ARC DOCUMENT SOLUTIONS, INC., 10-Q filed on 11/3/2017
Quarterly Report
Document and Entity Information
9 Months Ended
Sep. 30, 2017
Oct. 27, 2017
Document And Entity Information [Abstract]
 
 
Document Type
10-Q 
 
Amendment Flag
false 
 
Document Period End Date
Sep. 30, 2017 
 
Document Fiscal Year Focus
2017 
 
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
 
46,457,281 
Condensed Consolidated Balance Sheets (Unaudited) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Current assets:
 
 
Cash and cash equivalents
$ 26,363 
$ 25,239 
Accounts receivable, net of allowances for accounts receivable of $2,495 and $2,060
59,006 
59,735 
Inventories, net
19,095 
18,184 
Prepaid expenses
5,008 
3,861 
Other current assets
5,034 
4,785 
Total current assets
114,506 
111,804 
Property and equipment, net of accumulated depreciation of $205,435 and $201,192
65,645 
60,735 
Goodwill
121,051 
138,688 
Other intangible assets, net
10,087 
13,202 
Deferred income taxes
41,364 
42,667 
Other assets
2,590 
2,185 
Total assets
355,243 
369,281 
Current liabilities:
 
 
Accounts payable
25,027 
24,782 
Accrued payroll and payroll-related expenses
10,908 
12,219 
Accrued expenses
15,041 
16,138 
Current portion of long-term debt and capital leases
20,268 
13,773 
Total current liabilities
71,244 
66,912 
Long-term debt and capital leases
128,917 
143,400 
Other long-term liabilities
3,329 
2,148 
Total liabilities
203,490 
212,460 
Commitments and contingencies (Note 6)
   
   
ARC Document Solutions, Inc. stockholders’ equity:
 
 
Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding
Common stock, $0.001 par value, 150,000 shares authorized; 47,891 and 47,428 shares issued and 46,451 and 45,988 shares outstanding
48 
47 
Additional paid-in capital
120,204 
117,749 
Retained earnings
32,681 
41,822 
Accumulated other comprehensive loss
(2,545)
(3,793)
Total stockholders equity before adjustment of treasury stock
150,388 
155,825 
Less cost of common stock in treasury, 1,440 shares
5,909 
5,909 
Total ARC Document Solutions, Inc. stockholders’ equity
144,479 
149,916 
Noncontrolling interest
7,274 
6,905 
Total equity
151,753 
156,821 
Total liabilities and equity
$ 355,243 
$ 369,281 
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) (USD $)
In Thousands, except Share data, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Statement of Financial Position [Abstract]
 
 
Allowances for accounts receivable
$ 2,495 
$ 2,060 
Accumulated depreciation on property and equipment
$ 205,435 
$ 201,192 
Preferred stock, par value (in usd per share)
$ 0.001 
$ 0.001 
Preferred stock, shares authorized (in shares)
25,000,000 
25,000,000 
Preferred stock, shares issued (in shares)
Preferred stock, shares outstanding (in shares)
Common stock, par value (in usd per share)
$ 0.001 
$ 0.001 
Common stock, shares authorized (in shares)
150,000,000 
150,000,000 
Common stock, shares issued (in shares)
47,891,000 
47,428,000 
Common stock, shares outstanding (in shares)
46,451,000 
45,988,000 
Treasury stock, (in shares)
1,440,000 
1,440,000 
Condensed Consolidated Statements of Operations (Unaudited) (USD $)
In Thousands, except Per Share data, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Income Statement [Abstract]
 
 
 
 
Service sales
$ 85,625 
$ 89,178 
$ 262,459 
$ 272,394 
Equipment and supplies sales
10,833 
11,265 
35,010 
35,369 
Total net sales
96,458 
100,443 
297,469 
307,763 
Cost of sales
67,231 
67,713 
202,918 
204,904 
Gross profit
29,227 
32,730 
94,551 
102,859 
Selling, general and administrative expenses
25,843 
24,893 
76,540 
76,752 
Amortization of intangible assets
1,053 
1,160 
3,250 
3,705 
Goodwill impairment
17,637 
17,637 
73,900 
Restructuring expense
(Loss) income from operations
(15,306)
6,677 
(2,876)
(51,525)
Other income, net
(19)
(16)
(60)
(54)
Loss on extinguishment and modification of debt
124 
66 
230 
156 
Interest expense, net
1,530 
1,563 
4,679 
4,535 
(Loss) income before income tax (benefit) provision
(16,900)
5,100 
(7,725)
(56,162)
Income tax (benefit) provision
(2,200)
2,200 
1,574 
(5,884)
Net (loss) income
(14,767)
2,902 
(9,299)
(50,278)
Income attributable to the noncontrolling interest
(7)
(61)
(55)
(211)
Net (loss) income attributable to ARC Document Solutions, Inc. shareholders
$ (14,774)
$ 2,841 
$ (9,354)
$ (50,489)
(Loss) earnings per share attributable to ARC Document Solutions, Inc. shareholders:
 
 
 
 
Basic (dollars per share)
$ (0.32)
$ 0.06 
$ (0.20)
$ (1.10)
Diluted (dollars per share)
$ (0.32)
$ 0.06 
$ (0.20)
$ (1.10)
Weighted average common shares outstanding:
 
 
 
 
Basic (shares)
45,834 
45,599 
45,756 
46,055 
Diluted (shares)
45,834 
46,189 
45,756 
46,055 
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Statement of Comprehensive Income [Abstract]
 
 
 
 
Net (loss) income
$ (14,767)
$ 2,902 
$ (9,299)
$ (50,278)
Other comprehensive income (loss), net of tax
 
 
 
 
Foreign currency translation adjustments, net of tax
681 
(250)
1,421 
(873)
Fair value adjustment of derivatives, net of tax
55 
47 
141 
(50)
Other comprehensive income (loss), net of tax
736 
(203)
1,562 
(923)
Comprehensive (loss) income
(14,031)
2,699 
(7,737)
(51,201)
Comprehensive income attributable to noncontrolling interest
149 
36 
369 
22 
Comprehensive (loss) income attributable to ARC Document Solutions, Inc. shareholders
$ (14,180)
$ 2,663 
$ (8,106)
$ (51,223)
Condensed Consolidated Statements of Equity (Unaudited) (USD $)
In Thousands, unless otherwise specified
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive Loss
Common Stock in Treasury
Noncontrolling Interest
Beginning Balance at Dec. 31, 2015
$ 209,134 
$ 47 
$ 115,089 
$ 89,687 
$ (2,097)
$ (612)
$ 7,020 
Beginning Balance (in shares) at Dec. 31, 2015
 
47,130 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock-based compensation
2,073 
 
2,073 
 
 
 
