ARC DOCUMENT SOLUTIONS, INC., 10-Q filed on 11/4/2021
Quarterly Report
v3.21.2
Cover Page - shares
9 Months Ended
Sep. 30, 2021
Oct. 28, 2021
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Sep. 30, 2021  
Document Transition Report false  
Entity File Number 001-32407  
Entity Registrant Name ARC DOCUMENT SOLUTIONS, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 20-1700361  
Entity Address, Address Line One 12657 Alcosta Blvd, Suite 200  
Entity Address, City or Town San Ramon  
Entity Address, State or Province CA  
Entity Address, Postal Zip Code 94583  
City Area Code 925  
Local Phone Number 949-5100  
Title of 12(b) Security Common Stock, par value $0.001 per share  
Trading Symbol ARC  
Security Exchange Name NYSE  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth false  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding (in shares)   43,124,707
Amendment Flag false  
Document Fiscal Year Focus 2021  
Document Fiscal Period Focus Q3  
Entity Central Index Key 0001305168  
Current Fiscal Year End Date --12-31  
v3.21.2
Condensed Consolidated Balance Sheets (Unaudited) - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Current assets:    
Cash and cash equivalents $ 54,903 $ 54,950
Accounts receivable, net of allowances for accounts receivable of $2,136 and $2,357 40,098 36,279
Inventory 9,144 9,474
Prepaid expenses 4,712 4,065
Other current assets 4,083 3,979
Total current assets 112,940 108,747
Property and equipment, net of accumulated depreciation of $229,074 and $219,834 47,385 57,830
Right-of-use assets from operating leases 32,189 37,859
Goodwill 121,051 121,051
Other intangible assets, net 355 515
Deferred income taxes 14,493 17,261
Other assets 2,306 2,175
Total assets 330,719 345,438
Current liabilities:    
Accounts payable 23,189 18,661
Accrued payroll and payroll-related expenses 11,886 10,088
Accrued expenses 17,086 17,783
Current operating lease liability 10,700 12,158
Current portion of finance leases 14,364 17,557
Total current liabilities 77,225 76,247
Long-term operating lease liabilities 27,833 33,561
Long-term debt and finance leases 66,140 79,679
Other long-term liabilities 1,543 1,615
Total liabilities 172,741 191,102
Commitments and contingencies (Note 6)
ARC Document Solutions, Inc. shareholders’ equity:    
Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding 0 0
Common stock, $0.001 par value, 150,000 shares authorized; 50,439 and 49,422 shares issued and 43,125 and 42,792 shares outstanding 50 49
Additional paid-in capital 129,076 127,755
Retained earnings 41,319 37,308
Accumulated other comprehensive loss (2,669) (2,787)
Total stockholders equity before adjustment of treasury stock 167,776 162,325
Less cost of common stock in treasury, 7,314 and 6,630 shares 16,250 14,657
Total ARC Document Solutions, Inc. shareholders’ equity 151,526 147,668
Noncontrolling interest 6,452 6,668
Total equity 157,978 154,336
Total liabilities and equity $ 330,719 $ 345,438
v3.21.2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Statement of Financial Position [Abstract]    
Allowances for accounts receivable $ 2,136 $ 2,357
Accumulated depreciation on property and equipment $ 229,074 $ 219,834
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) 0 0
Preferred stock, shares outstanding (in shares) 0 0
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) 50,439,000 49,422,000
Common stock, shares outstanding (in shares) 43,125,000 42,792,000
Treasury stock, (in shares) 7,314,000 6,630,000
v3.21.2
Condensed Consolidated Statements of Operations (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Income Statement [Abstract]        
Net sales $ 72,432 $ 72,379 $ 202,961 $ 225,123
Cost of sales 48,643 48,186 137,593 152,888
Gross profit 23,789 24,193 65,368 72,235
Selling, general and administrative expenses 18,829 19,186 54,373 60,816
Amortization of intangible assets 37 285 168 1,353
Income from operations 4,923 4,722 10,827 10,066
Other income, net (7) (11) (30) (44)
Interest expense, net 495 871 1,691 3,111
Income before income tax provision 4,435 3,862 9,166 6,999
Income tax provision 1,298 1,234 2,949 2,489
Net income 3,137 2,628 6,217 4,510
Loss attributable to the noncontrolling interest 41 163 324 425
Net income attributable to ARC Document Solutions, Inc. shareholders $ 3,178 $ 2,791 $ 6,541 $ 4,935
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:        
Basic (in usd per share) $ 0.08 $ 0.07 $ 0.15 $ 0.11
Diluted (in usd per share) $ 0.07 $ 0.07 $ 0.15 $ 0.11
Weighted average common shares outstanding:        
Basic (in shares) 42,073 42,747 42,213 43,017
Diluted (in shares) 42,724 42,918 42,629 43,160
v3.21.2
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Statement of Comprehensive Income [Abstract]        
Net income $ 3,137 $ 2,628 $ 6,217 $ 4,510
Other comprehensive (loss) income, net of tax        
Foreign currency translation adjustments, net of tax (97) 444 226 (145)
Other comprehensive (loss) income, net of tax (97) 444 226 (145)
Comprehensive income 3,040 3,072 6,443 4,365
Comprehensive (loss) income attributable to noncontrolling interest, net of tax (4) 44 (216) (316)
Comprehensive income attributable to ARC Document Solutions, Inc. shareholders $ 3,044 $ 3,028 $ 6,659 $ 4,681
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) - USD ($)
shares in Thousands, $ in Thousands
Total
Common Stock
Additional Paid-in Capital
Retained Earnings
Accumulated Other Comprehensive (Loss) Income
Common Stock in Treasury
Noncontrolling Interest
Beginning balance (in shares) at Dec. 31, 2019   49,189          
Beginning balance at Dec. 31, 2019 $ 150,040 $ 49 $ 126,117 $ 31,969 $ (3,357) $ (11,410) $ 6,672
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock-based compensation (in shares)   643          
Stock-based compensation 1,334 $ 1 1,333        
Issuance of common stock under employee stock purchase plan (in shares)   79          
Issuance of common stock under Employee Stock Purchase Plan 55   55        
