ARC DOCUMENT SOLUTIONS, INC., 10-Q filed on 11/7/2014
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2014
Oct. 31, 2014
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2014 
 
Document Fiscal Year Focus
2014 
 
Document Fiscal Period Focus
Q3 
 
Entity Registrant Name
ARC Document Solutions, Inc. 
 
Entity Central Index Key
0001305168 
 
Current Fiscal Year End Date
--12-31 
 
Entity Filer Category
Accelerated Filer 
 
Entity Common Stock, Shares Outstanding
 
46,723,728 
Condensed Consolidated Balance Sheets (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 24,835 
$ 27,362 
Accounts receivable, net of allowances for accounts receivable of $2,507 and $2,517
64,056 
56,328 
Inventories, net
16,167 
14,047 
Deferred income taxes
347 
356 
Prepaid expenses
5,208 
4,324 
Other current assets
3,466 
4,013 
Total current assets
114,079 
106,430 
Property and equipment, net of accumulated depreciation of $215,606 and $206,636
59,515 
56,181 
Goodwill
212,608 
212,608 
Other intangible assets, net
24,682 
27,856 
Deferred financing fees, net
2,575 
3,242 
Deferred income taxes
976 
1,186 
Other assets
2,356 
2,419 
Total assets
416,791 
409,922 
Current liabilities:
 
 
Accounts payable
25,427 
23,363 
Accrued payroll and payroll-related expenses
14,733 
11,497 
Accrued expenses
23,369 
21,365 
Current portion of long-term debt and capital leases
11,394 
21,500 
Total current liabilities
74,923 
77,725 
Long-term debt and capital leases
194,238 
198,228 
Deferred income taxes
33,110 
31,667 
Other long-term liabilities
3,059 
3,163 
Total liabilities
305,330 
310,783 
Commitments and contingencies (Note 7)
   
   
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; 46,790 and 46,365 shares issued and 46,721 and 46,320 shares outstanding
46 
46 
Additional paid-in capital
109,690 
105,806 
Retained deficit
(5,026)
(14,628)
Accumulated other comprehensive income
229 
634 
Total stockholders equity before adjustment of treasury stock
104,939 
91,858 
Less cost of common stock in treasury, 69 and 45 shares
319 
168 
Total ARC Document Solutions, Inc. stockholders’ equity
104,620 
91,690 
Noncontrolling interest
6,841 
7,449 
Total equity
111,461 
99,139 
Total liabilities and equity
$ 416,791 
$ 409,922 
Condensed Consolidated Balance Sheets (Parenthetical) (USD $)
In Thousands, except Per Share data, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 2,507 
$ 2,517 
Accumulated depreciation on property and equipment
$ 215,606 
$ 206,636 
Preferred stock, par value
$ 0.001 
$ 0.001 
Preferred stock, shares authorized
25,000 
25,000 
Preferred stock, shares issued
Preferred stock, shares outstanding
Common stock, par value
$ 0.001 
$ 0.001 
Common stock, shares authorized
150,000 
150,000 
Common stock, shares issued
46,790 
46,365 
Common stock, shares outstanding
46,721 
46,320 
Treasury stock, shares
69 
45 
Condensed Consolidated Statements of Operations (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Income Statement [Abstract]
 
 
 
 
Service sales
$ 94,426 
$ 88,830 
$ 279,555 
$ 268,258 
Equipment and supplies sales
12,381 
12,422 
36,607 
37,652 
Total net sales
106,807 
101,252 
316,162 
305,910 
Cost of sales
70,584 
68,372 
206,798 
205,040 
Gross profit
36,223 
32,880 
109,364 
100,870 
Selling, general and administrative expenses
26,331 
24,019 
80,720 
72,683 
Amortization of intangible assets
1,497 
1,610 
4,498 
5,056 
Restructuring expense
11 
657 
765 
1,765 
Income from operations
8,384 
6,594 
23,381 
21,366 
Other income
(22)
(25)
(71)
(86)
Loss on extinguishment of debt
347 
262 
347 
262 
Interest expense, net
3,780 
5,895 
11,637 
18,012 
Income before income tax provision
4,279 
462 
11,468 
3,178 
Income tax provision
659 
790 
1,930 
1,946 
Net income (loss)
3,620 
(328)
9,538 
1,232 
Loss (income) attributable to noncontrolling interest
41 
(122)
64 
(545)
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders
$ 3,661 
$ (450)
$ 9,602 
$ 687 
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:
 
 
 
 
Basic (dollars per share)
$ 0.08 
$ (0.01)
$ 0.21 
$ 0.01 
Diluted (dollars per share)
$ 0.08 
$ (0.01)
$ 0.20 
$ 0.01 
Weighted average common shares outstanding:
 
 
 
 
Basic (shares)
46,338 
45,976 
46,195 
45,880 
Diluted (shares)
47,015 
45,976 
46,856 
45,947 
Condensed Consolidated Statements of Comprehensive Income (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net income (loss)
$ 3,620 
$ (328)
$ 9,538 
$ 1,232 
Other comprehensive (loss) income, net of tax
 
 
 
 
Foreign currency translation adjustments
(428)
385 
(463)
259 
Other comprehensive (loss) income, net of tax
(428)
385 
(463)
259 
Comprehensive income
3,192 
57 
9,075 
1,491 
Comprehensive (loss) income attributable to noncontrolling interest
(43)
182 
(122)
757 
Comprehensive income (loss) attributable to ARC Document Solutions, Inc. shareholders
$ 3,235 
$ (125)
$ 9,197 
$ 734 
Condensed Consolidated Statements of Equity (USD $)
In Thousands, unless otherwise specified
Total
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Common Stock in Treasury [Member]
Noncontrolling Interest [Member]
Beginning Balance at Dec. 31, 2012
$ 110,837 
$ 46 
$ 102,510 
$ 695 
$ 689 
$ (44)
$ 6,941 
Beginning Balance, shares at Dec. 31, 2012
 