 
Stock-based compensation (in shares)
 
229 
 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan
96 
 
96 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan (in shares)
 
28 
 
 
 
 
 
Stock options exercised
76 
 
76 
 
 
 
 
Stock options exercised (in shares)
 
28 
 
 
 
 
 
Tax deficiency from stock-based compensation
(70)
 
(70)
 
 
 
 
Treasury shares
(5,297)
 
 
 
 
(5,297)
 
Comprehensive income (loss):
 
 
 
 
 
 
 
Net (loss) income
(50,278)
 
 
(50,489)
 
 
211 
Foreign currency translation adjustments, net of tax
(873)
 
 
 
(684)
 
(189)
Fair value adjustment of derivatives, net of tax
(50)
 
 
 
(50)
 
 
Comprehensive (loss) income
(51,201)
 
 
 
 
 
 
Ending Balance at Sep. 30, 2016
154,811 
47 
117,264 
39,198 
(2,831)
(5,909)
7,042 
Ending Balance (in shares) at Sep. 30, 2016
 
47,415 
 
 
 
 
 
Beginning Balance at Dec. 31, 2016
156,821 
47 
117,749 
41,822 
(3,793)
(5,909)
6,905 
Beginning Balance (in shares) at Dec. 31, 2016
47,428 
47,428 
 
 
 
 
 
Increase (Decrease) in Stockholders' Equity [Roll Forward]
 
 
 
 
 
 
 
Stock-based compensation
2,251 
2,250 
 
 
 
 
Stock-based compensation (in shares)
 
403 
 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan
103 
 
103 
 
 
 
 
Issuance of common stock under Employee Stock Purchase Plan (in shares)
 
33 
 
 
 
 
 
Stock options exercised
73 
 
73 
 
 
 
 
Stock options exercised (in shares)
 
27 
 
 
 
 
 
Comprehensive income (loss):
 
 
 
 
 
 
 
Net (loss) income
(9,299)
 
 
(9,354)
 
 
55 
Foreign currency translation adjustments, net of tax
1,421 
 
 
 
1,107 
 
314 
Fair value adjustment of derivatives, net of tax
141 
 
 
 
141 
 
 
Comprehensive (loss) income
(7,737)
 
 
 
 
 
 
Ending Balance at Sep. 30, 2017
$ 151,753 
$ 48 
$ 120,204 
$ 32,681 
$ (2,545)
$ (5,909)
$ 7,274 
Ending Balance (in shares) at Sep. 30, 2017
47,891 
47,891 
 
 
 
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Cash flows from operating activities
 
 
 
 
Net (loss) income
$ (14,767)
$ 2,902 
$ (9,299)
$ (50,278)
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
 
 
 
 
Allowance for accounts receivable
306 
324 
867 
644 
Depreciation
7,377 
6,697 
21,787 
20,032 
Amortization of intangible assets
1,053 
1,160 
3,250 
3,705 
Amortization of deferred financing costs
69 
111 
246 
344 
Goodwill impairment
17,637 
17,637 
73,900 
Stock-based compensation
699 
650 
2,251 
2,073 
Deferred income taxes
(2,380)
2,299 
1,045 
(6,018)
Deferred tax valuation allowance
454 
(1)
488 
(16)
Loss on extinguishment and modification of debt
124 
66 
230 
156 
Other non-cash items, net
(205)
(87)
(340)
(540)
Changes in operating assets and liabilities:
 
 
 
 
Accounts receivable
554 
(897)
406 
(2,285)
Inventory
(142)
(429)
(650)
(3,196)
Prepaid expenses and other assets
1,029 
1,179 
(1,129)
513 
Accounts payable and accrued expenses
(482)
(1,811)
(33)
(5,008)
Net cash provided by operating activities
11,326 
12,163 
36,756 
34,046 
Cash flows from investing activities
 
 
 
 
Capital expenditures
(2,335)
(2,430)
(7,246)
(7,580)
Other
72 
135 
466 
842 
Net cash used in investing activities
(2,263)
(2,295)
(6,780)
(6,738)
Cash flows from financing activities
 
 
 
 
Proceeds from stock option exercises
46 
73 
76 
Proceeds from issuance of common stock under Employee Stock Purchase Plan
37 
26 
103 
96 
Share repurchases
(200)
(5,297)
Contingent consideration on prior acquisitions
(63)
(86)
(214)
(453)
Early extinguishment of long-term debt
(7,000)
(14,150)
(16,000)
Payments on long-term debt agreements and capital leases
(52,146)
(3,310)
(60,060)
(9,651)
Borrowings under revolving credit facilities
52,350 
54,850 
Payments under revolving credit facilities
(9,375)
(9,675)
Payment of deferred financing costs
(270)
(76)
(270)
(106)
Net cash used in financing activities
(9,465)
(10,600)
(29,343)
(31,335)
Effect of foreign currency translation on cash balances
161 
(80)
491 
(296)
Net change in cash and cash equivalents
(241)
(812)
1,124 
(4,323)
Cash and cash equivalents at beginning of period
26,604 
20,452 
25,239 
23,963 
Cash and cash equivalents at end of period
26,363 
19,640 
26,363 
19,640 
Noncash investing and financing activities
 
 
 
 
Capital lease obligations incurred
6,404 
3,738 
20,714 
12,345 
Contingent liabilities in connection with acquisition of businesses
$ 0 
$ 0 
$ 27 
$ 85 
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 a leading document solutions provider to architectural, engineering, construction, and facilities management professionals, while also providing document solutions to businesses of all types. ARC offers a variety of services including: Construction Document Information Management ("CDIM"), Managed Print Services ("MPS"), and Archive and Information Management ("AIM"). 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 Securities and Exchange Commission (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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
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 2016 Form 10-K.
Correction to 2016 Financial Statements
Subsequent to the issuance of the Company's 2016 Consolidated Financial Statements, management identified an immaterial error in the balance sheet presentation of the Company's deferred tax assets and liabilities as of December 31, 2016. In its 2016 Consolidated Financial Statements, the Company presented its deferred taxes on a gross basis; however, such deferred taxes should have been presented on a net basis by taxing jurisdiction in accordance with Accounting Standards Codification (ASC) 740, Income Taxes. As a result of the error, the Company has corrected the deferred tax assets and deferred tax liabilities balances as of December 31, 2016 in the accompanying Condensed Consolidated Balance Sheets. The correction resulted in a decrease to the Company's deferred tax liabilities balance of $30.3 million with a corresponding decrease of the same amount to the Company's deferred tax assets balance as of December 31, 2016. This correction had no impact to the Company's previously reported Consolidated Statements of Operations, Consolidated Statements of Comprehensive Income (Loss), Consolidated Statements of Equity, Consolidated Statements of Cash Flows, or Notes to the Consolidated Financial Statements. The Company has concluded that the error correction was not material to the Consolidated Financial Statements.
Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. The new guidance simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. Accordingly, the Company is required to perform its annual, or interim, goodwill impairment tests by comparing the fair value of a reporting unit with its respective carrying value, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company elected to early-adopt ASU 2017-04 for its annual goodwill impairment test as of September 30, 2017. See Note 3, “Goodwill and Other Intangibles” for further information regarding the process of assessing goodwill impairment and the results of the Company's 2017 annual goodwill impairment test.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. The new guidance addresses diversity in practice for classification of certain transactions in the statement of cash flows including, but not limited to: debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-15 on its Condensed Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the statement of operations when share-based awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company's statement of cash flows, and provides an accounting policy election to account for forfeitures as they occur. The Company adopted ASU 2016-09 on January 1, 2017, which resulted in a cumulative adjustment to equity of $0.2 million. In conjunction with the adoption of ASU 2016-09, the Company elected to account for forfeitures of share-based awards when they occur.

