10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________ 

Form 10-Q

_______________________________________ 

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2016

or

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-32407

_______________________________________ 

ARC DOCUMENT SOLUTIONS, INC.

(Exact name of Registrant as specified in its Charter)

_______________________________________ 

Delaware	20-1700361
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1981 N. Broadway, Suite 385

Walnut Creek, California 94596

(925) 949-5100

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

_______________________________________ 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ý    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ý    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	ý
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  ý

As of October 28, 2016, there were 45,974,642 shares of the issuer’s common stock outstanding.

ARC DOCUMENT SOLUTIONS, INC.

Form 10-Q

For the Quarter Ended September 30, 2016

Table of Contents

PART I—FINANCIAL INFORMATION	4
Item 1. Condensed Consolidated Financial Statements	4
Condensed Consolidated Balance Sheets as of September 30, 2016 and December 31, 2015 (Unaudited)	4
Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2016 and 2015 (Unaudited)	5
Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and nine months ended September 30, 2016 and 2015 (Unaudited)	6
Condensed Consolidated Statements of Equity for the nine months ended September 30, 2016 and 2015 (Unaudited)	7
Condensed Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2016 and 2015 (Unaudited)	8
Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3. Quantitative and Qualitative Disclosures About Market Risk	35
Item 4. Controls and Procedures	35
PART II—OTHER INFORMATION	37
Item 1. Legal Proceedings	37
Item 1A. Risk Factors	37
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 6. Exhibits	38
Signatures	39
Exhibit Index	40
Exhibit 31.1
Exhibit 31.2
Exhibit 32.1
Exhibit 32.2

2

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains statements that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. When used in this Form 10-Q, the words “believe,” “expect,” “anticipate,” “estimate,” “intend,” “plan,” “project,” “target,” “likely,” “will,” “would,” “could,” and variations of such words and similar expressions as they relate to our management or to ARC Document Solutions, Inc. (the “Company”) are intended to identify forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those contemplated herein. We have described in Part II, Item 1A-“Risk Factors” a number of factors that could cause our actual results to differ from our projections or estimates. These factors and other risk factors described in this Form 10-Q are not necessarily all of the important factors that could cause actual results to differ materially from those expressed in any of our forward-looking statements. Other unknown or unpredictable factors also could harm our results. Consequently, there can be no assurance that the actual results or developments anticipated by us will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, us. Given these uncertainties, you are cautioned not to place undue reliance on such forward-looking statements.

Except where otherwise indicated, the statements made in this Form 10-Q are made as of the date we filed this report with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. All future written and verbal forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. We undertake no obligation, and specifically disclaim any obligation, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should, however, consult further disclosures we make in future filings of our Forms 10-K, Forms 10-Q, and Forms 8-K, and any amendments thereto, as well as our proxy statements.

3

PART I—FINANCIAL INFORMATION

Item 1.Condensed Consolidated Financial Statements

ARC DOCUMENT SOLUTIONS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

	September 30,			December 31,
(In thousands, except per share data)	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	19,640		$	23,963
Accounts receivable, net of allowances for accounts receivable of $2,007 and $2,094	61,373			60,085
Inventories, net	19,981			16,972
Prepaid expenses	4,689			4,555
Other current assets	3,485			4,131
Total current assets	109,168			109,706
Property and equipment, net of accumulated depreciation of $208,749 and $202,457	56,923			57,590
Goodwill	138,688			212,608
Other intangible assets, net	14,393			17,946
Deferred income taxes	74,138			74,196
Other assets	2,255			2,492
Total assets	$	395,565		$	474,538
Liabilities and Equity
Current liabilities:
Accounts payable	$	22,534		$	23,989
Accrued payroll and payroll-related expenses	10,196			12,118
Accrued expenses	16,793			19,194
Current portion of long-term debt and capital leases	12,926			14,374
Total current liabilities	62,449			69,675
Long-term debt and capital leases	145,978			157,018
Deferred income taxes	29,845			35,933
Other long-term liabilities	2,482			2,778
Total liabilities	240,754			265,404
Commitments and contingencies (Note 6)
Stockholders’ equity:
ARC Document Solutions, Inc. stockholders’ equity:
Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding	—			—
Common stock, $0.001 par value, 150,000 shares authorized; 47,415 and 47,130 shares issued and 45,975 and 47,029 shares outstanding	47			47
Additional paid-in capital	117,264			115,089
Retained earnings	39,198			89,687
Accumulated other comprehensive loss	(2,831		)	(2,097		)
	153,678			202,726
Less cost of common stock in treasury, 1,440 and 101 shares	5,909			612
Total ARC Document Solutions, Inc. stockholders’ equity	147,769			202,114
Noncontrolling interest	7,042			7,020
Total equity	154,811			209,134
Total liabilities and equity	$	395,565		$	474,538

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

ARC DOCUMENT SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands, except per share data)	2016			2015			2016			2015
Service sales	$	89,178		$	94,384		$	272,394		$	287,045
Equipment and supplies sales	11,265			12,034			35,369			37,081
Total net sales	100,443			106,418			307,763			324,126
Cost of sales	67,713			70,475			204,904			211,303
Gross profit	32,730			35,943			102,859			112,823
Selling, general and administrative expenses	24,893			25,816			76,752			80,403
Amortization of intangible assets	1,160			1,375			3,705			4,306
Goodwill impairment	—			—			73,920			—
Restructuring expense	—			4			7			89
Income (loss) from operations	6,677			8,748			(51,525		)	28,025
Other income, net	(16		)	(25		)	(54		)	(81		)
Loss on extinguishment of debt	66			96			156			193
Interest expense, net	1,563			1,679			4,535			5,475
Income (loss) before income tax provision (benefit)	5,064			6,998			(56,162		)	22,438
Income tax provision (benefit)	2,162			(73,338		)	(5,884		)	(71,766		)
Net income (loss)	2,902			80,336			(50,278		)	94,204
Income attributable to the noncontrolling interest	(61		)	(50		)	(211		)	(225		)
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	2,841		$	80,286		$	(50,489	)	$	93,979
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:
Basic	$	0.06		$	1.72		$	(1.10	)	$	2.02
Diluted	$	0.06		$	1.69		$	(1.10	)	$	1.98
Weighted average common shares outstanding:
Basic	45,599			46,698			46,055			46,601
Diluted	46,189			47,557			46,055			47,541

