Cover Page
Cover Page - shares | 3 Months Ended | |
Mar. 31, 2023 | Apr. 27, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2023 | |
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 $0.001 per share | |
Trading Symbol | ARC | |
Security Exchange Name | NYSE | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Small Business | true | |
Entity Emerging Growth | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding (in shares) | 43,636,242 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Entity Central Index Key | 0001305168 | |
Current Fiscal Year End Date | --12-31 |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Current assets: | ||
Cash and cash equivalents | $ 49,803 | $ 52,561 |
Accounts receivable, net of allowances for accounts receivable of $2,013 and $1,947 | 39,423 | 38,748 |
Inventory | 9,204 | 8,610 |
Prepaid expenses | 3,665 | 4,018 |
Other current assets | 3,143 | 3,540 |
Total current assets | 105,238 | 107,477 |
Property and equipment, net of accumulated depreciation of $230,906 and $231,913 | 38,748 | 40,214 |
Right-of-use assets from operating leases | 29,066 | 28,163 |
Goodwill | 121,051 | 121,051 |
Other intangible assets, net | 198 | 208 |
Deferred income taxes | 6,998 | 7,993 |
Other assets | 2,170 | 2,209 |
Total assets | 303,469 | 307,315 |
Current liabilities: | ||
Accounts payable | 23,207 | 22,972 |
Accrued payroll and payroll-related expenses | 8,671 | 11,235 |
Accrued expenses | 15,137 | 16,882 |
Current operating lease liability | 10,060 | 9,924 |
Current portion of finance leases | 10,615 | 11,558 |
Total current liabilities | 67,690 | 72,571 |
Long-term operating lease liabilities | 24,014 | 23,339 |
Long-term debt and finance leases | 54,160 | 54,916 |
Other long-term liabilities | 133 | 199 |
Total liabilities | 145,997 | 151,025 |
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; 52,268 and 51,400 shares issued and 43,636 and 43,101 shares outstanding | 52 | 51 |
Additional paid-in capital | 134,510 | 132,952 |
Retained earnings | 44,231 | 44,416 |
Accumulated other comprehensive loss | (4,138) | (4,187) |
Total stockholders equity before adjustment of treasury stock | 174,655 | 173,232 |
Less cost of common stock in treasury, 8,632 and 8,299 shares | 18,994 | 18,877 |
Total ARC Document Solutions, Inc. shareholders’ equity | 155,661 | 154,355 |
Noncontrolling interest | 1,811 | 1,935 |
Total equity | 157,472 | 156,290 |
Total liabilities and equity | $ 303,469 | $ 307,315 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Statement of Financial Position [Abstract] | ||
Allowances for accounts receivable | $ 2,013 | $ 1,947 |
Accumulated depreciation | $ 230,906 | $ 231,913 |
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) | 52,268,000 | 51,400,000 |
Common stock, shares outstanding (in shares) | 43,636,000 | 43,101,000 |
Treasury stock, (in shares) | 8,632,000 | 8,299,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Operations (Unaudited) - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Statement [Abstract] | ||
Net sales | $ 68,918 | $ 69,488 |
Cost of sales | 45,993 | 47,039 |
Gross profit | 22,925 | 22,449 |
Selling, general and administrative expenses | 19,482 | 19,355 |
Amortization of intangible assets | 11 | 35 |
Income from operations | 3,432 | 3,059 |
Other income, net | (11) | (25) |
Interest expense, net | 456 | 430 |
Income before income tax provision | 2,987 | 2,654 |
Income tax provision | 1,160 | 798 |
Net income | 1,827 | 1,856 |
Loss attributable to the noncontrolling interest | 113 | 116 |
Net income attributable to ARC Document Solutions, Inc. shareholders | $ 1,940 | $ 1,972 |
Earnings per share attributable to ARC Document Solutions, Inc. shareholders: | ||
Basic (in usd per share) | $ 0.05 | $ 0.05 |
Diluted (in usd per share) | $ 0.04 | $ 0.05 |
Weighted average common shares outstanding: | ||
Basic (in shares) | 42,552 | 42,064 |
Diluted (in shares) | 43,764 | 43,739 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Comprehensive Income (Loss) (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 1,827 | $ 1,856 |
Other comprehensive income, net of tax | ||
Foreign currency translation adjustments | 38 | 42 |
Other comprehensive income, net of tax | 38 | 42 |
Comprehensive income | 1,865 | 1,898 |
Comprehensive loss attributable to noncontrolling interest, net of tax | (124) | (84) |
Comprehensive income attributable to ARC Document Solutions, Inc. shareholders | $ 1,989 | $ 1,982 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Equity (Unaudited) - USD ($) shares in Thousands, $ in Thousands | Total | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Loss | Common Stock in Treasury | Noncontrolling Interest |
