Officer Director	
Jorge Avalos	 	39	 	Chief Financial Officer	
Rahul K. Roy	 	55	 	Chief Technology Officer	
Dilantha Wijesuriya	 	53	 	Chief Operating Officer	
D. Jeffery Grimes	 	51	 	Vice President, Senior Corporate Counsel and Corporate Secretary	
Kumarakulasingam (“Suri”) Suriyakumar has served as our President and Chief Executive Officer since June 1, 2007, and he served as the Company’s President and Chief Operating Officer from 1991 until his appointment as Chief Executive Officer. On July 24, 2008, Mr. Suriyakumar was appointed Chairman of our Board of Directors. Mr. Suriyakumar served as an advisor of Holdings from March 1998 until his appointment as a director of the Company in October 2004. Mr. Suriyakumar joined Micro Device, Inc. (our predecessor company) in 1989. He became the Vice President of Micro Device, Inc. in 1990. Prior to joining the Company, Mr. Suriyakumar was employed with Aitken Spence & Co. LTD, a highly diversified conglomerate and one of the five largest corporations in Sri Lanka.

Jorge Avalos was appointed Chief Financial Officer of the Company on February 1, 2015. Prior to his appointment to Chief Financial Officer, Mr. Avalos served as Chief Accounting Officer and Vice President Finance of the Company, positions he held since April 14, 2011. Mr. Avalos joined the Company in June 2006 as the Company’s Director of Finance, and became the Company’s Corporate Controller in December 2006, and Vice President, Corporate Controller in December 2010. From March 2005 through June 2006, Mr. Avalos was employed with Vendare Media Group, an online network and social media company, as its controller. From September 1998 through March 2005, Mr. Avalos was employed with PricewaterhouseCoopers LLP, a global professional services firm focusing on audit and assurance, tax and advisory services.
Rahul K. Roy joined Holdings as its Chief Technology Officer in September 2000. Prior to joining the Company, Mr. Roy was the founder, President and Chief Executive Officer of MirrorPlus Technologies, Inc., which developed software for the reprographics industry, from August 1993 until it was acquired by the Company in 1999. Mr. Roy also served as the Chief Operating Officer of InPrint, a provider of printing, software, duplication, packaging, assembly and distribution services to technology companies, from 1993 until it was acquired by the Company in 1999.
Dilantha ("Dilo") Wijesuriya joined Ford Graphics, a former division of the Company, in January 1991. He subsequently became president of that division in 2001, and became a Company regional operations head in 2004, which position he retained until his appointment as the Company’s Senior Vice President, National Operations in August 2008. Mr. Wijesuriya was appointed Chief Operating Officer of the Company on February 25, 2011. Prior to his employment with the Company, Mr. Wijesuriya was

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a divisional manager with Aitken Spence & Co. LTD, a highly diversified conglomerate and one of the five largest corporations in Sri Lanka.
D. Jeffery Grimes was appointed Vice President, Senior Corporate Counsel and Corporate Secretary in March 2014. Prior to joining the Company, Mr. Grimes was Vice President, Legal Affairs, General Counsel and Corporate Secretary of Aradigm Corporation, a publicly traded specialty pharmaceutical company focused on the development and commercialization of drug products for severe respiratory diseases. From 2000 to 2013, Mr. Grimes worked as in-house counsel for medical device, specialty pharmaceutical, and technology companies serving in various senior corporate legal roles. Mr. Grimes received joint J.D./M.B.A. degrees and a Bachelor's degree in Finance, from University of Colorado at Boulder.
Available Information
ARC Document Solutions, Inc. uses its corporate website, www.e-arc.com, as a channel for routine distribution of important information, including news releases, analyst presentations and financial information. The company files with or furnishes to the SEC Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports, as well as proxy statements and annual reports to shareholders, and, from time to time, other documents. The reports and other documents filed with or furnished to the SEC are available to investors on or through our corporate website free of charge as soon as reasonably practicable after we electronically file them with or furnish them to the SEC. In addition, the public may read and copy any of the materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington D.C. 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an internet site located at http://www.sec.gov that contains reports, proxy and information statements and other information regarding issuers, such as ARC, that file electronically with the SEC. ARC’s SEC filings and other documents pertaining to the conduct of its business can be found on the “Investors” page of its website. These documents are available in print to any shareholder who requests a copy by writing or by calling ARC Document Solutions.

Item 1A. Risk Factors
Our business faces significant risks. The following risk factors could adversely affect our results of operations and financial condition and the price of our common stock. We may encounter risks in addition to those described below. Additional risks and uncertainties not currently known to us or that we currently deem immaterial may also impair or adversely affect our results of operations and financial condition.
We are highly dependent on the architectural, engineering and construction (AEC) industry and any decline in that industry could adversely affect our future revenue and profitability.
We estimate that customers in the AEC industry accounted for approximately 77% of our net sales for the year ended December 31, 2014 , therefore our results largely depend on the strength of that industry. Our historical operating results reflect the cyclical and variable nature of the AEC industry. We believe that the industry generally experiences downturns several months after a downturn in the general economy, and that there may be a similar delay in the recovery of the AEC industry following a recovery of the general economy. A downturn in the AEC industry would diminish demand for some of our products and services, and would therefore negatively affect our revenues and have a material adverse effect on our business, operating results and financial condition.
Adverse domestic and global economic conditions and disruption of financial and commercial real estate markets could have a material adverse effect on our business and results of operations.
During the past several years, domestic and international financial markets have experienced significant disruption, including, among other things, extreme volatility and severely diminished liquidity and credit availability. These developments and the related severe domestic and international economic downturn could adversely affect our business and financial condition in a number of ways, including effects beyond those that were experienced in recent previous recessions. A prolonged economic downturn may adversely affect the ability of our customers and suppliers to obtain financing and to perform their obligations under agreements with us. These restrictions could result in a decrease in, or cancellation of, existing business, could limit new business, and could negatively affect our ability to collect on our accounts receivable on a timely basis, if at all. These events may, in the aggregate, have a material adverse effect on our results of operations and financial condition.
Because a significant portion of our overall costs are fixed, our earnings are highly sensitive to changes in revenue.

Our network of service centers, equipment and related support activities involves substantial fixed costs which cannot be adjusted quickly to respond to declines in demand for our services. We estimate approximately 36% of our overall costs were fixed for the year ended December 31, 2014 . As a consequence, our results of operations are subject to relatively high levels of

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volatility and our earnings could deteriorate rapidly in the face of declining revenues because our ability to reduce fixed costs in the short-term is limited. If we fail to manage our fixed costs appropriately, or to maintain adequate cash reserves to cover such costs, we may suffer material adverse effects on our results of operations and financial condition.
Impairment of goodwill may adversely affect future results of operations.
We have intangible assets, including goodwill and other identifiable acquired intangibles on our balance sheet due to prior acquisitions. At September 30, 2014 , we assessed goodwill for impairment and determined that goodwill was not impaired.
The results of our impairment analysis are as of a particular point in time. If our assumptions regarding future forecasted revenue or profitability of our reporting units are not achieved, we may be required to record additional goodwill impairment charges in future periods, if any such change constitutes a triggering event prior to the quarter in which we perform our annual goodwill impairment test.
Competition in our industry and innovation by our competitors may hinder our ability to execute our business strategy and adversely affect our profitability.
The markets for our products and services are highly competitive, with competition primarily at local and regional levels. We compete primarily based on the level and quality of customer service, technological leadership, and price. Our future success depends, in part, on our ability to continue to improve our service and product offerings, and develop and integrate new technology solutions. In addition, current and prospective customers may decide to perform certain services themselves instead of outsourcing these services to us. These competitive pressures could adversely affect our sales and consolidated results of operations.

We also face the possibility that competition will continue to increase, particularly if copy and printing or business services companies choose to compete in lines of business similar to ours. Many of these companies are substantially larger and have significantly greater financial resources than us, which could place us at a competitive disadvantage. In addition, we could encounter competition in the future from large, well-capitalized companies such as equipment dealers and system integrators that can produce their own technology and leverage their existing distribution channels. Any such future competition could adversely affect our business and reduce our future revenue and profitability.
If we are unable to charge for our value-added services to offset declines in print volumes, our long-term revenue could decline.
Our customers value the ability to view and order prints over the internet and print to output devices in their own offices and other locations throughout the country and the world. In 2014 , our Traditional Reprographics sales represented approximately 27% of our total net sales, and our Onsite Services represented approximately 32% of our total net sales. Both categories of revenue are generally derived from a charge per square foot of printed material. Future technology advances may further facilitate and improve our customers’ ability to reduce print and the associated costs thereof. As technology continues to improve, this trend toward printing on an “as needed” basis could result in further decreased printing volumes and sales decline in the longer term. Failure to offset these declines in printing volumes by changing how we charge for our services and develop additional revenue sources could significantly affect our business and reduce our long term revenue, resulting in an adverse effect on our results of operations and financial condition.
We derive a significant percentage of net sales from within the State of California and our business could be disproportionately harmed by an economic downturn or natural disaster affecting California.
We derived approximately 30% of our net sales in 2014 from our operations in California. As a result, we are dependent to a large extent upon the AEC industry in California and, accordingly, are sensitive to economic factors affecting AEC activity in California, including general and local economic conditions, macroeconomic trends, political factors affecting commercial and residential real estate development and natural disasters (including drought, earthquakes and wildfires). Any adverse developments affecting California could have a disproportionately negative effect on our results of operations and financial condition.
Our growth strategy depends, in part, on our ability to successfully market and execute several different, but related, service offerings. Failure to do so could impede our future growth and adversely affect our competitive position.
As part of our growth strategy, we intend to continue to offer and grow a variety of service offerings that are relatively new to the company. Our efforts will be affected by our ability to acquire new customers for our new service offerings as well as sell the new service offerings to existing customers. If we fail to procure new customers, our growth may be adversely affected and we may incur operating losses as a result of a failure to realize revenue from investments made in new service offerings.

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We are dependent upon our vendors to continue to supply us equipment, parts, supplies, and services at comparable terms and price levels as the business grows.
Our access to equipment, parts, supplies, and services depends upon our relationships with, and our ability to purchase these items on competitive terms from our principal vendors. These vendors are not required to use us to distribute their equipment and are generally free to change the prices and other terms at which they sell to us. In addition, we compete with the selling efforts of some of these vendors. Significant deterioration in relationships with, or in the financial condition of, these significant vendors could have an adverse effect on our ability to sell equipment as well as our ability to provide effective service and technical support. If one of these vendors terminates or significantly curtails its relationship with us, or if one of these vendors ceases operations, we would be forced to expand our relationships with our other existing vendors or seek out new relationships with previously unused vendors.
Our failure to adequately protect the proprietary aspects of our technology, including SKYSITE®, PlanWell® and Abacus®, may cause us to lose market share.
Our success depends on our ability to protect and preserve the proprietary aspects of our technology products. We rely on a combination of copyright, trademark and trade secret protection, confidentiality agreements, license agreements, non-competition agreements, reseller agreements, customer contracts, and technical measures to establish and protect our rights in our proprietary technologies. These protections, however, may not be adequate to remedy harm we suffer due to misappropriation of our proprietary rights by third parties. Furthermore, we may, from time to time, be subject to intellectual property litigation which can be expensive, a burden on management’s time and our Company’s resources, and the outcome of any such litigation may be uncertain.
In performing our document management services, we handle customers’ confidential information. Our failure to protect our customers’ confidential information against security breaches could damage our reputation, harm our business and adversely affect our results of operations.
Our document management services involve the handling of our customers’ confidential information. Any compromise of security, accidental loss or theft of customer data in our possession could damage our reputation and expose us to risk of liability, which could harm our business and adversely affect our consolidated results of operation.
Added risks are associated with our international operations.
We have international operations in China, India, the United Kingdom, Canada, Hong Kong and Australia. Approximately 14% of our revenues for fiscal 2014 were derived from our international operations, with approximately 7% derived from China. Our future revenues, costs of operations and net income could be adversely affected by a number of factors related to our international operations, including changes in economic conditions from country to country, currency fluctuations, changes in a country’s political condition, trade protection measures, licensing and other legal requirements and local tax issues.

A large percentage of our cash and cash equivalents are held outside of the United States, and we could be subject to repatriation delays and costs which could reduce our financial flexibility.

A large percentage of our cash and cash equivalents are currently held outside the United States. Repatriation of some of the funds could be subject to delay for local country approvals and could have potential adverse tax consequences. As a result of holding cash and cash equivalents outside of the U.S., our financial flexibility may be reduced.

Our business could suffer if we fail to attract, retain, and successfully integrate skilled personnel.
We believe that our ability to attract, retain, and successfully integrate qualified personnel is critical to our success. As we continue to place more emphasis on document management and storage technology, our need to hire and retain software and other technology focused personnel has and can be expected to continue to increase. Competition for such personnel, particularly in the San Francisco Bay Area, is intense. If we lose key personnel and/or are unable to recruit qualified personnel, our ability to manage and grow our business will be adversely affected. In addition, the loss of the services of one or more members of our senior management team would disrupt our business and impede our ability to successfully execute our business strategy.
The market prices of our common stock may be volatile, which could cause the value of an investment in our stock to decline.
The market price of our common stock may fluctuate substantially due to a variety of factors, many of which are beyond our control. Between January 1, 2014 and March 6, 2015, the closing price of our common stock has fluctuated from a low of $5.43 to a high of $10.36 per share. Factors that may contribute to fluctuations in the market prices of our common stock include:

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• failure to sustain an active, liquid trading market for our shares;
		
•	changes in financial estimates or recommendations by securities analysts or failure to meet analysts' performance expectations;	
• changes in market valuations of similar companies;
• changes in our capital structure, such as future issuances of securities or the incurrence of debt;
• sales of our capital stock by our directors or executive officers;
• the gain or loss of significant customers;
		
•	actual or anticipated developments in our business or our competitors' businesses, such as announcements by us or our competitors of significant contracts, acquisitions or strategic alliances, or in the competitive landscape generally;	
• litigation involving us, our industry or both;
• additions or departures of key personnel;
• investors' general perception of us; and
• changes in general economic, industry and market conditions.
The stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of particular companies. These types of broad market fluctuations may adversely affect the trading price of our common stock.
In the past, stockholders have sometimes instituted securities class action litigation against companies following periods of volatility in the market price of their securities. Any similar litigation against us could result in substantial costs, divert management's attention as well as our other resources and could have a material adverse effect on our business, results of operations and financial condition.
Damage or disruption to our facilities, including our technology center, could impair our ability to effectively provide our services and may have a significant effect on our revenues, expenses and financial condition.
Our IT systems are an important part of our operations. We currently store customer data at servers hosted by Amazon and at our technology center located in Silicon Valley near known earthquake fault zones. Although we have redundant systems and offsite backup procedures in place, interruption in service, damage to or destruction of our technology center or a disruption of our data storage processes resulting from sustained process abnormalities, human error, acts of terrorism, violence, war or a natural disaster, such as fire, earthquake or flood, could result in delays, in reduced levels of customer service and have a material adverse effect on the markets in which we operate and on our business operations.
Although we currently maintain general property damage insurance, if we incur losses from uninsured events, we could incur significant expenses which would adversely affect our results of operations and financial condition.
Results of tax examinations may adversely affect our future results of operations.
We are subject to various tax examinations on an ongoing basis. Adverse results of tax examinations for income, payroll, value added, sales-based and other taxes may require future material tax payments if we are unable to sustain our position with the relevant jurisdiction. Where appropriate, we have made accruals for these matters which are reflected in our Consolidated Balance Sheets and Statements of Operations.
Our debt instruments impose certain restrictions on our ability to operate which in turn could negatively affect our ability to respond to business and market conditions and therefore could have adverse effect on our business and results of operations.
As of December 31, 2014 , we had $203.9 million in outstanding short and long-term borrowings under term loans, lines of credit, and capital leases, excluding trade payables. The terms of the agreements under which this indebtedness was incurred may limit or restrict, among other things, our ability to incur certain additional debt, make certain restricted payments, consummate certain asset sales, and enter into certain transactions with affiliates.
We are also required to maintain specified financial ratios, including leverage and fixed charge coverage ratios, as outlined in our Term A Credit Agreement. Our inability to meet these ratios could result in the acceleration of the repayment of the related

13

debt, the termination of our revolving line of credit, the increase in our effective cost of funds or the cross-default of other credit arrangements. As a result, our ability to operate may be restricted and our ability to respond to business and market conditions may be limited, which could have an adverse effect on our business and operating results.

Item 1B. Unresolved Staff Comments
None.

Item 2. Properties
At the end of 2014 , we operated 178 service centers, of which 156 were in the United States, 9 were in Canada, 10 were in China, 2 were in London, England and 1 in India. We also occupied technology centers in Silicon Valley, California and Kolkata, India, as well as other facilities, including our executive offices located in Walnut Creek, California.
In total the Company occupied approximately 1.2 million square feet as of December 31, 2014 .
We lease nearly all of our service centers, each of our administrative facilities and our technology centers. The two facilities that we own are subject to liens under our credit agreement. In addition to the facilities that are owned, our fixed assets are comprised primarily of machinery and equipment, vehicles, and computer equipment. We believe that our facilities are adequate and appropriate for the purposes for which they are currently used in our operations and are well maintained.
Item 3. Legal Proceedings

On October 21, 2010, a former employee, individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, L.L.C. and American Reprographics Company in the State of California at any time from October 21, 2006 through the present, filed an action against the Company in the Superior Court of California for Orange County. The complaint alleges, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought includes damages, restitution, penalties, interest, costs, and attorneys’ fees and such other relief as the court deems proper. On March 15, 2013, the Company participated in a private mediation session with claimants’ counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. The Company has received preliminary court approval of the settlement, and awaits final court approval. The Company has a liability of $0.9 million as of December 31, 2014  related to the claim, which represents management's best estimate based on information available.

On February 1, 2013, the Company 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 the Company's 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. The Company instituted this suit to stop the defendant from using similar unfair business practices against it 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, including the settlement with the defendant, associated with the litigation totaled $3.8 million in 2014 and were recorded as selling, general and administrative expense.
In addition to the matters described above, the Company is involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or cash flows.

Item 4. Mine Safety Disclosures
Not applicable.

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PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock, par value $0.001, is listed on the New York Stock Exchange (“NYSE”) under the stock symbol “ARC”. The following table sets forth for the fiscal periods indicated the high and low sales prices per share of our common stock as reported by the NYSE.

	
																	
 	 	2014	 	2013	
 	 	High	 	Low	 	High	 	Low	
First Quarter	 	$	8.51		 	$	6.59		 	$	3.03		 	$	2.12		
Second Quarter	 	$	7.92		 	$	5.67		 	$	4.25		 	$	2.76		
Third Quarter	 	$	8.30		 	$	5.40		 	$	5.24		 	$	4.00		
Fourth Quarter	 	$	10.67		 	$	8.10		 	$	9.35		 	$	4.58		
Performance Graph
The following graph compares the cumulative 5-year total return to shareholders of ARC Document Solutions’ common stock relative to the cumulative total returns of (a) the Russell 2000 index, (b) a customized peer group of 15 companies identified as: (1) having a business-to-business focus, (2) offering outsourced/managed services, (3) having a digital or technology service that is significant to their customer offering, and (4) involved in print publishing.
The graph assumes that the value of the investment in the company’s common stock, in the peer group, and the index (including reinvestment of dividends) was $100 on December 31, 2009 and tracks it through December 31, 2014.

 

15

	
																			
 	 	2009	 	2010	 	2011	 	2012	 	2013	 	2014	
ARC Document Solutions, Inc.	 	100.00		 	108.27		 	65.48		 	36.52		 	117.26		 	145.79		
Russell 2000	 	100.00		 	126.86		 	121.56		 	141.43		 	196.34		 	205.95		
Managed Services & Publishing Peer Group	 	100.00		 	126.78		 	125.04		 	165.53		 	230.24		 	233.64		
The stock price performance included in the graph above is not necessarily indicative of future stock price performance.
Holders
As of February 23, 2015 , the approximate number of stockholders of record of our common stock was 124 , and the closing price of our common stock was $9.38 per share as reported by the NYSE. Because many of the shares of our common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of beneficial owners represented by these stockholders of record.
Dividends
We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare cash dividends will be made at the discretion of our board of directors, subject to compliance with Delaware corporate law, certain covenants under our debt instruments which restrict or limit our ability to declare or pay dividends, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our board of directors may deem relevant.
Securities Authorized for Issuance Under Equity Compensation Plans
Information regarding the securities authorized for issuance under our equity compensation plans can be found under Item 12 of this Annual Report on Form 10-K.

Issuer Purchases of Equity Securities

														
Period	 	(a) Total
Number of
Shares
Purchased(1)
(in thousands)	 	(b) Average
Price Paid per
Share(1)	 	(c) Total Number of Shares
Purchased as Part of
Publicly Announced Plans
or Programs	 	(d) Maximum Number of
Shares That May Yet Be
Purchased Under the Plans
or Programs	
October 1, 2014—October 31, 2014	 	9		 	$	10.01		 	—		 	—		
November 1, 2014—November 30, 2014	 	—		 	—		 	—		 	—		
December 1, 2014—December 31, 2014	 	—		 	—		 	—		 	—		
Total	 	9		 	$	10.01		 	—		 	—		

(1)	Our stock plan provides us with the right to deduct or withhold, or require employees to remit to us, an amount sufficient to satisfy any applicable tax withholding requirements applicable to stock-based compensation awards. To the extent permitted, employees may elect to satisfy all or part of such withholding requirements with the Company's repurchase of shares having a fair market value equal to the minimum statutory tax withholding rate that could be imposed on the transaction. All shares shown in this table were repurchased during the fourth quarter of 2014 in connection with the settlement of vested restricted stock awards to satisfy tax withholding requirements.	

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Item 6. Selected Financial Data
The selected historical financial data presented below is derived from the audited consolidated financial statements of ARC Document Solutions for the fiscal years ended December 31, 2014 , 2013 , 2012 , 2011 , and 2010 . The selected historical financial data does not purport to represent what our financial position or results of operations might be for any future period or date. The financial data set forth below should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited consolidated financial statements included elsewhere in this report.

	
																					
 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	 	2011	 	2010	
 	 	(In thousands)	
Statement of Operations Data:	 	 	 	 	 	 	 	 	 	 	
Service Sales	 	 	 	 	 	 	 	 	 	 	
Onsite Services (1)	 	$	135,020		 	$	121,550		 	$	108,817		 	$	100,682		 	$	89,994		
Traditional Reprographics	 	113,179		 	116,673		 	126,785		 	145,449		 	173,364		
Color	 	90,310		 	83,601		 	79,080		 	84,062		 	81,552		
Digital	 	33,375		 	33,534		 	35,578		 	38,020		 	39,639		
Total service sales	 	371,884		 	355,358		 	350,260		 	368,213		 	384,549		
Equipment and Supplies Sales	 	51,872		 	51,837		 	55,858		 	54,519		 	57,090		
Total net sales	 	423,756		 	407,195		 	406,118		 	422,732		 	441,639		
Cost of sales	 	279,478		 	272,858		 	282,599		 	288,434		 	299,307		
Gross profit	 	144,278		 	134,337		 	123,519		 	134,298		 	142,332		
Selling, general and administrative expenses	 	107,672		 	96,800		 	93,073		 	101,315		 	107,744		
Amortization of intangibles	 	5,987		 	6,612		 	11,035		 	18,715		 	11,657		
Goodwill impairment	 	—		 	—		 	16,707		 	65,444		 	38,263		
Restructuring expense	 	777		 	2,544		 	3,320		 	—		 	—		
Income (loss) from operations	 	29,842		 	28,381		 	(616	)	 	(51,176	)	 	(15,332	)	
Other income, net	 	(96	)	 	(106	)	 	(100	)	 	(103	)	 	(156	)	
Loss on early extinguishment of debt	 	5,599		 	16,339		 	—		 	—		 	2,509		
Interest expense, net	 	14,560		 	23,737		 	28,165		 	31,104		 	24,091		
Income (loss) before income tax provision (benefit)	 	9,779		 	(11,589	)	 	(28,681	)	 	(82,177	)	 	(41,776	)	
Income tax provision (benefit)	 	2,348		 	2,986		 	2,784		 	50,931		 	(14,186	)	
Net income (loss)	 	7,431		 	(14,575	)	 	(31,465	)	 	(133,108	)	 	(27,590	)	
(Income) loss attributable to noncontrolling interest	 	(156	)	 	(748	)	 	(503	)	 	21		 	88		
Net income (loss) attributable to ARC Document Solutions	 	$	7,275		 	$	(15,323	)	 	$	(31,968	)	 	$	(133,087	)	 	$	(27,502	)	
 	 	 	 	 	 	 	 	 	 	 	
 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	 	2011	 	2010	
 	 	(In thousands, except per share amounts)	
Earnings (loss) per share attributable to ARC shareholders:	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.16		 	$	(0.33	)	 	$	(0.70	)	 	$	(2.93	)	 	$	(0.61	)	
Diluted	 	$	0.15		 	$	(0.33	)	 	$	(0.70	)	 	$	(2.93	)	 	$	(0.61	)	
Weighted average common shares outstanding:	 	 	 	 	 	 	 	 	 	 	
Basic	 	46,245		 	45,856		 	45,668		 	45,401		 	45,213		
Diluted	 	47,088		 	45,856		 	45,668		 	45,401		 	45,213		

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 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	 	2011	 	2010	
 	 	(In thousands)	
Other Financial Data:	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	$	34,135		 	$	34,745		 	$	39,522		 	$	47,876		 	$	45,649		
Capital expenditures	 	$	13,269		 	$	18,191		 	$	20,348		 	$	15,553		 	$	8,634		
Interest expense, net	 	$	14,560		 	$	23,737		 	$	28,165		 	$	31,104		 	$	24,091		
 	 	As of December 31,	
 	 	2014	 	2013	 	2012	 	2011	 	2010	
 	 	(In thousands)	
Balance Sheet Data:	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	22,636		 	$	27,362		 	$	28,021		 	$	25,437		 	$	26,293		
Total assets	 	$	414,068		 	$	409,922		 	$	415,839		 	$	441,357		 	$	569,085		
Long term obligations	 	$	212,837		 	$	233,058		 	$	241,429		 	$	240,900		 	$	221,088		
Total ARC stockholders’ equity	 	$	102,775		 	$	91,690		 	$	103,896		 	$	130,677		 	$	256,506		
Working capital	 	$	20,664		 	$	28,705		 	$	40,650		 	$	40,405		 	$	22,387		

		
(1)	Represents services provided at our customers’ sites, which includes both Managed Print Services (MPS) and Facilities Management (FM).	