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ARC DOCUMENT SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands)	2016			2015			2016			2015
Net income (loss)	$	2,902		$	80,336		$	(50,278	)	$	94,204
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax	(250		)	(1,434		)	(873		)	(1,524		)
Fair value adjustment of derivatives, net of tax	47			(69		)	(50		)	(263		)
Other comprehensive loss, net of tax	(203		)	(1,503		)	(923		)	(1,787		)
Comprehensive income (loss)	2,699			78,833			(51,201		)	92,417
Comprehensive income (loss) attributable to noncontrolling interest	36			(237		)	22			(30		)
Comprehensive income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	2,663		$	79,070		$	(51,223	)	$	92,447

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

ARC DOCUMENT SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

	ARC Document Solutions, Inc. Shareholders
	Common Stock									Accumulated
(In thousands, except per share data)	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			Other Comprehensive Loss			Common Stock in Treasury			Noncontrolling Interest			Total
Balance at December 31, 2014	46,800	$	47	$	110,650		$	(7,353	)	$	(161	)	$	(408	)	$	7,063		$	109,838
Stock-based compensation	131	—		3,009			—			—			—			—			3,009
Issuance of common stock under Employee Stock Purchase Plan	13	—		83			—			—			—			—			83
Stock options exercised	125	—		562			—			—			—			—			562
Treasury shares	24	—		—			—			—			(204		)	—			(204		)
Comprehensive income:
Net income	—	—		—			93,979			—			—			225			94,204
Foreign currency translation adjustments, net of tax	—	—		—			—			(1,269		)	—			(255		)	(1,524		)
Fair value adjustment of derivatives, net of tax	—	—		—			—			(263		)	—			—			(263		)
Comprehensive income																			92,417
Balance at September 30, 2015	47,093	$	47	$	114,304		$	86,626		$	(1,693	)	$	(612	)	$	7,033		$	205,705
	ARC Document Solutions, Inc. Shareholders
	Common Stock									Accumulated
(In thousands, except per share data)	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			Other Comprehensive Loss			Common Stock in Treasury			Noncontrolling Interest			Total
Balance at December 31, 2015	47,130	$	47	$	115,089		$	89,687		$	(2,097	)	$	(612	)	$	7,020		$	209,134
Stock-based compensation	229	—		2,073			—			—			—			—			2,073
Issuance of common stock under Employee Stock Purchase Plan	28	—		96			—			—			—			—			96
Stock options exercised	28	—		76			—			—			—			—			76
Tax deficiency from stock based compensation				(70		)													(70		)
Treasury shares	—	—		—			—			—			(5,297		)	—			(5,297		)
Comprehensive loss:
Net (loss) income	—	—		—			(50,489		)	—			—			211			(50,278		)
Foreign currency translation adjustments, net of tax	—	—		—			—			(684		)	—			(189		)	(873		)
Fair value adjustment of derivatives, net of tax	—	—		—			—			(50		)	—			—			(50		)
Comprehensive loss																			(51,201		)
Balance at September 30, 2016	47,415	$	47	$	117,264		$	39,198		$	(2,831	)	$	(5,909	)	$	7,042		$	154,811

The accompanying notes are an integral part of these condensed consolidated financial statements.

7

ARC DOCUMENT SOLUTIONS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands)	2016			2015			2016			2015
Cash flows from operating activities
Net income (loss)	$	2,902		$	80,336		$	(50,278	)	$	94,204
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Allowance for accounts receivable	324			110			644			292
Depreciation	6,697			7,040			20,032			21,184
Amortization of intangible assets	1,160			1,375			3,705			4,306
Amortization of deferred financing costs	111			138			344			460
Goodwill impairment	—			—			73,920			—
Stock-based compensation	650			735			2,073			2,739
Deferred income taxes	2,299			2,198			(6,018		)	8,221
Deferred tax valuation allowance	(1		)	(76,091		)	(16		)	(80,882		)
Loss on early extinguishment of debt	66			96			156			193
Other non-cash items, net	(87		)	(73		)	(540		)	(357		)
Changes in operating assets and liabilities:
Accounts receivable	(897		)	2,996			(2,285		)	(3,637		)
Inventory	(429		)	1,083			(3,196		)	(1,775		)
Prepaid expenses and other assets	1,179			1,224			513			2,941
Accounts payable and accrued expenses	(1,811		)	(202		)	(5,008		)	(4,772		)
Net cash provided by operating activities	12,163			20,965			34,046			43,117
Cash flows from investing activities
Capital expenditures	(2,430		)	(3,880		)	(7,580		)	(11,517		)
Other	135			266			842			514
Net cash used in investing activities	(2,295		)	(3,614		)	(6,738		)	(11,003		)
Cash flows from financing activities
Proceeds from stock option exercises	46			1			76			562
Proceeds from issuance of common stock under Employee Stock Purchase Plan	26			25			96			83
Share repurchases	(200		)	—			(5,297		)	(204		)
Contingent consideration on prior acquisitions	(86		)	(360		)	(453		)	(360		)
Early extinguishment of long-term debt	(7,000		)	(3,625		)	(16,000		)	(10,875		)
Payments on long-term debt agreements and capital leases	(3,310		)	(7,262		)	(9,651		)	(20,042		)
Net repayments under revolving credit facilities	—			(144		)	—			(1,888		)
Payment of deferred financing costs	(76		)	—			(106		)	(25		)
Payment of hedge premium	—			—			—			(632		)
Net cash used in financing activities	(10,600		)	(11,365		)	(31,335		)	(33,381		)
Effect of foreign currency translation on cash balances	(80		)	(598		)	(296		)	(545		)
Net change in cash and cash equivalents	(812		)	5,388			(4,323		)	(1,812		)
Cash and cash equivalents at beginning of period	20,452			15,436			23,963			22,636
Cash and cash equivalents at end of period	$	19,640		$	20,824		$	19,640		$	20,824
Supplemental disclosure of cash flow information
Noncash investing and financing activities
Capital lease obligations incurred	$	3,738		$	2,625		$	12,345		$	9,667
Contingent liabilities in connection with acquisition of businesses	$	—		$	—		$	85		$	—

The accompanying notes are an integral part of these condensed consolidated financial statements.