Treasury shares (2,432)         (2,432)  
Cash dividends (427)     (427)      
Comprehensive income (loss) 4,365     4,935 (254)   (316)
Ending balance (in shares) at Sep. 30, 2020   49,911          
Ending balance at Sep. 30, 2020 152,935 $ 50 127,505 36,477 (3,611) (13,842) 6,356
Beginning balance (in shares) at Jun. 30, 2020   49,891          
Beginning balance at Jun. 30, 2020 149,435 $ 50 127,077 33,686 (3,848) (13,842) 6,312
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock-based compensation 413   413        
Issuance of common stock under employee stock purchase plan (in shares)   20          
Issuance of common stock under Employee Stock Purchase Plan 15   15        
Comprehensive income (loss) 3,072     2,791 237   44
Ending balance (in shares) at Sep. 30, 2020   49,911          
Ending balance at Sep. 30, 2020 $ 152,935 $ 50 127,505 36,477 (3,611) (13,842) 6,356
Beginning balance (in shares) at Dec. 31, 2020 49,422 49,422          
Beginning balance at Dec. 31, 2020 $ 154,336 $ 49 127,755 37,308 (2,787) (14,657) 6,668
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock-based compensation (in shares)   963          
Stock-based compensation 1,225 $ 1 1,224        
Issuance of common stock under employee stock purchase plan (in shares)   27          
Issuance of common stock under Employee Stock Purchase Plan 43   43        
Stock options exercised (in shares)   27          
Stock options exercised 54   54        
Treasury shares (1,593)         (1,593)  
Cash dividends (2,530)     (2,530)      
Comprehensive income (loss) $ 6,443     6,541 118   (216)
Ending balance (in shares) at Sep. 30, 2021 50,439 50,439          
Ending balance at Sep. 30, 2021 $ 157,978 $ 50 129,076 41,319 (2,669) (16,250) 6,452
Beginning balance (in shares) at Jun. 30, 2021   50,403          
Beginning balance at Jun. 30, 2021 155,795 $ 50 128,524 38,982 (2,535) (15,682) 6,456
Increase (Decrease) in Stockholders' Equity [Roll Forward]              
Stock-based compensation 481   481        
Issuance of common stock under employee stock purchase plan (in shares)   9          
Issuance of common stock under Employee Stock Purchase Plan 17   17        
Stock options exercised (in shares)   27          
Stock options exercised 54   54        
Treasury shares (568)         (568)  
Cash dividends (841)     (841)      
Comprehensive income (loss) $ 3,040     3,178 (134)   (4)
Ending balance (in shares) at Sep. 30, 2021 50,439 50,439          
Ending balance at Sep. 30, 2021 $ 157,978 $ 50 $ 129,076 $ 41,319 $ (2,669) $ (16,250) $ 6,452
v3.21.2
Condensed Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) - $ / shares
1 Months Ended 9 Months Ended
Jul. 31, 2021
Sep. 30, 2021
Sep. 30, 2020
Statement of Stockholders' Equity [Abstract]      
Quarterly cash dividends declared (in usd per share) $ 0.02 $ 0.02 $ 0.01
v3.21.2
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($)
$ in Thousands
9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Cash flows from operating activities    
Net income $ 6,217 $ 4,510
Adjustments to reconcile net income to net cash provided by operating activities:    
Allowance for accounts receivable 164 706
Depreciation 18,760 21,402
Amortization of intangible assets 168 1,353
Amortization of deferred financing costs 47 48
Stock-based compensation 1,224 1,333
Deferred income taxes 2,637 2,419
Deferred tax valuation allowance 125 22
Other non-cash items, net (167) 226
Changes in operating assets and liabilities:    
Accounts receivable, net (4,008) 9,310
Inventory 338 3,469
Prepaid expenses and other assets 6,965 10,765
Accounts payable and accrued expenses (4,296) (16,548)
Net cash provided by operating activities 28,174 39,015
Cash flows from investing activities    
Capital expenditures (3,391) (5,053)
Other 291 250
Net cash used in investing activities (3,100) (4,803)
Cash flows from financing activities    
Proceeds from stock option exercises 54 0
Proceeds from issuance of common stock under Employee Stock Purchase Plan 43 55
Share repurchases (1,593) (2,432)
Payments on finance leases (13,918) (10,236)
Borrowings under revolving credit facilities 69,250 45,000
Payments under revolving credit facilities (76,750) (45,000)
Payment of deferred financing costs (281) 0
Dividends paid (2,112) (870)
Net cash used in financing activities (25,307) (13,483)
Effect of foreign currency translation on cash balances 186 188
Net change in cash and cash equivalents (47) 20,917
Cash and cash equivalents at beginning of period 54,950 29,425
Cash and cash equivalents at end of period 54,903 50,342
Noncash investing and financing activities    
Finance lease obligations incurred 4,771 9,624
Operating lease obligations incurred $ 2,115 $ 4,582
v3.21.2
Description of Business and Basis of Presentation
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
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 U.S. 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 reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
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 Annual Report on Form 10-K for the year ended December 31, 2020.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Net sales of the Company’s principal services and products were as follows:
 
 Three Months Ended 
September 30,
Nine Months Ended 
September 30,
 2021202020212020
CDIM$44,890 $47,107 $125,413 $137,337 
MPS(1)
18,497 17,648 53,837 61,189 
AIM4,073 2,910 10,382 9,163 
Equipment and supplies sales4,972 4,714 13,329 17,434 
Net sales$72,432 $72,379 $202,961 $225,123 
(1) MPS includes $17.1 million of rental income and $1.4 million of service income for the three months ended September 30, 2021 and $49.3 million of rental income and $4.5 million of service income for the nine months ended September 30, 2021. MPS includes $16.1 million of rental income and $1.6 million of service income for the three months ended September 30, 2020 and $56.2 million of rental income and $5.0 million of service income for the nine months ended September 30, 2020.