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with the other sections of this Annual Report on Form 10-K, including Part 1, “Item 1 — Business”; Part I, “Item 1A — Risk Factors”; Part II, “Item 6 — Selected Financial Data”; and Part II, “Item 8 — Financial Statements and Supplementary Data.”
Business Summary
ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC,” “we,” “us,” or “our”) is the nation's leading document solutions provider for the architectural, engineering and construction (“AEC”) industry while also providing document solutions to businesses of all types.
We help our customers reduce their costs and improve productivity of their documents, improve their access and control over documents, and offer a wide variety of ways to print, produce, distribute, collaborate on, and store documents.
We have categorized our service and product offerings to report distinct sales recognized from our Onsite Services, Color Services, Digital Services, Traditional Reprographics Services, and Equipment and Supplies Sales.
Onsite Services consists of placement, management, and optimization of print and imaging equipment in our customers’ facilities, relieving them of the burden of owning and managing print devices and print networks, and shifting their costs to a “per-use” basis. Onsite Services sales are driven by the ongoing print needs of our customers, and are less exposed to the episodic large-format printing needs associated with construction projects.
Color Services consists of specialized color printing and finishing services to marketing departments, regional and national retailers, and our traditional AEC customer base. This includes services provided under our Riot Creative Imaging brand.
Digital Services consists of digital document management services of all kinds, including archiving and information management (“AIM”), “digital shipping” and managed file transfer, software licensing, and technology consulting services.
Traditional Reprographics consists of the management, distribution, and print-on-demand of black and white construction drawings (frequently referred to as “blueprints”) and specification books. It derives a majority of its revenue from large-format black and white printing.
Equipment and Supplies consists of reselling printing, imaging, and related equipment to customers primarily in the AEC industry.
We have expanded our business beyond the services we traditionally provided to the AEC industry in the past and are currently focused on growing managed print services, technology-based document management services, and digital color imaging, as we believe the mix of services demanded by the AEC industry continues to shift toward document management at customer locations (represented primarily by our Onsite Services revenues), and away from its historical emphasis on printing of large-format black and white construction drawings “offsite” in our service centers (represented primarily by our Traditional Reprographics revenues). This belief is supported by the fact that our Onsite Services in 2014 were 32% of our total sales as compared to 27% for Traditional Reprographics. Onsite Services is our largest service offering and continues to grow at a rate of more than 10% on a year-over-year basis. In comparison, our revenue mix in 2013 consisted of 30% of our sales coming from Onsite Services as compared to 29% Traditional Reprographics.
We deliver our services through a nationwide network of service centers, regionally-based technical specialists, locally-based sales executives, and a national/regional sales force known as Global Solutions.
Acquisition activity during the last three years has been minimal and did not materially affect our overall business.
We believe we offer a distinct portfolio of services within the AEC industry that include our legacy reprographics business as well as our newer offerings in Onsite Services, Color Services, and Digital Services. Our customer base for these services, however, is still primarily the AEC industry. Based on our analysis of our operating results, we estimate that sales to the AEC industry accounted for approximately 77% of our net sales for the year ended December 31, 2014 , with the remaining 23% consisting of sales to non-AEC industries.
We identify operating segments based on the various business activities that earn revenue and incur expense, whose operating results are reviewed by the Company's Chief Executive Officer, who is our Company's chief operating decision maker. Since our operating segments have similar products and services, classes of customers, production processes, distribution methods and economic characteristics, we have a single reportable segment. See Note 2 “Summary of Significant Accounting Policies” for further information.
Costs and Expenses.

19

Our cost of sales consists primarily of materials (paper, toner and other consumables), labor, and “indirect costs” which consist primarily of expenses for service center ("offsite") facilities and equipment. Facilities and equipment expenses include maintenance, repairs, rents, insurance, and depreciation. Paper is the largest component of our material cost; however, paper pricing typically does not significantly affect our operating margins due, in part, to our efforts to pass increased costs on to our customers. We closely monitor material cost as a percentage of net sales to measure volume and waste. We also track labor utilization, or net sales per employee, to measure productivity and determine staffing levels.
We maintain low levels of inventory. Historically, our capital expenditure requirements have varied due to the cost and availability of capital lease lines of credit. As we continue to foster our relationships with credit providers and obtain attractive lease rates, we are increasingly choosing to lease rather than purchase equipment. During most of 2013, we were more frequently electing to purchase equipment for our facilities and onsite service installations rather than lease equipment due to the availability of cash to fund capital expenditures and the interest savings thereby.
Research and development costs consist mainly of the salaries, leased building space, and computer equipment that comprises our data storage and development centers in Fremont, California and Kolkata, India. Such costs are primarily recorded to cost of sales.
We believe customers are increasingly (1) adopting technology and digital document management practices, and (2) changing their workflow patterns and thereby their document and printing needs. While there were some indications that the non-residential construction market strengthened in 2012, we believe that there was a growing body of evidence by the third quarter of 2012 that demonstrated Traditional Reprographics sales would not likely recover at the same pace due to these factors. To ensure that the Company’s costs and resources were in line with demand for our current portfolio of services and products, management initiated a restructuring plan in October of 2012, that was completed by the fourth quarter of 2013. The restructuring plan included the closure or downsizing of 33 of the Company’s service centers in 2012, which represented more than 10% of our total number of service center locations, and we closed an additional 23 service centers in 2013. In addition, as part of the restructuring plan, we reduced headcount and middle management associated with our service center locations, streamlined the senior operational management team, and allocated more resources into growing sales categories such as Onsite Services and Digital Services. The reduction in headcount totaled approximately 300 full-time employees, which represented approximately 10% of our total workforce.
During 2014 , our gross margins improved by 100 basis points compared to the same period in 2013 . We attribute this improvement primarily to our restructuring efforts initiated in October 2012 and ongoing margin improvement programs, both of which suggest continuing, though abated, year-over-year margin expansion in future periods.
Non-GAAP Financial Measures.
EBIT, 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.
EBIT represents net income before interest and taxes. EBITDA represents net income before interest, taxes, depreciation and amortization. EBIT margin is a non-GAAP measure calculated by dividing EBIT by net sales. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.
We have presented EBIT, 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 EBIT and 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. As a result, we believe EBIT is the best measure of operating segment profitability and the most useful metric by which to measure and compare the performance of our operating segments. We use EBITDA to measure performance for determining consolidated-level compensation. In addition, we use EBIT and EBITDA to evaluate potential acquisitions and potential capital expenditures.
EBIT, 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;	

20

		
•	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, EBIT, 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 EBIT, EBITDA and related ratios only as supplements.
Our presentation of adjusted net income and adjusted EBITDA over certain periods 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 below.
Specifically, we have presented adjusted net income (loss) attributable to ARC and adjusted earnings (loss) per share attributable to ARC shareholders for the years ended December 31, 2014 , 2013 and 2012 to reflect the exclusion of loss on extinguishment of debt, restructuring expense, trade secret litigation costs, goodwill impairment, amortization impact related specifically to the change in useful lives of trade names, interest rate swap related costs, and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. We have presented adjusted cash flows from operating activities for the years ended December 31, 2014 , 2013 and 2012 to reflect the exclusion of cash payments related to trade secret litigation costs, cash payments related to restructuring expenses, and the receipt of a federal income tax refund in 2013 related to the Company's 2009 consolidated federal income tax return. This presentation facilitates a meaningful comparison of our operating results for the years ended December 31, 2014 , 2013 and 2012 . We believe these charges were the result of the current macroeconomic environment, our capital restructuring, or other items which are not indicative of our actual operating performance.
We have presented adjusted EBITDA for the years ended December 31, 2014 , 2013 and 2012 to exclude loss on extinguishment of debt, trade secret litigation costs, stock-based compensation expense, goodwill impairment, and restructuring expense. The adjustment of EBITDA for these items is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.
The following is a reconciliation of cash flows provided by operating activities to EBIT, EBITDA, and net income (loss) attributable to ARC Document Solutions, Inc. shareholders:

	
												
 	Year Ended December 31,	
(In thousands)	2014	 	2013	 	2012	
Cash flows provided by operating activities	$	50,012		 	$	46,798		 	$	37,552		
Changes in operating assets and liabilities, net of effect of business acquisitions	4,438		 	(2,388	)	 	(463	)	
Non-cash expenses, including depreciation, amortization and restructuring	(47,019	)	 	(58,985	)	 	(68,554	)	
Income tax provision	2,348		 	2,986		 	2,784		
Interest expense, net	14,560		 	23,737		 	28,165		
Income attributable to the noncontrolling interest	(156	)	 	(748	)	 	(503	)	
EBIT	24,183		 	11,400		 	(1,019	)	
Depreciation and amortization	34,135		 	34,745		 	39,522		
EBITDA	58,318		 	46,145		 	38,503		
Interest expense, net	(14,560	)	 	(23,737	)	 	(28,165	)	
Income tax provision	(2,348	)	 	(2,986	)	 	(2,784	)	
Depreciation and amortization	(34,135	)	 	(34,745	)	 	(39,522	)	
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	7,275		 	$	(15,323	)	 	$	(31,968	)	

21

The following is a reconciliation of net income (loss) attributable to ARC Document Solutions, Inc. to EBIT, EBITDA and adjusted EBITDA:

	
												
 	Year Ended December 31,	
(In thousands)	2014	 	2013	 	2012	
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	7,275		 	$	(15,323	)	 	$	(31,968	)	
Interest expense, net	14,560		 	23,737		 	28,165		
Income tax provision	2,348		 	2,986		 	2,784		
EBIT	24,183		 	11,400		 	(1,019	)	
Depreciation and amortization	34,135		 	34,745		 	39,522		
EBITDA	58,318		 	46,145		 	38,503		
Loss on extinguishment of debt	5,599		 	16,339		 	—		
Trade secret litigation costs (1)	3,766		 	—		 	—		
Goodwill impairment	—		 	—		 	16,707		
Restructuring expense	777		 	2,544		 	3,320		
Stock-based compensation	3,802		 	3,207		 	1,999		
Adjusted EBITDA	$	72,262		 	$	68,235		 	$	60,529		
(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. Legal fees associated with the litigation, including the settlement with the defendant, totaled  $3.8 million  for the year ended December 31, 2014 and were recorded as selling, general and administrative expense.
The following is a reconciliation of cash flows provided by operating activities to adjusted cash flows provided by operating activities:

												
 	Year Ended December 31,	
(In thousands)	2014	 	2013	 	2012	
Cash flows provided by operating activities	$	50,012		 	$	46,798		 	$	37,552		
Payments related to trade secret litigation costs	2,744		 	—		 	—		
Payments related to restructuring expenses	1,203		 	4,304		 	940		
Receipt of federal income tax refund (1)	—		 	(3,762	)	 	—		
Adjusted cash flows provided by operating activities	$	53,959		 	$	47,340		 	$	38,492		
(1) In March 2013, ARC received a federal income tax refund of $3.8 million related to its 2009 consolidated federal income tax return.

22

The following is a reconciliation of net income (loss) margin attributable to ARC to EBIT margin, EBITDA margin and adjusted EBITDA margin:

										
 	 	Year Ended December 31,	
 	 	2014	 	2013 (1)	 	2012 (1)	
Net income (loss) margin attributable to ARC	 	1.7	%	 	(3.8	)%	 	(7.9	)%	
Interest expense, net	 	3.4		 	5.8		 	6.9		
Income tax provision	 	0.6		 	0.7		 	0.7		
EBIT margin	 	5.7		 	2.8		 	(0.3	)	
Depreciation and amortization	 	8.1		 	8.5		 	9.7		
EBITDA margin	 	13.8		 	11.3		 	9.5		
Loss on extinguishment of debt	 	1.3		 	4.0		 	—		
Trade secret litigation costs	 	0.9		 	—		 	—		
Goodwill impairment	 	—		 	—		 	4.1		
Restructuring expense	 	0.2		 	0.6		 	0.8		
Stock-based compensation	 	0.9		 	0.8		 	0.5		
Adjusted EBITDA margin	 	17.1	%	 	16.8	 %	 	14.9	 %	

(1)	Column does not foot due to rounding.	

The following is a reconciliation of net income (loss) attributable to ARC Document Solutions, Inc. to unaudited adjusted net income (loss) attributable to ARC Document Solutions, Inc.:

													
 	 	Year Ended December 31,	
(In thousands, except per share amounts)	 	2014	 	2013	 	2012	
Net income (loss) attributable to ARC Document Solutions, Inc.	 	$	7,275		 	$	(15,323	)	 	$	(31,968	)	
Loss on extinguishment of debt	 	5,599		 	16,339		 	—		
Goodwill impairment	 	—		 	—		 	16,707		
Restructuring expense	 	777		 	2,544		 	3,320		
Trade secret litigation costs	 	3,766		 	—		 	—		
Change in trade name impact to amortization	 	—		 	—		 	3,158		
Interest rate swap related costs	 	—		 	—		 	3,440		
Income tax benefit related to above items	 	(3,953	)	 	(7,667	)	 	(7,676	)	
Deferred tax valuation allowance and other discrete tax items	 	(1,657	)	 	8,245		 	11,311		
Unaudited adjusted net income (loss) attributable to ARC Document Solutions, Inc.	 	$	11,807		 	$	4,138		 	$	(1,708	)	
Actual:	 	 	 	 	 	 	
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:	 	 	 	 	 	 	
Basic	 	$	0.16		 	$	(0.33	)	 	$	(0.70	)	
Diluted	 	$	0.15		 	$	(0.33	)	 	$	(0.70	)	
Weighted average common shares outstanding:	 	 	 	 	 	 	
Basic	 	46,245		 	45,856		 	45,668		
Diluted	 	47,088		 	45,856		 	45,668		
Adjusted:	 	 	 	 	 	 	
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:	 	 	 	 	 	 	
Basic	 	$	0.26		 	$	0.09		 	$	(0.04	)	
Diluted	 	$	0.25		 	$	0.09		 	$	(0.04	)	
Weighted average common shares outstanding:	 	 	 	 	 	 	
Basic	 	46,245		 	45,856		 	45,668		
Diluted	 	47,088		 	46,157		 	45,668		

23

Results of Operations

	
																										
 	 	 	 	 	 	 	2014 Versus 2013	 	2013 Versus 2012	
 	Year Ended December 31,	 	Increase (decrease)	 	Increase (decrease)	
(In millions, except percentages)	2014 (1)	 	2013(1)	 	2012(1)	 	$(1)	 	%	 	$(1)	 	%	
Onsite Services (2)	$	135.0		 	$	121.6		 	$	108.8		 	$	13.4		 	11.0	 %	 	$	12.8		 	11.8	 %	
Traditional Reprographics	113.2		 	116.7		 	126.8		 	(3.5	)	 	(3.0	)%	 	(10.1	)	 	(8.0	)%	
Color	90.3		 	83.6		 	79.1		 	6.7		 	8.0	 %	 	4.5		 	5.7	 %	
Digital	33.4		 	33.5		 	35.6		 	(0.1	)	 	(0.3	)%	 	(2.1	)	 	(5.9	)%	
Total services sales	$	371.9		 	$	355.4		 	$	350.3		 	$	16.5		 	4.6	 %	 	$	5.1		 	1.5	 %	
Equipment and Supplies Sales	51.9		 	51.8		 	55.9		 	0.1		 	0.2	 %	 	(4.1	)	 	(7.3	)%	
Total net sales	$	423.8		 	$	407.2		 	$	406.1		 	$	16.6		 	4.1	 %	 	$	1.1		 	0.3	 %	
Gross profit	$	144.3		 	$	134.3		 	$	123.5		 	$	10.0		 	7.4	 %	 	$	10.8		 	8.7	 %	
Selling, general and administrative expenses	$	107.7		 	$	96.8		 	$	93.1		 	$	10.9		 	11.3	 %	 	$	3.7		 	4.0	 %	
Amortization of intangibles	$	6.0		 	$	6.6		 	$	11.0		 	$	(0.6	)	 	(9.1	)%	 	$	(4.4	)	 	(40.0	)%	
Goodwill impairment	$	—		 	$	—		 	$	16.7		 	$	—		 	—	 %	 	$	(16.7	)	 	(100.0	)%	
Restructuring expense	$	0.8		 	$	2.5		 	$	3.3		 	$	(1.7	)	 	(68.0	)%	 	$	(0.8	)	 	(24.2	)%	
Loss on extinguishment of debt	$	5.6		 	$	16.3		 	$	—		 	$	(10.7	)	 	(65.6	)%	 	$	16.3		 	100.0	 %	
Interest expense, net	$	14.6		 	$	23.7		 	$	28.2		 	$	(9.1	)	 	(38.4	)%	 	$	(4.5	)	 	(16.0	)%	
Income tax provision	$	2.3		 	$	3.0		 	$	2.8		 	$	(0.7	)	 	(23.3	)%	 	$	0.2		 	7.1	 %	
Net income (loss) attributable to ARC	$	7.3		 	$	(15.3	)	 	$	(32.0	)	 	$	22.6		 	(147.7	)%	 	$	16.7		 	(52.2	)%	
Adjusted net income (loss) attributable to ARC	$	11.8		 	$	4.1		 	$	(1.7	)	 	$	7.7		 	187.8	 %	 	$	5.8		 	(341.2	)%	
Cash flows provided by operating activities	$	50.0		 	$	46.8		 	$	37.6		 	$	3.2		 	6.8	 %	 	$	9.2		 	24.5	 %	
Adjusted cash flows provided by operating activities	$	54.0		 	$	47.3		 	$	38.5		 	$	6.7		 	14.2	 %	 	$	8.8		 	22.9	 %	
EBITDA	$	58.3		 	$	46.1		 	$	38.5		 	$	12.2		 	26.5	 %	 	$	7.6		 	19.7	 %	
Adjusted EBITDA	$	72.3		 	$	68.2		 	$	60.5		 	$	4.0		 	5.9	 %	 	$	7.7		 	12.7	 %	

(1)	Column does not foot due to rounding.	
		
(2)	Represents services provided at our customers’ sites, which includes both Managed Print Services (MPS) and Facilities Management (FM).	

24

The following table provides information on the percentages of certain items of selected financial data as a percentage of net sales for the periods indicated:

	
									
 	As Percentage of Net Sales	
 	Year Ended December 31,	
 	2014(1)	 	2013(1)	 	2012(1)	
Net Sales	100.0	 %	 	100.0	 %	 	100.0	 %	
Cost of sales	66.0		 	67.0		 	69.6		
Gross profit	34.0		 	33.0		 	30.4		
Selling, general and administrative expenses	25.4		 	23.8		 	22.9		
Amortization of intangibles	1.4		 	1.6		 	2.7		
Goodwill impairment	—		 	—		 	4.1		
Restructuring expense	0.2		 	0.6		 	0.8		
Income (loss) from operations	7.0		 	7.0		 	(0.2	)	
Other income, net	—		 	—		 	—		
Loss on extinguishment of debt	1.3		 	4.0		 	—		
Interest expense, net	3.4		 	5.8		 	6.9		
Loss before income tax provision	2.3		 	(2.8	)	 	(7.1	)	
Income tax provision	0.6		 	0.7		 	0.7		
Net income (loss)	1.8		 	(3.6	)	 	(7.7	)	
Income attributable to the noncontrolling interest	—		 	(0.2	)	 	(0.1	)	
Net income (loss) attributable to ARC	1.7	 %	 	(3.8	)%	 	(7.9	)%	
 	 	 	 	 	 	
EBITDA	13.8	 %	 	11.3	 %	 	9.5	 %	
Adjusted EBITDA	17.1	 %	 	16.8	 %	 	14.9	 %	

(1)	Column does not foot due to rounding.	
Fiscal Year Ended December 31, 2014 Compared to Fiscal Year Ended December 31, 2013
Net Sales
Net sales in 2014 increase d 4.1% . The increase in net sales was primarily due to the higher sales activity for Onsite and Color Services, which were partially offset by lower sales activity in Traditional Reprographics Services. In 2014 , Onsite Services generated the largest percentage of net sales, and it produced the highest percentage change from 2013 ( 11.0% growth). Declines in Traditional Reprographics sales remain influenced by the continuing trend of a greater use of digital processes for document workflow and less reliance on print.
Onsite Services . Onsite Services sales increase d $13.4 million or 11.0% , in 2014 , and represented approximately 32% of total net sales for 2014 , as compared to approximately 30% during 2013 . Onsite Services revenue is derived from two sources: 1) an engagement with the customer to place primarily large-format equipment, that we own or lease, in our customers’ offices, typically referred to as a facilities management engagement or “traditional FM,” and 2) an arrangement by which our customers outsource their printing function to us, including all office printing, copying, and reprographics printing, typically referred to as Managed Print Services, or “MPS.” In both cases, we establish long-term contracted revenue streams for which we are paid a single cost per unit of material used, often referred to as a “click charge.”
The number of Onsite Services locations has grown to approximately 8,500 as of December 31, 2014 , an increase of approximately 800 locations compared to December 31, 2013 , due primarily to growth in new MPS placements. We believe Onsite Services is a high growth area for us as demonstrated by the adoption of our MPS services by large, multi-national firms in the AEC space over the past several years. We intend to continue the expansion of our Onsite Service offering through our regional sales force and through Global Solutions, our national accounts group. Our Global Solutions sales force has established long-term contract relationships with 22 of the largest 50 AEC firms. As our Onsite Services, and more specifically MPS services, become a larger percentage of our sales, our overall sales will be less exposed to the seasonality associated with construction projects. MPS services are driven primarily by the number of customer employees at an office and largely by non-construction project related work such as office printing and copying.