8

ARC DOCUMENT SOLUTIONS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share data or where otherwise noted)

(Unaudited)

1. Description of Business and Basis of Presentation

ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC” or the “Company”) is a leading document solutions provider to architectural, engineering, construction, and facilities management professionals, while also providing document solutions to businesses of all types. ARC offers a variety of services including: Construction Document Information Management ("CDIM"), Managed Print Services ("MPS"), and Archive and Information Management ("AIM"). In addition, ARC also sells Equipment and Supplies. The Company conducts its operations through its wholly-owned operating subsidiary, ARC Document Solutions, LLC, a Texas limited liability company, and its affiliates.

Basis of Presentation

The accompanying interim Condensed Consolidated Financial Statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and in conformity with the requirements of the Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the accompanying interim Condensed Consolidated Financial Statements presented reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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 2015 Form 10-K.

Recent Accounting Pronouncements

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

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the statement of operations when share-based awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company's statement of cash flows, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-09 on its condensed consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Codification (“ASC”) 842, Leases. The new guidance replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASC 842 is

9

effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASC 842 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value and amends existing guidance which requires inventory be measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for financial statement preparers. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-11 on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the existing revenue recognition requirements in “Revenue Recognition (Topic 605).” The new guidance requires entities to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The new guidance amends Accounting Standards Codification ("ASC") 350-40, Intangibles - Goodwill and Other, Internal-Use Software, to provide guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-05 on January 1, 2016. The adoption of ASU 2015-05 did not have a material impact to the Company's condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of deferred financing fees in an entity's financial statements. Under the ASU, deferred financing fees are to be presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-03 as of January 1, 2016. In conjunction with the adoption of ASU 2015-03, the Company reclassified net deferred financing fees of $1.6 million at December 31, 2015 from an asset to a direct deduction from the related debt liability to conform to the current period presentation.

Segment Reporting

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

Net sales of the Company’s principal services and products were as follows:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Service Sales
CDIM	$	53,228	$	54,710	$	161,753	$	168,187
MPS	32,796		35,923		100,082		108,934
AIM	3,154		3,751		10,559		9,924
Total service sales	89,178		94,384		272,394		287,045
Equipment and supplies sales	11,265		12,034		35,369		37,081
Total net sales	$	100,443	$	106,418	$	307,763	$	324,126

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

10

can be significantly affected by economic factors that influence the AEC/O industry, such as non-residential construction spending, GDP growth, interest rates, unemployment rates, and office vacancy rates. Reduced activity (relative to historic levels) in the AEC/O industry would diminish demand for some of ARC’s services and products, and would therefore negatively affect revenues and have a material adverse effect on its business, operating results and financial condition.

As part of the Company’s growth strategy, ARC intends to continue to offer and grow a variety of service offerings, some of which are relatively new to the Company. The success of the Company’s efforts will be affected by its ability to acquire new customers for the Company’s new service offerings, as well as to sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition.

2. Earnings per Share

The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income attributable to ARC by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if common shares subject to outstanding options and acquisition rights had been issued and if the additional common shares were dilutive. Common share equivalents are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2016, stock options of 3.0 million and 4.4 million common shares were excluded from the calculation of diluted net income (loss) attributable to ARC per common share, respectively, because they were anti-dilutive. For the three and nine months ended September 30, 2015, stock options of 2.1 million and 1.5 million common shares were excluded from the calculation of diluted net income attributable to ARC per common share, respectively, because they were anti-dilutive. The Company's common share equivalents consist of stock options issued under the Company's stock plan.

Basic and diluted weighted average common shares outstanding were calculated as follows for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2016	2015	2016	2015
Weighted average common shares outstanding during the period—basic	45,599	46,698	46,055	46,601
Effect of dilutive stock options	590	859	—	940
Weighted average common shares outstanding during the period—diluted	46,189	47,557	46,055	47,541

Stock Repurchase Program

On February 8, 2016, the Company announced that the Company's Board of Directors had approved a stock repurchase program that authorizes the Company to purchase up to $15.0 million of the Company's outstanding common stock through December 31, 2017. Under the repurchase program, purchases of shares of common stock may be made from time to time in the open market, or in privately negotiated transactions, in compliance with applicable state and federal securities laws. The stock repurchase program does not obligate the company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time without prior notice. See Part II, Item 2., “Unregistered Sales of Equity Securities and Use of Proceeds” of this report for additional information on the stock repurchase program.

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3. Goodwill and Other Intangibles Resulting from Business Acquisitions

Goodwill

In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles-Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2016, the Company performed its assessment and determined that goodwill was not impaired.

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the second quarter of 2016, in connection with an operationally focused reorganization of certain of the Company's reporting units, one additional reporting unit was added. As such, the goodwill of the former reporting units affected was reassigned to the new reporting unit based on their relative fair values and represented less than one percent of the Company's goodwill balance at the time.

Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.

At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company performed its preliminary assessment as of June 30, 2016 and noted that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis; however, step two of the analysis was subject to finalization of the implied fair value of goodwill. The preliminary results of step two of the Company's goodwill impairment analysis indicated that the Company's goodwill was impaired by approximately $73.9 million. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million. The Company completed step two of the analysis in the third quarter of 2016 with no change to the previous estimate.

Given the current economic environment, the changing document and printing needs of the Company’s customers, and the uncertainties regarding the related impact on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim goodwill impairment test in 2016 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, the Company may be required to record additional goodwill impairment charges in future periods, whether in connection with the Company’s next annual impairment testing in the third quarter of 2017, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

The changes in the carrying amount of goodwill from January 1, 2015 through September 30, 2016 are summarized as follows:

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	Gross Goodwill		Accumulated Impairment Loss		Net Carrying Amount
January 1, 2015	$	405,558	$	192,950	$	212,608
Additions	—		—		—
Goodwill impairment	—		—		—
December 31, 2015	405,558		192,950		212,608
Additions	—		—		—
Goodwill impairment	—		73,920		(73,920		)
September 30, 2016	$	405,558	$	266,870	$	138,688

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 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 its long-lived assets for possible impairment during the nine months ended September 30, 2016 and concluded that its long-lived assets were not impaired.

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, 2016 and December 31, 2015 which continue to be amortized:

	September 30, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable other intangible assets
Customer relationships	$	99,227	$	85,265	$	13,962	$	99,050	$	81,572	$	17,478
Trade names and trademarks	20,312		19,881		431		20,329		19,861		468
	$	119,539	$	105,146	$	14,393	$	119,379	$	101,433	$	17,946

Based on current information, estimated future amortization expense of amortizable intangible assets for the remainder of the 2016 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:

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2016 (excluding the nine months ended September 30, 2016)	$	1,135
2017	4,267
2018	3,855
2019	3,134
2020	1,523
Thereafter	479
	$	14,393

4. Income Taxes

On a quarterly basis, the Company estimates its effective tax rate for the full fiscal year and records a quarterly income tax provision based on the anticipated rate in conjunction with the recognition of any discrete items within the quarter.