CDIM consists of professional services and software services to (i) reproduce and distribute large-format and small-format documents in either black and white or color (“Ordered Prints”) and (ii) specialized graphic color printing. Substantially all of the Company’s revenue from CDIM comes from professional services to reproduce Ordered Prints. Sales of Ordered Prints are initiated through a customer order or quote and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligation under the terms of a contract with a customer are satisfied, which generally occurs with the transfer of control of the Ordered Prints. Transfer of control occurs at a specific point in time, when the Ordered Prints are delivered to the customer’s site or handed to the customer for walk-in orders. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue.
MPS consists of placement, management, and optimization of print and imaging equipment in customers' offices, job sites, and other facilities. MPS relieves the Company’s customers of the burden of purchasing print equipment and related supplies and maintaining print devices and print networks, and it shifts their costs to a “per-use” basis. MPS is supported by our hosted proprietary technology, Abacus®, which allows our customers to capture, control, manage, print, and account for their documents. Under its MPS contracts, the Company is paid a fixed rate per unit for each print produced (per-use), often referred to as a “click charge”. MPS sales are driven by the ongoing print needs of the Company’s customers at their facilities. Upon the issuance of Accounting Standards Codification ("ASC") 842, Leases, the Company concluded that certain of its MPS arrangements, which had previously been accounted for as service revenue under ASC 606, Revenue from Contracts with Customers, are accounted for as operating leases under ASC 842.
AIM combines software and professional services to facilitate the capture, management, access and retrieval of documents and information that have been produced in the past. AIM includes our hosted SKYSITE® software to organize, search and retrieve documents, as well as the provision of services that include the capture and conversion of hardcopy and electronic documents into digital files (“Scanned Documents”), and their cloud-based storage and maintenance. Sales of AIM professional services, which represents the majority of AIM revenue, are initiated through a customer order or proposal and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligation under the terms of a contract with a customer are satisfied, which generally occurs with the transfer of control of the digital files. Transfer of control occurs at a specific point in time, when the Scanned Documents are delivered to the customer either through SKYSITE or on electronic media. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue.
Equipment and Supplies sales consist of reselling printing, imaging, and related equipment (“Goods”) to customers primarily in architectural, engineering and construction firms. Sales of equipment and supplies are initiated through a customer order and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligations under the terms of a contract with a customer are satisfied, which occurs with the transfer of control of the Goods. Transfer of control occurs at a specific point in time, when the Goods are delivered to the customer’s site. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue. The Company has experienced minimal customer returns or refunds and does not offer a warranty on equipment that it is reselling.
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Loss (Topic 326) (“ASU 2016-13”), which updates the guidance on recognition and measurement of credit losses for financial assets. The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses. ASU 2016-13 must be adopted on a modified-retrospective approach. This update was effective for fiscal years beginning after December 15, 2020 including interim periods within those fiscal years. In October 2019, the FASB approved an extension for all non-SEC filers, including small reporting companies, to extend the effective date to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Therefore, the effective date for this update will be January 1, 2023. The Company is currently evaluating the potential impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.
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, all of which have been amplified due to the COVID-19 pandemic. Reduced activity (relative to historic levels) in the AEC/O industry would diminish demand for some of ARC’s services and products, and it would therefore negatively affect revenues and have a material adverse effect on ARC's 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.
v3.21.2
Earnings per Share
9 Months Ended
Sep. 30, 2021
Earnings Per Share [Abstract]  
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 shares of common stock 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 shares of common stock that would have been outstanding if shares subject to outstanding options and acquisition rights had been issued and if the additional 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, 2021, 4.4 million and 4.6 million shares of common stock, respectively, 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, 2020, 5.2 million shares of common stock were excluded from the calculation of diluted net loss attributable to ARC per common share, 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, 2021 and 2020:
 
 Three Months Ended 
September 30,
Nine Months Ended 
September 30,
 2021202020212020
Weighted average common shares outstanding during the period—basic42,073 42,747 42,213 43,017 
Effect of dilutive stock awards651 171 416 143 
Weighted average common shares outstanding during the period—diluted42,724 42,918 42,629 43,160 
v3.21.2
Goodwill and Other Intangibles
9 Months Ended
Sep. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill and Other Intangibles Goodwill and Other Intangibles
Goodwill
In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2021, the Company performed its annual assessment and determined that goodwill was not impaired.