46,274 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock-based compensation
2,049 
 
2,049 
 
 
 
 
Stock-based compensation, shares
 
50 
 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan
13 
 
13 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan, shares
 
 
 
 
 
 
Treasury stock, shares
 
28 
 
 
 
 
 
Treasury stock
(90)
 
 
 
 
(90)
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
(485)
 
 
 
 
 
(485)
Comprehensive income:
 
 
 
 
 
 
 
Net income (loss)
1,232 
 
 
687 
 
 
545 
Foreign currency translation adjustments
259 
 
 
 
47 
 
212 
Comprehensive income
1,491 
 
 
 
 
 
 
Ending Balance at Sep. 30, 2013
113,815 
46 
104,572 
1,382 
736 
(134)
7,213 
Ending Balance, shares at Sep. 30, 2013
 
46,356 
 
 
 
 
 
Beginning Balance at Dec. 31, 2013
99,139 
46 
105,806 
(14,628)
634 
(168)
7,449 
Beginning Balance, shares at Dec. 31, 2013
46,365 
46,365 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock-based compensation
2,618 
 
2,618 
 
 
 
 
Stock-based compensation, shares
 
174 
 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan
65 
 
65 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan, shares
 
11 
 
 
 
 
 
Stock options exercised
1,201 
 
1,201 
 
 
 
 
Stock options exercised, shares
 
216 
 
 
 
 
 
Treasury stock, shares
69 
24 
 
 
 
 
 
Treasury stock
(151)
 
 
 
 
(151)
 
Noncontrolling Interest, Decrease from Distributions to Noncontrolling Interest Holders
(486)
 
 
 
 
 
(486)
Comprehensive income:
 
 
 
 
 
 
 
Net income (loss)
9,538 
 
 
9,602 
 
 
(64)
Foreign currency translation adjustments
(463)
 
 
 
(405)
 
(58)
Comprehensive income
9,075 
 
 
 
 
 
 
Ending Balance at Sep. 30, 2014
$ 111,461 
$ 46 
$ 109,690 
$ (5,026)
$ 229 
$ (319)
$ 6,841 
Ending Balance, shares at Sep. 30, 2014
46,790 
46,790 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Cash flows from operating activities
 
 
 
 
Net income (loss)
$ 3,620 
$ (328)
$ 9,538 
$ 1,232 
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Allowance for accounts receivable
197 
105 
444 
551 
Depreciation
7,039 
7,059 
21,063 
21,034 
Amortization of intangible assets
1,497 
1,610 
4,498 
5,056 
Amortization of deferred financing costs
190 
270 
587 
831 
Amortization of discount on long-term debt
207 
168 
656 
500 
Stock-based compensation
956 
728 
2,618 
2,049 
Deferred income taxes
2,100 
182 
6,272 
918 
Deferred tax valuation allowance
(1,615)
386 
(4,652)
560 
Restructuring expense, non-cash portion
   
70 
   
363 
Loss on early extinguishment of debt
347 
262 
347 
262 
Other non-cash items, net
(401)
(68)
(337)
(363)
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
(930)
4,491 
(8,424)
(7,358)
Inventory
(142)
441 
(2,071)
721 
Prepaid expenses and other assets
(946)
(1,102)
(309)
1,988 
Accounts payable and accrued expenses
3,192 
5,745 
6,819 
11,666 
Net cash provided by operating activities
15,311 
20,019 
37,049 
40,010 
Cash flows from investing activities
 
 
 
 
Capital expenditures
(3,430)
(4,814)
(10,027)
(14,856)
Payments related to business acquisitions
(342)
Other
105 
83 
505 
622 
Net cash used in investing activities
(3,325)
(4,731)
(9,864)
(14,234)
Cash flows from financing activities
 
 
 
 
Proceeds from stock option exercises
191 
1,201 
Proceeds from issuance of common stock under Employee Stock Purchase Plan
17 
65 
13 
Share repurchases, including shares surrendered for tax withholding
(151)
(90)
Proceeds from borrowings on long-term debt agreements
402 
Payments of debt extinguishment costs
(66)
(66)
Early extinguishment of long-term debt
(5,000)
(7,000)
(12,500)
(7,000)
Payments on long-term debt agreements and capital leases
(5,497)
(2,988)
(16,437)
(9,395)
Net repayments under revolving credit facilities
(532)
(228)
(828)
(438)
Payment of deferred financing costs
(454)
Dividends paid to noncontrolling interest
(486)
(485)
(486)
(485)
Net cash used in financing activities
(11,307)
(10,763)
(29,590)
(17,059)
Effect of foreign currency translation on cash balances
(50)
152 
(122)
316 
Net change in cash and cash equivalents
629 
4,677 
(2,527)
9,033 
Cash and cash equivalents at beginning of period
24,206 
32,377 
27,362 
28,021 
Cash and cash equivalents at end of period
24,835 
37,054 
24,835 
37,054 
Noncash investing and financing activities
 
 
 
 
Capital lease obligations incurred
5,506 
2,491 
14,909 
6,737 
Contingent liabilities in connection with business acquisitions
$ 186 
$ 0 
$ 1,110 
$ 0 
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation
Description of Business and Basis of Presentation
ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC” or the “Company”) 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. 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 interim Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conformity with the requirements of the SEC. As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the accompanying interim Condensed Consolidated Financial Statements presented reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim Condensed 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 interim Condensed Consolidated Financial Statements.
These interim Condensed Consolidated Financial Statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2013 Form 10-K.
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 condensed 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 Company is currently in the process of evaluating the impact of the adoption on its condensed consolidated financial statements.
In March 2013, the FASB issued ASU 2013-05. The new guidance covers the accounting for a cumulative translation adjustment on the parent entity upon de-recognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The adoption of ASU 2013-05 had no impact to the Company’s condensed consolidated financial statements.
Segment Reporting
The provisions of Accounting Standards Codification (“ASC”) 280, Disclosures about Segments of an Enterprise and Related Information, 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 and 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 and economic characteristics, the Company is deemed to operate as a single reportable segment.
Net sales of the Company’s principal services and products were as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Service Sales
 