In February 2016, the FASB issued Accounting Standards Codification (“ASC”) 842 (“ASC 842”), Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. While the Company is continuing to assess the potential impacts that ASC 842 will have on its condensed consolidated financial statements, the Company believes that the most significant impact relates to its accounting for facility leases related to its service centers and office space, which are currently classified as operating leases. The resulting impact of the adoption of ASC 842 will be an increase to assets and a corresponding increase to liabilities for the same amount on the Company's consolidated balance sheet. The Company expects the accounting for capital leases related to its machinery and equipment will remain substantially unchanged under the new standard.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value and amends existing guidance which requires inventory be measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for financial statement preparers. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company adopted ASU 2015-11 on January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on its Condensed Consolidated Financial Statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 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. In addition, ASU 2014-09 provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
The Company will adopt the new standard on January 1, 2018 under the modified retrospective method and expects the cumulative effect adjustment in retained earnings as of adoption date to be minimal. While the Company is continuing to finalize its ASU 2014-09 assessment and the resulting impact the adoption will have on its consolidated financial statements, the Company does not expect the adoption will have a material impact to its consolidated financial statements.
The Company has performed an analysis of each of its service revenue categories (CDIM, MPS and AIM) to identify any differences in the recognition, measurement, or presentation of revenue recognition and related costs. In addition, the Company is analyzing its product revenue category (equipment and supplies sales). Based on its preliminary analyses, the Company expects the pattern of revenue recognition and the costs to acquire customer contracts to remain consistent with the Company's current revenue recognition policy. The Company is also analyzing detailed disclosure requirements as well as any changes to the Company’s systems and internal controls to support adoption of the new standard.
Segment 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 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, distribution methods and economic characteristics, the Company operates 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,
 
2017
 
2016
 
2017
 
2016
Service Sales
 
 
 
 
 
 
 
CDIM
$
50,089

 
$
53,228

 
$
155,031

 
$
161,753

MPS
32,153

 
32,796

 
97,697

 
100,082

AIM
3,383

 
3,154

 
9,731

 
10,559

Total service sales
85,625

 
89,178

 
262,459

 
272,394

Equipment and supplies sales
10,833

 
11,265

 
35,010

 
35,369

Total net sales
$
96,458

 
$
100,443

 
$
297,469

 
$
307,763


Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to customers in the architectural, engineering, construction and building owner/operator (AEC/O) industry. As a result, the Company’s operating results and financial condition can be significantly affected by economic factors that influence the AEC/O 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/O 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, some of which 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 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. For the three and nine months ended September 30, 2017, 5.3 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, 2016, 3.0 million and 4.4 million common shares were excluded from the calculation of diluted net loss attributable to ARC per common share, respectively, because they were anti-dilutive. 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 three and nine months ended September 30, 2017 and 2016:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Weighted average common shares outstanding during the period—basic
45,834

 
45,599

 
45,756

 
46,055

Effect of dilutive stock options

 
590

 

 

Weighted average common shares outstanding during the period—diluted
45,834

 
46,189

 
45,756

 
46,055



Stock Repurchase Program
On February 8, 2016, the Company announced that the Company's Board of Directors had approved a stock repurchase program that authorizes the Company to purchase up to $15.0 million of the Company's outstanding common stock through December 31, 2017. Under the repurchase program, purchases of shares of common stock may be made from time to time in the open market, or in privately negotiated transactions, in compliance with applicable state and federal securities laws. The stock repurchase program does not obligate the company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time without prior notice. See Part II, Item 2., “Unregistered Sales of Equity Securities and Use of Proceeds” of this report for additional information on the stock repurchase program.
Goodwill and Other Intangibles Resulting from Business Acquisitions
Goodwill and Other Intangibles Resulting from Business Acquisitions
Goodwill and Other Intangibles
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 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.
Traditionally, 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 an implied fair value of goodwill.
For its annual goodwill impairment test as of September 30, 2017, the Company elected to early-adopt ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compared the fair value of a reporting unit with its respective carrying value, and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.
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. 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.
At September 30, 2017, the Company's goodwill impairment analysis showed one reporting unit with goodwill attributed to it had a carrying amount which exceeded its fair value. The underperformance of the Company relative to its forecast in the third quarter of 2017, and more specifically, the underperformance against forecast of one of the Company's reporting units which previously had goodwill impairment in 2016 drove the decline in the fair value of the reporting unit. As a result, the Company recorded a pretax, non-cash charge for the three and nine months ended September 30, 2017 to reduce the carrying value of goodwill by $17.6 million.
At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company's interim goodwill impairment analysis as of June 30, 2016 indicated that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million.
Given the changing document and printing needs of the Company’s customers, and the uncertainties regarding the effect on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment test in 2017 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 2018, 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, 2016 through September 30, 2017 are summarized as follows:
 
 
Gross
Goodwill
 
Accumulated
Impairment
Loss
 
Net
Carrying
Amount
 
 
 
 
 
 
January 1, 2016
$
405,558

 
$
192,950

 
$
212,608

Additions

 

 

Goodwill impairment

 
73,920

 
(73,920
)
December 31, 2016
405,558

 
266,870

 
138,688

Additions

 

 

Goodwill impairment

 
17,637

 
(17,637
)
September 30, 2017
$
405,558

 
$
284,507

 
$
121,051


See “Critical Accounting Policies” in Management’s Discussion and Analysis of Financial Condition and Results of Operations for further information regarding the process and assumptions used in the goodwill impairment analysis.
Long-lived and Other Intangible 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. 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 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 assessed potential impairments of its long lived assets as of September 30, 2017 and concluded that there was no impairment.
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 following table sets forth the Company’s other intangible assets resulting from business acquisitions as of September 30, 2017 and December 31, 2016 which continue to be amortized:
 