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. In 2017, the Company elected to early-adopt ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test.
Given the uncertainty regarding the ultimate financial impact of the COVID-19 pandemic and the ensuing economic recovery, there can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment analysis in 2021 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, or its assumptions regarding disruptions caused by the pandemic, and its impact on the recovery from COVID-19 change, then the Company may be required to record goodwill impairment charges in future periods, whether in connection with the next annual impairment testing in the third quarter of 2022, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material. There was no change in the carrying amount of goodwill from January 1, 2020 through September 30, 2021. 
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, 2021 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, 2021 and December 31, 2020 which continue to be amortized: 
 September 30, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizable other intangible assets
Customer relationships$99,427 $99,330 $97 $99,425 $99,191 $234 
Trade names and trademarks20,334 20,076 258 20,325 20,044 281 
$119,761 $119,406 $355 $119,750 $119,235 $515 
Estimated future amortization expense of other intangible assets for the remainder of the 2021 fiscal year, and each of the subsequent four fiscal years and thereafter, are as follows: 
2021 (excluding the nine months ended September 30, 2021) $30 
2022103 
202344 
202442 
202538 
Thereafter98 
$355 
v3.21.2
Income Taxes
9 Months Ended
Sep. 30, 2021
Income Tax Disclosure [Abstract]  
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 provision of $1.3 million and $2.9 million in relation to pretax income of $4.4 million and $9.2 million for the three and nine months ended September 30, 2021, respectively, which resulted in an effective income tax rate of 29.3% and 32.2%, respectively, primarily impacted by certain stock-based compensation, change in valuation allowances against certain deferred tax assets and non-deductible expenses. The Company recorded an income tax provision of $1.2 million and $2.5 million in relation to pretax income of $3.9 million and $7.0 million for the three and nine months ended September 30, 2020, respectively, which resulted in an effective income tax rate of 32.0% and 35.6%, respectively, primarily due to certain stock-based compensation, a change in valuations allowances against certain deferred tax assets, and non-deductible expenses.
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, such as the ultimate financial impact of
and recovery from the COVID-19 pandemic or otherwise, could have a material effect on its financial condition and results of operations. The Company has a $2.2 million valuation allowance against certain deferred tax assets as of September 30, 2021.Based on the Company’s current assessment, the remaining net deferred tax assets as of September 30, 2021 are considered more likely than not to be realized. The valuation allowance of $2.2 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 depends on future taxable income, reversals of existing taxable temporary differences or through a loss carry back.
v3.21.2
Long-Term Debt
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Long-term debt consists of the following: 
September 30, 2021December 31, 2020
Revolving Loans; 1.7% and 2.2% interest rate at September 30, 2021 and December 31, 2020
$47,500 $55,000 
Various finance leases; weighted average interest rate of 4.8% and 4.9% at September 30, 2021 and December 31, 2020, respectively; principal and interest payable monthly through September 2027
33,004 42,236 
80,504 97,236 
Less current portion(14,364)(17,557)
$66,140 $79,679 
Credit Agreement
On April 22, 2021, the Company entered into a Credit Agreement with U.S. Bank National Association, as administrative agent and the lender party thereto (the "2021 Credit Agreement"). The 2021 Credit Agreement provides for the extension of revolving loans in an aggregate principal amount not to exceed $70 million and replaces the Credit Agreement dated as of November 20, 2014, as amended (the "2014 Credit Agreement"). The 2021 Credit Agreement features terms similar to the 2014 Credit Agreement, including the ability to use excess cash of up to $15 million per year for restricted payments such as share repurchases and dividends. The obligation under the 2021 Credit Agreement matures on April 22, 2026.
As of September 30, 2021, the Company's borrowing availability of revolving loans under the revolving loan commitment was $20.3 million, after deducting outstanding letters of credit of $2.2 million and outstanding revolving loans of $47.5 million.
Loans borrowed under the 2021 Credit Agreement bear interest, in the case of LIBOR loans, at a per annum rate equal to the applicable LIBOR (which rate shall not be less than zero), plus a margin ranging from 1.25% to 1.75%, based on the Company’s Total Leverage Ratio (as defined in the 2021 Credit Agreement). Loans borrowed under the 2021 Credit Agreement that are not LIBOR loans bear interest at a per annum rate (which rate shall not be less than zero) equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR plus 1.00% per annum, and (C) the rate of interest announced, from time to time, by U.S. Bank National Association as its “prime rate,” plus (ii) a margin ranging from 0.25% to 0.75%, based on the Company’s Total Leverage Ratio.
The Company pays certain recurring fees with respect to the 2021 Credit Agreement, including administration fees to the administrative agent.
Subject to certain exceptions, including, in certain circumstances, reinvestment rights, the loans extended under the 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 2021 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 2021 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; make certain 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 2021 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 2.75 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the 2021 Credit
Agreement), as of the last day of each fiscal quarter, an amount not less than 1.15 to 1.00. We were in compliance with our covenants as of September 30, 2021.