25

Traditional Reprographics . Traditional Reprographics sales decrease d $3.5 million or 3.0% in 2014 , and represented approximately 27% of total net sales for 2014 , as compared to approximately 29% during 2013 .
Overall Traditional Reprographics Services sales nationwide were negatively affected lower volume of printed construction drawings due to the adoption of technology referenced above, poor weather conditions over much of the US during the early part of the first quarter, as well as increased production of documents on customer sites as opposed to documents being produced at our service centers.
Color Services . Color Services sales increase d $6.7 million or 8.0% , and comprised approximately 21% of our total net sales in 2014 . The increase in sales from Color Services is primarily due to additional sales realized from the acquisition of two businesses in the United Kingdom during the second quarter of 2014. Also contributing to our color sales growth is our continued focus on the expansion and enhancement of our Color Services offerings through our Riot Creative Imaging brand and to our AEC industry customer base.
Digital . Digital Services sales decrease d $0.1 million or 0.3% in 2014 . Sales of Digital Services decreased slightly to 7.9% of total net sales for 2014 , as compared to 8.2% for 2013 , primarily due to a decline in those services related to project-based work performed at our service centers, offset in part by sales of our AIM services which were introduced into the market in 2013. New digital service offerings such as AIM experienced growth, but not at a rate sufficient to offset the decline in digital service sales related to project work.
Equipment and Supplies Sales . Equipment and Supplies Sales increase d by $0.1 million or 0.2% in 2014 , primarily due to increased equipment sales in the United States during 2014 partially offset by the decline in equipment sales in China. Revenues from Equipment and Supplies Sales represented approximately 12% of total net sales in 2014 , compared to approximately 13% in 2013 . The growth of equipment sales in the United States in 2014 was driven by large equipment purchases from customers who prefer to own their own equipment. Equipment and Supplies Sales derived from UNIS Document Solutions Co. Ltd (“UDS”), our Chinese business venture, were $19.3 million in 2014 , as compared to $19.9 million in 2013 . The decrease in Equipment and Supplies Sales from our Chinese operations was driven by a softening Chinese economy and a corresponding decrease in capital expenditures from several of our largest customers in China. Quarterly movements in Equipment and Supplies Sales are largely driven by the timing of replacements of aging equipment fleets for customers who prefer to own their equipment. In the long term we do not anticipate growth in Equipment and Supplies Sales, as we are placing more focus on growth in our Onsite Services and converting sales contracts to Onsite Services agreements.
Gross Profit
Gross profit and gross margin increased to $144.3 million , and 34.0% , in 2014 , compared to $134.3 million , and 33.0% , in 2013 , on a sales increase of $16.6 million .
We were able to achieve expansion of our gross margins of 100 basis points in 2014 due primarily to (1) increased sales that allow us to better leverage our fixed costs, (2) margin expansion programs at our service centers and customer onsite locations, and (3) expense reductions associated with the Company's restructuring in 2012. Specifically, year-over-year overhead costs as a percentage of sales decreased by approximately 100 basis points in 2014 . We believe the savings from these efforts are sustainable, and we believe the effect of these measures, coupled with leveraging our fixed costs in an environment of increasing sales, should result in continued margin expansion in 2015, though at an abated level from 2014.
Selling, General and Administrative Expenses
Selling, marketing, general and administrative expenses increased by $10.9 million or 11.3% in 2014 compared to 2013 .
Year-over-year sales and marketing expenses increased $3.3 million in 2014 , driven by increased sales commissions resulting from an increase in sales year-over-year, as well as our continued investment in our sales team which included: (1) hiring of new sales and sales administrative personnel, and (2) expanded training of new and existing sales personnel to implement specific sales initiatives supporting our digital services, onsite, and color offerings.
General and administrative expenses increased $7.6 million in 2014 primarily due to legal fees related to trade secret litigation during 2014, as well as an increase in accrued incentive bonuses due to an improvement in the Company's financial performance in 2014.
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

26

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, we entered into a settlement with the defendant. Legal fees associated with the litigation, including the settlement with the defendant, totaled  $3.8 million  for the year ended December 31, 2014.
Amortization of Intangibles
Amortization of intangibles of $6.0 million in 2014 , decreased by $0.6 million or 9.1% compared to 2013 , primarily due to the complete amortization of certain customer relationships related to historical acquisitions.
Goodwill Impairment
We assess goodwill at least annually for impairment as of September 30, or more frequently if events and circumstances indicate that goodwill might be impaired. Goodwill impairment testing is performed at the reporting unit level. At September 30, 2014, we assessed goodwill for impairment and determined that goodwill was not impaired.
See “Critical Accounting Policies” section for further information related to our goodwill impairment test.
Restructuring Expense
Restructuring expenses totaled $0.8 million in 2014 , and primarily consisting of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.
For further information, please see Note 3 “Restructuring Expenses” to our Consolidated Financial Statements.
Loss on extinguishment of debt
In November 2014, we entered into a new $175.0 million term loan credit agreement ("Term A Loan Facility") with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto. The proceeds from the new term loan credit agreement were used to pay in full and terminate our previous term loan credit agreement ("Term B Loan Facility"). The $5.6 million loss on extinguishment of debt is due to the write-down of the unamortized original issue discount and deferred financing fees related to the Term B Loan Facility and previous revolving credit facility.
Interest Expense, Net
Net interest expense totaled $14.6 million in 2014 , compared to $23.7 million in 2013 . The decrease was due to the purchase and redemption of all our outstanding 10.5% senior notes in 2013, and the replacement of the notes with the $200.0 million Term B Loan Facility with an effective interest rate of 6.25%. During 2014, we made principal payments on our Term B Loan Facility totaling $25.0 million. In November 2014, we were able to further reduce our effective interest rate on long-term debt by entering into the $175.0 million Term A Loan Facility with an initial effective interest rate of 2.74% at December 31, 2014 . We expect additional interest savings related to the 2014 refinancing of approximately $6 million in 2015.
Income Taxes
We recorded an income tax provision of $2.3 million on pretax income of $9.8 million for 2014 , which yields an effective income tax rate of 24.0%. Our income tax provision was primarily due to the impact of amortization of tax basis goodwill in a deferred tax liability position. Our income tax provision includes a reduction of our valuation allowance of $3.6 million against certain of our deferred tax assets which included a $1.6 million shortfall in stock based compensation. Excluding the valuation allowance reduction, shortfall in stock based compensation and other nondeductible compensation, our tax provision would have been $3.9 million which yields an effective income tax rate of 39.8%.
Noncontrolling Interest
Net income attributable to noncontrolling interest represents 35% of the income of UDS and its subsidiaries, which together comprise our Chinese operations.
Net Income (Loss) Attributable to ARC
Net income attributable to ARC was $7.3 million in 2014 , as compared to a net loss attributable to ARC of $15.3 million in 2013 . The net income attributable to ARC in 2014 is primarily due to increased sales and gross margins as noted above, and

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reductions in loss on extinguishment of debt and interest expense in 2014. This increase was partially offset by the increase in selling, general and administrative expenses, as noted above.
EBITDA
EBITDA margin increase d to 13.8% in 2014 , as compared to 11.3% in 2013 . Excluding the effect of stock-based compensation, trade secret litigation costs, restructuring expense, and loss on extinguishment of debt, adjusted EBITDA margin increased to 17.1% in 2014 , as compared to 16.8% in 2013 . The increases in EBITDA and adjusted EBITDA were due primarily to the increase in gross margins described above partially offset by the increase in selling, marketing, general and administrative expenses.
Fiscal Year Ended December 31, 2013 Compared to Fiscal Year Ended December 31, 2012
Net Sales
Net sales in 2013 increase d 0.3% . The increase in net sales was primarily due to the higher sales activity for Onsite and Color Services, which were partially offset by lower sales activity in Traditional Reprographics Services and Equipment and Supplies Sales. In the second half of 2013 , Onsite Services was our largest offering as a percentage of total net sales, and for the full year, had the highest percentage change from 2012 ( 11.8% growth).
Onsite Services . Onsite Services sales increase d $12.8 million or 11.8% , in 2013, and represented approximately 30% of total net sales for 2013 , as compared to approximately 27% during 2012 .
The number of Onsite Services locations grew to approximately 7,700 as of December 31, 2013 , an increase of approximately 700 locations compared to December 31, 2012 , due primarily to growth in new MPS placements.
Traditional Reprographics . Traditional Reprographics sales decrease d $10.1 million or 8.0% in 2013 , and represented approximately 29% of total net sales for 2013 , as compared to approximately 31% during 2012 .
Overall Traditional Reprographics Services sales nationwide were negatively affected by the lower volume of construction drawings produced through large-format black and white printing driven by the effect of technology adoption referenced above, as well as increased production of documents on customer sites as opposed to documents being produced at our service centers.
Color Services . Color Services sales increase d $4.5 million or 5.7% , and comprised approximately 21% of our total net sales in 2013. We attribute this increase to our continued focus on the expansion and enhancement of our Color Services offerings through our Riot Creative Imaging brand and to our AEC industry customer base.
Digital . Digital Services sales decrease d $2.1 million or 5.9% in 2013 . Sales of Digital Services decreased slightly to approximately 8% of total net sales for 2013 , as compared to approximately 9% for 2012 . We attribute this decrease in Digital Services to a decline in those services related to project-based work performed at our service centers, offset in part by sales of our AIM services which were formally introduced into the market in 2013.
Equipment and Supplies Sales . Equipment and Supplies Sales decrease d by $4.1 million or 7.3% in 2013 . We experienced declines in both our operations in the United States and in China. Equipment and Supplies Sales represented approximately 13% of total net sales in 2013 , compared to approximately 14% in 2012 . The decrease in Equipment and Supplies Sales in the United States was driven primarily by the lack of vendor promotions in 2013 that had been offered to our customers in 2012, as well as a large non-recurring equipment order in 2012. Equipment and Supplies Sales derived from our Chinese operations were $19.9 million in 2013 , as compared to $21.5 million in 2012 . The decrease in Equipment and Supplies Sales from UNIS Document Solutions Co. Ltd (“UDS”), our Chinese business venture, was due to several large non-recurring equipment orders in 2012.
Gross Profit
Gross profit and gross margin increased to $134.3 million , and 33.0% , in 2013 , compared to $123.5 million , and 30.4% , in 2012 , on a sales increase of $1.1 million .
We were able to achieve expansion of our gross margins of 260 basis points in 2013 due primarily to a combination of: (1) the closure or merging of underperforming service centers and the reduction in labor and facility costs resulting from our restructuring plan initiated in the fourth quarter of 2012, and (2) ongoing margin expansion initiatives in 2013. Overall, direct labor and overhead costs as a percentage of sales decreased 130 and 60 basis points, respectively, in 2013 due primarily to savings from facilities closures and related cost reductions in response to the declining sales in our Traditional Reprographics Services that are performed from our service centers.

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A shift in our business mix also contributed to the year-over-year increase in gross margins in 2013 . Due to a decline in lower-margin Equipment and Supplies Sales and 2013 margin expansion initiatives, material costs as a percentage of consolidated sales were 70 points lower in 2013 compared to 2012 .
Selling, General and Administrative Expenses
The increase of $3.7 million in selling, marketing, general and administrative expenses in 2013 was primarily due to an increase in sales and marketing expenses, partially offset by a decrease in general and administrative expenses.
Year-over-year sales and marketing expenses increased $4.4 million in 2013 , driven by our continued investment in sales which included: (1) the hiring of new sales and sales administrative personnel, (2) expanded trainings of new and existing sales personnel to implement specific sales initiatives, such as color sales, and our Onsite offering, and (3) expanded incentive programs geared towards organic sales growth.
General and administrative expenses decreased $0.7 million in 2013 primarily due to decreases in headcount related to our restructuring plan initiated in the fourth quarter of 2012, which were partially offset by an increase in incentive bonuses due to the improvement in our financial performance in 2013.
Amortization of Intangibles
Amortization of intangibles of $6.6 million in 2013 , decreased by $4.4 million or 40.0% compared to 2012 , primarily due to phasing out the use of local trade names in April 2012.
During the fourth quarter of 2010, the Company decided to phase out the use of local trade names over the following 18 months and revised the remaining estimated useful lives of our trade name intangible assets accordingly. Effective January 1, 2011, all divisions began using the ARC name, though some use of the original brand names remain in circulation to ensure business recognition and the retention of existing customers. Once the “legacy” trade names were fully transitioned to the ARC name and removed from the marketplace, they quickly lost their value. This change in estimate was accounted for on a prospective basis, resulting in increased amortization expense over the revised useful lives for each trade name.
Goodwill Impairment
We assess goodwill at least annually for impairment as of September 30, or more frequently if events and circumstances indicate that goodwill might be impaired. Goodwill impairment testing is performed at the reporting unit level. At September 30, 2013, we assessed goodwill for impairment and determined that goodwill was not impaired.
At September 30, 2012, our annual goodwill impairment analysis indicated that seven of our 27 reporting units, six in the United States and one in Canada, had goodwill impairments as of September 30, 2012. Accordingly, we recorded a pretax, non-cash charge for the three months ended September 30, 2012 to reduce the carrying value of goodwill by $16.7 million.
See “Critical Accounting Policies” section for further information related to our goodwill impairment test.
Restructuring Expense
Restructuring expenses totaled $2.5 million in 2013, and primarily consisted of estimated lease termination and obligation costs.
For further information, please see Note 3 “Restructuring Expenses” to our Consolidated Financial Statements.
Loss on extinguishment of debt
In December 2013, we commenced a cash tender offer and consent solicitation for all of our outstanding 10.5% senior unsecured notes due December 15, 2016 (the “Notes”) and entered into the $200.0 million Term B Loan. The proceeds of the Term Loan Credit Agreement were used to repurchase all of the outstanding Notes that were validly tendered, and were also applied to redeem all of the Notes which remained outstanding following the tender offer. The weighted average purchase price to purchase and redeem the Notes in this transaction was 105.8% of par. This transaction, when combined with other repurchases of Notes done during 2013, resulted in a loss on extinguishment of debt of $16.3 million for 2013. The Term B Loan bears interest at either a LIBOR rate (subject to a 1% floor) or a base rate, plus an applicable margin of 5.25% with respect to LIBOR loans and 4.25% with respect to base rate loans. As of December 31, 2013, all loans under the Term Loan Credit Agreement were accruing interest at the LIBOR rate, for a total interest rate of 6.25% or 425 basis points lower than the extinguished Notes. For additional information regarding the impact of the note repurchases to interest expense, please see "Interest Expense, Net" discussion below.

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Interest Expense, Net
Net interest expense totaled $23.7 million in 2013 , compared to $28.2 million in 2012 . The decrease was driven by a reduction in interest expense reclassified from accumulated other comprehensive income into earnings as a result of the previously terminated interest rate swap agreement on December 1, 2010. The amortization period for the interest rate swap expense ended in December of 2012, and therefore had no impact in 2013 compared to $3.4 million in additional interest expense in 2012 . Also contributing to the decrease in interest expense was (1) the repurchases of our outstanding 10.5% senior notes during the third and fourth quarters of 2013, and (2) a reduction in interest rates incurred on new capital leases. The interest savings related to the repurchases of the 10.5% senior notes was approximately $0.5 million in 2013 .
Income Taxes
We recorded an income tax provision of $3.0 million in relation to pretax loss of $11.6 million for 2013 , which was primarily due to the impact of amortization of tax basis goodwill in a deferred tax liability position. Our income tax provision includes a $7.3 million valuation allowance against certain of our deferred tax assets. Had we not recorded this valuation allowance, our tax benefit would have been 4.3 million . This yields an effective income tax rate benefit of 37.0% .
Noncontrolling Interest
Net income attributable to noncontrolling interest represents 35% of the income of UDS and its subsidiaries, which together comprise our Chinese operations.
Net Loss Attributable to ARC
Net loss attributable to ARC was $15.3 million in 2013 , as compared to net loss attributable to ARC of $32.0 million in 2012 . The decrease in net loss attributable to ARC in 2013 is primarily due to the goodwill impairment charge in 2012, an increase in gross margins and a reduction in amortization and interest expense in 2013 . This decrease was partially offset by the loss on extinguishment of debt and the increase in selling, general and administrative expenses in 2013 , as noted above.
EBITDA
EBITDA margin increase d to 11.3% in 2013 , as compared to 9.5% in 2012 . Excluding the effect of stock-based compensation, restructuring expense, goodwill impairment charge in 2012 and loss on extinguishment of debt, adjusted EBITDA margin increased to 16.8% in 2013 , as compared to 14.9% in 2012 . The increases in EBITDA and adjusted EBITDA were due primarily to the increase in gross profit as a result of the restructuring plan initiated in the fourth quarter of 2012 as well as ongoing 2013 and 2014 margin expansion initiatives.
The following table sets forth certain quarterly financial data for the eight quarters ended December 31, 2014 . This quarterly information has been prepared on the same basis as the annual financial statements and, in our opinion, reflects all adjustments necessary for a fair presentation of the information for periods presented. Operating results for any quarter are not necessarily indicative of results for any future period.

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 	 	Quarter Ended (In thousands, except percentages)	
 	 	Mar. 31,	 	June 30,	 	Sept. 30,	 	Dec. 31,	 	Mar. 31,	 	June 30,	 	Sept. 30,	 	Dec. 31,	
 	 	2014	 	2013	
Onsite Services	 	$	31,382		 	$	34,110		 	$	34,950		 	$	34,578		 	$	28,976		 	$	30,576		 	$	30,990		 	$	31,008		
Traditional Reprographics	 	28,325		 	30,181		 	28,196		 	26,477		 	29,558		 	30,516		 	28,907		 	27,693		
Color	 	21,165		 	23,148		 	22,869		 	23,128		 	20,905		 	21,846		 	20,638		 	20,212		
Digital	 	8,059		 	8,759		 	8,411		 	8,146		 	8,361		 	8,690		 	8,295		 	8,187		
Total service revenue	 	88,931		 	96,198		 	94,426		 	92,329		 	87,800		 	91,628		 	88,830		 	87,100		
Equipment and Supplies Sales	 	11,442		 	12,784		 	12,381		 	15,265		 	12,236		 	12,994		 	12,422		 	14,185		
Total net sales	 	$	100,373		 	$	108,982		 	$	106,807		 	$	107,594		 	$	100,036		 	$	104,622		 	$	101,252		 	$	101,285		
Quarterly sales as a % of annual sales	 	23.7	%	 	25.7	%	 	25.2	%	 	25.4	%	 	24.6	%	 	25.7	%	 	24.9	%	 	24.9	%	
Gross profit	 	$	33,934		 	$	39,207		 	$	36,223		 	$	34,914		 	$	32,379		 	$	35,611		 	$	32,880		 	$	33,467		
Gross margin	 	33.8	%	 	36.0	%	 	33.9	%	 	32.5	%	 	32.4	%	 	34.0	%	 	32.5	%	 	33.0	%	
Income from operations	 	$	5,847		 	$	9,150		 	$	8,384		 	$	6,461		 	$	6,387		 	$	8,385		 	$	6,594		 	$	7,015		
EBITDA	 	$	14,466		 	$	17,628		 	$	16,636		 	$	9,588		 	$	14,847		 	$	16,984		 	$	14,904		 	$	(590	)	
Net income (loss) attributable to ARC	 	$	1,396		 	$	4,545		 	$	3,661		 	$	(2,327	)	 	$	415		 	$	722		 	$	(450	)	 	$	(16,010	)	
Income (loss) per share attributable to ARC shareholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.03		 	$	0.10		 	$	0.08		 	$	(0.05	)	 	$	0.01		 	$	0.02		 	$	(0.01	)	 	$	(0.35	)	
Diluted	 	$	0.03		 	$	0.10		 	$	0.08		 	$	(0.05	)	 	$	0.01		 	$	0.02		 	$	(0.01	)	 	$	(0.35	)	
The following is a reconciliation of EBITDA to net loss for each respective quarter.

	
																																	
 	 	Quarter Ended (In thousands)	
 	 	Mar. 31,	 	June 30,	 	Sept. 30,	 	Dec. 31,	 	Mar. 31,	 	June 30,	 	Sept. 30,	 	Dec. 31,	
 	 	2014	 	2013	
EBITDA	 	$	14,466		 	$	17,628		 	$	16,636		 	$	9,588		 	$	14,847		 	$	16,984		 	$	14,904		 	$	(590	)	
Interest expense, net	 	(3,913	)	 	(3,944	)	 	(3,780	)	 	(2,923	)	 	(6,041	)	 	(6,076	)	 	(5,895	)	 	(5,725	)	
Income tax (provision) benefit	 	(664	)	 	(607	)	 	(659	)	 	(418	)	 	311		 	(1,467	)	 	(790	)	 	(1,040	)	
Depreciation and amortization	 	(8,493	)	 	(8,532	)	 	(8,536	)	 	(8,574	)	 	(8,702	)	 	(8,719	)	 	(8,669	)	 	(8,655	)	
Net income (loss) attributable to ARC	 	$	1,396		 	$	4,545		 	$	3,661		 	$	(2,327	)	 	$	415		 	$	722		 	$	(450	)	 	$	(16,010	)	
We believe that quarterly revenues and operating results may vary significantly in the future and that quarter-to-quarter comparisons of our results of operations are not necessarily indications of future performance. In addition, our quarterly operating results, particularly those of our Traditional Reprographics offerings, are typically affected by seasonal factors, primarily the number of working days in a quarter and the holiday season in the fourth quarter. Therefore, historically, in regards to our service offerings our fourth quarter has been the slowest and the least profitable. While our Traditional Reprographics business is still influenced by the nature of building cycles, our remaining offerings are less so. Onsite Services, our largest revenue line, are driven by the production of office documents and our customer's desire to improve business processes and reduce print management costs. Due primarily to the continued quarterly sequential growth of our onsite sales and the impact of inclement weather in the first quarter of 2014, our 2014 fourth quarter sales and Adjusted EBITDA were higher than the first quarter of 2014. We recorded losses on extinguishment of debt in the amount of $5.3 million, $0.3 million, $16.1 million and $0.3 million during the quarters ended December 31, 2014, September 30, 2014, December 31, 2013 and September 30, 2013, respectively. We recorded valuation allowances against certain deferred tax assets of $1.1 million, $(1.6) million, $(1.7) million, and $(1.3) million during the quarters ended December 31, 2014, September 30, 2014, June 30, 2014 and March 31, 2014, respectively. We recorded valuation

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allowances against certain deferred tax assets of $7.2 million, $0.4 million, and $0.2 million during the quarters ended December 31, 2013, September 30, 2013 and June 30, 2013, respectively.
We believe inflation has not had a significant effect on our operations. Price increases for raw materials, such as paper and fuel charges, typically have been, and we expect will continue to be, passed on to customers in the ordinary course of business.
Liquidity and Capital Resources
Our principal sources of cash have been operations and borrowings under our debt and lease agreements. Our recent historical uses of cash have been for ongoing operations, payment of principal and interest on outstanding debt obligations, and capital expenditures.
Total cash and cash equivalents as of December 31, 2014 was $22.6 million . Of this amount, $14.5 million was held in foreign countries, with $12.7 million held in China.
Supplemental information pertaining to our historical sources and uses of cash is presented as follows and should be read in conjunction with our Consolidated Statements of Cash Flows and notes thereto included elsewhere in this report.

	
													
 	 	Year Ended December 31,	
(In thousands)	 	2014	 	2013	 	2012	
Net cash provided by operating activities	 	$	50,012		 	$	46,798		 	$	37,552		
Net cash used in investing activities	 	$	(13,796	)	 	$	(17,450	)	 	$	(20,025	)	
Net cash used in financing activities	 	$	(40,771	)	 	$	(30,284	)	 	$	(15,067	)	

Operating Activities
Cash flows from operations are primarily driven by sales and net profit generated from these sales, excluding non-cash charges.
The overall increase in cash flows from operations in 2014 was primarily due the increase in our net income driven by our expansion of adjusted EBITDA of $4.0 million as described above, as well a reduction of cash interest of over $9.0 million due to our long term debt refinancings. These increases were offset, in part, by the income tax refund of $3.8 million received in 2013 related to our 2009 consolidated federal income tax return, cash payments of $2.7 million related to trade secret litigation costs, and increases in accounts receivable, prepaid expenses and other assets. Days sales outstanding (“DSO”) increased to 52  days as of December 31, 2014 from 50 days as of December 31, 2013 .
The overall increase in cash flows from operations in 2013 was primarily due the increase in our net income driven by our expansion of EBITDA of approximately $7.0 million, as well as an income tax refund of $3.8 million received in 2013 related to our 2009 consolidated federal income tax return, and the timing of accounts payable and accrued expenses. These increases were offset, in part, by an increase in accounts receivable and cash payments related to our restructuring plan of $4.3 million in 2013, compared to $0.9 million in 2012.
Investing Activities
Net cash used in investing activities was primarily related to capital expenditures. We incurred capital expenditures totaling $13.3 million , $18.2 million , and $20.3 million in 2014 , 2013 and 2012 , respectively. The decrease in capital expenditures from 2013 to 2014 , and from 2012 to 2013, is primarily due to our increased reliance on leasing rather than purchasing equipment. As we continue to foster our relationships with credit providers and obtain attractive lease rates, we may increasingly choose to lease rather than purchase equipment in the future.
Financing Activities
Net cash of $40.8 million used in financing activities in 2014 primarily relates to proceeds and payments on our debt agreements and capital leases.
During 2014, we paid $25.0 million in aggregate principal amount of our $200.0 million Term B Loan Facility. In November 2014, we entered into a $175.0 million Term A Loan Facility, and the related proceeds were used to pay our remaining outstanding balance of $175.0 million Term B Loan Facility. In December 2014, we paid $2.0 million in aggregate principal amount of our Term A Loan Facility. Cash payments for deferred financing fees related to the Term A Loan Facility totaled $2.5 million .
Our cash position, working capital, and debt obligations as of December 31, 2014 , 2013 and 2012 are shown below and should be read in conjunction with our Consolidated Balance Sheets and notes thereto contained elsewhere in this report.