Beginning balance (in shares) at Dec. 31, 2021 | 50,584 | ||||||
Beginning balance at Dec. 31, 2021 | $ 158,992 | $ 50 | $ 129,881 | $ 41,768 | $ (2,501) | $ (16,771) | $ 6,565 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation (in shares) | 105 | ||||||
Stock-based compensation | 451 | 451 | |||||
Stock options exercised (in shares) | 135 | ||||||
Stock options exercised | 288 | $ 1 | 287 | ||||
Issuance of common stock under employee stock purchase plan (in shares) | 6 | ||||||
Issuance of common stock under Employee Stock Purchase Plan | 20 | 20 | |||||
Treasury shares | (281) | (281) | |||||
Cash dividends - common stock | (2,116) | (2,116) | |||||
Comprehensive income (loss), net of tax | 1,898 | 1,972 | 10 | (84) | |||
Ending balance (in shares) at Mar. 31, 2022 | 50,830 | ||||||
Ending balance at Mar. 31, 2022 | $ 159,252 | $ 51 | 130,639 | 41,624 | (2,491) | (17,052) | 6,481 |
Beginning balance (in shares) at Dec. 31, 2022 | 51,400 | 51,400 | |||||
Beginning balance at Dec. 31, 2022 | $ 156,290 | $ 51 | 132,952 | 44,416 | (4,187) | (18,877) | 1,935 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||||
Stock-based compensation (in shares) | 105 | ||||||
Stock-based compensation | 494 | 494 | |||||
Stock options exercised (in shares) | 751 | ||||||
Stock options exercised | 1,036 | $ 1 | 1,035 | ||||
Issuance of common stock under employee stock purchase plan (in shares) | 12 | ||||||
Issuance of common stock under Employee Stock Purchase Plan | 29 | 29 | |||||
Treasury shares | (117) | (117) | |||||
Cash dividends - common stock | (2,125) | (2,125) | |||||
Comprehensive income (loss), net of tax | $ 1,865 | 1,940 | 49 | (124) | |||
Ending balance (in shares) at Mar. 31, 2023 | 52,268 | 52,268 | |||||
Ending balance at Mar. 31, 2023 | $ 157,472 | $ 52 | $ 134,510 | $ 44,231 | $ (4,138) | $ (18,994) | $ 1,811 |
Condensed Consolidated Statem_4
Condensed Consolidated Statements of Equity (Unaudited) (Parenthetical) - $ / shares | 1 Months Ended | 3 Months Ended | |
Feb. 28, 2023 | Mar. 31, 2023 | Mar. 31, 2022 | |
Statement of Stockholders' Equity [Abstract] | |||
Cash dividends declared (in usd per share) | $ 0.05 | $ 0.05 | $ 0.05 |
Condensed Consolidated Statem_5
Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Cash flows from operating activities | ||
Net income | $ 1,827 | $ 1,856 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Allowance for credit losses | 98 | 72 |
Depreciation | 4,652 | 5,394 |
Amortization of intangible assets | 11 | 35 |
Amortization of deferred financing costs | 16 | 15 |
Stock-based compensation | 494 | 451 |
Deferred income taxes | 962 | 735 |
Deferred tax valuation allowance | 43 | 8 |
Other non-cash items, net | (75) | (50) |
Changes in operating assets and liabilities: | ||
Accounts receivable | (698) | (1,390) |
Inventory | (583) | (867) |
Prepaid expenses and other assets | 3,258 | 3,213 |
Accounts payable and accrued expenses | (6,181) | (6,541) |
Net cash provided by operating activities | 3,824 | 2,931 |
Cash flows from investing activities | ||
Capital expenditures | (2,255) | (1,242) |
Other | 92 | 88 |
Net cash used in investing activities | (2,163) | (1,154) |
Cash flows from financing activities | ||
Proceeds from stock option exercises | 1,036 | 288 |
Proceeds from issuance of common stock under Employee Stock Purchase Plan | 29 | 20 |
Share repurchases | (117) | (281) |
Payments on finance leases | (3,183) | (4,033) |
Borrowings under revolving credit facilities | 42,000 | 38,000 |
Payments under revolving credit facilities | (42,000) | (39,250) |
Dividends paid | (2,122) | (2,108) |
Net cash used in financing activities | (4,357) | (7,364) |
Effect of foreign currency translation on cash balances | (62) | 32 |
Net change in cash and cash equivalents | (2,758) | (5,555) |
Cash and cash equivalents at beginning of period | 52,561 | 55,929 |
Cash and cash equivalents at end of period | 49,803 | 50,374 |
Noncash investing and financing activities | ||
Finance lease obligations incurred | 1,485 | 1,689 |
Operating lease obligations incurred | $ 3,365 | $ 1,147 |
Description of Business and Bas
Description of Business and Basis of Presentation | 3 Months Ended |
Mar. 31, 2023 | |