The 2021 Credit Agreement also includes certain tests the Company is required to meet in order to pay dividends, repurchase stock and make other restricted payments. In order to make such payments which are permitted subject to certain customary conditions set forth in the 2021 Credit Agreement, the amount of all such payments will be limited to $15 million during any twelve-month period. When calculating the fixed charge coverage ratio, the Company may exclude up to $10 million of such restricted payments that would otherwise constitute fixed charges in any twelve-month period.
The 2021 Credit Agreement allows for payment of dividends. In July 2021, the Company's board of directors declared a quarterly cash dividend of $0.02 per share that is payable on November 30, 2021 to shareholders of record as of October 29, 2021. Accordingly, the Company recorded a dividend payable of $841 thousand within accrued expenses as of September 30, 2021.
The 2021 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 2021 Credit Agreement are guaranteed by the Company and each of the Company's other United States subsidiaries. The 2021 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).
v3.21.2
Commitments and Contingencies
9 Months Ended
Sep. 30, 2021
Commitments and Contingencies Disclosure [Abstract]  
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. Certain lease agreements for the Company's facilities generally contain renewal options and provide for annual increases in rent based on the local Consumer Price Index. Refer to Note 7, Leasing, on our Annual Report on Form 10-K for the year ended December 31, 2020 a schedule of the Company's future minimum operating lease payments.
Legal Proceedings. The Company is involved, and will continue to be involved, in legal proceedings arising out of the conduct of our business, including commercial and employment-related lawsuits. Some of these lawsuits purport or may be determined to be class actions and seek substantial damages, and some may remain unresolved for several years. The Company establishes accruals for specific legal proceedings when it is considered probable that a loss has been incurred and the amount of the loss can be reasonably estimated. The Company's evaluation of whether a loss is reasonably probable is based on our assessment and consultation with legal counsel regarding the ultimate outcome of the matter. As of September 30, 2021, the Company has accrued for the potential impact of loss contingencies that are probable and reasonably estimable. The Company does not currently believe that the ultimate resolution of any of these matters will have a material adverse effect on its results of operations, financial condition, or cash flows. However, the results of these matters cannot be predicted with certainty, and an unfavorable resolution of one or more of these matters could have a material adverse effect on the Company's results of operations, financial condition, or cash flows.
v3.21.2
Stock-Based Compensation
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation Stock-Based Compensation
On April 29, 2021, the Company's shareholders approved the Company's 2021 Incentive Plan, replacing the 2014 Stock Incentive Plan, as amended, which is the only equity incentive plan under which the Company can currently grant equity incentive awards. The 2021 Incentive 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 Company is authorized to issue up to 3.5 million shares plus such additional number of shares of common stock (up to 6,132,593 shares) as is equal to the number of shares of common stock subject to awards granted under the 2014 Incentive Plan and the Company's 2005 Stock Plan, which awards expire, terminate or are otherwise surrendered, cancelled, forfeited or repurchased by the Company pursuant to a contractual repurchase right. As of September 30, 2021, 2.6 million shares remained available for issuance under the 2021 Incentive Plan.
Stock options granted under the Company's 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 is 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, 2021, the Company granted options to acquire a total of 0.7 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, 2021, the Company granted 0.9 million shares of restricted stock awards to certain key employees with a deemed issuance price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. These stock options and restricted stock awards vest annually over three years from the grant date. In addition, the Company granted approximately 28 thousand shares of restricted stock awards to each of the Company's four non-employee members of its board of directors with a deemed issuance price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted.
Stock-based compensation expense was $0.5 million and $1.2 million for the three and nine months ended September 30, 2021, respectively, compared to stock-based compensation expense of $0.4 million and $1.3 million for the three and nine months ended September 30, 2020, respectively.
As of September 30, 2021, total unrecognized compensation cost related to unvested stock-based payments totaled $2.8 million and is expected to be recognized over a weighted-average period of approximately 2.3 years.
v3.21.2
Fair Value Measurements
9 Months Ended
Sep. 30, 2021
Fair Value Disclosures [Abstract]  
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. 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.
As of September 30, 2021, the Company's assets and liabilities that are measured at fair value were not material.
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 interim Condensed Consolidated Balance Sheets were $13.5 million as of September 30, 2021 and $13.2 million as of December 31, 2020 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 finance leases reported in the interim 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 interim Condensed Consolidated Balance Sheet as of September 30, 2021 for borrowings under its 2021 Credit Agreement is $47.5 million. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its 2021 Credit Agreement is $47.5 million as of September 30, 2021.
v3.21.2
Description of Business and Basis of Presentation (Policies)
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
Basis of Presentation
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 U.S. 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 reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2021 are not necessarily indicative of the results that may be expected for the year ending December 31, 2021.
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 Annual Report on Form 10-K for the year ended December 31, 2020.
Revenue Recognition Revenue RecognitionRevenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.
CDIM consists of professional services and software services to (i) reproduce and distribute large-format and small-format documents in either black and white or color (“Ordered Prints”) and (ii) specialized graphic color printing. Substantially all of the Company’s revenue from CDIM comes from professional services to reproduce Ordered Prints. Sales of Ordered Prints are initiated through a customer order or quote and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligation under the terms of a contract with a customer are satisfied, which generally occurs with the transfer of control of the Ordered Prints. Transfer of control occurs at a specific point in time, when the Ordered Prints are delivered to the customer’s site or handed to the customer for walk-in orders. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue.