 
September 30, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizable other intangible assets
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
99,484

 
$
89,789

 
$
9,695

 
$
99,104

 
$
86,305

 
$
12,799

Trade names and trademarks
20,283

 
19,891

 
392

 
20,281

 
19,878

 
403

 
$
119,767

 
$
109,680

 
$
10,087

 
$
119,385

 
$
106,183

 
$
13,202


Estimated future amortization expense of other intangible assets for the remainder of the 2017 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:
 
2017 (excluding the nine months ended September 30, 2017)
$
1,027

2018
3,875

2019
3,151

2020
1,539

2021
178

Thereafter
317

 
$
10,087

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 annual effective rate and the recognition of any discrete items within the quarter.
The Company recorded an income tax benefit of $2.2 million and an income tax provision of $1.6 million in relation to pretax losses of $16.9 million and $7.7 million for the three and nine months ended September 30, 2017, respectively, which resulted in an effective income tax rate of 12.8% and (20.4)%, for the three and nine months ended September 30, 2017, respectively. The Company recorded an income tax provision of $2.2 million in relation to pretax income of $5.1 million for the three months ended September 30, 2016, and an income tax benefit of $5.9 million in relation to pretax losses of $56.2 million for the nine months ended September 30, 2016, which resulted in an effective income tax rate of 15.2% and 13.1%, for the three and nine months ended September 30, 2016, respectively. The Company's low effective income tax rate was primarily due to the portion of its goodwill impairments related to historical stock acquisitions which cannot be deducted for income tax purposes until the related stock is disposed of ($10.0 million and $41.4 million recognized in 2017 and 2016, respectively).

In accordance with ASC 740-10, Income Taxes, the Company evaluates the need for deferred tax asset valuation allowances based on a more likely than not standard. The ability to realize deferred tax assets depends on the ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction. The Company considers the following possible sources of taxable income when assessing the realization of deferred tax assets:

Future reversals of existing taxable temporary differences;
Future taxable income exclusive of reversing temporary differences and carryforwards;
Taxable income in prior carryback years; and
Tax-planning strategies.

The assessment regarding whether a valuation allowance is required or should be adjusted also considers all available positive and negative evidence factors, including but not limited to:

Nature, frequency, and severity of recent losses;
Duration of statutory carryforward periods;
Historical experience with tax attributes expiring unused; and
Near- and medium-term financial outlook.

The Company utilizes a rolling three years of actual and current year anticipated results as the primary measure of cumulative income/losses in recent years, as adjusted for permanent differences. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability. The Company's accounting for deferred tax consequences represents its best estimate of those future events. Changes in the Company's current estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations. The Company has a $1.8 million valuation allowance against certain deferred tax assets as of September 30, 2017.

Based on the Company’s current assessment, the remaining net deferred tax assets as of September 30, 2017 are considered more likely than not to be realized. The valuation allowance of $1.8 million may be increased or reduced 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, 2017 included in prepaid expenses 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, 2017
 
December 31, 2016
Term A loan facility maturing 2022 net of deferred financing fees of $811 and $1,039; 3.07% and 2.86% interest rate at September 30, 2017 and December 31, 2016
 
$
58,064

 
$
119,961

Borrowings from revolving loan facility under the Term A Credit Agreement; 3.23% and 2.64% interest rate at September 30, 2017 and December 31, 2016
 
46,125

 
950

Various capital leases; weighted average interest rate of 4.6% and 5.6% at September 30, 2017 and December 31, 2016; principal and interest payable monthly through September 2022
 
44,975

 
36,231

Various other notes payable with a weighted average interest rate of 10.8% and 10.7% at September 30, 2017 and December 31, 2016; principal and interest payable monthly through November 2019
 
21

 
31

 
 
149,185

 
157,173

Less current portion
 
(20,268
)
 
(13,773
)
 
 
$
128,917

 
$
143,400




Amended Term A Loan Facility
On July 14, 2017, the Company amended its Credit Agreement (the “Term A Credit Agreement”) which was originally entered into on November 20, 2014 with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.
The original Term A Credit Agreement provided 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 then effective Term Loan Credit Agreement. The original Credit Agreement also provided for the extension of revolving loans (“Revolving Loans”) in an aggregate principal amount not to exceed $30.0 million. The amendment increases the maximum aggregate principal amount of Revolving Loans under the agreement from $30 million to $80 million and resizes the outstanding principal amount of the Term Loan under the agreement at $60 million. Upon the execution of the amendment to the Term A Credit Agreement, the total principal amount outstanding under the agreement remained unchanged at $110.0 million. As amended, the principal of the resized Term Loan balance will amortize at an annual rate of 7.5% during the first and second years following the date of the amendment and at an annual rate of 10% during the third, fourth and fifth years following the date of the amendment, with any remaining balance payable upon the maturity date. The amendment also extended the maturity date for both the Revolving Loans and the Term Loans until July 14, 2022.
As of September 30, 2017, the Company's borrowing availability under the amended Term A Credit Agreement was $32.1 million, which was the maximum borrowing limit of $80.0 million reduced by outstanding letters of credit of $1.8 million and revolver credit facility balance of $46.1 million.

Loans borrowed under the amended 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 1.25% to 2.25%, based on the Company’s Total Leverage Ratio (as defined in the amended Term A Credit Agreement). Loans borrowed under the amended 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 0.25% to 1.25%, based on the Company’s Total Leverage Ratio. The amendment reduced the rate of interest payable on the loans borrowed under the amended Term A Credit Agreement by 0.25%.

The Company pays 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 amended 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 amended 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 amended 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 addition, the amended 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; and (ii) a Fixed Charge Coverage Ratio (as defined in the amended Term A Credit Agreement), as of the last day of each fiscal quarter, an amount not less than 1.15 to 1.00.

The amended 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 amended Term A Credit Agreement are guaranteed by the Company and each other United States domestic subsidiary of the Company. The amended 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).
Prior to entering into the amended Term A Credit Agreement, the Company had paid $68.2 million in aggregate principal on its original $175.0 million Term Loan Credit Agreement. Principal payments on the Term Loan Credit Agreement of $14.2 million in 2017 resulted in a loss on extinguishment and modification of debt of $0.1 million and $0.2 million for the three and nine months ended September 30, 2017.
Commitments and Contingencies
Commitments and Contingencies
Commitments and Contingencies
Operating Leases. The Company leases machinery, equipment, and office and operational facilities under non-cancelable operating lease agreements used in the ordinary course of business.