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 digital printing company. ARC provides digital printing and document-related services to customers in a growing variety of industries. ARC offers Digital Printing services, Managed Print Services ("MPS"), and Scanning and Digital Imaging services. In addition, ARC also sells Equipment and Supplies. The Company conducts its operations through its wholly-owned operating subsidiary, ARC Document Solutions, LLC, a Texas limited liability company, and its affiliates. Basis of Presentation The accompanying interim Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conformity with the requirements of the 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 months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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 thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. Noncontrolling Interest The Company accounted for its investment in UNIS Document Solutions Co. Ltd. ("UDS"), under the purchase method of accounting, in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations . UDS has been consolidated in the Company's financial statements from the date of acquisition. Noncontrolling interest, which represents the 35% noncontrolling interest in UDS owned by the joint venture ("JV") partner, is reflected on the Company's Condensed Consolidated Financial Statements. Revenue Recognition Revenue is recognized when control of the promised goods or services is transferred to ARC's customers, in an amount that reflects the consideration it expects 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 2023 2022 Service Sales Digital Printing $ 41,379 $ 41,947 MPS (1) 19,016 18,654 Scanning and Digital Imaging 4,594 4,169 Total services sales $ 64,989 $ 64,770 Equipment and Supplies Sales 3,929 4,718 Total net sales $ 68,918 $ 69,488 (1) MPS includes $17.5 million of rental income and $1.5 million of service income for the three months ended March 31, 2023. MPS includes $17.2 million of rental income and $1.5 million of service income for the three months ended March 31, 2022. Digital Printing 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 Digital Printing 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 the Company expects 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 the Company's hosted proprietary technology, Abacus ® , which allows 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 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. Scanning and Digital Imaging combines software and professional services to facilitate the capture, management, access and retrieval of documents and information that have been produced in the past. Scanning and Digital Imaging includes the Company's hosted SKYSITE ® software and ARC Facilities solution 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 Scanning and Digital Imaging professional services, which represent substantially all revenue for the business line, 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; generally, this 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, ARC Facilities, or through other electronic media. Revenue is measured as the amount of consideration the Company expects 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; generally, this 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 the Company expects 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. Recently Adopted Accounting Pronouncements 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 implementation of CECL did not have a material impact on the Company's 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 a significant portion 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 results largely depend on the strength of that industry. The Company's historical operating results reflect the cyclical and variable nature of the AEC/O industry. ARC believes that the AEC/O industry generally experiences downturns several months after a downturn in the general economy, and that there may be a similar delay in the recovery of the AEC/O industry following a recovery of the general economy. A downturn in the AEC/O industry would diminish demand for all of the Company's products and services, and would therefore negatively affect the Company's revenues and have a material adverse effect on the Company'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 that are relatively new to the company. The success of the Company's efforts will be affected by its ability to acquire new customers for the Company's new service offerings as well as sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition. |
Earnings per Share
Earnings per Share | 3 Months Ended |
Mar. 31, 2023 | |