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 	December 31,	
(In thousands)	2014	 	2013	 	2012	
Cash and cash equivalents	$	22,636		 	$	27,362		 	$	28,021		
Working capital	$	20,664		 	$	28,705		 	$	40,650		
 	 	 	 	 	 	
Borrowings from senior secured credit facility, term loan facility and Notes (1)	$	173,000		 	$	196,000		 	$	196,852		
Other debt obligations	30,885		 	23,728		 	25,673		
Total debt obligations	$	203,885		 	$	219,728		 	$	222,525		

(1)	Net of original issue discount of $ 4,000 and $3,148 at December 31, 2013 and 2012 , respectively.	
The decrease of $8.0 million in working capital in 2014 was primarily due to the $15.5 million current portion of our Term A Loan Facility, partially offset by an increase in accounts receivable of $5.7 million . In accordance with the Term A Credit Agreement, we are required to make quarterly mandatory repayments of principal of $4.4 million, resulting in an increase in the short-term portion of our outstanding debt. Cash and cash equivalents decreased by $4.7 million , as noted above. The increase in accounts receivable was driven by higher revenue in the fourth quarter of 2014 as compared to the fourth quarter of 2013. To manage our working capital, we chiefly focus on our number of days sales outstanding and monitor the aging of our accounts receivable, as receivables are the most significant element of our working capital.
We believe that our current cash and cash equivalents balance of $22.6 million , availability under our revolving credit facility, availability under our equipment lease lines, and cash flows provided by operations should be adequate to cover the next twelve months of working capital needs, debt service requirements consisting of scheduled principal and interest payments, and planned capital expenditures, to the extent such items are known or are reasonably determinable based on current business and market conditions. In addition, we may elect to finance certain of our capital expenditure requirements through borrowings under our revolving credit facility, which had no debt outstanding as of December 31, 2014 , other than contingent reimbursement obligations for undrawn standby letters of credit described below that were issued under this facility. See “Debt Obligations” section for further information related to our revolving credit facility.
We generate the majority of our revenue from sales of services and products to the AEC industry. As a result, our operating results and financial condition can be significantly affected by economic factors that influence the AEC industry, such as non-residential and residential construction spending. Additionally, a general economic downturn may adversely affect the ability of our customers and suppliers to obtain financing for significant operations and purchases, and to perform their obligations under their agreements with us. We believe that credit constraints in the financial markets could result in a decrease in, or cancellation of, existing business, could limit new business, and could negatively affect our ability to collect our accounts receivable on a timely basis.
While we have not been actively seeking growth through acquisition during the last three years, the executive team continues to selectively evaluate potential acquisitions.
Debt Obligations
Term A Loan Facility
On November 20, 2014 we entered into a Credit Agreement (the “Term A Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.
The Term A Credit Agreement provides for the extension of term loans (“Term Loans”) in an aggregate principal amount of $175.0 million, the entirety of which was disbursed on the Closing Date in order to pay outstanding obligations under the Company’s Term Loan Credit Agreement dated as of December 20, 2013. The Credit Agreement also provides for the extension of revolving loans (“Revolving Loans”) in an aggregate principal amount not to exceed $30.0 million. The Revolving Loan facility under the Term A Credit Agreement replaces the Company’s Credit Agreement dated as of January 27, 2012. The Company may request incremental commitments to the aggregate principal amount of Term Loans and Revolving Loans available under the Credit Agreement by an amount not to exceed $75 million in the aggregate. Unless an incremental commitment to increase the Term Loan or provide a new term loan matures at a later date, the obligations under the Credit Agreement mature on November 20, 2019.
Loans borrowed under the Term A Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus a margin ranging from 1.50% to 2.50%, based on the Company’s Total Leverage Ratio (as

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defined in the Term A Credit Agreement). Loans borrowed under the Term A Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR rate plus 1.00% per annum, and (C) the rate of interest announced, from time to time, by Wells Fargo Bank, National Association as its “prime rate,” plus (ii) a margin ranging from 0.50% to 1.50%, based on our Company’s Total Leverage Ratio.
We will pay certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.
Subject to certain exceptions, including in certain circumstances, reinvestment rights, the loans extended under the Term A Credit Agreement are subject to customary mandatory prepayment provisions with respect to: the net proceeds from certain asset sales; the net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term A Credit Agreement); the net proceeds from certain issuances of equity securities; and net proceeds of certain insurance recoveries and condemnation events of our Company.
The Term A Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of our Company and its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; sell certain property or assets; engage in mergers or other fundamental changes; consummate acquisitions; make investments; pay dividends, other distributions or repurchase equity interest of our Company or its subsidiaries; change the nature of their business; prepay or amend certain indebtedness; engage in certain transactions with affiliates; amend their organizational documents; or enter into certain restrictive agreements. In accordance with the Term A Credit Agreement, we are permitted to pay dividends related to our equity securities payable solely in shares of equity securities. In addition, the Term A Credit Agreement contains financial covenants which requires us to maintain (i) at all times, a Total Leverage Ratio in an amount not to exceed 3.25 to 1.00 through the Company’s fiscal quarter ending September 30, 2016, and thereafter, in an amount not to exceed 3.00 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the Term A Credit Agreement), as of the last day of each fiscal quarter, in an amount not less than 1.25 to 1.00.
The Term A Credit Agreement contains customary events of default, including with respect to: nonpayment of principal, interest, fees or other amounts; failure to perform or observe covenants; material inaccuracy of a representation or warranty when made; cross-default to other material indebtedness; bankruptcy, insolvency and dissolution events; inability to pay debts; monetary judgment defaults; actual or asserted invalidity or impairment of any definitive loan documentation, repudiation of guaranties or subordination terms; certain ERISA related events; or a change of control.

The obligations of the Company’s subsidiary that is the borrower under the Credit Agreement are guaranteed by the Company and each other United States domestic subsidiary of the Company. The Credit Agreement and any interest rate protection and other hedging arrangements provided by any lender party to the Credit Facility or any affiliate of such a lender are secured on a first priority basis by a perfected security interest in substantially all of the borrower’s, the Company’s and each guarantor’s assets (subject to certain exceptions).
Term B Loan Facility

On December 20, 2013, we entered into a Term Loan Credit Agreement (the “Term B Loan Credit Agreement”) among ARC, as borrower, JPMorgan Chase Bank., N.A, as administrative agent and as collateral agent, and the lenders party thereto. Concurrently with the Company’s entry into the Term A Credit Agreement described above, the Company paid in full and terminated the Term B Loan Credit Agreement resulting in a loss on early extinguishment of debt of $5.6 million in 2014.

The credit facility provided under the Term B Loan Credit Agreement consisted of an initial term loan facility of $200.0 million, the entirety of which was disbursed in order to pay for the purchase of the Notes that were accepted under a cash tender offer and the subsequent redemption of the remaining outstanding Notes and to pay associated fees and expenses in connection with the cash tender offer and redemption.

By refinancing the Notes with this Term Loan Credit Agreement, we were able to reduce the effective interest rate on our long-term debt from 10.5% (or $21.0 million of interest per year on $200.0 million of principal) to 6.25% (or $12.5 million of interest per year on $200.0 million of principal).
10.5% Senior Notes
On December 1, 2010, we completed a private placement of 10.5% senior unsecured notes due 2016 (the “Notes”). During the third and fourth quarters of 2013, we repurchased $12.3 million in aggregate principal amount of the Notes in the open market using available cash. In December 2013 we commenced a cash tender offer and consent solicitation for all of the remaining outstanding Notes and accepted for payment all Notes that were validly tendered, followed by a redemption of all Notes which remained outstanding following the tender offer. In addition, we discharged all of our obligations under the indenture governing

34

the Notes by causing to be delivered a notice of redemption to holders of the remaining outstanding Notes and we deposited funds sufficient to pay and discharge all remaining indebtedness on the Notes, including accrued and unpaid interest. The purchase and redemption of the Notes resulted in a loss on early extinguishment of debt of $16.3 million in 2013.
2012 Credit Agreement
On January 27, 2012, we entered into a Credit Agreement (the “2012 Credit Agreement”), which, as amended in 2013, provided revolving loans in an aggregate principal amount not to exceed $40.0 million, with a Canadian sublimit of $5.0 million, based on inventory and accounts receivable of our subsidiaries organized in the US (“United States Domestic Subsidiaries”) and Canada (“Canadian Domestic Subsidiaries”) that meet certain eligibility criteria. Concurrently with the Company’s entry into the Term A Credit Agreement described above, the Company terminated the 2012 Credit Agreement.
Foreign Credit Agreement
In the third quarter of 2013, UDS, ARC’s Chinese operations, entered into a revolving credit facility with a term of 18 months . The facility provides for a maximum credit amount of 20.0 million  Chinese Yuan Renminbi, which translates to U.S.  $3.3 million as of December 31, 2014 . Draws on the facility are limited to 30  day periods and incur a fee of 0.05% of the amount drawn and no additional interest is charged. As of December 31, 2014 , there was $1.8 million in outstanding debt drawn on our foreign credit facility.

The following table sets forth the outstanding balance, borrowing capacity and applicable interest rate under the term loan credit agreement and senior secured credit facilities.

	
												
 	 	December 31, 2014	
 	 	Balance	 	Available
Borrowing
Capacity	 	Interest
Rate	
 	 	(Dollars in thousands)	
Term A Loan Facility (1)	 	$	173,000		 	$	27,719		 	2.74	%	
Foreign revolving facilities	 	1,897		 	1,353		 	0.60	%	
 	 	$	174,897		 	$	29,072		 	 	
 (1) Term A loan facility available borrowing capacity, net of $2.3 million of outstanding standby letters of credit as of December 31, 2014
As of December 31, 2014 , we had $28.8 million of capital lease obligations outstanding, with a weighted average interest rate of 6.8% and maturities between 2014 and 2018.
Other Notes Payable
As of December 31, 2014 , we had $0.2 million of notes payable outstanding, with an interest rate of 6.5% and maturities in 2016. These notes are collateralized by equipment previously purchased.
Off-Balance Sheet Arrangements
As of December 31, 2014 , we did not have any off-balance-sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.
Contractual Obligations and Other Commitments
Our future contractual obligations as of December 31, 2014 , are as follows:

	
																					
 	 	Total	 	Less than
1 year	 	1 to 3 years	 	3 to 5 years	 	More than
5 years	
 	 	(Dollars in thousands)	
Debt obligations	 	$	175,096		 	$	17,536		 	$	35,060		 	$	122,500		 	$	—		
Capital lease obligations	 	28,789		 	10,433		 	14,082		 	4,196		 	78		
Interest on long-term debt and capital leases	 	22,481		 	6,105		 	10,162		 	6,211		 	3		
Operating lease	 	51,013		 	17,648		 	23,613		 	8,032		 	1,720		
Total	 	$	277,379		 	$	51,722		 	$	82,917		 	$	140,939		 	$	1,801		

35

Operating Leases. We have entered into various non-cancelable operating leases primarily related to our facilities.
Contingent Transaction Consideration. We have entered into earnout obligations in connection with prior acquisitions. If the acquired businesses generate sales and/or operating profits in excess of predetermined targets, we are obligated to make additional cash payments in accordance with the terms of such earnout obligations. As of December 31, 2014 , we recorded liabilities related to future earnout payments consummated subsequent to the adoption of ASC 805, Business Combinations, of  $1.8 million . Liabilities related to future earnout payments are carried at fair value, and any changes in fair value at each reporting period, are recognized in our consolidated statement of operations.
Critical Accounting Policies
Our management prepares financial statements in conformity with GAAP. When we prepare these financial statements, we are required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to accounts receivable, inventories, deferred tax assets, goodwill and intangible assets and long-lived assets. We base our estimates and judgments on historical experience and on various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for our judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates.
Goodwill
In connection with acquisitions, we apply the provisions of ASC 805, Business Combinations , using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.
In accordance with ASC 350, Intangibles - Goodwill and Other , we assess goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired.
At September 30, 2014, we performed our assessment and determined that goodwill was not impaired.
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the third quarter of 2014, in connection with an operationally focused reorganization of our business into a regional format, we realigned our management and reporting structure. The reorganization was implemented to (1) better align our operations and sales territories to that of our customers, (2) quickly respond to the evolving needs of companies operating in the AEC industry, our primary market, (3) eliminate redundant business practices, and (4) realize operational economies of scale by combining operational staff, sales staff, back-office functions and streamlining our management structure. We concluded that a number of our reporting units met the required aggregation criteria, and as a result, we aggregated those reporting units into seven reporting units identified for purposes of evaluating goodwill for impairment as of September 30, 2014.
Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of our reporting units to their carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
We determine the fair value of our reporting units using an income approach. Under the income approach, we determined fair value based on estimated discounted future cash flows of each reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others.
Our projections are driven, in part, by industry data gathered from third parties, including projected growth rates of the AEC industry by segment (i.e., residential and non-residential) and anticipated GDP growth rates, as well as company-specific data

36

such as estimated composition of our customer base (i.e. non-AEC vs. AEC, residential vs. non- residential), historical revenue trends, and EBITDA margin performance of our reporting units. Our revenue projections for each of ARC’s reporting units include the estimated respective customer composition for each reporting unit, year-to-date revenue at the time of the goodwill impairment analysis, and projected growth rates for the related customer types. Although we rely on a variety of internal and external sources in projecting revenue, our relative reliance on each source or trend changes from year to year. In 2012 and into 2013, we noted a continued divergence between our historic revenue growth rates and AEC non-residential construction growth rates, as well as the “dilution” of traditional reprographics as the Company’s dominant business line. Therefore, we increased our reliance upon internal sources for our short-term and long-term revenue forecasts. Once the forecasted revenue was established for each of the reporting units based on the process noted above, using the current year EBITDA margin as a base line, we forecasted future EBITDA margins. In general, our EBITDA margins are significantly affected by (1) revenue trends and (2) cost management initiatives. Revenue trends impact our EBITDA margins because a significant portion of our cost of sales are considered relatively fixed therefore an increase in forecasted revenue (particularly when combined with any cost management or productivity enhancement initiatives) would result in meaningful gross margin expansion. Similarly, a significant portion of our selling, general, and administrative expenses are considered fixed. Hence, in forecasting EBITDA margins, significant reliance was placed on the historical impact of revenue trends on EBITDA margin.
The estimated fair values of our reporting units were based upon their respective projected EBITDA margins, which were anticipated to increase between 0 and 200 basis points from 2014 to 2015, followed by year-over-year increases of approximately 100 to 200 basis points in 2016, with stabilization expected in 2017. These cash flows were discounted using a weighted average cost of capital ranging from 11% to 13%, depending upon the size and risk profile of the reporting unit. We considered market information in assessing the reasonableness of the fair value under the income approach described above.
The results of step one of the goodwill impairment test, as of September 30, 2014, were as follows:

	
							
(Dollars in thousands)	Number of
Reporting
Units	 	Representing
Goodwill of	
No goodwill balance	1		 	$	—		
Reporting units failing step one that continue to carry a goodwill balance	—		 	—		
Fair value of reporting unit exceeds its carrying value by 25%-30%	1		 	7,285		
Fair value of reporting unit exceeds its carrying value by more than 75%	5		 	205,323		
 	7		 	$	212,608		
Based upon a sensitivity analysis, a reduction of approximately 50 basis points of projected EBITDA in 2014 and beyond, assuming all other assumptions remain constant, would result in no reporting unit proceeding to step two of the analysis.
Based upon a separate sensitivity analysis, a 50 basis point increase to the weighted average cost of capital would result in no reporting unit proceeding to step two of the analysis.
Given the current economic environment and the changing document and printing needs of our customers and the uncertainties regarding the effect on our business, there can be no assurance that the estimates and assumptions made for purposes of our goodwill impairment testing in 2014 will prove to be accurate predictions of the future. If our assumptions, including forecasted EBITDA of certain reporting units, are not achieved, we may be required to record additional goodwill impairment charges in future periods, whether in connection with our next annual impairment testing in the third quarter of 2014, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles - Goodwill and Other ) outside of the quarter when we regularly perform our annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.
Revenue Recognition
We apply the provisions of ASC 605, Revenue Recognition . In general, we recognize revenue when (i) persuasive evidence of an arrangement exists, (ii) shipment of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured. Net sales include an allowance for estimated sales returns and discounts.
We recognize revenues from Traditional Reprographics, Color Services and Onsite Services when services have been rendered, while revenues from the sale of equipment and supplies are recognized upon delivery to the customer or upon customer pickup.

37

We recognize revenues from Digital services when such services have been rendered as they relate to scanning services, "digital shipping" and managed file transfer. Revenues derived from our Digital Services include hosted software licensing activities, which are recognized ratably over the term of the license.
We have established contractual pricing for certain large national customer accounts. These contracts generally establish uniform pricing at all service centers for Global Solutions. Revenues earned from our Global Solutions are recognized in the same manner as non-Global Solutions revenues.
Management provides for returns, discounts and allowances based on historic experience and adjusts such allowances as considered necessary. To date, such provisions have been within the range of management’s expectations.
Income Taxes
Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.
When establishing a valuation allowance, we consider future sources of taxable income such as future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. A tax planning strategy is an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets. In the event we determine the deferred tax assets, more likely than not, will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which we make such a determination.
As of June 30, 2011, we determined that cumulative losses for the preceding twelve quarters constituted sufficient objective evidence (as defined by ASC 740-10, Income Taxes ) that a valuation allowance was needed. As of December 31, 2014 , the valuation allowance against certain deferred tax assets was $82.0 million .
In future quarters we will continue to evaluate our historical results for the preceding twelve quarters and our future projections to determine whether we will generate sufficient taxable income to utilize our deferred tax assets, and whether a partial or full valuation allowance is still required. Should we generate sufficient taxable income, however, we may reverse a portion or all of the then current valuation allowance. Based on recent earnings in certain jurisdictions there is a reasonable possibility that, within the next year, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance will no longer be needed. As such, we may release a significant portion of the valuation allowance within the next 12 months. This release would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period such release is recorded. Any such adjustment could materially impact our financial position and results of operations.
We calculate our current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.
Income taxes have not been provided on certain undistributed earnings of foreign subsidiaries because such earnings are considered to be permanently reinvested.
The amount of taxable income or loss we report to the various tax jurisdictions is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We report tax-related interest and penalties as a component of income tax expense.
Recent Accounting Pronouncements
See Note 2, “Summary of Significant Accounting Policies” to our Consolidated Financial Statements for disclosure on recent accounting pronouncements.

38

Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Our primary exposure to market risk is interest rate risk associated with our debt instruments. We use both fixed and variable rate debt as sources of financing. In 2014, we entered into a $175.0 million Term A Credit Agreement. Borrowings under the Term A Credit Agreement bear interest at a rate equal to an applicable margin plus a variable rate. As such, our Term A Credit Agreement exposes us to market risk for changes in interest rates. As of December 31, 2014 , we had $203.9 million of total debt, net of discount, and capital lease obligations, of which approximately 15% was at a fixed rate, with the remainder at variable rates. Given our debt position at December 31, 2014 , the effect of a 100 basis point increase in LIBOR on our interest expense would be approximately $1.7 million annually.
As of December 31, 2014 , we were not party to any derivative or hedging transactions; however, we have entered into derivative instruments in the past to manage our exposure to changes in interest rates. These instruments allowed us to raise funds at floating rates and effectively swap them into fixed rates, without the exchange of the underlying principal amount. We have not, and do not plan to, enter into any derivative financial instruments for trading or speculative purposes.
Although we have international operating entities, our exposure to foreign currency rate fluctuations is not significant to our financial condition or results of operations.
Item 8. Financial Statements and Supplementary Data
Our financial statements and the accompanying notes that are filed as part of this report are listed under “Part IV, Item 15. Financial Statements Schedules and Reports” and are set forth beginning on page F-1 immediately following the signature pages of this Annual Report on Form 10-K, except for our quarterly results of operations, which are included in Item 7 of this Annual Report on Form 10-K.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.

Item 9A. Controls and Procedures
Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Exchange Act are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of December 31, 2014 . Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of December 31, 2014 , our disclosure controls and procedures were effective.
Management’s Report on Internal Control Over Financial Reporting
Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) or 15(d)-15(f) of the Exchange Act). Under the supervision and with the participation of the Company’s management, including our Chief Executive Officer and President, and our Chief Financial Officer, the Company conducted an evaluation of the effectiveness of its internal control over financial reporting based upon the framework in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, the Company’s management concluded that its internal control over financial reporting was effective as of December 31, 2014 .
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

39

Changes in Internal Control Over Financial Reporting
There were no changes to internal control over financial reporting during the quarter ended December 31, 2014 , that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm has issued an audit report on internal control over financial reporting, which appears below.

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
ARC Document Solutions, Inc.
Walnut Creek, California
We have audited the internal control over financial reporting of ARC Document Solutions, Inc. and subsidiaries (the “Company”) as of December 31, 2014 , based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014 , based on the criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended December 31, 2014 of the Company and our report dated March 13, 2015 expressed an unqualified opinion on those financial statements and financial statement schedule.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 13, 2015

41

Item 9B. Other Information

None.

PART III
Item 10. Directors, Executive Officers and Corporate Governance
Certain information regarding our executive officers is included in Part I, Item 1, of this Annual Report on Form 10-K under “Executive Officers of the Registrant.” All other information regarding directors, executive officers and corporate governance required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2015 annual meeting of stockholders, which will be filed with the SEC within 120 days after our fiscal year end of December 31, 2014 , and is set forth under “Nominees for Director,” “Corporate Governance Profile,” “Section 16(a) Beneficial Ownership Reporting Compliance,” and in other applicable sections in the proxy statement.

Item 11. Executive Compensation
The information required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2015 annual meeting of stockholders and is set forth under “Executive Compensation.”
The information in the section of the proxy statement for our 2015 annual meeting captioned “Compensation Committee Report” is incorporated by reference herein but shall be deemed furnished, not filed and shall not be deemed to be incorporated by reference into any filing we make under the Securities Act of 1933 or the Exchange Act.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2015 annual meeting of stockholders and is set forth under “Beneficial Ownership of Voting Securities” and “Equity Compensation Plan Information.”

Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to the applicable information in the proxy statement for our 2015 annual meeting of stockholders and is set forth under “Certain Relationships and Related Transactions” and “Corporate Governance Profile.”

Item 14. Principal Accountant Fees and Services
The information required by this item is incorporated herein by reference to the proxy statement for our 2015 annual meeting of stockholders and is set forth under “Auditor Fees.”

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PART IV
Item 15 . Exhibits and Financial Statement Schedules.
(a) The following documents are filed as part of this Annual Report on Form 10-K:

	
(1) Financial Statements	
 	
Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP	
Consolidated Balance Sheets as of December 31, 2014 and 2013	
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012	
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012	
Consolidated Statements of Equity for the years ended December 31, 2014, 2013 and 2012	
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012	
Notes to Consolidated Financial Statements	
 	
(2)  Financial Statement Schedules	
 	
Schedule II — Valuation and Qualifying Accounts	
All other schedules have been omitted as the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the Consolidated Financial Statements and notes thereto.
(3) Exhibits
See Item 15(b) below.
(b) Exhibits
The following exhibits are filed herewith as part of this Annual Report on Form 10-K or are incorporated by reference to exhibits previously filed with the SEC:

43

Index to Exhibits

	

Number	  	Description	
 	 	
3.1		  	Certificate of Ownership and Merger as filed with Secretary of State of the State of Delaware (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed December 27, 2012).	
 	 	
3.2		  	Restated Certificate of Incorporation, filed March 13, 2013.	
 	 	
3.3		  	Second Amended and Restated Bylaws, (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on October 6, 2009).	
 	 	
4.1		  	Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K filed on March 9, 2011).	
 	 	
4.2		  	Indenture, dated December 1, 2010, among ARC Document Solutions, certain subsidiaries of ARC Document Solutions as guarantors thereto, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	
4.3		  	Form of 10.5% Senior Note due 2016 (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	
4.4		  	Registration Rights Agreement, dated December 1, 2010, among ARC Document Solutions, certain subsidiaries of ARC Document Solutions as guarantors thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	 	
4.5		 	First Supplemental Indenture dated December 20, 2013 among ARC Document Solutions, Inc., the Guarantors named therein, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on December 24, 2013).

10.1		  	ARC Document Solutions 2005 Stock Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on January 13, 2005).^	
 	 	
10.2		  	Amendment No. 1 to ARC Document Solutions 2005 Stock Plan dated May 22, 2007 (incorporated by reference to Exhibit 10.63 to the Registrant’s Form 10-Q filed on August 9, 2007).^	
 	 	
10.3		  	Amendment No. 2 to ARC Document Solutions 2005 Stock Plan dated May 2, 2008 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed August 8, 2008). ^	
 	 	
10.4		  	Amendment No. 3 to ARC Document Solutions 2005 Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed August 7, 2009). ^	
 	 	
10.5		  	Forms of Stock Option Agreements under the 2005 Stock Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).^	
 	 	
10.6		  	Forms of Restricted Stock Award Agreements under 2005 Stock Plan (incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on December 6, 2004).^	

44

	
				
10.7		  	Form of Restricted Stock Unit Award Agreement under 2005 Stock Plan (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on December 6, 2004).^	
 	 	
10.8		  	Form of Stock Appreciation Right Agreement under 2005 Stock Plan (incorporated by reference to Exhibit 10.29 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on January 13, 2005).^	
 	 	
10.9		  	Form of ARC Document Solutions Stock Option Grant Notice — Non-employee Directors (Discretionary Non-statutory Stock Options) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on December 16, 2005).^	
 	 	
10.10		  	Form of ARC Document Solutions Non-employee Directors Nonstatutory Stock Option Agreement (Discretionary Grants) (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on December 16, 2005).^	

				
 	 	 	
10.11		  	Amended and Restated ARC Document Solutions 2005 Employee Stock Purchase Plan amended and restated as of July 30, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on November 9, 2009).^	
 	 	
10.12		  	Lease Agreement, for the premises commonly known as 934 and 940 Venice Boulevard, Los Angeles, CA, dated November 19, 1997, by and between American Reprographics Company, L.L.C. (formerly Ford Graphics Group, L.L.C.) and Sumo Holdings LA, LLC (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.13		  	Amendment to Lease for the premises commonly known as 934 and 940 Venice Boulevard, Los Angeles, CA, effective as of August 2, 2005, by and between Sumo Holdings LA, LLC, Landlord and American Reprographics Company, L.L.C. (formerly known as Ford Graphics Group, L.L.C.) Tenant (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.14		  	Lease Agreement for the premises commonly known as 835 West Julian Street, San Jose, CA, dated February 1, 2009, by and between American Reprographics Company, L.L.C. and Sumo Holdings San Jose, LLC (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.15		  	Amendment to Lease for the premises commonly known as 835 West Julian Street, San Jose, CA, dated effective February 1, 2009, by and between Sumo Holdings San Jose, LLC, Landlord, and American Reprographics Company, L.L.C. Tenant (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on May 8, 2009).	
 	 	