MPS consists of placement, management, and optimization of print and imaging equipment in customers' offices, job sites, and other facilities. MPS relieves the Company’s customers of the burden of purchasing print equipment and related supplies and maintaining print devices and print networks, and it shifts their costs to a “per-use” basis. MPS is supported by our hosted proprietary technology, Abacus®, which allows our customers to capture, control, manage, print, and account for their documents. Under its MPS contracts, the Company is paid a fixed rate per unit for each print produced (per-use), often referred to as a “click charge”. MPS sales are driven by the ongoing print needs of the Company’s customers at their facilities. Upon the issuance of Accounting Standards Codification ("ASC") 842, Leases, the Company concluded that certain of its MPS arrangements, which had previously been accounted for as service revenue under ASC 606, Revenue from Contracts with Customers, are accounted for as operating leases under ASC 842.
AIM combines software and professional services to facilitate the capture, management, access and retrieval of documents and information that have been produced in the past. AIM includes our hosted SKYSITE® software to organize, search and retrieve documents, as well as the provision of services that include the capture and conversion of hardcopy and electronic documents into digital files (“Scanned Documents”), and their cloud-based storage and maintenance. Sales of AIM professional services, which represents the majority of AIM revenue, are initiated through a customer order or proposal and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligation under the terms of a contract with a customer are satisfied, which generally occurs with the transfer of control of the digital files. Transfer of control occurs at a specific point in time, when the Scanned Documents are delivered to the customer either through SKYSITE or on electronic media. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue.
Equipment and Supplies sales consist of reselling printing, imaging, and related equipment (“Goods”) to customers primarily in architectural, engineering and construction firms. Sales of equipment and supplies are initiated through a customer order and are governed by established terms and conditions agreed upon at the onset of the customer relationship. Revenue is recognized when the performance obligations under the terms of a contract with a customer are satisfied, which occurs with the transfer of control of the Goods. Transfer of control occurs at a specific point in time, when the Goods are delivered to the customer’s site. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Taxes collected concurrent with revenue-producing activities are excluded from revenue. The Company has experienced minimal customer returns or refunds and does not offer a warranty on equipment that it is reselling.
Recent Accounting Pronouncements Not Yet Adopted
Recent Accounting Pronouncements Not Yet Adopted
In June 2016, the FASB issued Accounting Standards Update No. 2016-13, Financial Instruments - Credit Loss (Topic 326) (“ASU 2016-13”), which updates the guidance on recognition and measurement of credit losses for financial assets. The new requirements, known as the current expected credit loss model ("CECL") will require entities to adopt an impairment model based on expected losses rather than incurred losses. ASU 2016-13 must be adopted on a modified-retrospective approach. This update was effective for fiscal years beginning after December 15, 2020 including interim periods within those fiscal years. In October 2019, the FASB approved an extension for all non-SEC filers, including small reporting companies, to extend the effective date to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Therefore, the effective date for this update will be January 1, 2023. The Company is currently evaluating the potential impact of the adoption of the new standard on its consolidated statements of financial condition and results of operations.
Segment Reporting
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
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, all of which have been amplified due to the COVID-19 pandemic. Reduced activity (relative to historic levels) in the AEC/O industry would diminish demand for some of ARC’s services and products, and it would therefore negatively affect revenues and have a material adverse effect on ARC's 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 shares of common stock 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 shares of common stock that would have been outstanding if shares subject to outstanding options and acquisition rights had been issued and if the additional shares were dilutive. Common share equivalents are excluded from the computation if their effect is anti-dilutive.
Goodwill
Goodwill
In accordance with ASC 350, Intangibles - Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2021, the Company performed its annual assessment and determined that goodwill was not impaired.
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. In 2017, the Company elected to early-adopt ASU 2017-04, Intangibles - Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which simplifies subsequent goodwill measurement by eliminating step two from the goodwill impairment test.
Given the uncertainty regarding the ultimate financial impact of the COVID-19 pandemic and the ensuing economic recovery, there can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment analysis in 2021 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, or its assumptions regarding disruptions caused by the pandemic, and its impact on the recovery from COVID-19 change, then the Company may be required to record goodwill impairment charges in future periods, whether in connection with the next annual impairment testing in the third quarter of 2022, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.
Long-Lived Assets
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.
Other Intangible Assets 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.
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. 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.
v3.21.2
Description of Business and Basis of Presentation (Tables)
9 Months Ended
Sep. 30, 2021
Accounting Policies [Abstract]  
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,
 2021202020212020
CDIM$44,890 $47,107 $125,413 $137,337 
MPS(1)
18,497 17,648 53,837 61,189 
AIM4,073 2,910 10,382 9,163 
Equipment and supplies sales4,972 4,714 13,329 17,434 
Net sales$72,432 $72,379 $202,961 $225,123 
(1) MPS includes $17.1 million of rental income and $1.4 million of service income for the three months ended September 30, 2021 and $49.3 million of rental income and $4.5 million of service income for the nine months ended September 30, 2021. MPS includes $16.1 million of rental income and $1.6 million of service income for the three months ended September 30, 2020 and $56.2 million of rental income and $5.0 million of service income for the nine months ended September 30, 2020.