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 months ended March 31, 2023, 3.8 million shares of common stock, were excluded from the calculation of diluted net income attributable to ARC per common share, because they were anti-dilutive. For the three months ended March 31, 2022, 2.8 million shares of common stock were excluded from the calculation of diluted net income 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 equity incentive plan. Basic and diluted weighted average common shares outstanding were calculated as follows for the three months ended March 31, 2023 and 2022: Three Months Ended 2023 2022 Weighted average common shares outstanding during the period—basic 42,552 42,064 Effect of dilutive stock awards 1,212 1,675 Weighted average common shares outstanding during the period—diluted 43,764 43,739 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles | 3 Months Ended |
Mar. 31, 2023 | |
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, 2022, 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. There can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment analysis in 2022 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 2023, 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, 2022 through March 31, 2023. See “Critical Accounting Policies and Significant Judgements and Estimates" in Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 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, 2022 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 March 31, 2023 and December 31, 2022 which continue to be amortized: March 31, 2023 December 31, 2022 Gross Accumulated Net Gross Accumulated Net Amortizable other intangible assets Customer relationships $ 99,114 $ 99,102 $ 12 $ 99,087 $ 99,073 $ 14 Trade names and trademarks 20,284 20,098 186 20,281 20,087 194 $ 119,398 $ 119,200 $ 198 $ 119,368 $ 119,160 $ 208 Estimated future amortization expense of other intangible assets for the remainder of the 2023 fiscal year, and each of the subsequent four fiscal years and thereafter, are as follows: 2023 (excluding the three months ended March 31, 2023) $ 31 2024 40 2025 36 2026 35 2027 35 Thereafter 21 $ 198 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2023 | |
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 $1.2 million in relation to pretax income of $3.0 million, for the three months ended March 31, 2023, which resulted in an effective income tax rate of 38.8%, primarily impacted by state taxes, non-deductible compensation, certain stock-based compensation and other non-deductible expenses. The Company recorded an income tax provision of $0.8 million in relation to pretax income of $2.7 million, for the three months ended March 31, 2022, which resulted in an effective income tax rate of 30.1%, primarily impacted by state taxes, certain stock-based compensation, changes in valuation 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. |
Long-Term Debt
Long-Term Debt | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Long-Term Debt | Long-Term Debt Long-term debt consists of the following: March 31, 2023 December 31, 2022 Revolving Loans; 6.2% and 5.6% interest rate at March 31, 2023 and December 31, 2022 $ 40,000 $ 40,000 Various finance leases; weighted average interest rate of 5.3% and 5.1% at March 31, 2023 and December 31, 2022, respectively; principal and interest payable monthly through March 2028 24,775 26,474 64,775 66,474 Less current portion (10,615) (11,558) $ 54,160 $ 54,916 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 March 31, 2023, the Company's borrowing availability under the revolving loan commitment was $27.8 million, after deducting outstanding letters of credit of $2.2 million and outstanding revolving loans of $40.0 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 rate 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. As of March 31, 2023, LIBOR loans borrowed under the 2021 Credit Agreement accrued interest at 6.2%. 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. ARC was in compliance with its covenants as of March 31, 2023. 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 February 2023, the Company's board of directors declared a quarterly cash dividend of $0.05 per share that is payable on May 31, 2023 to shareholders of record as of April 28, 2023. Accordingly, the Company recorded a dividend payable of $2.1 million within accrued expenses as of March 31, 2023. 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). |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2023 | |