10.16		  	Lease Agreement for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated April 1, 1999, by and between American Reprographics Company, L.L.C. and Sumo Holdings Irvine, LLC (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.17		  	Amendment to Lease for the premises commonly known as 17721 Mitchell North, Irvine, CA, effective as of August 2, 2005, by and between Sumo Holdings Irvine, LLC, Lessor and American Reprographics Company, L.L.C., Lessee (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.18		  	Assignment of Lease and Consent for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated effective April 28, 2009, by and between OCB, LLC, American Reprographics Company, L.L.C. and Sumo Holdings Irvine LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on May 8, 2009).	

45

	
				
10.19		  	Second Amendment to Lease for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated effective April 28, 2009, by and between Sumo Holdings Irvine LLC, Lessor, and OCB, LLC, Lessee, (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed on May 8, 2009).	
 	 	
10.20		  	Lease Agreement for the premises commonly known as 1322 V Street, Sacramento, CA, dated December 1, 1997, by and between American Reprographics Company, L.L.C. (formerly Ford Graphics Group, L.L.C.) and Sumo Holdings Sacramento, LLC (Sacramento Property) (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.21		  	Amendment to Lease for the premises commonly known as 1322 V Street, Sacramento, CA, effective as of August 2, 2005, by and between Sumo Holdings Sacramento, LLC, Landlord and American Reprographics Company, L.L.C. (formerly known as Ford Graphics Group, L.L.C.) Tenant (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.22		  	Lease Agreement for the premises commonly known as 345 Clinton Street, Costa Mesa, CA, dated September 23, 2003, by and between American Reprographics Company (dba Consolidated Reprographics) and Sumo Holdings Costa Mesa, LLC (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.23		  	Lease Agreement for the premises commonly known as 616 Monterey Pass Road, Monterey Park, CA, by and dated November 19, 1997, between Dieterich-Post Company and American Reprographics Company, L.L.C. (as successor lessee) (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 10-K filed on March 1, 2007).	
 	 	
10.24		  	Indemnification Agreement, dated April 10, 2000, among American Reprographics Company, L.L.C., American Reprographics Holdings, L.L.C., ARC Acquisition Co., L.L.C., Mr. Chandramohan, Mr. Suriyakumar, Micro Device, Inc., Dieterich-Post Company, ZS Ford L.P., and ZS Ford L.L.C. (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.25		  	Restricted Stock Award Grant Notice between American Reprographics Company and Mr. Sathiyamurthy Chandramohan dated March 27, 2007 (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed on March 30, 2007).^	
 	 	
10.26		  	Amended and Restated Employment Agreement, dated March 21, 2012, between American Reprographics Company and Mr. Suriyakumar (incorporated by reference to Exhibit 10. 1 to the Registrant’s Form 8-K (filed on March 21, 2011).^	

				
 	 	
10.27		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Kumarakulasingam Suriyakumar (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (filed on February 21, 2012).^	
 	 	
10.28		  	Restricted Stock Award Grant Notice between American Reprographics Company and Mr. Suriyakumar dated March 27, 2007 (incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K filed on March 30, 2007).^	
 	 	
10.29		  	Amended and Restated Employment Agreement, dated March 21, 2011, between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on March 21, 2011).^	
 	 	
10.30		  	Agreement to Grant Stock dated effective December 7, 2004, between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.36 to the Registrant’s Form 10-K filed on March 31, 2005).^	

46

	

10.31		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Rahul Roy (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on February 21, 2012).^	
 	 	
10.32		  	First Amendment to Agreement to Grant Stock dated May 17, 2006 between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.48 to the Registrant’s Form 10-K filed on March 1, 2007).^	
 	 	
10.33		  	Amended and Restated Executive Employment Agreement, dated March 21, 2011, between American Reprographics Company and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on March 21, 2011). ^	
 	 	
10.34		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on February 21, 2012).^	
 	 	
10.35		  	Restricted Stock Award Grant Notice between American Reprographics Company and Dilantha Wijesuriya dated October 28, 2009 (incorporated by reference to Exhibit 10.79 to the Registrant’s Form 10-K filed on February 26, 2010). ^	
 	 	
10.36		  	Executive Employment Agreement, dated April 14, 2011, between American Reprographics Company and Jorge Avalos, (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 15, 2011).^	
 	 	
10.37		  	Separation Agreement, dated April 13, 2011, between American Reprographics Company and Jonathan Mather (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 21, 2011).^	
 	 	
10.38		  	Executive Employment Agreement, dated July 18, 2011, between American Reprographics Company and John E.D. Toth, (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on July 18, 2011).^	
 	 	
10.39		  	Form of Indemnification Agreement between ARC Document Solutions, Inc. and each of its Directors and Executive Officers.	
 	 	
10.40		  	Amendment No. 1 to Amended and Restated Employment Agreement, dated March 13, 2013, between ARC Document Solutions, Inc. and Mr. Rahul K. Roy.^	
 	 	
10.41		 	Letter Amendment, dated March 13, 2014, by and between ARC Document Solutions, Inc. and Mr. Suriyakumar (incorporated by reference to Exhibit 10.47 to the Registrant's Form 10-K filed on March 14, 2014).^	
 	 	 	
10.42		 	Amended and Restated Employment Agreement, dated March 13, 2014, between ARC Document Solutions, Inc. and Mr. Kumarakulasingam (incorporated by reference to Exhibit 10.48 to the Registrant's Form 10-K filed on March 14, 2014).^	
 	 	 	
10.43		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and John Toth (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 7, 2014).	
 	 	 	
10.44		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Rahul K. Roy (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on May 7, 2014).^	

47

	
				
10.45		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.3 to the Registrant's Form 8-K filed on May 7, 2014).^	
 	 	 	
10.46		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Jorge Avalos (incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K filed on May 7, 2014).^	
 	 	 	
10.47		 	ARC Document Solutions, Inc. 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 6, 2014).	
 	 	 	
10.48		 	Amendment No. 1 to ARC Document Solutions, Inc. 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on May 6, 2014).	
 	 	 	
10.49		 	Amended and Restated Executive Employment Agreement dated May 17, 2014 by and between ARC Document Solutions, Inc. and Mr. Suriyakumar (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 19, 2014).^	
 	 	 	
10.50		 	Credit Agreement dated November 20, 2014, among ARC Document Solutions, LLC, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on November 21, 2014).	
 	 	 	
21.1		  	List of Subsidiaries.*	

48

	

Number	  	Description	
 	 	
23.1		  	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.*	
 	 	
31.1		  	Certification of Principal Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
31.2		  	Certification of Principal Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.1		  	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.2		  	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
101.INS		  	XBRL Instance Document *	
 	 	
101.SCH		  	XBRL Taxonomy Extension Schema *	
 	 	
101.CAL		  	XBRL Taxonomy Extension Calculation Linkbase *	
 	 	
101.DEF		  	XBRL Taxonomy Extension Definition Linkbase *	
 	 	
101.LAB		  	XBRL Taxonomy Extension Label Linkbase *	
 	 	
101.PRE		  	XBRL Taxonomy Extension Presentation Linkbase *	

	
		
*	Filed herewith	

		
^	Indicates management contract or compensatory plan or agreement	

49

SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	

ARC DOCUMENT SOLUTIONS, INC.	
 	 	
By:	 	/s/ KUMARAKULASINGAM SURIYAKUMAR	
 	 	Chairman, President and Chief Executive Officer	
Date: March 13, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant in the capacities and on the dates indicated.

	

Signature	  	Title	  	Date	
 	 	 	
/s/ KUMARAKULASINGAM SURIYAKUMAR
Kumarakulasingam Suriyakumar	  	Chairman, President and
Chief Executive Officer and Director (Principal Executive Officer)	  	March 13, 2015	
 	 	 	
/s/ JORGE AVALOS
Jorge Avalos	  	Chief Financial Officer (Principal Financial Officer)	  	March 13, 2015	
 	 	 	
/s/ THOMAS J. FORMOLO
Thomas J. Formolo	  	Director	  	March 13, 2015	
 	 	 	
/s/ ERIBERTO SCOCIMARA
Eriberto Scocimara	  	Director	  	March 13, 2015	
 	 	 	
/s/ DEWITT KERRY MCCLUGGAGE
Dewitt Kerry McCluggage	  	Director	  	March 13, 2015	
 	 	 	
/s/ JAMES F. MCNULTY
James F. McNulty	  	Director	  	March 13, 2015	
 	 	 	
/s/ MARK W. MEALY
Mark W. Mealy	  	Director	  	March 13, 2015	
 	 	 	
/s/ MANUEL PEREZ DE LA MESA
Manuel Perez de la Mesa	  	Director	  	March 13, 2015	

50

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	

 	 	
Report of Independent Registered Public Accounting Firm Deloitte & Touche LLP	  	F-2	  	
 	 	
Consolidated Balance Sheets as of December 31, 2014 and 2013	  	F-3	  	
 	 	
Consolidated Statements of Operations for the years ended December 31, 2014, 2013 and 2012	  	F-4	  	
 	 	
Consolidated Statements of Comprehensive Income (Loss) for the years ended December 31, 2014, 2013 and 2012	  	F-5	  	
 	 	
Consolidated Statements of Equity for the years ended December 31, 2014, 2013 and 2012	  	F-6	  	
 	 	
Consolidated Statements of Cash Flows for the years ended December 31, 2014, 2013 and 2012	  	F-7	  	
 	 	
Notes to Consolidated Financial Statements	  	F-8	  	
 	 	
Financial Statement Schedule:	  	 	 	
 	 	
Schedule II — Valuation and Qualifying Accounts	  	F-29	  	

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
ARC Document Solutions, Inc.
Walnut Creek, California
We have audited the accompanying consolidated balance sheets of ARC Document Solutions, Inc. and subsidiaries (the “Company”) as of December 31, 2014 and 2013 , and the related consolidated statements of operations, comprehensive income (loss), equity, and cash flows for each of the three years in the period ended December 31, 2014 . Our audits also included the financial statement schedule listed in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of ARC Document Solutions, Inc. and subsidiaries as of December 31, 2014 and 2013 , and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2014 , in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of December 31, 2014 , based on the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 13, 2015 , expressed an unqualified opinion on the Company’s internal control over financial reporting.
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 13, 2015

F-2

ARC DOCUMENT SOLUTIONS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)

	
								
 	December 31,	 	December 31,	
 	2014	 	2013	
Assets	 	 	 	
Current assets:	 	 	 	
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		
Liabilities and Equity	 	 	 	
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 (Note 8)		 		
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		
The accompanying notes are an integral part of these consolidated financial statements.

F-3

ARC DOCUMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)

	
												
 	Year Ended 
 December 31,	
 	2014	 	2013	 	2012	
Service sales	$	371,884		 	$	355,358		 	$	350,260		
Equipment and supplies sales	51,872		 	51,837		 	55,858		
Total net sales	423,756		 	407,195		 	406,118		
Cost of sales	279,478		 	272,858		 	282,599		
Gross profit	144,278		 	134,337		 	123,519		
Selling, general and administrative expenses	107,672		 	96,800		 	93,073		
Amortization of intangible assets	5,987		 	6,612		 	11,035		
Goodwill impairment	—		 	—		 	16,707		
Restructuring expense	777		 	2,544		 	3,320		
Income (loss) from operations	29,842		 	28,381		 	(616	)	
Other income, net	(96	)	 	(106	)	 	(100	)	
Loss on extinguishment of debt	5,599		 	16,339		 	—		
Interest expense, net	14,560		 	23,737		 	28,165		
Income (loss) before income tax provision	9,779		 	(11,589	)	 	(28,681	)	
Income tax provision	2,348		 	2,986		 	2,784		
Net income (loss)	7,431		 	(14,575	)	 	(31,465	)	
Income attributable to noncontrolling interest	(156	)	 	(748	)	 	(503	)	
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	7,275		 	$	(15,323	)	 	$	(31,968	)	
 	 	 	 	 	 	
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:	 	 	 	 	 	
Basic	$	0.16		 	$	(0.33	)	 	$	(0.70	)	
Diluted	$	0.15		 	$	(0.33	)	 	$	(0.70	)	
Weighted average common shares outstanding:	 	 	 	 	 	
Basic	46,245		 	45,856		 	45,668		
Diluted	47,088		 	45,856		 	45,668		
The accompanying notes are an integral part of these consolidated financial statements.

F-4

ARC DOCUMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(In thousands, except per share data)

	
												
 	Year Ended 
 December 31,	
 	2014	 	2013	 	2012	
Net income (loss)	$	7,431		 	$	(14,575	)	 	$	(31,465	)	
Other comprehensive income, net of tax	 	 	 	 	 	
Foreign currency translation adjustments	(851	)	 	190		 	345		
Amortization of derivative, net of tax effect of $0, $0 and $1,285	—		 	—		 	2,154		
Other comprehensive (loss) income, net of tax	(851	)	 	190		 	2,499		
Comprehensive income (loss)	6,580		 	(14,385	)	 	(28,966	)	
Comprehensive income attributable to noncontrolling interest	100		 	993		 	553		
Comprehensive income (loss) income attributable to ARC Document Solutions, Inc. shareholders	$	6,480		 	$	(15,378	)	 	$	(29,519	)	
The accompanying notes are an integral part of these consolidated financial statements.

F-5

ARC DOCUMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF EQUITY
(In thousands, except per share data)

	
																															
 	ARC Document Solutions, Inc. Shareholders	 	 	 	 	
 	Common Stock	 	 	 	 	 	Accumulated	 	 	 	 	 	 	
	Shares	 	Par
Value	 	Additional Paid-in
Capital	 	Retained
Earnings	 	Other Comprehensive
Income (loss)	 	Common Stock in
Treasury	 	Noncontrolling
Interest	 	Total	
Balance at December 31, 2011	46,235		 	$	46		 	$	99,728		 	$	32,663		 	$	(1,760	)	 	$	—		 	$	6,388		 	$	137,065		
Stock-based compensation	6		 			 	1,999		 			 			 			 			 	$	1,999		
Issuance of common stock under Employee Stock Purchase Plan	6		 			 	28		 			 			 			 			 	$	28		
Stock options exercised	15		 			 	79		 			 			 			 			 	$	79		
Tax benefit from stock-based compensation, net of tax deficiency	—		 			 	676		 			 			 			 			 	$	676		
Treasury shares	12		 			 	—		 	—		 			 	(44	)	 			 	$	(44	)	
Comprehensive loss			 			 	—		 	(31,968	)	 	2,449		 	—		 	553		 	$	(28,966	)	
Balance at December 31, 2012	46,274		 	$	46		 	$	102,510		 	$	695		 	$	689		 	$	(44	)	 	$	6,941		 	$	110,837		
Stock-based compensation	41		 			 	3,207		 			 			 			 			 	3,207		
Issuance of common stock under Employee Stock Purchase Plan	6		 			 	30		 			 			 			 			 	30		
Stock options exercised	11		 			 	59		 			 			 			 			 	59		
Dividends paid to noncontrolling interest			 			 	—		 			 			 			 	(485	)	 	(485	)	
Treasury shares	33	 		 	—		 		 		 	(124	)	 		 	(124	)	
Comprehensive loss		 		 	—		 	(15,323	)	 	(55	)	 	—		 	993	 	(14,385	)	
Balance at December 31, 2013	46,365		 	$	46		 	$	105,806		 	$	(14,628	)	 	$	634		 	$	(168	)	 	$	7,449		 	$	99,139		
Stock-based compensation	167		 			 	3,532		 			 	—		 			 			 	3,532		
Issuance of common stock under Employee Stock Purchase Plan	13		 			 	82		 			 	—		 			 			 	82		
Stock options exercised	223		 	1		 	1,230		 			 			 			 			 	1,231		
Treasury shares	32		 			 	—		 			 	—		 	(240	)	 			 	(240	)	
Dividends paid to noncontrolling interest			 			 	—		 		 	—		 	—		 	(486	)	 	(486	)	
Comprehensive income (loss)		 		 	—		 	7,275		 	(795	)	 	—		 	100		 	6,580		
Balance at December 31, 2014	46,800		 	$	47		 	$	110,650		 	$	(7,353	)	 	$	(161	)	 	$	(408	)	 	$	7,063		 	$	109,838		
The accompanying notes are an integral part of these consolidated financial statements.

F-6

ARC DOCUMENT SOLUTIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share data)  

												
 	Year Ended December 31,	
 	2014	 	2013	 	2012	
Cash flows from operating activities	 	 	 	 	 	
Net income (loss)	$	7,431		 	$	(14,575	)	 	$	(31,465	)	
Adjustments to reconcile net income (loss) to net cash provided by operating activities:	 	 	 	 	 	
Allowance for accounts receivable	546		 	636		 	456		
Depreciation	28,148		 	28,133		 	28,487		
Amortization of intangible assets	5,987		 	6,612		 	11,035		
Amortization of deferred financing costs	758		 	1,098		 	1,088		
Amortization of bond discount	764		 	671		 	611		
Goodwill impairment	—		 	—		 	16,707		
Stock-based compensation	3,802		 	3,207		 	1,999		
Deferred income taxes	5,429		 	(4,909	)	 	(6,433	)	
Deferred tax valuation allowance	(3,552	)	 	7,277		 	9,750		
Restructuring expense, non-cash portion	—		 	244		 	2,379		
Amortization of derivative, net of tax effect	—		 	—		 	2,154		
Loss on early extinguishment of debt	5,599		 	16,339		 	—		
Other non-cash items, net	(462	)	 	(323	)	 	321		
Changes in operating assets and liabilities, net of effect of business acquisitions:	 	 	 	 	 	
Accounts receivable	(6,898	)	 	(5,133	)	 	2,533		
Inventory	(2,220	)	 	376		 	(3,005	)	
Prepaid expenses and other assets	(1,830	)	 	1,966		 	1,032		
Accounts payable and accrued expenses	6,510		 	5,179		 	(97	)	
Net cash provided by operating activities	50,012		 	46,798		 	37,552		
Cash flows from investing activities	 	 	 	 	 	
Capital expenditures	(13,269	)	 	(18,191	)	 	(20,348	)	
Payments for businesses acquired, net of cash acquired	(342	)	 	—		 	—		
Other	(185	)	 	741		 	323		
Net cash used in investing activities	(13,796	)	 	(17,450	)	 	(20,025	)	
Cash flows from financing activities	 	 	 	 	 	
Proceeds from stock option exercises	1,227		 	59		 	79		
Proceeds from issuance of common stock under Employee Stock Purchase Plan	82		 	30		 	28		
Share repurchases, including shares surrendered for tax withholding	(240	)	 	(124	)	 	—		
Proceeds from borrowings on long-term debt agreements	175,000		 	196,402		 	—		
Payments of debt extinguishment costs	—		 	(11,330	)	 	—		
Early extinguishment of long-term debt	(194,500	)	 	(200,000	)	 	—		
Payments on long-term debt agreements and capital leases	(19,217	)	 	(12,379	)	 	(15,601	)	
Net borrowings (repayments) under revolving credit facilities	98		 	(237	)	 	1,266		
Payment of deferred financing costs	(2,735	)	 	(2,220	)	 	(839	)	
Dividends paid to noncontrolling interest	(486	)	 	(485	)	 	—		
Net cash used in financing activities	(40,771	)	 	(30,284	)	 	(15,067	)	
Effect of foreign currency translation on cash balances	(171	)	 	277		 	124		
Net change in cash and cash equivalents	(4,726	)	 	(659	)	 	2,584		
Cash and cash equivalents at beginning of period	27,362		 	28,021		 	25,437		
Cash and cash equivalents at end of period	$	22,636		 	$	27,362		 	$	28,021		
Supplemental disclosure of cash flow information:	 	 	 	 	 	
Cash paid for interest	13,303		 	22,873		 	23,277		
Income taxes paid (received), net	548		 	(3,345	)	 	(122	)	
Noncash financing activities:	 	 	 	 	 	
Capital lease obligations incurred	$	19,055		 	$	10,399		 	$	10,047		
Liabilities in connection with the acquisition of businesses	$	1,768		 	$	—		 	$	—		
Liabilities in connection with deferred financing costs	$	8		 	$	433		 	$	—		
The accompanying notes are an integral part of these consolidated financial statements.

F-7

ARC DOCUMENT SOLUTIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except per share data or where otherwise noted)

1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC” or the “Company”) is a leading document solutions company serving businesses of all types, with an emphasis on the non-residential segment of the architecture, engineering and construction (“AEC”) industry. ARC offers a variety of services including: Onsite Services, Digital Services, Color Services, and Traditional Reprographics Services. In addition, ARC also sells Equipment and Supplies. The Company conducts its operations through its wholly-owned operating subsidiary, ARC Document Solutions, LLC, a Texas limited liability company, and its affiliates.
Basis of Presentation
The accompanying Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and accompanying notes. The Company evaluates its estimates and assumptions on an ongoing basis and relies on historical experience and various other factors that it believes to be reasonable under the circumstances to determine such estimates. Actual results could differ from those estimates and such differences may be material to the Consolidated Financial Statements.
Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to customers in the AEC industry. As a result, the Company’s operating results and financial condition can be significantly affected by economic factors that influence the AEC industry, such as non-residential construction spending, GDP growth, interest rates, unemployment rates, and office vacancy rates. Reduced activity (relative to historic levels) in the AEC industry would diminish demand for some of ARC’s services and products, and would therefore negatively affect revenues and have a material adverse effect on its business, operating results and financial condition.
As part of the Company’s growth strategy, ARC intends to continue to offer and grow a variety of service offerings that are relatively new to the Company. The success of the Company’s efforts will be affected by its ability to acquire new customers for the Company’s new service offerings as well as sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents
Cash equivalents include demand deposits and short-term investments with a maturity of three months or less when purchased.
The Company maintains its cash deposits at numerous banks located throughout the United States, Canada, India, the United Kingdom and China, which at times, may exceed federally insured limits. UDS, the Company’s operations in China, held $12.7 million of the Company’s cash and cash equivalents as of December 31, 2014 . The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash and cash equivalents.
Restricted Cash
As of December 31, 2014 , the Company had restricted cash of $1.4 million related to a government grant received by UNIS Document Solutions Co. Ltd., (“UDS”), the Company's joint-venture in China, which was included in other current assets. Restrictions on the cash are removed upon approval by the governmental agency of project-based expenditures supporting technology investments made by UDS.
Concentrations of Credit Risk and Significant Vendors
Concentrations of credit risk with respect to trade receivables are limited due to a large, diverse customer base. No individual customer represented more than 4% of net sales during the years ended December 31, 2014 , 2013 and 2012 .

F-8

The Company has geographic concentration risk as sales in California, as a percent of total sales, were approximately 30% , 31% and 31% for the years ended December 31, 2014 , 2013 and 2012 , respectively.
The Company contracts with various suppliers. Although there are a limited number of suppliers that could supply the Company’s inventory, management believes any shortfalls from existing suppliers would be absorbed from other suppliers on comparable terms. However, a change in suppliers could cause a delay in sales and adversely affect results.
Purchases from the Company’s three largest vendors during the years ended December 31, 2014 , 2013 and 2012 comprised approximately 33% , 36% , and 34% respectively, of the Company’s total purchases of inventory and supplies.

Allowance for Doubtful Accounts
The Company performs periodic credit evaluations of the financial condition of its customers, monitors collections and payments from customers, and generally does not require collateral. The Company provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. The Company writes off an account when it is considered uncollectible. The Company estimates the allowance for doubtful accounts based on historical experience, aging of accounts receivable, and information regarding the credit worthiness of its customers. Additionally, the Company provides an allowance for returns and discounts based on historical experience. In 2014 , 2013 , and 2012 the Company recorded expenses of $0.5 million , $0.6 million and $0.5 million , respectively, related to the allowance for doubtful accounts.
Inventories
Inventories are valued at the lower of cost (determined on a first-in, first-out basis; or average cost) or market. Inventories primarily consist of reprographics materials for use and resale, and equipment for resale. On an ongoing basis, inventories are reviewed and adjusted for estimated obsolescence or unmarketable inventories to reflect the lower of cost or market. Charges to increase inventory reserves are recorded as an increase in cost of sales. Estimated inventory obsolescence has been provided for in the financial statements and has been within the range of management’s expectations. As of December 31, 2014 and 2013 , the reserves for inventory obsolescence was $0.9 million .
Income Taxes
Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce the Company's deferred tax assets to the amount that is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.