The Company recorded an income tax provision of $2.2 million in relation to pretax income of $5.1 million for the three months ended September 30, 2016, and an income tax benefit of $5.9 million in relation to pretax loss of $56.2 million for the nine months ended September 30, 2016, which resulted in an effective income tax rate of 42.6% and 10.5%, for the three and nine months ended September 30, 2016, respectively. The Company's low effective income tax rate for the nine months ended September 30, 2016 was primarily due to the $41.4 million goodwill impairment related to historical stock acquisitions which cannot be deducted for income tax purposes until the related stock is disposed of. The Company recorded income tax benefits of $73.3 million and $71.8 million in relation to pretax income of $7.0 million and $22.4 million for the three and nine months ended September 30, 2015.

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.

It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. The Company utilizes a rolling three years of actual and current year anticipated results as the primary measure of cumulative losses in recent years, excluding permanent differences. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability. The Company's accounting for deferred tax consequences represents its best estimate of those future events. Changes in the Company's current estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations. At September 30, 2015, as a result of sustained profitability in the U.S. evidenced by three years of earnings and forecasted continuing profitability, the Company determined it was more likely than not that future earnings would be sufficient to realize certain of its deferred tax assets in the U.S. Accordingly the Company reversed most of its U.S. valuation allowance, resulting in non-cash income tax benefit of $80.7 million for the year ended December 31, 2015. The Company continues to carry a $1.3 million valuation allowance against certain deferred tax assets as of September 30, 2016.

Based on the Company’s current assessment, the remaining net deferred tax assets as of September 30, 2016 are considered more likely than not to be realized. The valuation allowance of $1.3 million may be increased or reduced as conditions change or if the Company is unable to implement certain available tax planning strategies. The realization of the Company’s net deferred tax assets ultimately depend on future taxable income, reversals of existing taxable temporary differences or through a loss carry back.

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5. Long-Term Debt

Long-term debt consists of the following:

	September 30, 2016			December 31, 2015
Term A loan facility maturing 2019 net of deferred financing fees of $1,192 and $1,586; 2.59% and 2.50% interest rate at September 30, 2016 and December 31, 2015	$	125,808		$	141,414
Various capital leases; weighted average interest rate of 5.6% and 5.8% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through September 2021	33,059			29,866
Various other notes payable with a weighted average interest rate of 10.7% and 8.5% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through November 2019	37			112
	158,904			171,392
Less current portion	(12,926		)	(14,374		)
	$	145,978		$	157,018

Term A Loan Facility

On November 20, 2014 the Company entered into a Credit Agreement (the “Term A Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.

The Term A Credit Agreement provides for the extension of term loans (“Term Loans”) in an aggregate principal amount of $175.0 million, the entirety of which was disbursed on the Closing Date in order to pay outstanding obligations under the Company’s Term Loan Credit Agreement dated as of December 20, 2013. The Term A Credit Agreement also provides for the extension of revolving loans (“Revolving Loans”) in an aggregate principal amount not to exceed $30.0 million. The Revolving Loan facility under the Term A Credit Agreement replaces the Company’s Credit Agreement dated as of January 27, 2012. The Company may request incremental commitments to the aggregate principal amount of Term Loans and Revolving Loans available under the Term A Credit Agreement by an amount not to exceed $75.0 million in the aggregate. Unless an incremental commitment to increase the Term Loan or provide a new term loan matures at a later date, the obligations under the Term A Credit Agreement mature on November 20, 2019. As of September 30, 2016, the Company's borrowing availability under the Term A Credit Agreement was $28.2 million, which was the maximum borrowing limit of $30.0 million reduced by outstanding letters of credit of $1.8 million.

Loans borrowed under the Term A Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus a margin ranging from 1.50% to 2.50%, based on the Company’s Total Leverage Ratio (as defined in the Term A Credit Agreement). Loans borrowed under the Term A Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR rate plus 1.00%, and (C) the rate of interest announced, from time to time, by Wells Fargo Bank, National Association as its “prime rate,” plus (ii) a margin ranging from 0.50% to 1.50%, based on the Company’s Total Leverage Ratio.

The Company will pay certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.

Subject to certain exceptions, including in certain circumstances, reinvestment rights, the loans extended under the Term A Credit Agreement are subject to customary mandatory prepayment provisions with respect to: the net proceeds from certain asset sales; the net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term A Credit Agreement); the net proceeds from certain issuances of equity securities; and net proceeds of certain insurance recoveries and condemnation events of the Company.

The Term A Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of the Company and its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; sell certain property or assets; engage in mergers or other fundamental changes; consummate acquisitions; make investments; pay dividends, other distributions or repurchase equity interest of the Company or its subsidiaries; change the nature of their business; prepay or amend certain indebtedness; engage in certain transactions with affiliates; amend their organizational documents; or enter into certain restrictive agreements. In addition, the Term A Credit Agreement contains financial covenants which requires the Company to maintain (i) at all times, a Total Leverage

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Ratio in an amount not to exceed 3.25 to 1.00 through the Company’s fiscal quarter ending September 30, 2016, and thereafter, in an amount not to exceed 3.00 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the Term A Credit Agreement), as amended on June 24, 2016, the Company is required to maintain, as of the last day of each fiscal quarter, an amount not less than 1.15 to 1.00. On February 5, 2016, the Term A Credit Agreement was amended to exclude up to $15.0 million of stock repurchases from the calculation of the Company's Fixed Charge Coverage Ratio, provided that those stock repurchases are consummated in accordance with the other terms and conditions of the agreement.

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

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

As of September 30, 2016, the Company has paid $48.0 million in aggregate principal on its $175.0 million Term Loan Credit Agreement, which was $17.4 million above the required payments from inception to date. Principal payments on the Term Loan Credit Agreement of $16.0 million in 2016 resulted in a loss on extinguishment of debt of $66 thousand and $156 thousand for the three and nine months ended September 30, 2016.

Other Notes Payable

Includes notes payable collateralized by equipment previously purchased.

6. Commitments and Contingencies

Operating Leases. The Company has entered into various non-cancelable operating leases primarily related to facilities, equipment and vehicles used in the ordinary course of business.