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 the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for 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 the Company's 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 the Company's assessment and consultation with legal counsel regarding the ultimate outcome of the matter. As of March 31, 2023, 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. Environmental Matters. The Company has accrued liabilities for environmental assessment and remediation matters relating to operations at certain locations conducted in the past by predecessor companies that do not relate to ARC's current operations. The Company has accrued these liabilities because it is probable that a loss or cost will be incurred and the amount of loss or cost can be reasonably estimated. These estimates could change as a result of changes in planned remedial actions, remediation technologies, site conditions, the estimated time to complete remediation, environmental laws and regulations, and other factors. Because of the uncertainties associated with environmental assessment and remediation activities, the Company's future expenses relating to these matters could be higher than the liabilities it has accrued. Based upon current information, the Company believes that the impact of the resolution of these matters would not be, individually or in the aggregate, material to its financial position, results of operations or cash flows. |
Stock-Based Compensation
Stock-Based Compensation | 3 Months Ended |
Mar. 31, 2023 | |
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 March 31, 2023, 0.2 million shares remained available for issuance under the 2021 Incentive Plan. On April 26, 2023, the Company's shareholders approved an amendment to the 2021 Plan to increase the aggregate number of equity incentive shares authorized for issuance by 5,000,000 shares of common stock. 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 During the three months ended March 31, 2023, the Company granted options to acquire a total of 1.1 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. These stock options vest annually over three years to four years from the grant date and expire 10 years after the date of grant. During the three months ended March 31, 2023, the Company granted 0.1 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 restricted stock awards vest annually over three years from the grant date. Stock-based compensation expense was $0.5 million for the three months ended March 31, 2023 and March 31, 2022. |
Fair Value Measurements
Fair Value Measurements | 3 Months Ended |
Mar. 31, 2023 | |
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 March 31, 2023, 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 a 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 Sheet were $1.6 million as of March 31, 2023 and $1.7 million as of December 31, 2022 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 March 31, 2023 for borrowings under its 2021 Credit Agreement is $40.0 million. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its 2021 Credit Agreement is $40.0 million as of March 31, 2023. |
Description of Business and B_2
Description of Business and Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2023 | |
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 months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. 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 thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. |
Noncontrolling Interest | Noncontrolling Interest The Company accounted for its investment in UNIS Document Solutions Co. Ltd. ("UDS"), under the purchase method of accounting, in accordance with Accounting Standards Codification ("ASC") 805, Business Combinations |
Revenue Recognition | Revenue RecognitionRevenue is recognized when control of the promised goods or services is transferred to ARC's customers, in an amount that reflects the consideration it expects to be entitled to in exchange for those goods or services. Digital Printing 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 Digital Printing 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 the Company expects 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 the Company's hosted proprietary technology, Abacus ® , which allows 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 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. Scanning and Digital Imaging combines software and professional services to facilitate the capture, management, access and retrieval of documents and information that have been produced in the past. Scanning and Digital Imaging includes the Company's hosted SKYSITE ® software and ARC Facilities solution 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 Scanning and Digital Imaging professional services, which represent substantially all revenue for the business line, 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; generally, this 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, ARC Facilities, or through other electronic media. Revenue is measured as the amount of consideration the Company expects 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; generally, this 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 the Company expects 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. |