When establishing a valuation allowance, the Company considers future sources of taxable income such as future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. A tax planning strategy is an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets. In the event the Company determines that its deferred tax assets, more likely than not, will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which the Company makes such a determination.
As of June 30, 2011, the Company determined that cumulative losses for the preceding twelve quarters constituted sufficient objective evidence (as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740-10, Income Taxes ) that a valuation allowance was needed. As of December 31, 2014 and 2013 , the valuation allowance against certain deferred tax assets was $82.0 million and $85.6 million , respectively.

In future quarters the Company will continue to evaluate its historical results for the preceding twelve quarters and its future projections to determine whether the Company will generate sufficient taxable income to utilize its deferred tax assets, and whether a partial or full valuation allowance is still required. Should the Company generate sufficient taxable income, however, a portion or all of the then current valuation allowance may be reversed. Based on recent earnings in certain jurisdictions there is a reasonable possibility that, within the next year, sufficient positive evidence may become available to reach a conclusion that a portion of the valuation allowance will no longer be needed. As such, the Company may release a significant portion of the valuation allowance within the next 12 months. This release would result in the recognition of certain deferred tax assets and a decrease to income tax expense for the period such release is recorded. Any such adjustment could materially impact our financial position and results of operations.

F-9

The Company calculates its current and deferred tax provision based on estimates and assumptions that could differ from the actual results reflected in income tax returns filed in subsequent years. Adjustments based on filed returns are recorded when identified.

Income taxes have not been provided on certain undistributed earnings of foreign subsidiaries because such earnings are considered to be permanently reinvested.

The amount of taxable income or loss the Company reports to the various tax jurisdictions is subject to ongoing audits by federal, state and foreign tax authorities. The Company's estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. The Company uses a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. The Company records a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on its tax return. To the extent that the Company's assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense.
The Company’s effective income tax rate differs from the statutory tax rate primarily due to the valuation allowance on the Company’s deferred tax assets, state income taxes, stock-based compensation, goodwill and other identifiable intangibles, and other discrete items. See Note 9 “Income Taxes” for further information.
Income tax deficiencies and benefits affecting stockholders’ equity are primarily related to employee stock-based compensation.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, as follows:

	
			
Buildings	  	10-20 years	
Leasehold improvements	  	10-20 years or lease term, if shorter	
Machinery and equipment	  	3-7 years	
Furniture and fixtures	  	3-7 years	
Assets acquired under capital lease arrangements are included in machinery and equipment, are recorded at the present value of the minimum lease payments, and are depreciated using the straight-line method over the life of the asset or term of the lease, whichever is shorter. Expenses for repairs and maintenance are charged to expense as incurred, while renewals and betterments are capitalized. Gains or losses on the sale or disposal of property and equipment are reflected in operating income.

The Company accounts for software costs developed for internal use in accordance with ASC 350-40, Intangibles – Goodwill and Other, which requires companies to capitalize certain qualifying costs incurred during the application development stage of the related software development project. The primary use of this software is for internal use and, accordingly, such capitalized software development costs are depreciated on a straight-line basis over the economic lives of the related products not to exceed three years. The Company’s machinery and equipment (see Note 6 “Property and Equipment”) includes $0.1 million and $0.3 million of capitalized software development costs as of December 31, 2014 and 2013 , respectively, net of accumulated amortization of $17.5 million and $17.5 million as of December 31, 2014 and 2013 , respectively. Depreciation expense includes the amortization of capitalized software development costs which amounted to $0.2 million , $0.3 million and $0.5 million during the years ended December 31, 2014 , 2013 and 2012 , respectively.
Impairment of Long-Lived Assets
The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Property, Plant, and Equipment. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of cash flows of the other assets and liabilities. The Company has determined that the lowest level for which identifiable cash flows are available is the regional level, which is the operating segment level.
Factors considered by the Company include, but are not limited to, significant underperformance relative to historical or projected operating results; significant changes in the manner of use of the acquired assets or the strategy for the overall business; and significant negative industry or economic trends. When the carrying value of a long-lived asset may not be recoverable based

F-10

upon the existence of one or more of the above indicators of impairment, the Company estimates the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future undiscounted cash flows and eventual disposition is less than the carrying amount of the asset, the Company recognizes an impairment loss. An impairment loss is reflected as the amount by which the carrying amount of the asset exceeds the fair value of the asset, based on the fair value if available, or discounted cash flows, if fair value is not available. The Company had no long-lived asset impairments in 2014 , 2013 or 2012 .
Goodwill and Other Intangible Assets
In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations , using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.
In accordance with ASC 350, Intangibles – Goodwill and Other , the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired.
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.
Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.
Other intangible assets that have finite lives are amortized over their useful lives. Customer relationships are amortized using the accelerated method, based on customer attrition rates, over their estimated useful lives of 13 (weighted average) years.
Deferred Financing Costs
Direct costs incurred in connection with debt agreements are capitalized as incurred and amortized based on the effective interest method for the Company's borrowings under its term loan credit agreement ("Term A Credit Agreement"). At December 31, 2014 and 2013 , the Company had deferred financing costs of $2.4 million and $3.2 million , respectively, net of accumulated amortization of $0.1 million and $0.5 million , respectively.
In 2014, the Company added $2.5 million of deferred financing costs related to its Term A Credit Agreement. In addition, the Company wrote off $2.4 million of deferred financing costs due to the extinguishment, in full, of its previous term loan credit agreement ("Term B Loan Credit Agreement") and the termination of the Company's 2012 Credit Agreement.
In 2013, the Company added $2.7 million of deferred financing costs related to its Term Loan Credit Agreement and amended 2012 Credit Agreement. In addition, the Company wrote off $2.5 million of deferred financing costs due to the extinguishment, in full, of its 10.5% senior secured notes and the amendment to the Company's 2012 Credit Agreement.
Derivative Financial Instruments
As of December 31, 2014 the Company was not party to any derivative or hedging transactions.
Historically, the Company enters into derivative instruments to manage its exposure to changes in interest rates. These instruments allow the Company to raise funds at floating rates and effectively swap them into fixed rates, without the exchange

F-11

of the underlying principal amount. Such agreements are designated and accounted for under ASC 815, Derivatives and Hedging . Derivative instruments are recorded at fair value as either assets or liabilities in the Consolidated Balance Sheets.

Fair Values of Financial Instruments
The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments for disclosure purposes:
Cash equivalents: Cash equivalents are time deposits with maturity of three months or less when purchased, which are highly liquid and readily convertible to cash. Cash equivalents reported in the Company’s Consolidated Balance Sheet were $9.2 million and $12.9 million as of December 31, 2014 and 2013 , respectively, and are carried at cost and approximate fair value due to the relatively short period to maturity of these instruments.

Contingent Liabilities:  The Company recognizes liabilities for future earnout obligations on business acquisitions at their fair value based on discounted projected payments on such obligations. The inputs to the valuation, which are level 3 inputs within the fair value hierarchy, are projected sales to be provided by the acquired businesses based on historical sales trends for which earnout amounts are contractually based. Liabilities for future earnout obligations totaled  $1.8 million  as of December 31, 2014 .
Short- and long-term debt: The carrying amount of the Company’s capital leases reported in the Consolidated Balance Sheets approximates fair value based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements. The carrying amount reported in the Company’s Consolidated Balance Sheets as of December 31, 2014 for borrowings under its Term A Credit Agreement and other notes payable is $173.0 million and $0.2 million , respectively. The Company has determined the fair value of its borrowings under its Term A Credit Agreement and other notes payable is $173.0 million and $0.2 million , respectively, as of December 31, 2014 .
Insurance Liability
The Company maintains a high deductible insurance policy for a significant portion of its risks and associated liabilities with respect to workers’ compensation. The Company’s deductible is $250 thousand per individual. The accrued liabilities associated with this program are based on the Company’s estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to the Company, as of the balance sheet date. The Company’s estimated liability is not discounted and is based upon an actuarial report obtained from a third party. The actuarial report uses information provided by the Company’s insurance brokers and insurers, combined with the Company’s judgments regarding a number of assumptions and factors, including the frequency and severity of claims, claims development history, case jurisdiction, applicable legislation, and the Company’s claims settlement practices.
The Company is self-insured for healthcare benefits, with a stop-loss at $250 thousand per individual. Liabilities associated with the risks that are retained by the Company are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. The Company’s results could be materially affected by claims and other expenses related to such plans if future occurrences and claims differ from these assumptions and historical trends.
Commitments and Contingencies
In the normal course of business, the Company estimates potential future loss accruals related to legal, workers’ compensation, healthcare, tax and other contingencies. These accruals require management’s judgment on the outcome of various events based on the best available information. However, due to changes in facts and circumstances, the ultimate outcomes could differ from management’s estimates.
Revenue Recognition
The Company applies the provisions of ASC 605, Revenue Recognition . In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured. Net sales include an allowance for estimated sales returns and discounts.
The Company recognizes service revenue when services have been rendered, while revenues from the resale of equipment and supplies are recognized upon delivery to the customer or upon customer pickup. Revenue from equipment service agreements are recognized over the term of the service agreement.

F-12

The Company has established contractual pricing for certain large national customer accounts (“Global Solutions”). These contracts generally establish uniform pricing at all operating segments for Global Solutions. Revenues earned from the Company’s Global Solutions are recognized in the same manner as non-Global Solutions revenues.
Included in revenues are fees charged to customers for shipping, handling, and delivery services. Such revenues amounted to $11.6 million , $12.1 million , and $12.9 million for the years ended December 31, 2014 , 2013 and 2012 , respectively.
Revenues from hosted software licensing activities are recognized ratably over the term of the license. Revenues from software licensing activities comprise less than 1% of the Company’s consolidated revenues during the years ended December 31, 2014 , 2013 and 2012 .
Management provides for returns, discounts and allowances based on historic experience and adjusts such allowances as considered necessary. To date, such provisions have been within the range of management’s expectations.
Comprehensive Income (Loss)
The Company’s comprehensive income (loss) includes foreign currency translation adjustments and the amortized fair value of the company's previous swap transaction, net of taxes. The previous swap transaction was de-designated on December 1, 2010, as it no longer qualified as a cash flow hedge when the cash proceeds from the issuance of the Notes were used to pay off the Company’s previous credit agreement. At that time, the fair value of the Amended Swap Transaction was computed and the effective portion was stored in other comprehensive income and was amortized into income, net of tax effect, on the straight-line method, based on the original notional schedule.
Asset and liability accounts of international operations are translated into the Company’s functional currency, U.S. dollars, at current rates. Revenues and expenses are translated at the weighted-average currency rate for the fiscal year.

Segment and Geographic Reporting
The provisions of ASC 280, Segment Reporting , require public companies to report financial and descriptive information about their reportable operating segments. The Company identifies operating segments based on the various business activities that earn revenue and incur expense, whose operating results are reviewed by the Company's Chief Executive Officer, who is the Company's chief operating decision maker. Because its operating segments have similar products and services, classes of customers, production processes, distribution methods and economic characteristics, the Company is operates as a single reportable segment.
Net sales of the Company’s principal services and products were as follows:

	
												
 	Year Ended December 31,	
 	2014	 	2013	 	2012	
Service Sales	 	 	 	 	 	
Onsite Services(1)	$	135,020		 	$	121,550		 	$	108,817		
Traditional Reprographics	113,179		 	116,673		 	126,785		
Color	90,310		 	83,601		 	79,080		
Digital	33,375		 	33,534		 	35,578		
Total services sales	371,884		 	355,358		 	350,260		
Equipment and Supplies Sales	51,872		 	51,837		 	55,858		
Total net sales	$	423,756		 	$	407,195		 	$	406,118		

		
(1)	Represents work done at the Company’s customer sites which includes Facilities Management (“FM”) and Managed Print Services (“MPS”).	
The Company recognizes revenues in geographic areas based on the location to which the product was shipped or services have been rendered. Operations outside the United States have been small but growing. See table below for revenues and long-lived assets, net, excluding intangible assets, attributable to the Company’s U.S. operations and foreign operations.  

F-13

	
																																					
 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	
 	 	U.S.	 	Foreign
Countries	 	Total	 	U.S.	 	Foreign
Countries	 	Total	 	U.S.	 	Foreign
Countries	 	Total	
Revenues from external customers	 	$	364,382		 	$	59,374		 	$	423,756		 	$	354,995		 	$	52,200		 	$	407,195		 	$	353,763		 	$	52,355		 	$	406,118		
Long-lived assets, net, excluding intangible assets	 	$	51,826		 	$	7,694		 	$	59,520		 	$	48,319		 	$	7,862		 	$	56,181		 	$	48,486		 	$	7,985		 	$	56,471		
Advertising and Shipping and Handling Costs
Advertising costs are expensed as incurred and approximated $1.7 million , $1.4 million , and $1.5 million during the years ended December 31, 2014 , 2013 and 2012 , respectively. Shipping and handling costs incurred by the Company are included in cost of sales.
Stock-Based Compensation
The Company applies the Black-Scholes valuation model in determining the fair value of share-based payments to employees, which is then amortized on a straight-line basis over the requisite service period.
Total stock-based compensation for the years ended December 31, 2014 , 2013 and 2012 , was $3.8 million , $3.2 million and $2.0 million , respectively and was recorded in selling, general, and administrative expenses, consistent with the classification of the underlying salaries. In accordance with ASC 718, Income Taxes , the excess tax benefit resulting from stock-based compensation, in the Consolidated Statements of Cash Flows, are classified as financing cash inflows.
The weighted average fair value at the grant date for options issued in the fiscal years ended December 31, 2014 , 2013 and 2012 , was $3.69 , $1.57 and $2.97 respectively. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted average assumptions for the years ended December 31, 2014 and 2013 and 2012 :  

										
 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	
Weighted average assumptions used:	 	 	 	 	 	 	
Risk free interest rate	 	2.12	%	 	1.36	%	 	1.17	%	
Expected volatility	 	57.3	%	 	59.7	%	 	54.8	%	
Expected dividend yield	 	—	%	 	—	%	 	—	%	
Using historical exercise data as a basis, the Company determined that the expected term for stock options issued in 2014 , 2013 and 2012 was 7.1 years, 7.0  years and 7.1 years, respectively.
For fiscal years 2014 , 2013 and 2012 , expected stock price volatility is based on the Company’s historical volatility for a period equal to the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with an equivalent remaining term. The Company has not paid dividends in the past and does not currently plan to pay dividends in the near future. The Company assumed a forfeiture rate of 3% in 2014 , 3% in 2013 and 2% in 2012 . The Company’s assumed forfeiture rate is based on the historical forfeiture rate for employees at similar levels in the Company. The Company reviews its forfeiture rate at least on an annual basis.
As of December 31, 2014 , total unrecognized stock-based compensation expense related to nonvested stock-based compensation was approximately $3.7 million , which is expected to be recognized over a weighted average period of approximately 1.8  years.
For additional information, see Note 10 “Employee Stock Purchase Plan and Stock Plan.”
Research and Development Expenses
Research and development activities relate to costs associated with the design and testing of new technology or enhancements and maintenance to existing technology. Such costs are expensed as incurred are primarily recorded to cost of sales. In total,

F-14

research and development amounted to $6.3 million , $5.5 million and $5.4 million during the fiscal years ended December 31, 2014 , 2013 and 2012 , respectively.
Noncontrolling Interest
The Company accounted for its investment in UNIS Document Solutions Co. Ltd., (“UDS”) under the purchase method of accounting, in accordance with ASC 805, Business Combinations . UDS has been consolidated in the Company’s financial statements from the date of acquisition. Noncontrolling interest, which represents the 35 percent non-controlling interest in UDS, is reflected on the Company’s Consolidated Financial Statements.
Sales Taxes
The Company bills sales taxes, as applicable, to its customers. The Company acts as an agent and bills, collects, and remits the sales tax to the proper government jurisdiction. The sales taxes are accounted for on a net basis, and therefore are not included as part of the Company’s revenue.
Earnings Per Share
The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share . Basic earnings per share are computed by dividing net income attributable to ARC by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if common shares subject to outstanding options and acquisition rights had been issued and if the additional common shares were dilutive. Common share equivalents are excluded from the computation if their effect is anti-dilutive. There were 1.5 million , 2.1 million and 2.3 million common stock options excluded as their effect would have been anti-dilutive for the years ended December 31, 2014 , 2013 and 2012 , respectively. The Company’s common share equivalents consist of stock options issued under the Company’s Stock Plan.
Basic and diluted weighted average common shares outstanding were calculated as follows for the years ended December 31, 2014 , 2013 and 2012 :

	
									
 	Year Ended December 31,	
 	2014	 	2013	 	2012	
Weighted average common shares outstanding during the period — basic	46,245		 	45,856		 	45,668		
Effect of dilutive stock options	843		 	—		 	—		
Weighted average common shares outstanding during the period — diluted	47,088		 	45,856		 	45,668		
Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09 which supersedes the existing revenue recognition requirements in “Revenue Recognition (Topic 605).” The new guidance requires entities to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is not permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.

In April 2014, the FASB issued ASU 2014-08. The new guidance raises the threshold for a disposal to qualify as a discontinued operation and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. It is effective for annual periods beginning on or after December 15, 2014. Early adoption is permitted but only for disposals that have not been reported in financial statements previously issued. The adoption of ASU 2014-08 is not expected to have an impact on the Company's consolidated financial statements. The Company will adopt this standard effective January 1, 2015. Due to the change in requirements for reporting discontinued operations described above, presentation and disclosures of future transactions after adoption may be different than under current standards.

F-15

3. RESTRUCTURING EXPENSES
To ensure that the Company’s costs and resources were in line with demand for its current portfolio of services and products, management initiated a restructuring plan in the fourth quarter of 2012. Restructuring activities associated with the plan concluded in the fourth quarter of 2013. Through December 31, 2013 , the restructuring plan included the closure or downsizing of 56 of the Company’s service centers, which represented more than 25% of its total number of service center locations. In addition, as part of the restructuring plan, the Company reduced headcount and middle management associated with its service center locations, streamlined the senior operational management team, and allocated more resources into growing sales categories such as Onsite Services. The reduction in headcount totaled approximately 300 full-time employees, which represented approximately 10% of the Company’s total workforce. To date, the Company has incurred $6.6 million of expense related to its restructuring plan.
Restructuring expenses include employee termination costs, estimated lease termination and obligation costs, and other restructuring expenses. The Company’s restructuring efforts included service center closures in both 2012 and 2013. The Company closed or downsized 23 service center locations in 2013, in addition to 33 service center locations in 2012. Restructuring expenses in 2014 primarily consisted of revised estimated lease termination and obligation costs resulting from facilities closed in 2013 .
The following table summarizes restructuring expenses incurred in 2014 , 2013 and 2012 :

	
											
 	Year Ended December 31,	
 	2014	 	2013	2012	
Employee termination costs	$	—		 	$	15		$	784		
Estimated lease termination and obligation costs	554		 	1,803		2,168		
Other restructuring expenses	223		 	726		368		
Total restructuring expenses	$	777		 	$	2,544		$	3,320		
The changes in the restructuring liability from December 31, 2012 through December 31, 2014 are summarized as follows:

	

Balance, December 31, 2012	$	2,299		
Restructuring expenses	2,544		
Payments	(4,304	)	
Balance, December 31, 2013	$	539		
Restructuring expenses	777		
Payments	(1,203	)	
Balance, December 31, 2014	$	113		

4. ACQUISITIONS
During 2014, the Company acquired five businesses. Consideration for the purchase of the  five  businesses included earnout liabilities of $2.1 million , of which $0.3 million was paid in cash in 2014 with a remaining earnout liabilities balance of  $1.8 million as of December 31, 2014. The Company's requirement to pay these earnout liabilities is contingent upon the future financial growth of the acquired businesses. The results of operations of the companies acquired have been included in the Consolidated Financial Statements from their respective dates of acquisition. The acquisitions, individually and in aggregate, were not material to the Company's consolidated results of operations.
During 2013 and 2012, the Company had no business acquisitions.

5. GOODWILL AND OTHER INTANGIBLES RESULTING FROM BUSINESS ACQUISITIONS
In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations , using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.
In accordance with ASC 350, Intangibles-Goodwill and Other , the Company assesses goodwill for impairment annually as

F-16

of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2014, the Company performed its assessment and determined that goodwill was not impaired.
At September 30, 2012, absent the fact that the Company assesses goodwill for impairment annually as of September 30, the Company determined that there were sufficient indicators to trigger a goodwill impairment analysis. The indicators included, among other factors: (1) the Company’s underperformance relative to its plan in the third quarter of 2012, (2) the performance against plan of reporting units which previously had goodwill impairment, (3) the economic environment, and (4) the continued decrease in large and small format printing at the Company’s service centers, which the Company management believes is partly due to customers’ increasing adoption of technology. The Company’s analysis indicated that seven of its reporting units, six in the United States and one in Canada, had a goodwill impairment as of September 30, 2012. Accordingly, the Company recorded a pretax, non-cash charge for the three months ended September 30, 2012 to reduce the carrying value of goodwill by $16.7 million .
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the third quarter of 2014, in connection with an operationally focused reorganization of the Company's business into a regional format, the Company realigned its management and reporting structure. The reorganization was implemented to (1) better align the Company's operations and sales territories to that of its customers, (2) quickly respond to the evolving needs of companies operating in the AEC industry, the Company's primary market, (3) eliminate redundant business practices, and (4) realize operational economies of scale by combining operational staff, sales staff, back-office functions and streamlining the Company's management structure. The Company concluded that a number of its reporting units met the required aggregation criteria, and as a result, the Company aggregated those reporting units into seven reporting units identified for purposes of evaluating goodwill for impairment as of September 30, 2014.
Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.
Given the current economic environment, the changing document and printing needs of the Company’s customers, and the uncertainties regarding the related impact on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment testing in 2014 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, the Company may be required to record additional goodwill impairment charges in future periods, whether in connection with the Company’s next annual impairment testing in the third quarter of 2015, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other ) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.
The changes in the carrying amount of goodwill from January 1, 2013 through December 31, 2014 are summarized as follows:

F-17

	
												
 	Gross
Goodwill	 	Accumulated
Impairment
Loss	 	Net
Carrying
Amount	
January 1, 2013	$	405,558		 	$	192,950		 	$	212,608		
Additions	—		 	—		 	—		
Goodwill impairment	—		 	—		 	—		
December 31, 2013	405,558		 	192,950		 	212,608		
Additions	—		 	—		 	—		
Goodwill impairment	—		 	—		 	—		
December 31, 2014	$	405,558		 	$	192,950		 	$	212,608		
Other intangible assets that have finite lives are amortized over their useful lives. Customer relationships are amortized using the accelerated method, based on customer attrition rates, over their estimated useful lives of 13 (weighted average) years. The Company acquired five businesses during 2014 and recorded customer relationship intangibles of $2.1 million related to the acquisitions.
During the fourth quarter of 2010, the Company decided to consolidate the various brands that previously represented the Company’s market presence in North America. Beginning in January 2011, each of the Company’s North American operating segments and their respective locations began to adopt ARC, the Company’s overall brand name. Original brand names were used in conjunction with the new ARC brand name to reinforce the Company’s continuing presence in the business communities it serves, and ongoing relationships with its customers. Accordingly, the remaining estimated useful lives of the trade name intangible assets were revised down to 18 months . This change in estimate was accounted for on a prospective basis, resulting in increased amortization expense over the revised useful life of each trade name. There was no related impact for the years ended December 31, 2014 or 2013 . The impact of this change for the twelve months ended December 31, 2012 was an increase in amortization expense of approximately $3.2 million . Trade names were amortized using the straight-line method. The Company retired the original North American trade names in April 2012.
The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of December 31, 2014 and December 31, 2013 which continue to be amortized:

	
																								
 	December 31, 2014	 	December 31, 2013	
 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	 	Gross
Carrying
Amount	 	Accumulated
Amortization	 	Net
Carrying
Amount	
Amortizable other intangible assets	 	 	 	 	 	 	 	 	 	 	 	
Customer relationships	$	99,606		 	$	76,298		 	$	23,308		 	$	97,775		 	$	70,495		 	$	27,280		
Trade names and trademarks	20,370		 	19,837		 	533		 	20,375		 	19,799		 	576		
 	$	119,976		 	$	96,135		 	$	23,841		 	$	118,150		 	$	90,294		 	$	27,856		
Based on current information, estimated future amortization expense of other intangible assets for each of the next five fiscal years and thereafter are as follows:

	
				
2015	$	5,663		
2016	4,844		
2017	4,279		
2018	3,865		
2019	3,145		
Thereafter	2,045		
 	$	23,841		
6. PROPERTY AND EQUIPMENT

F-18

Property and equipment consist of the following:

								
 	December 31,	
 	2014	 	2013	
Machinery and equipment	$	254,206		 	$	241,626		
Buildings and leasehold improvements	16,399		 	17,255		
Furniture and fixtures	3,612		 	3,936		
 	274,217		 	262,817		
Less accumulated depreciation	(214,697	)	 	(206,636	)	
 	$	59,520		 	$	56,181		
Depreciation expense was $28.1 million , $28.1 million , and $28.5 million for the years ended December 31, 2014 , 2013 and 2012 , respectively.