v3.21.2
Earnings per Share (Tables)
9 Months Ended
Sep. 30, 2021
Earnings Per Share [Abstract]  
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, 2021 and 2020:
 
 Three Months Ended 
September 30,
Nine Months Ended 
September 30,
 2021202020212020
Weighted average common shares outstanding during the period—basic42,073 42,747 42,213 43,017 
Effect of dilutive stock awards651 171 416 143 
Weighted average common shares outstanding during the period—diluted42,724 42,918 42,629 43,160 
v3.21.2
Goodwill and Other Intangibles (Tables)
9 Months Ended
Sep. 30, 2021
Goodwill and Intangible Assets Disclosure [Abstract]  
Other Intangible Assets Resulting from Business Acquisitions The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of September 30, 2021 and December 31, 2020 which continue to be amortized: 
 September 30, 2021December 31, 2020
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Amortizable other intangible assets
Customer relationships$99,427 $99,330 $97 $99,425 $99,191 $234 
Trade names and trademarks20,334 20,076 258 20,325 20,044 281 
$119,761 $119,406 $355 $119,750 $119,235 $515 
Estimated Future Amortization Expense of Amortizable Intangible Assets
Estimated future amortization expense of other intangible assets for the remainder of the 2021 fiscal year, and each of the subsequent four fiscal years and thereafter, are as follows: 
2021 (excluding the nine months ended September 30, 2021) $30 
2022103 
202344 
202442 
202538 
Thereafter98 
$355 
v3.21.2
Long-Term Debt (Tables)
9 Months Ended
Sep. 30, 2021
Debt Disclosure [Abstract]  
Schedule of Long-Term Debt
Long-term debt consists of the following: 
September 30, 2021December 31, 2020
Revolving Loans; 1.7% and 2.2% interest rate at September 30, 2021 and December 31, 2020
$47,500 $55,000 
Various finance leases; weighted average interest rate of 4.8% and 4.9% at September 30, 2021 and December 31, 2020, respectively; principal and interest payable monthly through September 2027
33,004 42,236 
80,504 97,236 
Less current portion(14,364)(17,557)
$66,140 $79,679 
v3.21.2
Description of Business and Basis of Presentation (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Segment Reporting Information [Line Items]        
Net sales $ 72,432 $ 72,379 $ 202,961 $ 225,123
CDIM        
Segment Reporting Information [Line Items]        
Net sales 44,890 47,107 125,413 137,337
MPS        
Segment Reporting Information [Line Items]        
Net sales 18,497 17,648 53,837 61,189
Rental income 17,100 16,100 49,300 56,200
Service income 1,400 1,600 4,500 5,000
AIM        
Segment Reporting Information [Line Items]        
Net sales 4,073 2,910 10,382 9,163
Equipment and supplies sales        
Segment Reporting Information [Line Items]        
Net sales $ 4,972 $ 4,714 $ 13,329 $ 17,434
v3.21.2
Earnings per Share - Additional Information (Details) - shares
shares in Millions
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Earnings Per Share [Abstract]        
Common stock options excluded for anti-dilutive (in shares) 4.4 5.2 4.6 5.2
v3.21.2
Earnings per Share - Basic and Diluted Earnings Per Share (Details) - shares
shares in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Earnings Per Share [Abstract]        
Weighted average common shares outstanding during the period—basic (in shares) 42,073 42,747 42,213 43,017
Effect of dilutive stock awards (in shares) 651 171 416 143
Weighted average common shares outstanding during the period—diluted (in shares) 42,724 42,918 42,629 43,160
v3.21.2
Goodwill and Other Intangibles - Additional Information (Details)
9 Months Ended
Sep. 30, 2021
USD ($)
Finite-Lived Intangible Assets [Line Items]  
Goodwill impairment $ 0
Change of goodwill during period 0
Impairment of long lived assets $ 0
Customer relationships  
Finite-Lived Intangible Assets [Line Items]  
Estimated period for amortization (in years) 13 years
v3.21.2
Goodwill and Other Intangibles - Schedule of Other Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount $ 119,761 $ 119,750
Accumulated Amortization 119,406 119,235
Net Carrying Amount 355 515
Customer relationships    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 99,427 99,425
Accumulated Amortization 99,330 99,191
Net Carrying Amount 97 234
Trade names and trademarks    
Finite-Lived Intangible Assets [Line Items]    
Gross Carrying Amount 20,334 20,325
Accumulated Amortization 20,076 20,044
Net Carrying Amount $ 258 $ 281
v3.21.2
Goodwill and Other Intangibles - Estimated Future Amortization Expense of Amortizable Intangible Assets (Details) - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Goodwill and Intangible Assets Disclosure [Abstract]    
2021 (excluding the nine months ended September 30, 2021) $ 30  
2022 103  
2023 44  
2024 42  
2025 38  
Thereafter 98  
Net Carrying Amount $ 355 $ 515
v3.21.2
Income Taxes (Details) - USD ($)
$ in Thousands
3 Months Ended 9 Months Ended
Sep. 30, 2021
Sep. 30, 2020
Sep. 30, 2021
Sep. 30, 2020
Income Tax Disclosure [Abstract]        
Income tax provision $ 1,298 $ 1,234 $ 2,949 $ 2,489
Pretax income $ 4,435 $ 3,862 $ 9,166 $ 6,999
Effective income tax rate reconciliation, percent 29.30% 32.00% 32.20% 35.60%
Deferred tax assets, net of valuation allowance, current $ 2,200   $ 2,200  
v3.21.2