 
 
 
 
 
 
Onsite services(1)
$
34,950

 
$
30,990

 
$
100,442

 
$
90,542

Traditional reprographics
28,196

 
28,907

 
86,702

 
88,981

Color
22,869

 
20,638

 
67,182

 
63,389

Digital
8,411

 
8,295

 
25,229

 
25,346

Total services sales
94,426

 
88,830

 
279,555

 
268,258

Equipment and supplies sales
12,381

 
12,422

 
36,607

 
37,652

Total net sales
$
106,807

 
$
101,252

 
$
316,162

 
$
305,910

 
(1)
Represents work done at the Company’s customer sites which includes Managed Print Services (“MPS”) and Facilities Management (“FM”).
Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to 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 to 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.
Earnings Per Share
Earnings Per Share
Earnings per Share
The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income attributable to ARC by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed similar 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 stock equivalents are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2014, stock options for 1.7 million common shares were excluded from the calculation of diluted net income attributable to ARC per common share because they were anti-dilutive. For the three and nine months ended September 30, 2013, stock options for 2.2 million and 3.6 million common shares, respectively, were excluded from the calculation of diluted net income attributable to ARC per common share because they were anti-dilutive.
Basic and diluted earnings per share for the three and nine months ended September 30, 2014 and 2013 were calculated using the following common shares:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Weighted average common shares outstanding—basic
46,338

 
45,976

 
46,195

 
45,880

Effect of dilutive impact on equity-based compensation awards
677

 

 
661

 
67

Weighted average common shares outstanding—diluted
47,015

 
45,976

 
46,856

 
45,947

Restructuring Expenses
Restructuring Expenses
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. Restructuring expenses for the three and nine months ended September 30, 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 the three and nine months ended September 30, 2014 and 2013:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Employee termination costs
$

 
$
1

 
$

 
$
12

Estimated lease termination and obligation costs
7

 
395

 
540

 
1,361

Other restructuring expenses
4

 
261

 
225

 
392

Total restructuring expenses
$
11

 
$
657

 
$
765

 
$
1,765


The changes in the restructuring liability from December 31, 2013 through September 30, 2014 are summarized as follows:
 
 
Nine Months Ended September 30, 2014
Balance, December 31, 2013
$
539

Restructuring expenses
765

Payments
(1,194
)
Balance, September 30, 2014
$
110

Goodwill and Other Intangibles Resulting from Business Acquisitions
Goodwill and Other Intangibles Resulting from Business Acquisitions
Goodwill and Other Intangibles Resulting from Business Acquisitions
Goodwill
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. At September 30, 2014, the Company performed its 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.
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.
There was no change to the carrying amount of goodwill from January 1, 2013 through September 30, 2014.
Long-lived Assets
The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. 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 the cash flows of the other assets and liabilities.
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 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.
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 three businesses during the nine months ended September 30, 2014 and recorded customer relationship intangibles of $1.4 million related to the acquisitions. Consideration for the purchase of the three businesses included cash payments of $0.3 million for the nine months ended September 30, 2014, and earnout liabilities of $0.2 million and $1.1 million for the three and nine months ended September 30, 2014, respectively. The Company's requirement to pay these earnout liabilities is contingent upon the future financial growth of the three acquired businesses.
The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of September 30, 2014 and December 31, 2013 which continue to be amortized:
 
 
September 30, 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
$
99,033

 
$
74,892

 
$
24,141

 
$
97,775

 
$
70,495

 
$
27,280

Trade names and trademarks
20,369

 
19,828

 
541

 
20,375

 
19,799

 
576

 
$
119,402

 
$
94,720

 
$
24,682

 
$
118,150

 
$
90,294

 
$
27,856


Based on current information, estimated future amortization expense of amortizable intangible assets for the remainder of the 2014 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:
 
2014 (excluding the nine months ended September 30, 2014)
$
1,473

2015
5,531

2016
4,728

2017
4,180

2018
3,781

Thereafter
4,989

 
$
24,682

Income Taxes
Income Taxes
Income Taxes
On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate in conjunction with the recognition of any discrete items within the quarter.
The Company recorded an income tax provision of $0.7 million and $1.9 million in relation to pretax income of $4.3 million and $11.5 million for the three and nine months ended September 30, 2014, respectively. The income tax provision was primarily due to the impact of amortization of tax basis goodwill in a deferred tax liability position.
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 June 30, 2011, the Company determined that cumulative losses for the preceding twelve quarters constituted sufficient objective evidence (as defined by ASC 740-10) that a valuation allowance on certain deferred assets was needed. As of September 30, 2014, the Company has a $80.9 million valuation allowance against certain of its deferred tax assets.
Based on the Company’s assessment, the remaining net deferred tax assets of $1.3 million as of September 30, 2014, which relate to foreign entities, are considered more likely than not to be realized. The valuation allowance of $80.9 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. The Company has income tax receivables of $0.2 million as of September 30, 2014 included in other current assets in its condensed consolidated balance sheet primarily related to income tax refunds for prior years.
Long-Term Debt
Long-Term Debt
Long-Term Debt
Long-term debt consists of the following:
 
 
September 30, 2014
 
December 31, 2013
Term loan credit agreement maturing 2018, net of original issue discount of $3,135 and $4,000; 6.25% interest rate at September 30, 2014 and December 31, 2013, respectively.
$
176,865

 
$
196,000

Various capital leases; weighted average interest rate of 7.0% and 7.5% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through November 2019
27,563

 
21,516

Borrowings from foreign revolving credit facilities; 0.6% interest rate at September 30, 2014 and December 31, 2013
971

 
1,811

Various other notes payable with a weighted average interest rate of 6.5% and 6.4% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through June 2016
233

 
401

 
205,632

 
219,728

Less current portion
(11,394
)
 
(21,500
)
 
$
194,238

 
$
198,228



Term Loan Credit Agreement

On December 20, 2013, the Company entered into a Term Loan Credit Agreement (the “Term Loan Credit Agreement”) among the Company, as borrower, JPMorgan Chase Bank., N.A, as administrative agent and as collateral agent, and the lenders party thereto.