Legal Proceedings. On October 21, 2010, a former employee, individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, L.L.C. and American Reprographics Company in the State of California at any time from October 21, 2006 through the settlement date, filed an action against the Company in the Superior Court of California for the County of Orange. The complaint alleged, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought included damages, restitution, penalties, interest, costs, and attorneys’ fees and such other relief as the court deems proper. On March 15, 2013, the Company participated in a private mediation session with claimants’ counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. In the second quarter of 2016, the Company settled with the defendants and paid $1.0 million, which had been accrued as of December 31, 2015.

In addition to the matter described above, the Company is involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or cash flows.

7. Stock-Based Compensation

At the Company's annual meeting of stockholders held on May 1, 2014, the Company's stockholders approved the Company's 2014 Stock Plan (the “2014 Stock Plan”) as adopted by the Company's board of directors. The 2014 Stock Plan replaces the American Reprographics Company 2005 Stock Plan (the "2005 Plan"). The 2014 Stock Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash bonus awards to employees, directors and consultants of the Company. The 2014 Stock Plan authorizes the Company to issue up to 3.5 million shares of common stock. As of September 30, 2016, 1.6 million shares remain available for issuance under the Stock Plan.

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Stock options granted under the 2014 Stock Plan generally expire no later than ten years from the date of grant. Options generally vest and become fully exercisable over a period of three to four years from date of award, except that options granted to non-employee directors may vest over a shorter time period. The exercise price of options must be equal to at least 100% of the fair market value of the Company’s common stock on the date of grant. The Company allows for cashless exercises of vested outstanding options.

During the nine months ended September 30, 2016, the Company granted options to acquire a total of 528 thousand shares of the Company's common stock to certain key employees with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. During the nine months ended September 30, 2016, the Company granted 130 thousand shares of restricted stock to certain key employees at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The granted stock options and restricted stock vest annually over three years from the grant date. In addition, the Company granted approximately 14 thousand shares of restricted stock to each of the Company's seven non-employee members of its board of directors at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The restricted stock vests on the one-year anniversary of the grant date.

The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $0.7 million for the both the three months ended September 30, 2016 and 2015.

The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $2.1 million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively.

As of September 30, 2016, total unrecognized compensation cost related to unvested stock-based payments totaled $3.4 million and is expected to be recognized over a weighted-average period of approximately 1.8 years.

8. Derivatives and Hedging Transactions

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

In January 2015, the Company entered into threeone-year interest rate cap contracts to hedge against its exposure to interest rate volatility: (1) $80.0 million notional interest rate cap effective in 2015, (2) $65.0 million notional forward interest rate cap effective in 2016, and (3) $50.0 million notional forward interest rate cap effective in 2017. Over the next twelve months, the Company expects to reclassify $0.4 million from AOCL to interest expense.

The following table summarizes the fair value and classification on the Condensed Consolidated Balance Sheets of the Company's derivatives as of September 30, 2016 and December 31, 2015:

		Fair Value
	Balance Sheet Classification	September 30, 2016		December 31, 2015
Derivative designated as hedging instrument under ASC 815
Interest rate cap contracts - current portion	Other current assets	$	12	$	48
Interest rate cap contracts - long-term portion	Other assets	11		191
Total derivatives designated as hedging instruments		$	23	$	239

The following table summarizes the income (loss) recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the three and nine months ended September 30, 2016 and 2015:

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	Amount of Income (Loss) Recognized in AOCL on Derivative
	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016			2015
Derivative in ASC 815 Cash Flow Hedging Relationship
Interest rate cap contracts, net of tax	$	47	$	(69	)	$	(50	)	$	(263	)

The following table summarizes the effect of the interest rate cap on the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015:

	Amount of Loss Reclassified from AOCL into Income
	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2016				2015				2016				2015
	Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion
Location of Loss Reclassified from AOCL into Income
Interest expense	$	68	$	—	$	9	$	—	$	132	$	—	$	10	$	—

9. Fair Value Measurements

In accordance with ASC 820, Fair Value Measurement, the Company has categorized its assets and liabilities that are measured at fair value into a three-level fair value hierarchy as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three levels of the hierarchy are defined as follows:

Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2-inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a nonrecurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016:

	Significant Other Unobservable Inputs
	September 30, 2016
	Level 3		Total Losses
Nonrecurring Fair Value Measure
Goodwill	$	138,688	$	73,920

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

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016 and as of and for the year ended December 31 2015:

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		Significant Other Unobservable Inputs
		September 30, 2016						December 31, 2015
		Level 2		Level 3		Total Losses		Level 2		Level 3		Total Losses
Recurring Fair Value Measure
	Interest rate cap contracts	$	23	$	—	$	—	$	239	$	—	$	—
	Contingent purchase price consideration for acquired businesses	$	—	$	541	$	—	$	—	$	1,059	$	—

The Company determines the fair value of its interest rate cap contracts based on observable interest rate yield curves and represent the expected discounted cash flows underlying the financial instruments.

The Company recognizes liabilities for future earnout obligations on business acquisitions, or contingent purchase price consideration for acquired businesses, at their fair value based on discounted projected payments on such obligations. The inputs to the valuation, which are level 3 inputs within the fair value hierarchy, are projected sales to be provided by the acquired businesses based on historical sales trends for which earnout amounts are contractually based. Based on the Company's assessment as of September 30, 2016, the estimated contractually required earnout amounts would be achieved.

The following table presents the change in the Level 3 contingent purchase price consideration liability for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Beginning balance	$	604		$	1,479		$	1,059		$	1,768
Additions related to acquisitions	—			—			104			—
Payments	(86		)	(360		)	(453		)	(502		)
Adjustments included in earnings	15			32			(180		)	2
Foreign currency translation adjustments	8			(34		)	11			(151		)
Ending balance	$	541		$	1,117		$	541		$	1,117

Fair Values of Financial Instruments. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments for disclosure purposes:

Cash equivalents: Cash equivalents are time deposits with maturity of three months or less when purchased, which are highly liquid and readily convertible to cash. Cash equivalents reported in the Company’s Condensed Consolidated Balance Sheets were $8.3 million and $6.3 million as of September 30, 2016 and December 31, 2015, respectively, and are carried at cost and approximate fair value due to the relatively short period to maturity of these instruments.