Legal Proceedings. We are involved in various legal proceedings and other legal matters from time to time in the normal course of business. We do not believe that the outcome of any of these matters will have a material effect on our 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, 2017, 0.7 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, 2017, the Company granted options to acquire a total of 0.5 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. During the nine months ended September 30, 2017, the Company granted 0.4 million shares of restricted stock to certain key employees 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 granted stock options and restricted stock vest annually over a period of three to four years from the grant date.
Stock-based compensation was $0.7 million for the three months ended September 30, 2017 and 2016. Stock-based compensation was $2.3 million and $2.1 million for the nine months ended September 30, 2017 and 2016, respectively.
As of September 30, 2017, total unrecognized compensation cost related to unvested stock-based payments totaled $3.7 million and is expected to be recognized over a weighted-average period of approximately 1.9 years.
Derivatives and Hedging Transactions
Derivatives and Hedging Transactions
Derivatives and Hedging Transactions

The Company uses derivative financial instruments to hedge its exposure to interest rate volatility related to its Term A Loan Facility. The Company does not use derivative financial instruments for speculative or trading purposes. Such derivatives are designated as cash flow hedges and accounted for under ASC 815, Derivatives and Hedging. Derivative instruments are recorded at fair value as either assets or liabilities in the interim condensed consolidated balance sheets. Changes in fair value of cash flow hedges that are designated as effective hedging instruments are deferred in equity as a component of accumulated other comprehensive loss ("AOCL"). Any ineffectiveness in such cash flow hedges is immediately recognized in earnings. Changes in the fair value of hedges that are not designated as effective hedging instruments are immediately recognized in earnings. Cash flows from the Company’s derivative instruments are classified in the condensed consolidated statements of cash flows in the same category as the items being hedged.

In January 2015, the Company entered into three one-year interest rate cap contracts to hedge against its exposure to interest rate volatility: (1) $80.0 million notional interest rate cap effective in 2015, (2) $65.0 million notional forward interest rate cap effective in 2016, and (3) $50.0 million notional forward interest rate cap effective in 2017. Over the next twelve months, the Company expects to reclassify $0.1 million from AOCL to interest expense.

The following table summarizes the fair value and classification on the Condensed Consolidated Balance Sheets of the Company's derivatives as of September 30, 2017 and December 31, 2016:
 
 
 
Fair Value
 
Balance Sheet Classification
 
September 30, 2017
 
December 31, 2016
Derivative designated as hedging instrument under ASC 815
 
 
 
 
 
Interest rate cap contracts - current portion
Other current assets
 
$
10

 
$
39

Interest rate cap contracts - long-term portion
Other assets
 

 

Total derivatives designated as hedging instruments
 
 
$
10

 
$
39




The following table summarizes the income (loss) recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the three and nine months ended September 30, 2017 and 2016:

 
 
Amount of Income (Loss) Recognized in AOCL on Derivatives
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Derivative in ASC 815 Cash Flow Hedging Relationship
 
 
 
 
 
 
 
 
Interest rate cap contracts, net of tax
 
$
55

 
$
47

 
$
141

 
$
(50
)


The following table summarizes the effect of the interest rate cap on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016:

 
 
Amount of Loss Reclassified from AOCL into Income
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017

2016
 
2017
 
2016
 
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
Location of Loss Reclassified from AOCL into Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
103

 
$

 
$
68

 
$

 
$
261

 
$

 
$
132

 
$

Fair Value Measurements
Fair Value Measurements
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 nonrecurring basis as of and for the nine months ended September 30, 2017 and 2016:

 
Significant Other Unobservable Inputs
 
September 30, 2017
 
September 30, 2016
 
Level 3
 
Total Losses
 
Level 3
 
Total Losses
Nonrecurring Fair Value Measure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
121,051

 
$
17,637

 
$
138,688

 
$
73,920

 
 
 
 
 
 
 
 

In accordance with ASC 350, goodwill was written down to its implied fair value of $121.1 million as of September 30, 2017 and $138.7 million as of June 30, 2016, resulting in impairment charges of $17.6 million during the three and nine months ended September 30, 2017 and $73.9 million during the nine months ended September 30, 2016 . See Note 3, “Goodwill and Other Intangibles” for further information regarding the process of determining the implied fair value of goodwill and change in goodwill.

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis as of and for the nine months ended September 30, 2017 and as of and for the year ended December 31 2016:

 
 
 
Significant Other Unobservable Inputs
 
 
 
September 30, 2017
 
December 31, 2016
 
 
 
Level 2
 
Level 3
 
Total Losses
 
Level 2
 
Level 3
 
Total Losses
Recurring Fair Value Measure
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate cap contracts
 
$
10

 
$

 
$

 
$
39

 
$

 
$

 
Contingent purchase price consideration for acquired businesses
 
$

 
$
258

 
$

 
$

 
$
402

 
$



The Company determines the fair value of its interest rate cap contracts based on observable interest rate yield curves and represent the expected discounted cash flows underlying the financial instruments.
The Company recognizes liabilities for future earnout obligations on business acquisitions, or contingent purchase price consideration for acquired businesses, 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 September 30, 2017, 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 the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Beginning balance
$
318

 
$
604

 
$
402

 
$
1,059

     Additions related to acquisitions

 

 
34

 
104

     Payments
(70
)
 
(86
)
 
(221
)
 
(453
)
     Adjustments included in earnings
3

 
15

 
26

 
(180
)
     Foreign currency translation adjustments
7

 
8

 
17

 
11

Ending balance
$
258

 
$
541

 
$
258

 
$
541

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 Sheet were $6.4 million and $3.9 million as of September 30, 2017 and December 31, 2016, respectively, and are carried at cost and approximate fair value due to the relatively short period to maturity of these instruments.
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, 2017 for borrowings under its Term Loan Credit Agreement is $105.0 million, excluding unamortized deferred financing fees. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its Term Loan Credit Agreement is $105.0 million as of September 30, 2017.
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 Securities and Exchange Commission (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, 2017 are not necessarily indicative of the results that may be expected for the year ending December 31, 2017.
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 2016 Form 10-K.
Recent Accounting Pronouncements

In January 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2017-04, Intangibles-Goodwill and Other (Topic 350) - Simplifying the Test for Goodwill Impairment. The new guidance simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. Accordingly, the Company is required to perform its annual, or interim, goodwill impairment tests by comparing the fair value of a reporting unit with its respective carrying value, and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. The new standard is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2019 with early adoption permitted for interim or annual goodwill impairment tests performed after January 1, 2017. The Company elected to early-adopt ASU 2017-04 for its annual goodwill impairment test as of September 30, 2017. See Note 3, “Goodwill and Other Intangibles” for further information regarding the process of assessing goodwill impairment and the results of the Company's 2017 annual goodwill impairment test.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230) - Classification of Certain Cash Receipts and Cash Payments. The new guidance addresses diversity in practice for classification of certain transactions in the statement of cash flows including, but not limited to: debt prepayment or debt extinguishment costs, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, and distributions received from equity method investees. ASU 2016-15 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-15 on its Condensed Consolidated Financial Statements.