The credit facility provided under the Term Loan Credit Agreement consists 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 Company's then outstanding 10.5% senior unsecured notes due 2016 (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. The Company has the right to request increases to the aggregate amount of term loans by an amount not to exceed $50.0 million in the aggregate.

The Term Loan Credit Agreement maturity date, with respect to the initial $200.0 million term loan, is December 20, 2018. Under the Term Loan Credit Agreement, the Company is required to make regularly scheduled principal payments of $2.5 million each quarter, with all remaining unpaid principal due at maturity. During the nine months ended September 30, 2014, the Company made its scheduled principal payments of $7.5 million and voluntarily prepaid $12.5 million of its scheduled principal payments due through December 31, 2015.

The term loan extended under the Term Loan Credit Agreement can be maintained in different tranches consisting of Eurodollar loans or as base rate loans. It is expected that the borrowings under the Term Loan Credit Agreement will be maintained in Eurodollars and therefore will bear interest, for any interest period, at a rate per annum equal to (i) the higher of (A) the LIBOR rate for U.S. dollar deposits for a period equal to the applicable interest period as determined by the administrative agent in accordance with the Term Loan Credit Agreement and (B) with respect to the initial term loans only, 1.00%, plus (ii) an applicable margin of 5.25%.

The Company pays certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.
In accordance with the Term Loan Credit Agreement, the Company is required to maintain an Interest Expense Coverage Ratio (as defined in the Term Loan Credit Agreement) greater than or equal to 2.00:1.00 as of the end of each fiscal quarter. In addition, the Company is required to maintain a Total Leverage Ratio less than or equal to (i) 4.50:1.00 for any fiscal quarter ending through December 31, 2014; (ii) 4.25:1.00 for any fiscal quarter ending between March 31, 2015 and December 31, 2015; (iii) 4.00:1.00 for any fiscal quarter ending between March 31, 2016 and December 31, 2016; (iv) 3.75:1.00 for any fiscal quarter ending between March 31, 2017 and December 31, 2017; and (v) 3.50:1.00 for any fiscal quarter ending March 31, 2018 and thereafter. The Company was in compliance with the Term Loan Credit Agreement covenants as of September 30, 2014.

Subject to certain exceptions, the term loan extended under the Term Loan Credit Agreement is subject to customary mandatory prepayment provisions with respect to: the net cash proceeds from certain asset sales; the net cash proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term Loan Credit Agreement); a portion (with stepdowns based upon the achievement of a financial covenant linked to the total leverage ratio) of annual excess cash flow of the Company and certain of its subsidiaries, and with such required prepayment amount to be reduced dollar-for-dollar by the amount of voluntary prepayments of term loans made with internally generated funds; and, the net cash proceeds in excess of a certain amount from insurance recovery (other than business interruption insurance) and condemnation events of the Company and certain of its subsidiaries, subject to certain reinvestment rights.

The Term Loan 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 certain of its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; engage in mergers or other fundamental changes; sell certain property or assets; pay dividends of other distributions; consummate acquisitions; make investments, loans and advances; prepay certain indebtedness; change the nature of their business; engage in certain transactions with affiliates; and, incur restrictions on the ability of the Company’s subsidiaries to make distributions, advances and asset transfers.

The Term Loan Credit Agreement contains customary events of default, including with respect to: nonpayment of principal, interest, fees or other amounts; material inaccuracy of a representation or warranty when made; failure to perform or observe covenants; cross-default to other material indebtedness; bankruptcy and insolvency events; inability to pay debts; monetary judgment defaults; actual or asserted invalidity or impairment of any definitive loan documentation; and a change of control.

The obligations of the Company under the Term Loan Credit Agreement are guaranteed by each United States domestic subsidiary of the Company. The Term Loan Credit Agreement and any interest rate protection and other hedging arrangements provided by any lender party to the Senior Secured Credit Facilities or any affiliate of such a lender are secured on a first priority basis by a perfected security interest in substantially all of the Company’s and each guarantor’s assets (subject to certain exceptions), except that such lien is second priority in the case of inventory, receivables and related assets that are subject to a first priority security interest under the 2012 Credit Agreement (as defined below).
2012 Credit Agreement
On January 27, 2012, the Company entered into a Credit Agreement (the “2012 Credit Agreement”). The 2012 Credit Agreement was amended on December 20, 2013 in connection with the Company's entry into the Term Loan Credit Agreement for the principal purpose of making the 2012 Credit Agreement consistent with the Term Loan Credit Agreement. The 2012 Credit Agreement, as amended, provides 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 the Company’s subsidiaries organized in the US ("United States Domestic Subsidiaries") and Canada ("Canadian Domestic Subsidiaries") that meet certain eligibility criteria. The 2012 Credit Agreement has a maturity date of January 27, 2017.

Amounts borrowed in US dollars under the 2012 Credit Agreement bear interest, in the case of LIBOR loans, at a per annum rate equal to LIBOR plus the LIBOR Rate Margin (as defined in the 2012 Credit Agreement), which may range from 1.75% to 2.25%, based on Average Daily Net Availability (as defined in the 2012 Credit Agreement). All other amounts borrowed in US dollars that are not LIBOR loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds rate plus 0.5%, (B) the LIBOR (calculated based upon an interest period of three months and determined on a daily basis), plus 1.0% per annum, and (C) the rate of interest announced, from time to time, within Wells Fargo Bank, National Association at its principal office in San Francisco as its “prime rate,” plus (ii) the Base Rate Margin (as defined in the 2012 Credit Agreement), which may range from 0.75% to 1.25%, based on Average Daily Net Availability (as defined in the 2012 Credit Agreement). Amounts borrowed in Canadian dollars bear interest at a per annum rate equal to the Canadian Base Rate (as defined in the 2012 Credit Agreement) plus the LIBOR Margin, which may range from 1.75% to 2.25%, based on Average Daily Net Availability.