Short and long-term debt: The carrying amount of the Company’s capital leases reported in the Condensed Consolidated Balance Sheets approximates fair value based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements. The carrying amount reported in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2016 for borrowings under its Term Loan Credit Agreement is $127.0 million, excluding unamortized deferred financing fees. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its Term Loan Credit Agreement is $127.0 million as of September 30, 2016.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our interim Condensed Consolidated Financial Statements and the related notes and other financial information appearing elsewhere in this report as well as Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our 2015 Form 10-K and this Quarterly Report on Form 10-Q for the quarter ended September 30, 2016.

Business Summary

ARC Document Solutions, Inc. (“ARC Document Solutions,” “ARC,” “we,” “us,” or “our”) is a leading document solutions provider to design, engineering, construction, and facilities management professionals, while also providing document solutions to businesses of all types.

Our customers need us to manage the scale, complexity and workflow of their documents. We help them reduce their costs and increase their efficiency by improving their access and control over documents, and we offer a wide variety of ways to access, distribute, collaborate on, and store documents.

Each of our service offerings is enabled through a suite of supporting proprietary technology and a wide variety of value-added services. We have categorized our service and product offerings to report distinct sales recognized from:

Construction Document and Information Management (CDIM), which consists of software services and professional services to manage and distribute documents and information primarily related to construction projects. CDIM sales include software services such as SKYSITE® ProjectLink, our cloud-based project communication application, as well as providing document and information management services that are often technology-enabled. The bulk of our current revenue from CDIM comes from large-format and small-format printing services we provide in both black and white and in color. Sales from traditional construction plan printing have been in steady decline since the last recession as technology supplants the use of traditional “blueprints.”

Software services are a smaller part of overall CDIM sales which we anticipate to continue to grow with the adoption of technology. The sale of services address a variety of customer needs including the provision of project communication tools, project information management, building information modeling, digital document distribution services, printing services, and others.

Managed Print Services (MPS), consists of placement, management, and optimization of print and imaging equipment in our customers' offices, job sites, and other facilities. MPS relieves our customers of the burden of owning and managing print devices and print networks, and shifts their costs to a “per-use” basis. MPS is supported by our proprietary technology, Abacus™, which allows our customers to capture, control, manage, print, and account for their documents. MPS Services revenue is derived from two sources: 1) an engagement with the customer to place primarily large-format equipment, that we own or lease, at a construction site or in our customers’ offices, and 2) an arrangement by which our customers outsource their printing function to us, including all office printing, copying, and reprographics printing. In both cases this is recurring, contracted revenue with most contracts ranging from 3 to 5 years and we are paid a single cost per unit of material used, often referred to as a “click charge.” MPS sales are driven by the ongoing print needs of our customers at their facilities.

Archiving and Information Management (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 SKYSITE InfoLink 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, and their cloud-based storage and maintenance. AIM sales are driven by the need to leverage past intellectual property for present or future use, facilitate cost savings and efficiency improvements over current hardcopy and digital storage methods, as well as comply with regulatory and records retention requirements.

Equipment and Supplies, which consists of reselling printing, imaging, and related equipment to customers primarily to architectural, engineering and construction firms.

We have expanded our business beyond the services we traditionally provided to the architectural, engineering, construction, and building owner/operator (AEC/O) industry in the past and are currently focused on growing MPS, AIM and CDIM, as we believe the mix of services demanded by the AEC/O industry continues to shift toward document management at customer locations and in the cloud (represented primarily by our MPS and AIM revenues), and away from its historical emphasis on large-format construction drawings produced “offsite” in our service centers.

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We deliver our services via the cloud, through a nationwide network of service centers, regionally-based technical specialists, locally-based sales executives, and a national/regional sales force known as Global Solutions.

Acquisition activity during the last three years has been minimal and did not materially affect our overall business.

We believe we offer a distinct portfolio of services within the AEC/O industry, though clients outside of our core market continue to show significant interest in our offerings. Based on our analysis of our operating results, we estimate that sales to the AEC/O industry accounted for approximately 77% of our net sales for the nine months ended September 30, 2016, with the remaining 23% consisting of sales to businesses outside of construction.

We identify operating segments based on the various business activities that earn revenue and incur expense. Our operating results are reviewed by the Company's Chief Executive Officer, who is our Company's chief operating decision maker. Since our operating segments have similar products and services, classes of customers, production processes, distribution methods and economic characteristics, we have a single reportable segment. See Note 1 “Description of Business and Basis of Presentation” for further information.

Costs and Expenses

Our cost of sales consists primarily of materials (paper, toner and other consumables), labor, and “indirect costs” which consist primarily of equipment expenses related to our MPS contracts and our service center facilities. Facilities and equipment expenses include maintenance, repairs, rents, insurance, and depreciation. Paper is the largest component of our material cost; however, paper pricing typically does not significantly affect our operating margins due, in part, to our efforts to pass increased costs on to our customers. We closely monitor material cost as a percentage of net sales to measure volume and waste. We also track labor utilization, or net sales per employee, to measure productivity and determine staffing levels.

We maintain low levels of inventory. Historically, our capital expenditure requirements have varied due to the cost and availability of capital lease lines of credit. Our relationships with credit providers have provided attractive lease rates over the past two years, and as a result, we chose to lease rather than purchase equipment in a significant portion of our engagements.

Research and development costs consist mainly of the salaries, leased building space, and computer equipment that comprises our data storage and development centers in Fremont, California and Kolkata, India. Such costs are primarily recorded to cost of sales.

Non-GAAP Financial Measures

EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating, investing or financing activities as a measure of our liquidity.

EBITDA represents net income before interest, taxes, depreciation and amortization. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.

We have presented EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.

We use EBITDA to measure and compare the performance of our operating segments. Our operating segments’ financial performance includes all of the operating activities except debt and taxation which are managed at the corporate level for U.S. operating segments. We use EBITDA to compare the performance of our operating segments and to measure performance for determining consolidated-level compensation. In addition, we use EBITDA to evaluate potential acquisitions and potential capital expenditures.

EBITDA and related ratios have limitations as analytical tools, and should not be considered in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

• They do not reflect our cash expenditures, or future requirements for capital expenditures and contractual commitments;

• They do not reflect changes in, or cash requirements for, our working capital needs;

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• They do not reflect the significant interest expense, or the cash requirements necessary, to service interest or principal payments on our debt;

• Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA does not reflect any cash requirements for such replacements; and

• Other companies, including companies in our industry, may calculate these measures differently than we do, limiting their usefulness as comparative measures.

Because of these limitations, EBITDA and related ratios should not be considered as measures of discretionary cash available to us to invest in business growth or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBITDA and related ratios only as supplements.