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the statement of operations when share-based awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company's statement of cash flows, and provides an accounting policy election to account for forfeitures as they occur. The Company adopted ASU 2016-09 on January 1, 2017, which resulted in a cumulative adjustment to equity of $0.2 million. In conjunction with the adoption of ASU 2016-09, the Company elected to account for forfeitures of share-based awards when they occur.

In February 2016, the FASB issued Accounting Standards Codification (“ASC”) 842 (“ASC 842”), Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. While the Company is continuing to assess the potential impacts that ASC 842 will have on its condensed consolidated financial statements, the Company believes that the most significant impact relates to its accounting for facility leases related to its service centers and office space, which are currently classified as operating leases. The resulting impact of the adoption of ASC 842 will be an increase to assets and a corresponding increase to liabilities for the same amount on the Company's consolidated balance sheet. The Company expects the accounting for capital leases related to its machinery and equipment will remain substantially unchanged under the new standard.
In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value and amends existing guidance which requires inventory be measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for financial statement preparers. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. The Company adopted ASU 2015-11 on January 1, 2017. The adoption of ASU 2015-11 did not have a material impact on its Condensed Consolidated Financial Statements.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606). 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. In addition, ASU 2014-09 provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. The new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period.
The Company will adopt the new standard on January 1, 2018 under the modified retrospective method and expects the cumulative effect adjustment in retained earnings as of adoption date to be minimal. While the Company is continuing to finalize its ASU 2014-09 assessment and the resulting impact the adoption will have on its consolidated financial statements, the Company does not expect the adoption will have a material impact to its consolidated financial statements.
The Company has performed an analysis of each of its service revenue categories (CDIM, MPS and AIM) to identify any differences in the recognition, measurement, or presentation of revenue recognition and related costs. In addition, the Company is analyzing its product revenue category (equipment and supplies sales). Based on its preliminary analyses, the Company expects the pattern of revenue recognition and the costs to acquire customer contracts to remain consistent with the Company's current revenue recognition policy. The Company is also analyzing detailed disclosure requirements as well as any changes to the Company’s systems and internal controls to support adoption of the new standard.
Segment 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 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, distribution methods and economic characteristics, the Company operates as a single reportable segment.
Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to customers in the architectural, engineering, construction and building owner/operator (AEC/O) industry. As a result, the Company’s operating results and financial condition can be significantly affected by economic factors that influence the AEC/O 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/O 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, some of which 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 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. For the three and nine months ended September 30, 2017, 5.3 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, 2016, 3.0 million and 4.4 million common shares were excluded from the calculation of diluted net loss attributable to ARC per common share, respectively, because they were anti-dilutive. The Company's common share equivalents consist of stock options issued under the Company's stock plan.
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 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.
Traditionally, 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 an implied fair value of goodwill.
For its annual goodwill impairment test as of September 30, 2017, the Company elected to early-adopt ASU 2017-04 which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test. As a result, the Company compared the fair value of a reporting unit with its respective carrying value, and recognized an impairment charge for the amount by which the carrying amount exceeded the reporting unit’s fair value.
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. 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.
At September 30, 2017, the Company's goodwill impairment analysis showed one reporting unit with goodwill attributed to it had a carrying amount which exceeded its fair value. The underperformance of the Company relative to its forecast in the third quarter of 2017, and more specifically, the underperformance against forecast of one of the Company's reporting units which previously had goodwill impairment in 2016 drove the decline in the fair value of the reporting unit. As a result, the Company recorded a pretax, non-cash charge for the three and nine months ended September 30, 2017 to reduce the carrying value of goodwill by $17.6 million.
At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company's interim goodwill impairment analysis as of June 30, 2016 indicated that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million.
Given the changing document and printing needs of the Company’s customers, and the uncertainties regarding the effect on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment test in 2017 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 2018, 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 and Other Intangible 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. 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 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 assessed potential impairments of its long lived assets as of September 30, 2017 and concluded that there was no impairment.
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.
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.
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,
 
2017
 
2016
 
2017
 
2016
Service Sales
 
 
 
 
 
 
 
CDIM
$
50,089

 
$
53,228

 
$
155,031

 
$
161,753

MPS
32,153

 
32,796

 
97,697

 
100,082

AIM
3,383

 
3,154

 
9,731

 
10,559

Total service sales
85,625

 
89,178

 
262,459

 
272,394

Equipment and supplies sales
10,833

 
11,265

 
35,010

 
35,369

Total net sales
$
96,458

 
$
100,443

 
$
297,469

 
$
307,763

Earnings Per Share (Tables)
Basic and Diluted Earnings Per Share
Basic and diluted weighted average common shares outstanding were calculated as follows for the three and nine months ended September 30, 2017 and 2016:
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Weighted average common shares outstanding during the period—basic
45,834

 
45,599

 
45,756

 
46,055

Effect of dilutive stock options

 
590

 

 

Weighted average common shares outstanding during the period—diluted
45,834

 
46,189

 
45,756

 
46,055

Goodwill and Other Intangibles Resulting from Business Acquisitions (Tables)
The changes in the carrying amount of goodwill from January 1, 2016 through September 30, 2017 are summarized as follows:
 
 
Gross
Goodwill
 
Accumulated
Impairment
Loss
 
Net
Carrying
Amount
 
 
 
 
 
 
January 1, 2016
$
405,558

 
$
192,950

 
$
212,608

Additions

 

 

Goodwill impairment

 
73,920

 
(73,920
)
December 31, 2016
405,558

 
266,870

 
138,688

Additions

 

 

Goodwill impairment

 
17,637

 
(17,637
)
September 30, 2017
$
405,558

 
$
284,507

 
$
121,051

The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of September 30, 2017 and December 31, 2016 which continue to be amortized:
 
 
September 30, 2017
 
December 31, 2016
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
 
Gross
Carrying
Amount
 
Accumulated
Amortization
 
Net
Carrying
Amount
Amortizable other intangible assets
 
 
 
 
 
 
 
 
 
 
 
Customer relationships
$
99,484

 
$
89,789

 
$
9,695

 
$
99,104

 
$
86,305

 
$
12,799

Trade names and trademarks
20,283

 
19,891

 
392

 
20,281

 
19,878

 
403

 
$
119,767

 
$
109,680

 
$
10,087

 
$
119,385

 
$
106,183

 
$
13,202

stimated future amortization expense of other intangible assets for the remainder of the 2017 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:
 
2017 (excluding the nine months ended September 30, 2017)
$
1,027

2018
3,875

2019
3,151

2020
1,539

2021
178

Thereafter
317

 
$
10,087

Long-Term Debt (Tables)
Long-Term Debt
Long-term debt consists of the following:
 