The 2012 Credit Agreement contains various loan covenants that restrict the Company’s ability to take certain actions, including restrictions on incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making certain investments, entering into certain transactions with affiliates or changing the nature of the Company’s business. In addition, at any time when Excess Availability (as defined in the 2012 Credit Agreement) is less than $8.0 million, the Company is required to maintain a Fixed Charge Coverage Ratio (as defined in the 2012 Credit Agreement) of at least 1.0. The Company’s obligations under the 2012 Credit Agreement are secured by substantially all of the Company’s and its United States Domestic Subsidiaries’ assets. The Company's United States Domestic Subsidiaries have also guaranteed all of the Company’s obligations under the 2012 Credit Agreement. The obligations of the Company’s Canadian Domestics Subsidiaries which are borrowers under the 2012 Credit Agreement are secured by substantially all of the assets of the Company’s Canadian Domestic Subsidiaries.
As of and during the nine months ended September 30, 2014, the Company did not have any outstanding debt under the 2012 Credit Agreement, other than contingent reimbursement obligations for undrawn standby letters of credit described below that were issued under the 2012 Credit Agreement.
As of September 30, 2014, based on inventory and accounts receivable of the Company’s subsidiaries organized in the US and Canada, the Company’s borrowing availability under the 2012 Credit Agreement was $40.0 million. Standby letters of credit totaling $2.3 million reduced the Company’s borrowing availability under the 2012 Credit Agreement to $37.7 million as of September 30, 2014.
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. $3.2 million as of September 30, 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 and subordinated seller notes payable related to prior acquisitions.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Operating Leases. The Company has entered into various non-cancelable operating leases primarily related to facilities, equipment and vehicles used in the ordinary course of business.
Contingent Transaction Consideration. The Company is subject to earnout obligations entered into in connection with acquisitions. If acquired businesses generate sales and/or operating profits in excess of predetermined targets, the Company is obligated to make additional cash payments in accordance with the terms of such earnout obligations. As of September 30, 2014, the Company has potential future earnout obligations for acquisitions consummated before the adoption of ASC 805, Business Combinations, of approximately $1.5 million through 2014 if predetermined financial targets are met or exceeded. Earnout payments prior to the adoption of ASC 805 are recorded as additional purchase price (as goodwill) when the contingent payments are earned and become payable. The Company does not believe payment of such earnouts to be probable. As of September 30, 2014, the Company recorded liabilities related to future earnout payments consummated subsequent to the adoption of ASC 805 of $1.1 million. In accordance with ASC 805, changes to the liability are recognized in the company's consolidated statement of operations.
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 the County of Orange. 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 September 30, 2014 related to the claim, which represents management's best estimate based on information available.

On February 1, 2013, ARC filed a civil complaint against a competitor and a former employee in the Superior Court of California for Orange County, which alleged, among other claims, the misappropriation of ARC trade secrets; namely, proprietary customer lists that were used to communicate with ARC customers in an attempt to unfairly acquire their business. In prior litigation with the competitor based on related facts, in 2007 the competitor entered into a settlement agreement and stipulated judgment, which included an injunction. ARC 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 August 2014, the Company filed a Notice of Appeal. Legal fees associated with the litigation totaled $0.3 million and $2.8 million for the three and nine months ended September 30, 2014, respectively, and are recorded within selling, general and administrative expenses in the condensed consolidated statement of operations.
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.
Stock-Based Compensation
Stock-Based Compensation
Stock-Based Compensation
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 to 3.5 million shares of common stock. As of September 30, 2014, 2.9 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 nine months ended September 30, 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 nine months ended September 30, 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.
The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $1.0 million and $0.7 million for the three months ended September 30, 2014 and 2013, respectively.
The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $2.6 million and $2.0 million for the nine months ended September 30, 2014 and 2013, respectively.
As of September 30, 2014, total unrecognized compensation cost related to unvested stock-based payments totaled $4.6 million and is expected to be recognized over a weighted-average period of 2.0 years.
Fair Value Measurements
Fair Value Measurements
Fair Value Measurements
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 Condensed Consolidated Balance Sheets were $8.6 million and $12.9 million as of September 30, 2014 and December 31, 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 $1.1 million as of September 30, 2014.
Short- and long-term debt: The carrying amount of the Company’s capital leases reported in the Condensed 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 Condensed Consolidated Balance Sheet as of September 30, 2014 for borrowings under its Term Loan Credit Agreement is $176.9 million. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its Term Loan Credit Agreement is $181.4 million as of September 30, 2014.
Description of Business and Basis of Presentation (Policies)
Basis of Presentation
The accompanying interim Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conformity with the requirements of the SEC. As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the accompanying interim Condensed Consolidated Financial Statements presented reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ending December 31, 2014.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the interim Condensed 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 interim Condensed Consolidated Financial Statements.
These interim Condensed Consolidated Financial Statements and accompanying notes should be read in conjunction with the consolidated financial statements and notes included in the Company’s 2013 Form 10-K.
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 condensed 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 Company is currently in the process of evaluating the impact of the adoption on its condensed consolidated financial statements.
In March 2013, the FASB issued ASU 2013-05. The new guidance covers the accounting for a cumulative translation adjustment on the parent entity upon de-recognition of a subsidiary or group of assets within a foreign entity. This new guidance requires that the parent release any related cumulative translation adjustment into net income only if the sale or transfer results in the complete or substantially complete liquidation of the foreign entity in which the subsidiary or group of assets had resided. The adoption of ASU 2013-05 had no impact to the Company’s condensed consolidated financial statements.
Segment Reporting
The provisions of Accounting Standards Codification (“ASC”) 280, Disclosures about Segments of an Enterprise and Related Information, 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 and 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 and economic characteristics, the Company is deemed to operate as a single reportable segment.
Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to 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 to 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.
Earnings per Share
The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income attributable to ARC by the weighted-average number of common shares outstanding for the period. Diluted earnings per share is computed similar 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 stock equivalents are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2014, stock options for 1.7 million common shares were excluded from the calculation of diluted net income attributable to ARC per common share because they were anti-dilutive. For the three and nine months ended September 30, 2013, stock options for 2.2 million and 3.6 million common shares, respectively, were excluded from the calculation of diluted net income attributable to ARC per common share because they were anti-dilutive.
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. At September 30, 2014, the Company performed its 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.
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.
Goodwill
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. At September 30, 2014, the Company performed its 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.
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.
Long-lived Assets
The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. 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 the cash flows of the other assets and liabilities.
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 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.
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.
Description of Business and Basis of Presentation (Tables)
Net Sales of Principal Services and Products
Net sales of the Company’s principal services and products were as follows:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Service Sales
 