Our presentation of adjusted net income and adjusted EBITDA over certain periods is an attempt to provide meaningful comparisons to our historical performance for our existing and future investors. The unprecedented changes in our end markets over the past several years have required us to take measures that are unique in our history and specific to individual circumstances. Comparisons inclusive of these actions make normal financial and other performance patterns difficult to discern under a strict GAAP presentation. Each non-GAAP presentation, however, is explained in detail in the reconciliation tables below.

Specifically, we have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the three and nine months ended September 30, 2016 and 2015 to reflect the exclusion of loss on extinguishment of debt, goodwill impairment, restructuring expense, trade secret litigation costs, and changes in the valuation allowances related to certain deferred tax assets and other discrete tax items. This presentation facilitates a meaningful comparison of our operating results for the three and nine months ended September 30, 2016 and 2015. We believe these charges were the result of the then current macroeconomic environment, our capital restructuring, or other items which are not indicative of our actual operating performance.

We have presented adjusted EBITDA in the three and nine months ended September 30, 2016 and 2015 to exclude loss on extinguishment of debt, goodwill impairment, trade secret litigation costs, restructuring expense and stock-based compensation expense. The adjustment of EBITDA for these items is consistent with the definition of adjusted EBITDA in our credit agreement; therefore, we believe this information is useful to investors in assessing our financial performance.

The following is a reconciliation of cash flows provided by operating activities to EBITDA and net income (loss) attributable to ARC Document Solutions, Inc. shareholders:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands)	2016			2015			2016			2015
Cash flows provided by operating activities	$	12,163		$	20,965		$	34,046		$	43,117
Changes in operating assets and liabilities, net of effect of business acquisitions	1,958			(5,101		)	9,976			7,243
Non-cash expenses, including depreciation, amortization and goodwill impairment	(11,219		)	64,472			(94,300		)	43,844
Income tax provision (benefit)	2,162			(73,338		)	(5,884		)	(71,766		)
Interest expense, net	1,563			1,679			4,535			5,475
Income attributable to the noncontrolling interest	(61		)	(50		)	(211		)	(225		)
Depreciation and amortization	7,857			8,415			23,737			25,490
EBITDA	14,423			17,042			(28,101		)	53,178
Interest expense, net	(1,563		)	(1,679		)	(4,535		)	(5,475		)
Income tax (provision) benefit	(2,162		)	73,338			5,884			71,766
Depreciation and amortization	(7,857		)	(8,415		)	(23,737		)	(25,490		)
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	2,841		$	80,286		$	(50,489	)	$	93,979

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

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	Three Months Ended   September 30,					Nine Months Ended   September 30,
(In thousands)	2016		2015			2016			2015
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$	2,841	$	80,286		$	(50,489	)	$	93,979
Interest expense, net	1,563		1,679			4,535			5,475
Income tax provision (benefit)	2,162		(73,338		)	(5,884		)	(71,766		)
Depreciation and amortization	7,857		8,415			23,737			25,490
EBITDA	14,423		17,042			(28,101		)	53,178
Loss on extinguishment of debt	66		96			156			193
Goodwill impairment	—		—			73,920			—
Trade secret litigation costs(1)	—		—			—			34
Restructuring expense(2)	—		4			7			89
Stock-based compensation	650		735			2,073			2,739
Adjusted EBITDA	$	15,139	$	17,877		$	48,055		$	56,233

(1) On February 1, 2013, we filed a civil complaint against a competitor and a former employee in the Superior Court of California for Orange County, which alleged, among other claims, the misappropriation of ARC trade secrets; namely, proprietary customer lists that were used to communicate with ARC customers in an attempt to unfairly acquire their business. In prior litigation with the competitor based on related facts, in 2007 the competitor entered into a settlement agreement and stipulated judgment, which included an injunction. We instituted this suit to stop the defendant from using similar unfair business practices against us in the Southern California market. The case proceeded to trial in May 2014, and a jury verdict was entered for the defendants. In the first quarter of 2015, we entered into a settlement and paid the defendant. Legal fees associated with the litigation were recorded as selling, general and administrative expense.

(2) In October 2012, we initiated a restructuring plan which included the closure or downsizing of the Company's service center locations, as well as a reduction in headcount. Restructuring expenses in 2016 and 2015 primarily consist of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.

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

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016 (1)		2015
Net income (loss) margin attributable to ARC	2.8	%	75.4	%	(16.4	)%	29.0	%
Interest expense, net	1.6		1.6		1.5		1.6
Income tax provision (benefit)	2.2		(68.9	)	(1.9	)	(22.1	)
Depreciation and amortization	7.8		7.9		7.7		7.9
EBITDA margin	14.4		16.0		(9.1	)	16.4
Loss on extinguishment of debt	0.1		0.1		0.1		0.1
Goodwill impairment	—		—		24.0		—
Trade secret litigation costs	—		—		—		—
Restructuring expense	—		—		—		—
Stock-based compensation	0.6		0.7		0.7		0.8
Adjusted EBITDA margin	15.1	%	16.8	%	15.6	%	17.3	%

(1) Column does not foot due to rounding

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

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands, except per share amounts)	2016			2015			2016			2015
Net income (loss) attributable to ARC Document Solutions, Inc.	$	2,841		$	80,286		$	(50,489	)	$	93,979
Loss on extinguishment of debt	66			96			156			193
Goodwill impairment	—			—			73,920			—
Restructuring expense	—			4			7			89
Trade secret litigation costs	—			—			—			34
Income tax benefit related to above items	(26		)	(41		)	(13,395		)	(125		)
Deferred tax valuation allowance and other discrete tax items	138			(76,147		)	341			(80,554		)
Unaudited adjusted net income attributable to ARC Document Solutions, Inc.	$	3,019		$	4,198		$	10,540		$	13,616
Actual:
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:
Basic	$	0.06		$	1.72		$	(1.10	)	$	2.02
Diluted	$	0.06		$	1.69		$	(1.10	)	$	1.98
Weighted average common shares outstanding:
Basic	45,599			46,698			46,055			46,601
Diluted	46,189			47,557			46,055			47,541
Adjusted:
Earnings per share attributable to ARC Document Solutions, Inc. shareholders:
Basic	$	0.07		$	0.09		$	0.23		$	0.29
Diluted	$	0.07		$	0.09		$	0.23		$	0.29
Weighted average common shares outstanding:
Basic	45,599			46,698			46,055			46,601
Diluted	46,189			47,557			46,655			47,541