 
 
September 30, 2017
 
December 31, 2016
Term A loan facility maturing 2022 net of deferred financing fees of $811 and $1,039; 3.07% and 2.86% interest rate at September 30, 2017 and December 31, 2016
 
$
58,064

 
$
119,961

Borrowings from revolving loan facility under the Term A Credit Agreement; 3.23% and 2.64% interest rate at September 30, 2017 and December 31, 2016
 
46,125

 
950

Various capital leases; weighted average interest rate of 4.6% and 5.6% at September 30, 2017 and December 31, 2016; principal and interest payable monthly through September 2022
 
44,975

 
36,231

Various other notes payable with a weighted average interest rate of 10.8% and 10.7% at September 30, 2017 and December 31, 2016; principal and interest payable monthly through November 2019
 
21

 
31

 
 
149,185

 
157,173

Less current portion
 
(20,268
)
 
(13,773
)
 
 
$
128,917

 
$
143,400

Derivatives and Hedging Transactions (Tables)
The following table summarizes the fair value and classification on the Condensed Consolidated Balance Sheets of the Company's derivatives as of September 30, 2017 and December 31, 2016:
 
 
 
Fair Value
 
Balance Sheet Classification
 
September 30, 2017
 
December 31, 2016
Derivative designated as hedging instrument under ASC 815
 
 
 
 
 
Interest rate cap contracts - current portion
Other current assets
 
$
10

 
$
39

Interest rate cap contracts - long-term portion
Other assets
 

 

Total derivatives designated as hedging instruments
 
 
$
10

 
$
39

The following table summarizes the income (loss) recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the three and nine months ended September 30, 2017 and 2016:

 
 
Amount of Income (Loss) Recognized in AOCL on Derivatives
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017
 
2016
 
2017
 
2016
Derivative in ASC 815 Cash Flow Hedging Relationship
 
 
 
 
 
 
 
 
Interest rate cap contracts, net of tax
 
$
55

 
$
47

 
$
141

 
$
(50
)
The following table summarizes the effect of the interest rate cap on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2017 and 2016:

 
 
Amount of Loss Reclassified from AOCL into Income
 
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
 
2017

2016
 
2017
 
2016
 
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
 
Effective Portion
 
Ineffective Portion
Location of Loss Reclassified from AOCL into Income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
$
103

 
$

 
$
68

 
$

 
$
261

 
$

 
$
132

 
$

Fair Value Measurements Tables (Tables)
The following table summarizes the bases used to measure certain assets and liabilities at fair value on a nonrecurring basis as of and for the nine months ended September 30, 2017 and 2016:

 
Significant Other Unobservable Inputs
 
September 30, 2017
 
September 30, 2016
 
Level 3
 
Total Losses
 
Level 3
 
Total Losses
Nonrecurring Fair Value Measure
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
$
121,051

 
$
17,637

 
$
138,688

 
$
73,920

 
 
 
 
 
 
 
 
The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis as of and for the nine months ended September 30, 2017 and as of and for the year ended December 31 2016:

 
 
 
Significant Other Unobservable Inputs
 
 
 
September 30, 2017
 
December 31, 2016
 
 
 
Level 2
 
Level 3
 
Total Losses
 
Level 2
 
Level 3
 
Total Losses
Recurring Fair Value Measure
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate cap contracts
 
$
10

 
$

 
$

 
$
39

 
$

 
$

 
Contingent purchase price consideration for acquired businesses
 
$

 
$
258

 
$

 
$

 
$
402

 
$

The following table presents the change in the Level 3 contingent purchase price consideration liability for the three and nine months ended September 30, 2017 and 2016:
 
Three Months Ended 
 September 30,
 
Nine Months Ended 
 September 30,
 
2017
 
2016
 
2017
 
2016
Beginning balance
$
318

 
$
604

 
$
402

 
$
1,059

     Additions related to acquisitions

 

 
34

 
104

     Payments
(70
)
 
(86
)
 
(221
)
 
(453
)
     Adjustments included in earnings
3

 
15

 
26

 
(180
)
     Foreign currency translation adjustments
7

 
8

 
17

 
11

Ending balance
$
258

 
$
541

 
$
258

 
$
541

Description of Business and Basis of Presentation - Net Sales of Principal Services and Products (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Segment Reporting Information [Line Items]
 
 
 
 
 
ASU 2016-09 adoption adjustment
 
 
 
 
$ 242,000 
Service Sales
 
 
 
 
 
Service sales
85,625,000 
89,178,000 
262,459,000 
272,394,000 
 
Equipment and supplies sales
10,833,000 
11,265,000 
35,010,000 
35,369,000 
 
Total net sales
96,458,000 
100,443,000 
297,469,000 
307,763,000 
 
CDIM
 
 
 
 
 
Service Sales
 
 
 
 
 
Service sales
50,089,000 
53,228,000 
155,031,000 
161,753,000 
 
MPS
 
 
 
 
 
Service Sales
 
 
 
 
 
Service sales
32,153,000 
32,796,000 
97,697,000 
100,082,000 
 
AIM
 
 
 
 
 
Service Sales
 
 
 
 
 
Service sales
3,383,000 
3,154,000 
9,731,000 
10,559,000 
 
Accounting Standards Update 2016-09
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
ASU 2016-09 adoption adjustment
 
 
 
 
200,000 
Immaterial Error |
Scenario, Adjustment
 
 
 
 
 
Segment Reporting Information [Line Items]
 
 
 
 
 
Decrease to deferred tax liabilities
 
 
 
 
30,300,000 
Decrease to deferred tax assets
 
 
 
 
$ 30,300,000 
Earnings Per Share - Additional Information (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Feb. 8, 2016
Common Stock
Class of Stock [Line Items]
 
 
 
 
 
Common stock options excluded for anti-dilutive (in shares)
5,300,000 
3,000,000 
5,300,000.0 
4,400,000 
 
Stock repurchase program, authorized amount
 
 
 
 
$ 15,000,000.0 
Earnings Per Share - Basic and Diluted Earnings Per Share (Details)
In Thousands, unless otherwise specified
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Earnings Per Share [Abstract]
 
 
 
 
Weighted average common shares outstanding during the period—basic (in shares)
45,834 
45,599 
45,756 
46,055 
Effect of dilutive stock options (in shares)
590 
Weighted average common shares outstanding during the period—diluted (in shares)
45,834 
46,189 
45,756 
46,055 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Additional Information (Details) (USD $)
0 Months Ended 3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Jun. 30, 2016
Unit
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2016
Jun. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Reporting units with impaired goodwill
 
 
 
 
 
 
 
Number of reporting units
 
 
 
 
 
 
 