 
 
 
 
 
 
Onsite services(1)
$
34,950

 
$
30,990

 
$
100,442

 
$
90,542

Traditional reprographics
28,196

 
28,907

 
86,702

 
88,981

Color
22,869

 
20,638

 
67,182

 
63,389

Digital
8,411

 
8,295

 
25,229

 
25,346

Total services sales
94,426

 
88,830

 
279,555

 
268,258

Equipment and supplies sales
12,381

 
12,422

 
36,607

 
37,652

Total net sales
$
106,807

 
$
101,252

 
$
316,162

 
$
305,910

 
(1)
Represents work done at the Company’s customer sites which includes Managed Print Services (“MPS”) and Facilities Management (“FM”).
Earnings Per Share (Tables)
Basic and Diluted Earnings Per Share
Basic and diluted earnings per share for the three and nine months ended September 30, 2014 and 2013 were calculated using the following common shares:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2014
 
2013
 
2014
 
2013
Weighted average common shares outstanding—basic
46,338

 
45,976

 
46,195

 
45,880

Effect of dilutive impact on equity-based compensation awards
677

 

 
661

 
67

Weighted average common shares outstanding—diluted
47,015

 
45,976

 
46,856

 
45,947

Restructuring Expenses (Tables)
The following table summarizes restructuring expenses incurred in the three and nine months ended September 30, 2014 and 2013:
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2014
 
2013
 
2014
 
2013
Employee termination costs
$

 
$
1

 
$

 
$
12

Estimated lease termination and obligation costs
7

 
395

 
540

 
1,361

Other restructuring expenses
4

 
261

 
225

 
392

Total restructuring expenses
$
11

 
$
657

 
$
765

 
$
1,765

The changes in the restructuring liability from December 31, 2013 through September 30, 2014 are summarized as follows:
 
 
Nine Months Ended September 30, 2014
Balance, December 31, 2013
$
539

Restructuring expenses
765

Payments
(1,194
)
Balance, September 30, 2014
$
110

Goodwill and Other Intangibles Resulting from Business Acquisitions (Tables)
The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of September 30, 2014 and December 31, 2013 which continue to be amortized:
 
 
September 30, 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
$
99,033

 
$
74,892

 
$
24,141

 
$
97,775

 
$
70,495

 
$
27,280

Trade names and trademarks
20,369

 
19,828

 
541

 
20,375

 
19,799

 
576

 
$
119,402

 
$
94,720

 
$
24,682

 
$
118,150

 
$
90,294

 
$
27,856

Based on current information, estimated future amortization expense of amortizable intangible assets for the remainder of the 2014 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:
 
2014 (excluding the nine months ended September 30, 2014)
$
1,473

2015
5,531

2016
4,728

2017
4,180

2018
3,781

Thereafter
4,989

 
$
24,682

Long-Term Debt (Tables)
Long-Term Debt
Long-term debt consists of the following:
 
 
September 30, 2014
 
December 31, 2013
Term loan credit agreement maturing 2018, net of original issue discount of $3,135 and $4,000; 6.25% interest rate at September 30, 2014 and December 31, 2013, respectively.
$
176,865

 
$
196,000

Various capital leases; weighted average interest rate of 7.0% and 7.5% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through November 2019
27,563

 
21,516

Borrowings from foreign revolving credit facilities; 0.6% interest rate at September 30, 2014 and December 31, 2013
971

 
1,811

Various other notes payable with a weighted average interest rate of 6.5% and 6.4% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through June 2016
233

 
401

 
205,632

 
219,728

Less current portion
(11,394
)
 
(21,500
)
 
$
194,238

 
$
198,228

Description of Business and Basis of Presentation - Net Sales of Principal Services and Products (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Service Sales
 
 
 
 
Service sales
$ 94,426 
$ 88,830 
$ 279,555 
$ 268,258 
Equipment and supplies sales
12,381 
12,422 
36,607 
37,652 
Total net sales
106,807 
101,252 
316,162 
305,910 
Onsite Services [Member]
 
 
 
 
Service Sales
 
 
 
 
Service sales
34,950 1
30,990 1
100,442 1
90,542 1
Traditional Reprographics [Member]
 
 
 
 
Service Sales
 
 
 
 
Service sales
28,196 
28,907 
86,702 
88,981 
Color [Member]
 
 
 
 
Service Sales
 
 
 
 
Service sales
22,869 
20,638 
67,182 
63,389 
Digital [Member]
 
 
 
 
Service Sales
 
 
 
 
Service sales
$ 8,411 
$ 8,295 
$ 25,229 
$ 25,346 
Earnings Per Share - Additional Information (Detail)
In Millions, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Earnings Per Share [Abstract]
 