Recently Adopted Accounting Pronouncements | Recently Adopted Accounting Pronouncements 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 implementation of CECL did not have a material impact on the Company's 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 a significant portion 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 results largely depend on the strength of that industry. The Company's historical operating results reflect the cyclical and variable nature of the AEC/O industry. ARC believes that the AEC/O industry generally experiences downturns several months after a downturn in the general economy, and that there may be a similar delay in the recovery of the AEC/O industry following a recovery of the general economy. A downturn in the AEC/O industry would diminish demand for all of the Company's products and services, and would therefore negatively affect the Company's revenues and have a material adverse effect on the Company'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 that are relatively new to the company. The success of the Company's efforts will be affected by its ability to acquire new customers for the Company's new service offerings as well as sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition. |
Earnings Per Share | The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. |
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, 2022, 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. There can be no assurance that the estimates and assumptions made for purposes of the Company’s goodwill impairment analysis in 2022 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 2023, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other |
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. |
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 | 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. |
Description of Business and B_3
Description of Business and Basis of Presentation (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Accounting Policies [Abstract] | |
Schedule of Net Sales of Principal Services and Products | Net sales of the Company’s principal services and products were as follows: Three Months Ended 2023 2022 Service Sales Digital Printing $ 41,379 $ 41,947 MPS (1) 19,016 18,654 Scanning and Digital Imaging 4,594 4,169 Total services sales $ 64,989 $ 64,770 Equipment and Supplies Sales 3,929 4,718 Total net sales $ 68,918 $ 69,488 (1) MPS includes $17.5 million of rental income and $1.5 million of service income for the three months ended March 31, 2023. MPS includes $17.2 million of rental income and $1.5 million of service income for the three months ended March 31, 2022. |
Earnings per Share (Tables)
Earnings per Share (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Earnings Per Share [Abstract] | |
Schedule of Weighted Average Number of Shares | Basic and diluted weighted average common shares outstanding were calculated as follows for the three months ended March 31, 2023 and 2022: Three Months Ended 2023 2022 Weighted average common shares outstanding during the period—basic 42,552 42,064 Effect of dilutive stock awards 1,212 1,675 Weighted average common shares outstanding during the period—diluted 43,764 43,739 |
Goodwill and Other Intangibles
Goodwill and Other Intangibles (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Goodwill and Intangible Assets Disclosure [Abstract] | |
Schedule of Other Intangible Assets Resulting from Business Acquisitions | The following table sets forth the Company’s other intangible assets resulting from business acquisitions as of March 31, 2023 and December 31, 2022 which continue to be amortized: March 31, 2023 December 31, 2022 Gross Accumulated Net Gross Accumulated Net Amortizable other intangible assets Customer relationships $ 99,114 $ 99,102 $ 12 $ 99,087 $ 99,073 $ 14 Trade names and trademarks 20,284 20,098 186 20,281 20,087 194 $ 119,398 $ 119,200 $ 198 $ 119,368 $ 119,160 $ 208 |
Schedule of Estimated Future Amortization Expense of Amortizable Intangible Assets | Estimated future amortization expense of other intangible assets for the remainder of the 2023 fiscal year, and each of the subsequent four fiscal years and thereafter, are as follows: 2023 (excluding the three months ended March 31, 2023) $ 31 2024 40 2025 36 2026 35 2027 35 Thereafter 21 $ 198 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 3 Months Ended |
Mar. 31, 2023 | |