7. LONG-TERM DEBT
Long-term debt consists of the following:

	
								
 	December 31,	
 	2014	 	2013	
Term A loan facility maturing 2019; 2.74%  interest rate at December 31, 2014	$	173,000		 	$	—		
Term B loan facility maturing 2018, net of original issue discount of $4,000 (repaid) ; 6.25% interest rate at December 31, 2013	—		 	196,000		
Various capital leases; weighted average interest rate of 6.8%  and 7.5% at December 31, 2014 and 2013; principal and interest payable monthly through November 2020	28,789		 	21,516		
Borrowings from foreign revolving credit facilities; 0.6%  interest rate at December 31, 2014 and 2013	1,897		 	1,811		
Various other notes payable with a weighted average interest rate of 6.5%  and 6.4% at December 31, 2014 and 2013, respectively; principal and interest payable monthly through June 2016	199		 	401		
 	203,885		 	219,728		
Less current portion	(27,969	)	 	(21,500	)	
 	$	175,916		 	$	198,228		
Term A Loan Facility
On November 20, 2014 the Company entered into a Credit Agreement (the “Term A Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.
The Term A Credit Agreement provides for the extension of term loans (“Term Loans”) in an aggregate principal amount of $175.0 million , the entirety of which was disbursed on the Closing Date in order to pay outstanding obligations under the Company’s Term Loan Credit Agreement dated as of December 20, 2013. The Credit Agreement also provides for the extension of revolving loans (“Revolving Loans”) in an aggregate principal amount not to exceed $30.0 million . The Revolving Loan facility under the Term A Credit Agreement replaces the Company’s Credit Agreement dated as of January 27, 2012. The Company may request incremental commitments to the aggregate principal amount of Term Loans and Revolving Loans available under the Term A Credit Agreement by an amount not to exceed $75 million in the aggregate. Unless an incremental commitment to increase the Term Loan or provide a new term loan matures at a later date, the obligations under the Term A Credit Agreement mature on November 20, 2019. As of December 31, 2014 , the Company's borrowing availability under the Term A Credit Agreement was $27.7 million , which was the maximum borrowing limit of $30.0 million reduced by outstanding letters of credit of $2.3 million .
Loans borrowed under the Term A Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus a margin ranging from 1.50% to 2.50% , based on the Company’s Total Leverage Ratio (as defined in the Term A Credit Agreement). Loans borrowed under the Term A Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50% , (B) the one month LIBOR rate plus 1.00% per annum, and (C) the rate of interest announced, from time to time, by Wells Fargo Bank, National Association as its “prime rate,” plus (ii) a margin ranging from 0.50% to 1.50% , based on our Company’s Total Leverage Ratio.

F-19

The Company will pay certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.
Subject to certain exceptions, including in certain circumstances, reinvestment rights, the loans extended under the Term A Credit Agreement are subject to customary mandatory prepayment provisions with respect to: the net proceeds from certain asset sales; the net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term A Credit Agreement); the net proceeds from certain issuances of equity securities; and net proceeds of certain insurance recoveries and condemnation events of the Company.
The Term A Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of the Company and its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; sell certain property or assets; engage in mergers or other fundamental changes; consummate acquisitions; make investments; pay dividends, other distributions or repurchase equity interest of the Company or its subsidiaries; change the nature of their business; prepay or amend certain indebtedness; engage in certain transactions with affiliates; amend their organizational documents; or enter into certain restrictive agreements. In accordance with the Term A Credit Agreement, the Company is permitted to pay dividends related to its equity securities payable solely in shares of equity securities. In addition, the Term A Credit Agreement contains financial covenants which requires the Company to maintain (i) at all times, a Total Leverage Ratio in an amount not to exceed 3.25 to 1.00 through the Company’s fiscal quarter ending September 30, 2016, and thereafter, in an amount not to exceed 3.00 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the Term A Credit Agreement), as of the last day of each fiscal quarter, in an amount not less than 1.25 to 1.00.
The Term A Credit Agreement contains customary events of default, including with respect to: nonpayment of principal, interest, fees or other amounts; failure to perform or observe covenants; material inaccuracy of a representation or warranty when made; cross-default to other material indebtedness; bankruptcy, insolvency and dissolution events; inability to pay debts; monetary judgment defaults; actual or asserted invalidity or impairment of any definitive loan documentation, repudiation of guaranties or subordination terms; certain ERISA related events; or a change of control.

The obligations of the Company’s subsidiary that is the borrower under the Term A Credit Agreement are guaranteed by the Company and each other United States domestic subsidiary of the Company. The Term A Credit Agreement and any interest rate protection and other hedging arrangements provided by any lender party to the Credit Facility or any affiliate of such a lender are secured on a first priority basis by a perfected security interest in substantially all of the borrower’s, the Company’s and each guarantor’s assets (subject to certain exceptions).
Term B Loan Facility

On December 20, 2013, we entered into a Term Loan Credit Agreement (the “Term B Loan Credit Agreement”) among ARC, as borrower, JPMorgan Chase Bank., N.A, as administrative agent and as collateral agent, and the lenders party thereto. Concurrently with the Company’s entry into the Term A Credit Agreement described above, the Company paid in full and terminated the Term B Loan Credit Agreement resulting in a loss on early extinguishment of debt of $5.6 million in 2014.

The credit facility provided under the Term B Loan Credit Agreement consisted of an initial term loan facility of $200.0 million , the entirety of which was disbursed in order to pay for the purchase of the Notes that were accepted under a cash tender offer and the subsequent redemption of the remaining outstanding Notes and to pay associated fees and expenses in connection with the cash tender offer and redemption.
10.5% Senior Notes
On December 1, 2010, the Company completed a private placement of 10.5% senior unsecured notes due 2016 (the “Notes”). During the third and fourth quarters of 2013, the Company repurchased $12.3 million in aggregate principal amount of the Notes in the open market using available cash. In December 2013 the Company commenced a cash tender offer and consent solicitation for all of the remaining outstanding Notes and accepted for payment all Notes that were validly tendered, followed by a redemption of all Notes which remained outstanding following the tender offer. In addition, the Company discharged all of its obligations under the indenture governing the Notes by causing to be delivered a notice of redemption to holders of the remaining outstanding Notes and the Company deposited funds sufficient to pay and discharge all remaining indebtedness on the Notes, including accrued and unpaid interest. The purchase and redemption of the Notes resulted in a loss on early extinguishment of debt of $16.3 million in 2013.
2012 Credit Agreement
On January 27, 2012, the Company entered into a Credit Agreement (the “2012 Credit Agreement”), which, as amended in 2013, provided revolving loans in an aggregate principal amount not to exceed $40.0 million , with a Canadian sublimit of $5.0

F-20

million , based on inventory and accounts receivable of our subsidiaries organized in the US (“United States Domestic Subsidiaries”) and Canada (“Canadian Domestic Subsidiaries”) that meet certain eligibility criteria. Concurrently with the Company’s entry into the Term A Credit Agreement described above, the Company terminated the 2012 Credit Agreement.
Foreign Credit Agreement
In the third quarter of 2013, in conjunction with its Chinese operations, UNIS Document Solutions Co. Ltd. (“UDS”), the Company’s Chinese business venture with Beijing-based Unisplendour, entered into a revolving credit facility with a term of 18 months . The facility provides for a maximum credit amount of 20.0 million Chinese Yuan Renminbi, which translates to U.S.  $3.3 million as of December 31, 2014 . Draws on the facility are limited to 30  day periods and incur a fee of 0.05% of the amount drawn and no additional interest is charged.
Other Notes Payable
Includes notes payable collateralized by equipment previously purchased.
Minimum future maturities of long-term debt and capital lease obligations as of December 31, 2014 are as follows:

	
								
 	Long-Term Debt	 	Capital Lease Obligations	
Year ending December 31:	 	 	 	
2015	$	17,536		 	$	10,433		
2016	17,560		 	8,035		
2017	17,500		 	6,047		
2018	17,500		 	3,395		
2019	105,000		 	801		
Thereafter	—		 	78		
 	$	175,096		 	$	28,789		

8. COMMITMENTS AND CONTINGENCIES
The Company leases machinery, equipment, and office and operational facilities under non-cancelable operating lease agreements. Certain lease agreements for the Company’s facilities generally contain renewal options and provide for annual increases in rent based on the local Consumer Price Index. The following is a schedule of the Company’s future minimum lease payments as of December 31, 2014 :

	
					
Year ending December 31:	 	 	
2015	 	$	16,925		
2016	 	13,198		
2017	 	10,415		
2018	 	5,351		
2019	 	2,681		
Thereafter	 	1,720		
 	 	$	50,290		
Total rent expense under operating leases, including month-to-month rentals, amounted to $23.4 million , $24.1 million , and $26.3 million during the years ended December 31, 2014 , 2013 and 2012 , respectively. Under certain lease agreements, the Company is responsible for other costs such as property taxes, insurance, maintenance, and utilities.
The Company leased several of its facilities under lease agreements with entities owned by certain of its current and former executive officers. The term of the final lease with such related parties ended on March 2014. As of December 31, 2014, the Company is not party to any lease agreements with related parties. The rental expense on these facilities amounted to $43 thousand , $0.9 million and $1.1 million during the years ended December 31, 2014 , 2013 and 2012 , respectively.
The Company has entered into indemnification agreements with each director and named executive officer which provide indemnification under certain circumstances for acts and omissions which may not be covered by any directors’ and officers’

F-21

liability insurance. The indemnification agreements may require the Company, among other things, to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as officers and directors (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain officers’ and directors’ insurance if available on reasonable terms. There have been no events to date which would require the Company to indemnify its officers or directors.
On October 21, 2010, a former employee, individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, L.L.C. and American Reprographics Company in the State of California at any time from October 21, 2006 through the present, filed an action against the Company in the Superior Court of California for Orange County. The complaint alleges, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought includes damages, restitution, penalties, interest, costs, and attorneys’ fees and such other relief as the court deems proper. On March 15, 2013, the Company participated in a private mediation session with claimants’ counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. The Company has received preliminary court approval of the settlement, and awaits final court approval. The Company has a liability of $0.9 million as of December 31, 2014 related to the claim, which represents management's best estimate of the probable outcome based on information available. As such, the ultimate resolution of the claim could result in a loss different than the estimated loss recorded.

On February 1, 2013, the Company 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 the Company's 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. The Company instituted this suit to stop the defendant from using similar unfair business practices against it 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, including the settlement with the defendant, totaled  $3.8 million  in 2014 and were recorded as selling, general and administrative expense.
In addition to the matter described above, the Company is involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
9. INCOME TAXES
The following table includes the consolidated income tax provision for federal, state, and foreign income taxes related to the Company’s total earnings before taxes for 2014 , 2013 and 2012 :

	
													
 	 	Year Ended December 31,	
 	 	2014	 	2013	 	2012	
Current:	 	 	 	 	 	 	
Federal	 	$	—		 	$	—		 	$	59		
State	 	86		 	264		 	370		
Foreign	 	392		 	354		 	322		
 	 	478		 	618		 	751		
Deferred:	 	 	 	 	 	 	
Federal	 	1,453		 	1,898		 	1,356		
State	 	343		 	869		 	489		
Foreign	 	74		 	(399	)	 	188		
 	 	1,870		 	2,368		 	2,033		
Income tax provision	 	$	2,348		 	$	2,986		 	$	2,784		
The Company's foreign earnings before taxes were $0.3 million , $2.3 million and $2.9 million for 2014 , 2013 and 2012 , respectively.
The consolidated deferred tax assets and liabilities consist of the following:

F-22

	
								
 	December 31,	
 	2014	 	2013	
Deferred tax assets:	 	 	 	
Financial statement accruals not currently deductible	$	3,661		 	$	3,217		
Accrued vacation	914		 	763		
Deferred revenue	420		 	418		
State taxes	62		 	162		
Fixed assets	8,004		 	6,408		
Goodwill and other identifiable intangibles	25,079		 	32,111		
Stock-based compensation	5,098		 	6,061		
Federal tax net operating loss carryforward	33,005		 	31,817		
State tax net operating loss carryforward, net	5,179		 	4,584		
State tax credits, net	994		 	942		
Foreign tax credit carryforward	506		 	249		
Foreign tax net operating loss carryforward	455		 	361		
Gross deferred tax assets	83,377		 	87,093		
Less: valuation allowance	(81,989	)	 	(85,551	)	
Net deferred tax assets	1,388		 	1,542		
 	 	 	 	
Deferred tax liabilities:	 	 	 	
Goodwill and other identifiable intangibles	$	(33,463	)	 	$	(31,667	)	
Net deferred tax liabilities	$	(32,075	)	 	$	(30,125	)	

A reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

	
									
 	Year Ended December 31,	
 	2014	 	2013	 	2012	
Statutory federal income tax rate	35	%	 	35	 %	 	35	 %	
State taxes, net of federal benefit	4		 	3		 	1		
Foreign taxes	1		 	4		 	2		
Goodwill impairment	—		 	—		 	(8	)	
Valuation allowance	(36	)	 	(63	)	 	(34	)	
Non-deductible expenses and other	3		 	(1	)	 	(1	)	
Section 162(m) limitation	4		 	(2	)	 	—		
Stock-based compensation	16		 	(8	)	 	(4	)	
Discrete item for state taxes	(4	)	 	8		 	—		
Discrete items for other	1		 	(2	)	 	(1	)	
Effective income tax rate	24	%	 	(26	)%	 	(10	)%	

In accordance with ASC 740-10, Income Taxes , the Company evaluates its deferred tax assets to determine if a valuation allowance is required based on the consideration of all available evidence using a “more likely than not” standard, with significant weight being given to evidence that can be objectively verified. This assessment considers, among other matters, the nature, frequency and severity of current and cumulative losses, forecasts of future profitability; the length of statutory carryover periods for operating losses and tax credit carryovers; and available tax planning alternatives. As of December 31, 2014 , the Company determined that cumulative losses for the preceding twelve quarters constituted sufficient objective evidence (as defined by ASC 740-10, Income Taxes ) that a valuation allowance on certain deferred assets was needed.

Based on the Company’s assessment, the remaining net deferred tax assets of $1.4 million as of December 31, 2014 are considered to be more likely than not to be realized. The valuation allowance of $82.0 million may be increased or decreased as conditions change or if the Company is unable to implement certain available tax planning strategies. The realization of the Company’s net deferred tax assets ultimately depend on future taxable income, reversals of existing taxable temporary differences or through a loss carry back.

F-23

As of December 31, 2014 , the Company had approximately $94.3 million of consolidated federal, $105.4 million of state and $2.1 million of foreign net operating loss and charitable contribution carryforwards available to offset future taxable income, respectively. The federal net operating loss carryforward began in 2011 and will begin to expire in varying amounts between 2031 and 2034 . The charitable contribution carryforward began in 2009 and will begin to expire in varying amounts between 2015 and 2019. The state net operating loss carryforwards expire in varying amounts between 2015 and 2034 . The foreign net operating loss carryforwards begin to expire in varying amounts beginning in 2015 and 2034 .

Goodwill impairment item represents non-deductible goodwill impairment related to stock acquired in prior years. Non-deductible other items include meals and entertainment and other items that, individually, are not significant.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. In 2010, the IRS commenced an examination of the Company’s U.S. income tax return for 2008, which was completed in February of 2011. The IRS did not propose any adjustments to the Company’s 2008 U.S. income tax return. In 2011, the IRS commenced an examination of the Company’s 2009 and 2010 U.S. income tax returns. The IRS did not propose any significant adjustments to the Company’s 2009 and 2010 U.S. income tax returns as of December 31, 2014 .
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

	
												
 	2014	 	2013	 	2012	
Beginning balance at January 1,	$	266		 	$	266		 	$	—		
Additions based on tax positions related to the current year	—		 	—		 	266		
Reductions based on tax positions related to the prior year	(266	)	 	—		 	—		
Reductions for tax positions due to expiration of statute of limitations	—		 	—		 	—		
Ending balance at December 31,	$	—		 	$	266		 	$	266		
The Company recognizes penalties and interest related to unrecognized tax benefits in tax expense. Interest expense of $0 and $27 thousand is included in the ASC 740-10, Income Taxes, liability on the Company’s balance sheet as of December 31, 2014 and 2013 , respectively.
10. EMPLOYEE STOCK PURCHASE PLAN AND STOCK PLAN
Employee Stock Purchase Plan
Under the Company’s Employee Stock Purchase Plan (the “ESPP”) eligible employees may purchase up to a calendar year maximum per eligible employee of the lesser of (i)  2,500 shares of common stock, or (ii) a number of shares of common stock having an aggregate fair market value of $25 thousand as determined on the date of purchase at 85% of the fair market value of such shares of common stock on the applicable purchase date. The compensation expense in connection with the ESPP in 2014 , 2013 , and 2012 was $15 thousand , $5 thousand and $5 thousand , respectively.

Employees purchased the following shares in the periods presented:

	
												
 	Year Ended December 31,	
 	2014	 	2013	 	2012	
Shares purchased	13		 	6		 	6		
Average price per share	$	6.24		 	$	4.90		 	$	4.51		
Stock Plan
At the Company's annual meeting of stockholders held on May 1, 2014, the Company's stockholders approved the Company's 2014 Stock Plan (the “2014 Stock Plan”) as adopted by the Company's board of directors. The 2014 Stock Plan replaces the American Reprographics Company 2005 Stock Plan (the "2005 Plan"). The 2014 Stock Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash bonus awards to employees, directors and consultants of the Company. The 2014 Stock Plan authorizes the Company to issue up

F-24

to 3.5 million shares of common stock. At December 31, 2014 , 3.0 million shares remain available for issuance under the Stock Plan.
Stock options granted under the 2014 Stock Plan generally expire no later than ten years from the date of grant. Options generally vest and become fully exercisable over a period of three to four years from date of award, except that options granted to non-employee directors may vest over a shorter time period. The exercise price of options must be equal to at least 100% of the fair market value of the Company’s common stock on the date of grant. The Company allows for cashless exercises of vested outstanding options.
During the year ended December 31, 2014 , the Company granted options to acquire a total of 518 thousand shares of the Company’s common stock to certain key employees with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. These stock options will vest annually over three years and expire 10 years after the date of grant. In addition, the Company granted options to acquire a total of 48 thousand and 13 thousand shares of the Company’s common stock to its Chief Operating Officer and its Chief Financial Officer, respectively, with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. These stock options will vest annually over four years and expire 10 years after the date of grant.
During the year ended December 31, 2013, the Company granted options to acquire a total of 1.5 million shares of the Company's common stock to certain key employees with an exercise price equal to the fair market value of the Company's common stock on the date of grant.
In 2012, the Company granted options to acquire a total of 631 thousand shares, of the Company’s common stock to certain key employees with an exercise price equal to the fair market value of the Company’s common stock on the respective dates of grant.
The following is a further breakdown of the stock option activity under the Stock Plan:

	
													
 	Year Ended December 31, 2014	
 	Shares	 	Weighted
Average
Exercise
Price	 	Weighted
Average
Contractual
Life
(In years)	 	Aggregate
Intrinsic
Value
(In thousands)	
Outstanding at December 31, 2012	2,336		 	$	7.64		 	 	 	 	
Granted	1,508		 	$	2.67		 	 	 	 	
Exercised	(11	)	 	$	5.62		 	 	 	 	
Forfeited/Cancelled	(220	)	 	$	7.61		 	 	 	 	
Outstanding at December 31, 2013	3,613		 	$	5.57		 	 	 	 	
Granted	579		 	$	6.25		 	 	 	 	
Exercised	(223	)	 	$	5.53		 	 	 	 	
Forfeited/Cancelled	(288	)	 	$	7.86		 	 	 	 	
Outstanding at December 31, 2014	3,681		 	$	5.50		 	7.15	 	$	18,276		
Vested or expected to vest at December 31, 2014	3,632		 	$	5.51		 	7.13	 	$	18,002		
Exercisable at December 31, 2014	1,878		 	$	6.78		 	5.89	 	$	7,371		
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price on December 31, 2014 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the option holders exercised their options on December 31, 2014 . This amount changes based on the fair market value of the common stock. Total intrinsic value of options exercised during the years ended December 31, 2014 , 2013 and 2012 was $398 thousand , $27 thousand and $1 thousand , respectively.

A summary of the Company’s non-vested stock options as of December 31, 2014 , and changes during the fiscal year then ended is as follows:

F-25

	
							
 	 	 	Weighted
Average Grant Date	
Non-vested Options	Shares	 	Fair Market Value	
Non-vested at December 31, 2013	1,942		 	$	1.90		
Granted	579		 	$	3.68		
Vested	(701	)	 	$	3.03		
Forfeited/Cancelled	(17	)	 	$	2.68		
Non-vested at December 31, 2014	1,803		 	$	2.43		
The following table summarizes certain information concerning outstanding options at December 31, 2014 :

	

Range of Exercise Price	Options Outstanding at
December 31, 2014	
$2.37 – $3.99	1,488		
$5.37 – $7.19	1,167		
$8.20 – $9.03	976		
$23.85 – $35.42	50		
$2.37 – $35.42	3,681		
Restricted Stock
The Stock Plan provides for automatic grants of restricted stock awards to non-employee directors of the Company, as of each annual meeting of the Company’s stockholders having a then fair market value equal to $60 thousand .
In 2014, the Company granted 144 thousand shares of restricted stock to the Company's Chief Executive Officer. The restricted stock vests annually over four years after the date of grant. In addition, the Company granted 9 thousand shares of restricted stock to each of the Company's six non-employee members of its board of directors at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The restricted stock vests on the one -year anniversary of the grant date.
In 2013, the Company granted 15 thousand shares of restricted stock to each of the Company’s six non-employee members of its Board of Directors at a price per share equal to the closing price of the Company’s common stock on the respective dates the restricted stock was granted. The shares of restricted stock granted to the non-employee board members vested on the one -year anniversary of the grant date.
In 2012, the Company granted 9 thousand shares of restricted stock to each of the Company’s six non-employee members of its Board of Directors at a price per share equal to the closing price of the Company’s common stock on the respective date the restricted stock was granted. The shares of restricted stock granted to the non-employee board members will vest on the one -year anniversary of the grant date.

A summary of the Company’s non-vested restricted stock as of December 31, 2014 , and changes during the fiscal year then ended is as follows:

							
 	 	 	Weighted
Average Grant Date	
Non-vested Restricted Stock	Shares	 	Fair Market Value	
Non-vested at December 31, 2013	345		 	$	6.83		
Granted	201		 	$	7.08		
Vested	(255	)	 	$	6.16		
Forfeited/Cancelled	(1	)	 	$	8.53		
Non-vested at December 31, 2014	290		 	$	7.57		
The total fair value of restricted stock awards vested during the years ended December 31, 2014 , 2013 and 2012 was $1.8 million , $0.8 million and $1.2 million , respectively.
11. RETIREMENT PLANS

F-26

The Company sponsors a 401(k) Plan, which covers substantially all employees of the Company who have attained age 21. Under the Company’s 401(k) Plan, eligible employees may contribute up to 75% of their annual eligible compensation (or in the case of highly compensated employees, up to 6% of their annual eligible compensation), subject to contribution limitations imposed by the Internal Revenue Service. During a portion of 2009, the Company made an employer matching contribution equal to 20% of an employee’s contributions, up to a total of 4% of that employee’s compensation. In July 2009, the Company amended its 401(k) Plan to eliminate the mandatory company contribution and to provide for discretionary company contributions. In 2013, the Company reinstated the mandatory company contribution. An independent third party administers the Company’s 401(k) Plan. The Company's total expense under these plans amounted to $80 thousand and $50 thousand during the years ended December 31, 2014 and 2013, respectively. The Company did not make any discretionary contributions to its 401(k) plan in 2012.

12. DERIVATIVES AND HEDGING TRANSACTIONS
As of December 31, 2014 the Company was not party to any derivative or hedging transactions.
As of December 31, 2010, the Company was party to a swap transaction, in which the Company exchanged its floating-rate payments for fixed-rate payments. The swap transaction qualified as a cash flow hedge up to November 30, 2010. As of December 1, 2010, the swap transaction was de-designated upon issuance of the Notes and payoff of the Company’s previous credit agreement. The swap transaction no longer qualified as a cash flow hedge under ASC 815, Derivatives and Hedging , as all the floating-rate debt was extinguished. As of December 31, 2010, the swap transaction had a negative fair value of $9.7 million , all of which was recorded in accrued expenses. On January 3, 2011, the swap transaction was terminated and settled. The loss was reclassed out of accumulated other comprehensive loss into income from 2011 to 2012.
As of December 31, 2014 , there is no amount deferred in accumulated other comprehensive income related to any swap transactions.