Goodwill impairment
 
$ 17,637,000 
$ 0 
$ 73,900,000 
$ 73,900,000 
$ 17,637,000 
$ 73,900,000 
$ 73,920,000 
Impairment of intangible assets, finite-lived
 
 
 
 
 
$ 0 
 
$ 0 
Customer relationships
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Estimated period for amortization
 
 
 
 
 
13 years 0 months 
 
 
UNITED STATES
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Reporting units with impaired goodwill
 
 
 
 
 
 
 
CANADA
 
 
 
 
 
 
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
Reporting units with impaired goodwill
 
 
 
 
 
 
 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Schedule of Goodwill (Details) (USD $)
In Thousands, unless otherwise specified
3 Months Ended 6 Months Ended 9 Months Ended 12 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Jun. 30, 2016
Jun. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Dec. 31, 2016
Goodwill [Roll Forward]
 
 
 
 
 
 
 
Gross Goodwill
 
 
 
$ 405,558 
$ 405,558 
$ 405,558 
$ 405,558 
Accumulated Impairment Loss
 
 
 
192,950 
266,870 
192,950 
192,950 
Net Carrying Amount
 
138,700 
 
212,608 
138,688 
212,608 
212,608 
Additions
 
 
 
 
 
Goodwill impairment
(17,637)
(73,900)
(73,900)
(17,637)
(73,900)
(73,920)
Gross Goodwill
405,558 
 
 
 
405,558 
 
405,558 
Accumulated Impairment Loss
284,507 
 
 
 
284,507 
 
266,870 
Net Carrying Amount
$ 121,051 
 
$ 138,700 
$ 138,700 
$ 121,051 
 
$ 138,688 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Other Intangible Assets Resulting from Business Acquisitions (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
$ 119,767 
$ 119,385 
Accumulated Amortization
109,680 
106,183 
Net Carrying Amount
10,087 
13,202 
Customer relationships
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
99,484 
99,104 
Accumulated Amortization
89,789 
86,305 
Net Carrying Amount
9,695 
12,799 
Trade names and trademarks
 
 
Finite-Lived Intangible Assets [Line Items]
 
 
Gross Carrying Amount
20,283 
20,281 
Accumulated Amortization
19,891 
19,878 
Net Carrying Amount
$ 392 
$ 403 
Goodwill and Other Intangibles Resulting from Business Acquisitions - Estimated Future Amortization Expense of Amortizable Intangible Assets (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Goodwill and Intangible Assets Disclosure [Abstract]
 
 
2017 (excluding the nine months ended September 30, 2017)
$ 1,027 
 
2018
3,875 
 
2019
3,151 
 
2020
1,539 
 
2021
178 
 
Thereafter
317 
 
Net Carrying Amount
$ 10,087 
$ 13,202 
Income Taxes - Additional Information (Details) (USD $)
3 Months Ended 9 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Tax Credit Carryforward [Line Items]
 
 
 
 
Income tax (benefit) provision
$ 2,200,000 
$ (2,200,000)
$ (1,574,000)
$ 5,884,000 
Pretax gain amount
16,900,000 
(5,100,000)
7,725,000 
56,162,000 
Effective income tax rate reconciliation, percent
12.80% 
15.20% 
(20.40%)
13.10% 
Nondeductible expense, impairment losses
 
 
10,000,000 
41,400,000 
Valuation allowance
1,800,000 
 
1,800,000 
 
Other current assets
 
 
 
 
Tax Credit Carryforward [Line Items]
 
 
 
 
Income taxes receivable
$ 200,000 
 
$ 200,000 
 
Long-Term Debt - Summary of Long Term Debt (Details) (USD $)
In Thousands, unless otherwise specified
Sep. 30, 2017
Dec. 31, 2016
Debt Instrument [Line Items]
 
 
Long-term Debt and Capital Lease Obligations, Including Current Maturities
$ 149,185 
$ 157,173 
Current portion of long-term debt and capital leases
(20,268)
(13,773)
Long-term debt and capital leases
128,917 
143,400 
Revolving Credit Facility
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
46,125 
950 
Interest rate, effective percentage
3.23% 
2.64% 
Capital Lease Obligations
 
 
Debt Instrument [Line Items]
 
 
Capital Lease Obligations
44,975 
36,231 
Weighted average interest rate
4.60% 
5.60% 
Notes Payable, Other Payables
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
21 
31 
Weighted average interest rate
10.80% 
10.70% 
Term A Loan Facility |
Line of Credit
 
 
Debt Instrument [Line Items]
 
 
Long-term debt
58,064 
119,961 
Interest rate, effective percentage
3.07% 
2.86% 
Deferred Financing Fees
$ 811 
$ 1,039 
Long-Term Debt - Narrative (Details) (USD $)
3 Months Ended 9 Months Ended 0 Months Ended 0 Months Ended 0 Months Ended
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Sep. 30, 2016
Sep. 30, 2017
Line of Credit
Term A Loan Facility
Dec. 31, 2016
Line of Credit
Term A Loan Facility
Nov. 20, 2014
Line of Credit
Term A Loan Facility
Jul. 14, 2017
Line of Credit
Term A Loan Facility Agreement
Sep. 30, 2017
Revolving Credit Facility
Dec. 31, 2016
Revolving Credit Facility
Sep. 30, 2017
Revolving Credit Facility
Line of Credit
Term A Loan Facility
Nov. 20, 2014
Revolving Credit Facility
Line of Credit
Term A Loan Facility
Nov. 20, 2014
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
Jul. 14, 2017
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
Jul. 14, 2017
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
London Interbank Offered Rate (LIBOR)
Nov. 20, 2014
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
London Interbank Offered Rate (LIBOR)
Nov. 20, 2014
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
Federal Funds Effective Swap Rate
Sep. 30, 2017
Revolving Credit Facility
Letter of Credit
Term A Loan Facility
Nov. 20, 2014
Minimum
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
London Interbank Offered Rate (LIBOR)
Nov. 20, 2014
Minimum
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
Prime Rate
Nov. 20, 2014
Maximum
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
London Interbank Offered Rate (LIBOR)
Nov. 20, 2014
Maximum
Revolving Credit Facility
Line of Credit
Term A Loan Facility Agreement
Prime Rate
Debt Instrument [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Line of credit facility, maximum borrowing capacity
 
 
 
 
 
 
$ 175,000,000.0 
 
 
 
$ 80,000,000.0 
$ 30,000,000.0 
 
$ 80,000,000 
 
 
 
$ 1,800,000.0 
 
 
 
 
Long-term debt
 
 
 
 
58,064,000 
119,961,000 
 
110,000,000 
46,125,000 
950,000 
 
 
 
60,000,000 
 
 
 
 
 
 
 
 
Annual amortization rate of debt, year one