Debt Disclosure [Abstract] | |
Schedule of Long-Term Debt | Long-term debt consists of the following: March 31, 2023 December 31, 2022 Revolving Loans; 6.2% and 5.6% interest rate at March 31, 2023 and December 31, 2022 $ 40,000 $ 40,000 Various finance leases; weighted average interest rate of 5.3% and 5.1% at March 31, 2023 and December 31, 2022, respectively; principal and interest payable monthly through March 2028 24,775 26,474 64,775 66,474 Less current portion (10,615) (11,558) $ 54,160 $ 54,916 |
Description of Business and B_4
Description of Business and Basis of Presentation - Narrative (Details) | Mar. 31, 2023 |
UDS | |
Noncontrolling Interest [Line Items] | |
Noncontrolling interest, ownership percentage by noncontrolling owners | 35% |
Description of Business and B_5
Description of Business and Basis of Presentation - Schedule of Net Sales by Principal Services and Products (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Segment Reporting Information [Line Items] | ||
Total net sales | $ 68,918 | $ 69,488 |
Service Sales | ||
Segment Reporting Information [Line Items] | ||
Total net sales | 64,989 | 64,770 |
Digital Printing | ||
Segment Reporting Information [Line Items] | ||
Total net sales | 41,379 | 41,947 |
MPS | ||
Segment Reporting Information [Line Items] | ||
Total net sales | 19,016 | 18,654 |
Rental income | 17,500 | 17,200 |
Service income | 1,500 | 1,500 |
Scanning and Digital Imaging | ||
Segment Reporting Information [Line Items] | ||
Total net sales | 4,594 | 4,169 |
Equipment and Supplies Sales | ||
Segment Reporting Information [Line Items] | ||
Total net sales | $ 3,929 | $ 4,718 |
Earnings per Share - Narrative
Earnings per Share - Narrative (Details) - shares shares in Millions | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Earnings Per Share [Abstract] | ||
Common stock options excluded for anti-dilutive (in shares) | 3.8 | 2.8 |
Earnings per Share - Basic and
Earnings per Share - Basic and Diluted Weighted Average Common Shares Outstanding (Details) - shares shares in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Earnings Per Share [Abstract] | ||
Weighted average common shares outstanding during the period—basic (in shares) | 42,552 | 42,064 |
Effect of dilutive stock awards (in shares) | 1,212 | 1,675 |
Weighted average common shares outstanding during the period—diluted (in shares) | 43,764 | 43,739 |
Goodwill and Other Intangible_2
Goodwill and Other Intangibles - Narrative (Details) - USD ($) | 3 Months Ended | 9 Months Ended | 15 Months Ended |
Mar. 31, 2023 | Sep. 30, 2022 | Mar. 31, 2023 | |
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 |
Goodwill and Other Intangible_3
Goodwill and Other Intangibles - Schedule of Other Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | $ 119,398 | $ 119,368 |
Accumulated Amortization | 119,200 | 119,160 |
Net Carrying Amount | 198 | 208 |
Customer relationships | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 99,114 | 99,087 |
Accumulated Amortization | 99,102 | 99,073 |
Net Carrying Amount | 12 | 14 |
Trade names and trademarks | ||
Finite-Lived Intangible Assets [Line Items] | ||
Gross Carrying Amount | 20,284 | 20,281 |
Accumulated Amortization | 20,098 | 20,087 |
Net Carrying Amount | $ 186 | $ 194 |
Goodwill and Other Intangible_4
Goodwill and Other Intangibles - Estimated Future Amortization Expense of Amortizable Intangible Assets (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2023 (excluding the three months ended March 31, 2023) | $ 31 | |
2024 | 40 | |
2025 | 36 | |
2026 | 35 | |
2027 | 35 | |
Thereafter | 21 | |
Net Carrying Amount | $ 198 | $ 208 |
Income Taxes (Details)
Income Taxes (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2023 | Mar. 31, 2022 | |
Income Tax Disclosure [Abstract] | ||
Income tax provision | $ 1,160 | $ 798 |
Income before income tax provision | $ 2,987 | $ 2,654 |
Effective income tax rate reconciliation, percent | 38.80% | 30.10% |
Deferred tax assets, net of valuation allowance, current | $ 2,700 |
Long-Term Debt - Summary of Lon
Long-Term Debt - Summary of Long Term Debt (Details) - USD ($) $ in Thousands | Mar. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Various finance leases; weighted average interest rate of 5.3% and 5.1% at March 31, 2023 and December 31, 2022, respectively; principal and interest payable monthly through March 2028 | $ 24,775 | $ 26,474 |
Long-term debt and finance leases, including current maturities | 64,775 | 66,474 |
Less current portion | (10,615) | (11,558) |
Long-term debt and finance leases | $ 54,160 | $ 54,916 |
Weighted average discount rate, finance leases | 5.30% | 5.10% |