 
 
 
Common stock options excluded for anti-dilutive
1.7 
2.2 
1.7 
3.6 
Earnings Per Share - Basic and Diluted Earnings Per Share (Detail)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Earnings Per Share [Abstract]
 
 
 
 
Weighted average common shares outstanding—basic
46,338 
45,976 
46,195 
45,880 
Effect of dilutive impact on equity-based compensation awards
677 
661 
67 
Weighted average common shares outstanding—diluted
47,015 
45,976 
46,856 
45,947 
Restructuring Expenses - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
15 Months Ended
Dec. 31, 2013
Head_Count
Location
Sep. 30, 2014
Restructuring and Related Activities [Abstract]
 
 
Company's service centers closed
56 
 
Percentage of service locations closed
25.00% 
 
Headcount reduction of full-time employees
300 
 
Percentage of headcount reduction in full-time employees
10.00% 
 
Restructuring expense incurred to date
 
$ 6.6 
Restructuring Expenses - Summary of Restructuring Expenses (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring expenses
$ 11 
$ 657 
$ 765 
$ 1,765 
Employee Termination Costs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring expenses
12 
Estimated Lease Termination and Obligation Costs [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring expenses
395 
540 
1,361 
Other Restructuring Expenses [Member]
 
 
 
 
Restructuring Cost and Reserve [Line Items]
 
 
 
 
Restructuring expenses
$ 4 
$ 261 
$ 225 
$ 392 
Restructuring Expenses - Summary of Restructuring Liability (Detail) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Restructuring Reserve [Roll Forward]
 
 
 
 
Balance, December 31, 2013
 
 
$ 539 
 
Restructuring expenses
11 
657 
765 
1,765 
Payments
 
 
(1,194)
 
Balance, September 30, 2014
$ 110 
 
$ 110 
 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
business
Sep. 30, 2013
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Estimated period for amortization
 
 
13 years 
 
Number of businesses acquired
 
 
 
Payments related to business acquisitions
$ 0 
$ 0 
$ (342,000)
$ 0 
Contingent liabilities in connection with business acquisitions
186,000 
1,110,000 
Customer Relationships [Member]
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
Customer relationships acquired
 
 
$ 1,400,000 
 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Other Intangible Assets Resulting from Business Acquisitions (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 119,402 
$ 118,150 
Accumulated Amortization
94,720 
90,294 
Net Carrying Amount
24,682 
27,856 
Customer Relationships [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
99,033 
97,775 
Accumulated Amortization
74,892 
70,495 
Net Carrying Amount
24,141 
27,280 
Trade Names and Trademarks [Member]
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
20,369 
20,375 
Accumulated Amortization
19,828 
19,799 
Net Carrying Amount
$ 541 
$ 576 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Estimated Future Amortization Expense of Amortizable Intangible Assets (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
2014 (excluding the nine months ended September 30, 2014)
$ 1,473 
 
2015
5,531 
 
2016
4,728 
 
2017
4,180 
 
2018
3,781 
 
Thereafter
4,989 
 
Net Carrying Amount
$ 24,682 
$ 27,856 
Income Taxes - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Income Tax Disclosure [Abstract]
 
 
 
 
Income tax provision
$ 659,000 
$ 790,000 
$ 1,930,000 
$ 1,946,000 
Pretax gain amount
4,279,000 
462,000 
11,468,000 
3,178,000 
Valuation allowance
80,900,000 
 
80,900,000 
 
Net deferred tax asset
1,300,000 
 
1,300,000 
 
Income tax receivables
$ 200,000 
 
$ 200,000 
 
Long-Term Debt - Long-Term Debt (Detail) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2014
Dec. 31, 2013
Debt Disclosure [Abstract]
 
 
Term loan credit agreement maturing 2018, net of original issue discount of $3,135 and $4,000; 6.25% interest rate at September 30, 2014 and December 31, 2013, respectively.
$ 176,865 
$ 196,000 
Various capital leases; weighted average interest rate of 7.0% and 7.5% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through November 2019
27,563 
21,516 
Borrowings from foreign revolving credit facilities; 0.6% interest rate at September 30, 2014 and December 31, 2013
971 
1,811 
Various other notes payable with a weighted average interest rate of 6.5% and 6.4% at September 30, 2014 and December 31, 2013, respectively; principal and interest payable monthly through June 2016
233 
401 
Debt and capital lease obligations
205,632 
219,728 
Less current portion
(11,394)
(21,500)
Long-term debt and capital leases
$ 194,238 
$ 198,228 
Long-Term Debt - Long-Term Debt (Parenthetical) (Detail) (USD $)
In Thousands, unless otherwise specified
9 Months Ended
Sep. 30, 2014
Dec. 31, 2013
Debt Instrument [Line Items]
 
 
Unamortized discount on term loan credit agreement
$ 3,135 
$ 4,000 
Weighted average interest rate
6.50% 
6.40% 
Debt instrument maturity period
December 2018 
 
Capital Leases [Member]
 
 
Debt Instrument [Line Items]
 
 
Weighted average interest rate
7.00% 
7.50% 
Debt instrument maturity period
November 2019 
 
Foreign Credit Facility [Member]
 
 
Debt Instrument [Line Items]
 
 
Interest rate on revolving credit facility
0.60% 
0.60% 
Long-Term Debt - Additional Information (Detail) (USD $)
0 Months Ended 9 Months Ended
Dec. 20, 2013
Sep. 30, 2014
Debt Instrument [Line Items]
 
 
Interest rate on senior unsecured notes
10.50% 
 
Senior secured due date
2016 
 
Debt instrument, periodic payment, principal prepayment
 
$ 12,500,000 
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Aggregate principal amount of Notes
200,000,000 
 
Line of credit facility, additional borrowing capacity
50,000,000.0 
 
Debt instrument, periodic payment, principal
$ 2,500,000 
$ 7,500,000 
Debt instrument, covenant term, interest expense coverage ratio
2.00 
 