The following table summarizes the effect of the Amended Swap Transaction on the Consolidated Statements of Operations for the year ended December 31, 2014 , 2013 and 2012 :

	
																								
 	Amount of Gain or (Loss)
Reclassified from AOCL into Income	 	Amount of Gain or (Loss)
Recognized in Income	
 	(effective portion)	 	(ineffective portion)	
 	Year Ended December 31,	 	Year Ended December 31,	
 	2014	 	2013	 	2012	 	2014	 	2013	 	2012	
Location of Loss Reclassified from AOCL into Income	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	$	—		 	$	—		 	$	3,440		 	$	—		 	$	—		 	$	—		

13. FAIR VALUE MEASUREMENTS
In accordance with ASC 820, Fair Value Measurement , the Company has categorized its assets and liabilities that are measured at fair value into a three-level fair value hierarchy as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three levels of the hierarchy are defined as follows:
Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2-inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.
Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the consolidated financial statements as of and for the year ended December 31, 2014 and 2013 :

F-27

	
																	
 	 	Significant Other Unobservable Inputs
December 31,	
 	 	2014	 	2013	
 	 	Level 3	 	Total Losses	 	Level 3	 	Total Losses	
Recurring Fair Value Measure	 	 	 	 	 	 	 	 	
       Contingent purchase price consideration for
       acquired businesses	 	$	1,768		 	$	—		 	$	—		 	$	—		
The Company recognizes liabilities for future earnout obligations on business acquisitions at their fair value based on discounted projected payments on such obligations. The inputs to the valuation, which are level 3 inputs within the fair value hierarchy, are projected sales to be provided by the acquired businesses based on historical sales trends for which earnout amounts are contractually based. Based on the Company's assessment as of December 31, 2014, the estimated contractually required earnout amounts would be achieved. The following table presents the change in the Level 3 contingent purchase price consideration liability for 2014.

					
Balance, December 31, 2013	 	$	—		
     Additions related to acquisitions	 	2,110		
     Payments	 	(342	)	
     Adjustments included in earnings	 	—		
Balance, December 31, 2014	 	$	1,768		

F-28

Schedule II
ARC DOCUMENT SOLUTIONS, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
(Dollars in thousands)

	
																
 	Balance at
Beginning
of Period	 	Charges to
Cost and
Expenses	 	Deductions
(1)	 	Balance at
End of
Period	
Year ended December 31, 2014	 	 	 	 	 	 	 	
Allowance for accounts receivable	$	2,517		 	$	546		 	$	(650	)	 	$	2,413		
Year ended December 31, 2013	 	 	 	 	 	 	 	
Allowance for accounts receivable	$	2,634		 	$	636		 	$	(753	)	 	$	2,517		
Year ended December 31, 2012	 	 	 	 	 	 	 	
Allowance for accounts receivable	$	3,309		 	$	456		 	$	(1,131	)	 	$	2,634		

(1)	Deductions represent uncollectible accounts written-off net of recoveries.	

F-29

EXHIBIT INDEX

	

Number	  	Description	
 	 	
3.1		  	Certificate of Ownership and Merger as filed with Secretary of State of the State of Delaware (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed December 27, 2012).	
 	 	
3.2		  	Restated Certificate of Incorporation, filed March 13, 2013.	
 	 	
3.3		  	Second Amended and Restated Bylaws, (incorporated by reference to Exhibit 3.1 to the Registrant’s Form 8-K filed on October 6, 2009).	
 	 	
4.1		  	Specimen Stock Certificate (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 10-K filed on March 9, 2011).	
 	 	
4.2		  	Indenture, dated December 1, 2010, among ARC Document Solutions, certain subsidiaries of ARC Document Solutions as guarantors thereto, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	
4.3		  	Form of 10.5% Senior Note due 2016 (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	
4.4		  	Registration Rights Agreement, dated December 1, 2010, among ARC Document Solutions, certain subsidiaries of ARC Document Solutions as guarantors thereto, and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as representative of the several initial purchasers (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 8-K filed on December 2, 2010).	
 	 	 	
4.5		 	First Supplemental Indenture dated December 20, 2013 among ARC Document Solutions, Inc., the Guarantors named therein, and Wells Fargo Bank, National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Registrant’s Form 8-K filed on December 24, 2013).

10.1		  	ARC Document Solutions 2005 Stock Plan (incorporated by reference to Exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on January 13, 2005).^	
 	 	
10.2		  	Amendment No. 1 to ARC Document Solutions 2005 Stock Plan dated May 22, 2007 (incorporated by reference to Exhibit 10.63 to the Registrant’s Form 10-Q filed on August 9, 2007).^	
 	 	
10.3		  	Amendment No. 2 to ARC Document Solutions 2005 Stock Plan dated May 2, 2008 (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed August 8, 2008). ^	
 	 	
10.4		  	Amendment No. 3 to ARC Document Solutions 2005 Stock Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed August 7, 2009). ^	
 	 	
10.5		  	Forms of Stock Option Agreements under the 2005 Stock Plan (incorporated by reference to Exhibit 10.8 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).^	
 	 	
10.6		  	Forms of Restricted Stock Award Agreements under 2005 Stock Plan (incorporated by reference to Exhibit 10.27 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on December 6, 2004).^	

F-30

	
				
10.7		  	Form of Restricted Stock Unit Award Agreement under 2005 Stock Plan (incorporated by reference to Exhibit 10.28 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on December 6, 2004).^	
 	 	
10.8		  	Form of Stock Appreciation Right Agreement under 2005 Stock Plan (incorporated by reference to Exhibit 10.29 to the Registrant’s Registration Statement on Form S-1 A (Reg. No. 333-119788), as amended on January 13, 2005).^	
 	 	
10.9		  	Form of ARC Document Solutions Stock Option Grant Notice — Non-employee Directors (Discretionary Non-statutory Stock Options) (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on December 16, 2005).^	
 	 	
10.10		  	Form of ARC Document Solutions Non-employee Directors Nonstatutory Stock Option Agreement (Discretionary Grants) (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on December 16, 2005).^	

				
 	 	 	
10.11		  	Amended and Restated ARC Document Solutions 2005 Employee Stock Purchase Plan amended and restated as of July 30, 2009 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on November 9, 2009).^	
 	 	
10.12		  	Lease Agreement, for the premises commonly known as 934 and 940 Venice Boulevard, Los Angeles, CA, dated November 19, 1997, by and between American Reprographics Company, L.L.C. (formerly Ford Graphics Group, L.L.C.) and Sumo Holdings LA, LLC (incorporated by reference to Exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.13		  	Amendment to Lease for the premises commonly known as 934 and 940 Venice Boulevard, Los Angeles, CA, effective as of August 2, 2005, by and between Sumo Holdings LA, LLC, Landlord and American Reprographics Company, L.L.C. (formerly known as Ford Graphics Group, L.L.C.) Tenant (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.14		  	Lease Agreement for the premises commonly known as 835 West Julian Street, San Jose, CA, dated February 1, 2009, by and between American Reprographics Company, L.L.C. and Sumo Holdings San Jose, LLC (incorporated by reference to Exhibit 10.11 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.15		  	Amendment to Lease for the premises commonly known as 835 West Julian Street, San Jose, CA, dated effective February 1, 2009, by and between Sumo Holdings San Jose, LLC, Landlord, and American Reprographics Company, L.L.C. Tenant (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on May 8, 2009).	
 	 	
10.16		  	Lease Agreement for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated April 1, 1999, by and between American Reprographics Company, L.L.C. and Sumo Holdings Irvine, LLC (incorporated by reference to Exhibit 10.12 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.17		  	Amendment to Lease for the premises commonly known as 17721 Mitchell North, Irvine, CA, effective as of August 2, 2005, by and between Sumo Holdings Irvine, LLC, Lessor and American Reprographics Company, L.L.C., Lessee (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.18		  	Assignment of Lease and Consent for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated effective April 28, 2009, by and between OCB, LLC, American Reprographics Company, L.L.C. and Sumo Holdings Irvine LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 10-Q filed on May 8, 2009).	

F-31

	
				
10.19		  	Second Amendment to Lease for the premises commonly known as 17721 Mitchell North, Irvine, CA, dated effective April 28, 2009, by and between Sumo Holdings Irvine LLC, Lessor, and OCB, LLC, Lessee, (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 10-Q filed on May 8, 2009).	
 	 	
10.20		  	Lease Agreement for the premises commonly known as 1322 V Street, Sacramento, CA, dated December 1, 1997, by and between American Reprographics Company, L.L.C. (formerly Ford Graphics Group, L.L.C.) and Sumo Holdings Sacramento, LLC (Sacramento Property) (incorporated by reference to Exhibit 10.14 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.21		  	Amendment to Lease for the premises commonly known as 1322 V Street, Sacramento, CA, effective as of August 2, 2005, by and between Sumo Holdings Sacramento, LLC, Landlord and American Reprographics Company, L.L.C. (formerly known as Ford Graphics Group, L.L.C.) Tenant (incorporated by reference to Exhibit 10.4 to the Registrant’s Form 10-Q filed on November 14, 2005).	
 	 	
10.22		  	Lease Agreement for the premises commonly known as 345 Clinton Street, Costa Mesa, CA, dated September 23, 2003, by and between American Reprographics Company (dba Consolidated Reprographics) and Sumo Holdings Costa Mesa, LLC (incorporated by reference to Exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.23		  	Lease Agreement for the premises commonly known as 616 Monterey Pass Road, Monterey Park, CA, by and dated November 19, 1997, between Dieterich-Post Company and American Reprographics Company, L.L.C. (as successor lessee) (incorporated by reference to Exhibit 10.26 to the Registrant’s Form 10-K filed on March 1, 2007).	
 	 	
10.24		  	Indemnification Agreement, dated April 10, 2000, among American Reprographics Company, L.L.C., American Reprographics Holdings, L.L.C., ARC Acquisition Co., L.L.C., Mr. Chandramohan, Mr. Suriyakumar, Micro Device, Inc., Dieterich-Post Company, ZS Ford L.P., and ZS Ford L.L.C. (incorporated by reference to Exhibit 10.19 to the Registrant’s Registration Statement on Form S-1 (Reg. No. 333-119788), as filed on October 15, 2004).	
 	 	
10.25		  	Restricted Stock Award Grant Notice between American Reprographics Company and Mr. Sathiyamurthy Chandramohan dated March 27, 2007 (incorporated by reference to Exhibit 99.1 to the Registrant’s Form 8-K filed on March 30, 2007).^	
 	 	
10.26		  	Amended and Restated Employment Agreement, dated March 21, 2012, between American Reprographics Company and Mr. Suriyakumar (incorporated by reference to Exhibit 10. 1 to the Registrant’s Form 8-K (filed on March 21, 2011).^	

				
 	 	
10.27		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Kumarakulasingam Suriyakumar (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K (filed on February 21, 2012).^	
 	 	
10.28		  	Restricted Stock Award Grant Notice between American Reprographics Company and Mr. Suriyakumar dated March 27, 2007 (incorporated by reference to Exhibit 99.2 to the Registrant’s Form 8-K filed on March 30, 2007).^	
 	 	
10.29		  	Amended and Restated Employment Agreement, dated March 21, 2011, between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on March 21, 2011).^	
 	 	
10.30		  	Agreement to Grant Stock dated effective December 7, 2004, between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.36 to the Registrant’s Form 10-K filed on March 31, 2005).^	

F-32

	

10.31		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Rahul Roy (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on February 21, 2012).^	
 	 	
10.32		  	First Amendment to Agreement to Grant Stock dated May 17, 2006 between American Reprographics Company and Mr. Rahul K. Roy (incorporated by reference to Exhibit 10.48 to the Registrant’s Form 10-K filed on March 1, 2007).^	
 	 	
10.33		  	Amended and Restated Executive Employment Agreement, dated March 21, 2011, between American Reprographics Company and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.3 to the Registrant’s Form 8-K filed on March 21, 2011). ^	
 	 	
10.34		  	Letter Agreement, dated February 21, 2012, by and between American Reprographics Company and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.2 to the Registrant’s Form 8-K filed on February 21, 2012).^	
 	 	
10.35		  	Restricted Stock Award Grant Notice between American Reprographics Company and Dilantha Wijesuriya dated October 28, 2009 (incorporated by reference to Exhibit 10.79 to the Registrant’s Form 10-K filed on February 26, 2010). ^	
 	 	
10.36		  	Executive Employment Agreement, dated April 14, 2011, between American Reprographics Company and Jorge Avalos, (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 15, 2011).^	
 	 	
10.37		  	Separation Agreement, dated April 13, 2011, between American Reprographics Company and Jonathan Mather (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on April 21, 2011).^	
 	 	
10.38		  	Executive Employment Agreement, dated July 18, 2011, between American Reprographics Company and John E.D. Toth, (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on July 18, 2011).^	
 	 	
10.39		  	Form of Indemnification Agreement between ARC Document Solutions, Inc. and each of its Directors and Executive Officers.	
 	 	
10.40		  	Amendment No. 1 to Amended and Restated Employment Agreement, dated March 13, 2013, between ARC Document Solutions, Inc. and Mr. Rahul K. Roy.^	
 	 	
10.41		 	Letter Amendment, dated March 13, 2014, by and between ARC Document Solutions, Inc. and Mr. Suriyakumar (incorporated by reference to Exhibit 10.47 to the Registrant's Form 10-K filed on March 14, 2014).^	
 	 	 	
10.42		 	Amended and Restated Employment Agreement, dated March 13, 2014, between ARC Document Solutions, Inc. and Mr. Kumarakulasingam (incorporated by reference to Exhibit 10.48 to the Registrant's Form 10-K filed on March 14, 2014).^	
 	 	 	
10.43		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and John Toth (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on May 7, 2014).	
 	 	 	
10.44		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Rahul K. Roy (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on May 7, 2014).^	

F-33

	
				
10.45		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Dilantha Wijesuriya (incorporated by reference to Exhibit 10.3 to the Registrant's Form 8-K filed on May 7, 2014).^	
 	 	 	
10.46		 	Executive Employment Agreement, dated May 1, 2014, by and between ARC Document Solutions, Inc. and Jorge Avalos (incorporated by reference to Exhibit 10.4 to the Registrant's Form 8-K filed on May 7, 2014).^	
 	 	 	
10.47		 	ARC Document Solutions, Inc. 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 6, 2014).	
 	 	 	
10.48		 	Amendment No. 1 to ARC Document Solutions, Inc. 2014 Stock Incentive Plan (incorporated by reference to Exhibit 10.2 to the Registrant's Form 8-K filed on May 6, 2014).	
 	 	 	
10.49		 	Amended and Restated Executive Employment Agreement dated May 17, 2014 by and between ARC Document Solutions, Inc. and Mr. Suriyakumar (incorporated by reference to Exhibit 10.1 to the Registrant's Form 8-K filed on May 19, 2014).^	
 	 	 	
10.50		 	Credit Agreement dated November 20, 2014, among ARC Document Solutions, LLC, Wells Fargo Bank, National Association, as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant’s Form 8-K filed on November 21, 2014).	
 	 	 	
21.1		  	List of Subsidiaries.*	

F-34

	

Number	  	Description	
 	 	
23.1		  	Consent of Deloitte & Touche LLP, Independent Registered Public Accounting Firm.*	
 	 	
31.1		  	Certification of Principal Executive Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
31.2		  	Certification of Principal Financial Officer pursuant to Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.1		  	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
32.2		  	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*	
 	 	
101.INS		  	XBRL Instance Document *	
 	 	
101.SCH		  	XBRL Taxonomy Extension Schema *	
 	 	
101.CAL		  	XBRL Taxonomy Extension Calculation Linkbase *	
 	 	
101.DEF		  	XBRL Taxonomy Extension Definition Linkbase *	
 	 	
101.LAB		  	XBRL Taxonomy Extension Label Linkbase *	
 	 	
101.PRE		  	XBRL Taxonomy Extension Presentation Linkbase *	

	
		
*	Filed herewith	

		
^	Indicates management contract or compensatory plan or agreement	

F-35

Exhibit 21.1
LIST OF SUBSIDIARIES

					
 	 	 	 	 	
 	 	Jurisdiction of Formation	 	Doing Business As	
American Reprographics Company, L.L.C.	 	California	 	ARC	
 	 	 	 	ARC — Central	
 	 	 	 	ARC — Mesa	
 	 	 	 	ARC — Pacific	
 	 	 	 	ARC — Pacific Northwest	
 	 	 	 	ARC — Western	
 	 	 	 	ARC Digital Imaging	
 	 	 	 	ARC Imaging Resources	
 	 	 	 	ARC Socal – North	
 	 	 	 	Blair Graphics	
 	 	 	 	Blue Print Service Company	
 	 	 	 	Blueprints Plus	
 	 	 	 	BPS Reprographics	
 	 	 	 	Brownie’s Digital Imaging	
 	 	 	 	Central Valley Reprographics	
 	 	 	 	City Digital Imaging	
 	 	 	 	Consolidated Reprographics	
 	 	 	 	Dieterich — Post	
 	 	 	 	FDC Digital Imaging Solutions	
 	 	 	 	Ford Graphics	
 	 	 	 	Ford Graphics Seattle	
 	 	 	 	Hudson Reprographics	
 	 	 	 	IDM Group	
 	 	 	 	Independent Printing Company	
 	 	 	 	InPrint	
 	 	 	 	Kestrel Blueprint Company	
 	 	 	 	KV Blueprint	
 	 	 	 	Mercury — LDO	
 	 	 	 	Micro Device	
 	 	 	 	Mossner	
 	 	 	 	Mossner IDM	
 	 	 	 	OCB	
 	 	 	 	Olympic Reprographics	
 	 	 	 	Peninsula Digital	
 	 	 	 	Peninsula Digital Imaging	
 	 	 	 	Reliable Graphics	
 	 	 	 	Repro Northwest	
 	 	 	 	Reprographics Northwest	
 	 	 	 	Riot Creative Imaging	
 	 	 	 	San Jose Blue	
 	 	 	 	SBD Reprographics	
 	 	 	 	Scottblue Reprographics	
 	 	 	 	Stockton Blue	
 	 	 	 	SubHub	
 	 	 	 	Superior Reprographics	
 	 	 	 	Tacoma Reprographics	
 	 	 	 	The Blue Print Company	
 	 	 	 	The PEiR Group	
ARC Document Solutions India Private Limited
(fka: American Reprographics Company India Private Limited)	 	India	 	 	
ARC — UK Technologies Limited	 	United Kingdom	 	 	
ARC Acquisition Corporation	 	California	 	 	
ARC Digital Canada Corp.	 	British Columbia	 	ARC	
ARC Document Solutions Australia Pty Limited	 	Australia	 	 	
ARC Reprographics Canada Corp	 	British Columbia	 	 	
ARC Reprographics Hong Kong, Limited	 	Hong Kong	 	 	
ARC Technology Bermuda, Ltd.	 	Bermuda	 	 	

	
					
 	 	Jurisdiction of Formation	 	Doing Business As	
ERS Digital, Inc.	 	Minnesota	 	ARC	
 	 	 	 	ARC — Central	
 	 	 	 	ARC — Mesa	
 	 	 	 	ARC Document Solutions	
 	 	 	 	ARC Imaging Resources	
 	 	 	 	Atlas Blueprint	
 	 	 	 	Dayton Blue Print Company	
 	 	 	 	DBS Engineering Repro Systems	
 	 	 	 	Dunn Blue Print Company	
 	 	 	 	eBlueprint	
 	 	 	 	Gwyer Reprographics	
 	 	 	 	Letter Perfect Design	
 	 	 	 	Queen City Reprographics	
 	 	 	 	Resource Imaging Supply	
 	 	 	 	Riot Creative Imaging	
 	 	 	 	RK Digital	
 	 	 	 	Veenestra	
 	 	 	 	Wagner Repro & Supply	
Henan UNIS Waytron Document Technology Co., Ltd.	 	People's Republic of China	
Licensing Services International, LLC	 	California	
Mirror Plus Technologies, Inc.	 	California	 	ARC	
Planwell, LLC	 	California	 	Planwell Licensing	
 	 	 	 	Planwell Professional Services	
Reprografia Digital de Mexico, S.A. de C.V.	 	Mexico	 	 	
Reprographics Fort Worth, Inc.	 	Delaware	 	 	
ARC Document Solutions, LLC
(fka: Ridgway's, LLC)	 	Texas	 	A&E Supply Company	
 	 	 	 	A-Plus Digital Reprographics	
 	 	 	 	American Reprographics Southeast	
 	 	 	 	ARC	
 	 	 	 	ARC — Delaware	
 	 	 	 	ARC — Eastern	
 	 	 	 	ARC — FL	
 	 	 	 	ARC — Florida	
 	 	 	 	ARC — LA Gulf Coast	
 	 	 	 	ARC — Pacific Northwest	
 	 	 	 	ARC — Southern	
 	 	 	 	ARC — MA	
 	 	 	 	ARC — Maryland	
 	 	 	 	ARC — Oklahoma Central	
 	 	 	 	ARC — Texas	
 	 	 	 	ARC BIM Services Group	
 	 	 	 	ARC Document Solutions	
 	 	 	 	Blueprints Plus	
 	 	 	 	Crest Graphics	
 	 	 	 	Ford Graphics	
 	 	 	 	Ford Graphics Seattle	
 	 	 	 	Georgia Blue	
 	 	 	 	Imaging Technologies Services	
 	 	 	 	IT Plus Technologies	
 	 	 	 	Kansas Blue print	
 	 	 	 	Kestrel Blueprint Company	
 	 	 	 	Mathias Reprographics	
 	 	 	 	MBC Precision Imaging	
 	 	 	 	Micro Device	
 	 	 	 	Mix Imaging	
 	 	 	 	NGI	

	
					
 	 	Jurisdiction of Formation	 	Doing Business As	
ARC Document Solutions, LLC
(fka: Ridgway's, LLC)	 	Texas	 	NPI Digital	
 	 	 	 	Orlando Reprographics	
 	 	 	 	Pennsylvania Ridgway's. LLC	
 	 	 	 	RCMS	
 	 	 	 	RCMS Group	
 	 	 	 	Repro Northwest	
 	 	 	 	Reprographics Arlington	
 	 	 	 	Reprographics Dallas	
 	 	 	 	Reprographics Fort Worth	
 	 	 	 	Reprographics Roanoke	
 	 	 	 	Rhode Island Blueprint	
 	 	 	 	Ridgway's Best Digital	
 	 	 	 	Ridgway's Digital Imaging of Destin	
 	 	 	 	Ridgway's IL, LLC	
 	 	 	 	Ridgway's MD, LLC	
 	 	 	 	Ridgway’s NY, LLC	
 	 	 	 	Riot Creative Imaging	
 	 	 	 	StratoGrafix	
 	 	 	 	Superior Reprographics	
 	 	 	 	Tacoma Reprographics	
 	 	 	 	T-Square Express	
 	 	 	 	University Imaging	
 	 	 	 	Western Blue Print Company	
Shanghai UNIS Printing Technology Co., Ltd.	 	People's Republic of China	 	 	
Shenzhen UNIS – Printing Document Solutions Co., Ltd	 	People's Republic of China	 	 	
UNIS Document Solutions Co., Ltd.	 	People's Republic of China	 	 	

 	 	 	 	 	

Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in Registration Statement Nos. 333-141009, 333-132530 on Form S-3 and Registration Statement Nos. 333-195757, 333-122637 on Form S-8 of our reports dated March 13, 2015 , relating to the consolidated financial statements and financial statement schedule of ARC Document Solutions, Inc. and subsidiaries, and the effectiveness of ARC Document Solutions, Inc. and subsidiaries’ internal control over financial reporting, appearing in the Annual Report on Form 10-K of ARC Document Solutions, Inc. for the year ended December 31, 2014 .
/s/ DELOITTE & TOUCHE LLP
San Francisco, California
March 13, 2015

Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Kumarakulasingam Suriyakumar, certify that:
1. I have reviewed this Annual Report on Form 10-K of ARC Document Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

	

/s/ KUMARAKULASINGAM SURIYAKUMAR	
Kumarakulasingam Suriyakumar	
Chairman, President and Chief Executive Officer
 (Principal Executive Officer)	

Date: March 13, 2015

Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jorge Avalos, certify that:
1. I have reviewed this Annual Report on Form 10-K of ARC Document Solutions, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controls over financial reporting.

	

/s/ JORGE AVALOS	
Jorge Avalos	
Chief Financial Officer
 (Principal Financial Officer)	

Date: March 13, 2015

Exhibit 32.1
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of ARC Document Solutions, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Kumarakulasingam Suriyakumar, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

	
		
(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	

	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	

/s/ KUMARAKULASINGAM SURIYAKUMAR	
Kumarakulasingam Suriyakumar	
Chairman, President and Chief Executive Officer	

Date: March 13, 2015

Exhibit 32.2
CERTIFICATION
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of ARC Document Solutions, Inc. (the “Company”) on Form 10-K for the year ended December 31, 2014 , as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jorge Avalos, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge, that:

	
		
(1)	the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and	

	
		
(2)	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.	

	

/s/ JORGE AVALOS	
Jorge Avalos	
Chief Financial Officer
(Principal Financial Officer)	

Date: March 13, 2015