Line of Credit | Revolving Credit Facility | ||
Debt Instrument [Line Items] | ||
Revolving Loans; 6.2% and 5.6% interest rate at March 31, 2023 and December 31, 2022 | $ 40,000 | $ 40,000 |
Interest rate, effective percentage | 5.60% |
Long-Term Debt - Narrative (Det
Long-Term Debt - Narrative (Details) | 1 Months Ended | 3 Months Ended | |||
Apr. 22, 2021 USD ($) | Feb. 28, 2023 $ / shares | Mar. 31, 2023 USD ($) $ / shares | Mar. 31, 2022 $ / shares | Dec. 31, 2022 USD ($) | |
Debt Instrument [Line Items] | |||||
Quarterly cash dividends declared (in usd per share) | $ / shares | $ 0.05 | $ 0.05 | $ 0.05 | ||
Dividends payable | $ 2,100,000 | ||||
2021 Credit Agreement | |||||
Debt Instrument [Line Items] | |||||
Debt instrument covenant terms, measurement period | 12 months | ||||
Revolving Credit Facility | 2021 Credit Agreement | |||||
Debt Instrument [Line Items] | |||||
Letters of credit outstanding, amount | $ 2,200,000 | ||||
Revolving Credit Facility | Line of Credit | |||||
Debt Instrument [Line Items] | |||||
Long-term debt | 40,000,000 | $ 40,000,000 | |||
Interest rate, effective percentage | 5.60% | ||||
Revolving Credit Facility | 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 available borrowing capacity | 27,800,000 | ||||
Long-term debt | $ 40,000,000 | ||||
Covenant term, total leverage ratio | 2.75 | ||||
Fixed charged coverage ratio | 1.15 | ||||
Debt covenant terms, fixed charge coverage ratio, maximum annual payments | 15,000,000 | ||||
Debt covenant terms, fixed charge coverage ratio, restricted payments excluded | $ 10,000,000 | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | London Interbank Offered Rate (LIBOR) | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 1% | ||||
Interest rate, effective percentage | 6.20% | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | Federal Funds Effective Swap Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 0.50% | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | Minimum | London Interbank Offered Rate (LIBOR) | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 1.25% | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | Minimum | Prime Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 0.25% | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | Maximum | London Interbank Offered Rate (LIBOR) | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 1.75% | ||||
Revolving Credit Facility | Line of Credit | 2021 Credit Agreement | Maximum | Prime Rate | |||||
Debt Instrument [Line Items] | |||||
Basis spread on variable rate | 0.75% |
Stock-Based Compensation (Detai
Stock-Based Compensation (Details) - USD ($) $ in Millions | 3 Months Ended | |||
Mar. 31, 2023 | Mar. 31, 2022 | Apr. 26, 2023 | Apr. 29, 2021 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Share-based compensation expense | $ 0.5 | $ 0.5 | ||
Total unrecognized compensation cost related to unvested stock-based payments | $ 3.9 | |||
Expected weighted-average period to recognize compensation cost (in years) | 2 years 3 months 18 days | |||
Key Employees | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options granted (in shares) | 1,100,000 | |||
Share-based Payment Arrangement, Option | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock option expiration period (in years) | 10 years | |||
Exercise price of options, percentage of fair market value of Company's common stock | 100% | |||
Share-based Payment Arrangement, Option | Minimum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period (in years) | 3 years | |||
Share-based Payment Arrangement, Option | Maximum | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period (in years) | 4 years | |||
Restricted Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Vesting period (in years) | 3 years | |||
Restricted Stock | Key Employees | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Awards granted (in shares) | 100,000 | |||
2021 Incentive Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares authorized (in shares) | 3,500,000 | |||
Shares available for issuance (in shares) | 200,000 | |||
2021 Incentive Plan | Subsequent Event | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares authorized (in shares) | 5,000,000 | |||
2014 Inventive Plan And 2005 Stock Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares authorized (in shares) | 6,132,593 |
Fair Value Measurements (Detail
Fair Value Measurements (Details) - USD ($) $ in Millions | Mar. 31, 2023 | Dec. 31, 2022 |
Debt Instrument [Line Items] | ||
Cash and cash equivalents | $ 1.6 | $ 1.7 |
Term Loan | Line of Credit | ||
Debt Instrument [Line Items] | ||
Long-term debt | 40 | |
Fair value of borrowings | $ 40 |