Long-Term Debt - Summary of Long Term Debt (Details) - USD ($)
$ in Thousands
Sep. 30, 2021
Dec. 31, 2020
Debt Instrument [Line Items]    
Various finance leases; weighted average interest rate of 4.8% and 4.9% at September 30, 2021 and December 31, 2020, respectively; principal and interest payable monthly through September 2027 $ 33,004 $ 42,236
Long-term debt and finance leases, including current maturities 80,504 97,236
Less current portion (14,364) (17,557)
Long-term debt and finance leases $ 66,140 $ 79,679
Weighted average discount rate, finance leases 4.80% 4.90%
Line of Credit | Revolving Credit Facility    
Debt Instrument [Line Items]    
Revolving Loans; 1.7% and 2.2% interest rate at September 30, 2021 and December 31, 2020 $ 47,500 $ 55,000
Interest rate, effective percentage 1.70% 2.20%
v3.21.2
Long-Term Debt - Narrative (Details)
1 Months Ended 9 Months Ended
Apr. 22, 2021
USD ($)
Dec. 17, 2019
USD ($)
Jul. 31, 2021
$ / shares
Sep. 30, 2021
USD ($)
$ / shares
Sep. 30, 2020
$ / shares
Dec. 31, 2020
USD ($)
Debt Instrument [Line Items]            
Quarterly cash dividends declared (in usd per share) | $ / shares     $ 0.02 $ 0.02 $ 0.01  
Cash dividends payable       $ 841,000    
Line of Credit            
Debt Instrument [Line Items]            
Covenant term, total leverage ratio       2.75    
Fixed charged coverage ratio       1.15    
Line of Credit | 2021 Credit Agreement            
Debt Instrument [Line Items]            
Line of credit facility, maximum borrowing capacity $ 70,000,000          
Cash advances limit with restricted use $ 15,000,000          
Line of Credit | 2021 Credit Agreement | London Interbank Offered Rate (LIBOR)            
Debt Instrument [Line Items]            
Basis spread on variable rate 1.00%          
Line of Credit | 2021 Credit Agreement | London Interbank Offered Rate (LIBOR) | Minimum            
Debt Instrument [Line Items]            
Basis spread on variable rate 1.25%          
Line of Credit | 2021 Credit Agreement | London Interbank Offered Rate (LIBOR) | Maximum            
Debt Instrument [Line Items]            
Basis spread on variable rate 1.75%          
Line of Credit | 2021 Credit Agreement | Federal Funds Effective Swap Rate            
Debt Instrument [Line Items]            
Basis spread on variable rate 0.50%          
Line of Credit | 2021 Credit Agreement | Prime Rate | Minimum            
Debt Instrument [Line Items]            
Basis spread on variable rate 0.25%          
Line of Credit | 2021 Credit Agreement | Prime Rate | Maximum            
Debt Instrument [Line Items]            
Basis spread on variable rate 0.75%          
Revolving Credit Facility | Line of Credit            
Debt Instrument [Line Items]            
Line of credit available borrowing capacity       $ 20,300,000    
Long-term debt outstanding       47,500,000   $ 55,000,000
Debt covenant terms, fixed charge coverage ratio, maximum annual payments   $ 15,000,000        
Debt covenant terms, fixed charge coverage ratio, payments excluded   $ 10,000,000        
Revolving Credit Facility | Letter of Credit            
Debt Instrument [Line Items]            
Long-term debt outstanding       $ 2,200,000    
v3.21.2
Stock-Based Compensation (Details)
$ in Millions
3 Months Ended 9 Months Ended
Apr. 29, 2021
shares
Sep. 30, 2021
USD ($)
shares
Sep. 30, 2020
USD ($)
Sep. 30, 2021
USD ($)
member
shares
Sep. 30, 2020
USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Number of additional shares authorized (in shares) 3,500,000        
Number of shares authorized (in shares) 6,132,593        
Shares available for issuance (in shares)   2,600,000   2,600,000  
Stock option expiration period (in years)       10 years  
Exercise price of options, percentage of fair market value of Company's common stock       100.00%  
Share-based compensation expense | $   $ 0.5 $ 0.4 $ 1.2 $ 1.3
Total unrecognized compensation cost related to unvested stock-based payments | $   $ 2.8   $ 2.8  
Expected weighted-average period to recognize compensation cost (in years)       2 years 3 months 18 days  
Restricted Stock          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period (in years)       3 years  
Share-based Payment Arrangement, Option          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period (in years)       3 years  
Key Employees          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Options granted (in shares)       700,000  
Key Employees | Restricted Stock          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Grants in period (in shares)       900,000  
Non-employee members of board of directors | Restricted Stock          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Grants in period (in shares)       28,000  
Number of award grantees | member       4  
Minimum          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period (in years)       3 years  
Maximum          
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]          
Vesting period (in years)       4 years  
v3.21.2
Fair Value Measurements (Details) - USD ($)
$ in Millions
Sep. 30, 2021
Dec. 31, 2020
Debt Instrument [Line Items]    
Cash and cash equivalents $ 13.5 $ 13.2
Term Loan | Line of Credit    
Debt Instrument [Line Items]    
Long-term debt 47.5  
Fair value of borrowings $ 47.5