Eurodollar [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt Instrument, Basis Spread One on Variable Rate
1.00% 
 
Debt instrument, basis spread two on variable rate
5.25% 
 
Fiscal Quarter, Though December 31, 2014 [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument, covenant term, total leverage ratio
4.50 
 
Fiscal Quarter, March 31, 2015-December 31, 2015 [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument, covenant term, total leverage ratio
4.25 
 
Fiscal Quarter, March 31, 2016-December 31, 2016 [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument, covenant term, total leverage ratio
4.00 
 
Fiscal Quarter, March 31, 2017-December 31, 2017 [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument, covenant term, total leverage ratio
3.75 
 
Fiscal Quarter, March 31, 2018-December 31, 2018 [Member] |
Term Loan Credit Agreement 2013 [Member]
 
 
Debt Instrument [Line Items]
 
 
Debt instrument, covenant term, total leverage ratio
3.50 
 
Long-Term Debt 2012 Credit Agreement (Details) (USD $)
0 Months Ended
Jan. 27, 2012
Sep. 30, 2014
Line of Credit Facility [Line Items]
 
 
Excess Availability
$ 8,000,000.0 
 
Fixed Charged Coverage Ratio
1.0 
 
Line of Credit Facility, Current Borrowing Capacity
 
40,000,000 
Line of Credit Facility, Remaining Borrowing Capacity
 
37,700,000 
Standby Letters of Credit [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Line of Credit Facility, Current Borrowing Capacity
 
2,300,000 
Credit Agreement [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Line of Credit Facility, Maximum Borrowing Capacity
40,000,000.0 
 
Line Of Credit Facility Maximum Borrowing Capacity Canadian Sublimit
5,000,000.0 
 
Line of Credit Facility, Expiration Date
Jan. 27, 2017 
 
Minimum Applicable Incremental Rate Over Libor
1.75% 
 
Maximum Applicable Incremental Rate Over Libor
2.25% 
 
Applicable Incremental Rate Over Fed Funds Rate
0.50% 
 
Debt Instrument, Basis Spread One on Variable Rate
1.00% 
 
Minimum Applicable Incremental Rate Over Libor For Canadian Dollar Loans
1.75% 
 
Maximum Applicable Incremental Rate Over Libor For Canadian Dollar Loans
2.25% 
 
Long-term Line of Credit
 
$ 0 
Minimum [Member] |
Credit Agreement [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Line Of Credit Facility Basis Spread On Base Rate
0.75% 
 
Maximum [Member] |
Credit Agreement [Member]
 
 
Line of Credit Facility [Line Items]
 
 
Line Of Credit Facility Basis Spread On Base Rate
1.25% 
 
Long-Term Debt Foreign Credit Agreement (Details)
3 Months Ended 9 Months Ended
Sep. 30, 2013
Sep. 30, 2013
Foreign Credit Facility [Member]
CNY
Sep. 30, 2014
Foreign Credit Facility [Member]
USD ($)
Line of Credit Facility [Line Items]
 
 
 
Debt Instrument, Term
18 months 
 
 
Line of Credit Facility, Maximum Amount Outstanding During Period
 
 20,000,000 
$ 3,200,000 
Term Of Draws On Foreign Credit Facility
30 days 
 
 
Fee Incurred On Foreign Credit Facility
0.05% 
 
 
Commitments and Contingencies - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Commitments and Contingencies Disclosure [Abstract]
 
 
 
 
Potential future earnout obligations arising from acquisitions
$ 1,500,000 
 
$ 1,500,000 
 
Contingent liabilities in connection with business acquisitions
186,000 
1,110,000 
Loss on accrued liability
900,000 
 
900,000 
 
Legal fees
$ 300,000 
 
$ 2,800,000 
 
Stock-Based Compensation - Additional Information (Detail) (USD $)
In Millions, except Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Authorization to issue number of common stock
3,500,000 
 
3,500,000 
 
Shares available for issuance
2,900,000 
 
2,900,000 
 
Stock option expiration period
 
 
10 years 
 
Exercise price of options, percentage of fair market value of Company's common stock
 
 
100.00% 
 
Stock options granted to acquire common stock
 
 
518,000 
 
Impact of stock-based compensation before income taxes
$ 1.0 
$ 0.7 
$ 2.6 
$ 2.0 
Total unrecognized compensation cost related to unvested stock-based payments
$ 4.6 
 
$ 4.6 
 
Expected weighted-average period to recognize compensation cost
 
 
2 years 
 
Minimum [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period
 
 
3 years 
 
Maximum [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period
 
 
4 years 
 
Chief Operating Officer [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock options granted to acquire common stock
 
 
48,000 
 
Expiry period of stock option grant
 
 
10 years 
 
Chief Operating Officer [Member] |
Maximum [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period
 
 
4 years 
 
Chief Financial Officer [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Stock options granted to acquire common stock
 
 
13,000 
 
Chief Executive Officer [Member] |
Restricted Stock [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Vesting period
 
 
4 years 
 
Share-based compensation, grants in period
 
 
144,000 
 
Director [Member] |
Restricted Stock [Member]
 
 
 
 
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
 
 
 
 
Share-based compensation, grants in period
 
 
9,000 
 
Fair Value Measurements - Additional Information (Detail) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2014
Sep. 30, 2013
Sep. 30, 2014
Sep. 30, 2013
Dec. 31, 2013
Fair Value Disclosures [Abstract]
 
 
 
 
 
Cash equivalents reported in Balance Sheets
$ 8,600,000 
 
$ 8,600,000 
 
$ 12,900,000 
Contingent liabilities in connection with business acquisitions
186,000 
1,110,000 
 
Carrying amount of notes
176,900,000 
 
176,900,000 
 
 
Fair value of notes
$ 181,400,000 
 
$ 181,400,000