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Results of Operations

	Three Months Ended September 30,					Increase (decrease)					Nine Months Ended   September 30,						Increase (decrease)
(In millions, except percentages)	2016 (1)		2015			$			%		2016 (1)			2015			$			%
CDIM	$	53.2	$	54.7		$	(1.5	)	(2.7	)%	$	161.8		$	168.2		$	(6.4	)	(3.8	)%
MPS	32.8		35.9			(3.1		)	(8.7	)%	100.1			108.9			(8.9		)	(8.1	)%
AIM	3.2		3.8			(0.6		)	(15.9	)%	10.6			9.9			0.6			6.4	%
Total service sales	89.2		94.4			(5.2		)	(5.5	)%	272.4			287.0			(14.7		)	(5.1	)%
Equipment and supplies sales	11.3		12.0			(0.8		)	(6.4	)%	35.4			37.1			(1.7		)	(4.6	)%
Total net sales	$	100.4	$	106.4		$	(6.0	)	(5.6	)%	$	307.8		$	324.1		$	(16.4	)	(5.0	)%
Gross profit	$	32.7	$	35.9		$	(3.2	)	(8.9	)%	$	102.9		$	112.8		$	(10.0	)	(8.8	)%
Selling, general and administrative expenses	$	24.9	$	25.8		$	(0.9	)	(3.6	)%	$	76.8		$	80.4		$	(3.7	)	(4.5	)%
Amortization of intangibles	$	1.2	$	1.4		$	(0.2	)	(15.6	)%	$	3.7		$	4.3		$	(0.6	)	(14.0	)%
Goodwill impairment	$	—	$	—		$	—		—	%	$	73.9		$	—		$	73.9		100.0	%
Restructuring expense	$	—	$	—		$	—		—	%	$	—		$	0.1		$	(0.1	)	(92.1	)%
Loss on extinguishment of debt	$	0.1	$	0.1		$	—		(31.3	)%	$	0.2		$	0.2		$	—		(19.2	)%
Interest expense, net	$	1.6	$	1.7		$	(0.1	)	(6.9	)%	$	4.5		$	5.5		$	(0.9	)	(17.2	)%
Income tax provision (benefit)	$	2.2	$	(73.3	)	$	75.5		(102.9	)%	$	(5.9	)	$	(71.8	)	$	65.9		(91.8	)%
Net income (loss) attributable to ARC	$	2.8	$	80.3		$	(77.4	)	(96.5	)%	$	(50.5	)	$	94.0		$	(144.5	)	(153.7	)%
Adjusted net income attributable to ARC	$	3.0	$	4.2		$	(1.2	)	(28.1	)%	$	10.5		$	13.6		$	(3.1	)	(22.6	)%
EBITDA	$	14.4	$	17.0		$	(2.6	)	(15.4	)%	$	(28.1	)	$	53.2		$	(81.3	)	(152.8	)%
Adjusted EBITDA	$	15.1	$	17.9		$	(2.7	)	(15.3	)%	$	48.1		$	56.2		$	(8.2	)	(14.5	)%

(1) Column does not foot due to rounding

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

	As Percentage of Net Sales				As Percentage of Net Sales
	Three Months Ended September 30,				Nine Months Ended September 30,
	2016 (1)		2015 (1)		2016 (1)		2015 (1)
Net Sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	67.4		66.2		66.6		65.2
Gross profit	32.6		33.8		33.4		34.8
Selling, general and administrative expenses	24.8		24.3		24.9		24.8
Amortization of intangibles	1.2		1.3		1.2		1.3
Goodwill impairment	—		—		24.0		—
Restructuring expense	—		—		—		—
Income (loss) from operations	6.6		8.2		(16.7	)	8.6
Loss on extinguishment of debt	0.1		0.1		0.1		0.1
Interest expense, net	1.6		1.6		1.5		1.6
Income (loss) before income tax provision (benefit)	5.0		6.6		(18.2	)	6.9
Income tax provision (benefit)	2.2		(68.9	)	(1.9	)	(22.1	)
Net income (loss)	2.9		75.5		(16.3	)	29.1
Income attributable to the noncontrolling interest	(0.1	)	—		(0.1	)	(0.1	)
Net income (loss) attributable to ARC	2.8	%	75.4	%	(16.4	)%	29.0	%
EBITDA	14.4	%	16.0	%	(9.1	)%	16.4	%
Adjusted EBITDA	15.1	%	16.8	%	15.6	%	17.3	%

(1) Column does not foot due to rounding

Three and Nine Months Ended September 30, 2016 Compared to Three and Nine Months Ended September 30, 2015

Net Sales

Net sales for the three and nine months ended September 30, 2016decreased by 5.6% and 5.0%, respectively, compared to the same periods in 2015 due primarily to declines in our print-based service offerings.

CDIM. Year-over-year sales of CDIM services decreased $1.5 million, or 2.7%, and $6.4 million, or 3.8%, for the three and nine months ended September 30, 2016, respectively. CDIM services were negatively affected by the continued reduction in demand for printed construction drawings and related services driven by the ongoing adoption of technology replacing traditional print-based service offerings. Also contributing to the decline in CDIM was a decline in color printing services which was primarily driven by a color service location closure in our United Kingdom operations. CDIM services represented 53% of total net sales for both the three and nine months ended September 30, 2016, compared to 51% and 52% during the same periods in 2015, respectively.

MPS. Year-over-year sales of MPS services for the three and nine months ended September 30, 2016decreased $3.1 million, or 8.7%, and $8.9 million, or 8.1%, respectively, due primarily to a national MPS account that did not renew its agreement with us following a recent merger at the end of 2015. Also contributing to the decline was the continued optimization of our customers' in-house print environment driving a decrease in print volumes, which was partially offset by new MPS placements in 2016. The Company's MPS offering delivers value to its customers by optimizing their print infrastructure, which in turn, will lower their print volume over time. Sales reductions associated with a decline in print volume are offset by new customer acquisitions and expansion of MPS services within existing customers. Revenues from MPS Services sales represented approximately 33% of total net sales for both the three and nine months ended September 30, 2016, compared to 34% during the same both periods in 2015.

The number of MPS locations has grown to approximately 9,370 as of September 30, 2016, an increase of approximately 630 locations compared to September 30, 2015. While MPS is subject to temporary performance fluctuations based on the loss or acquisition of large clients, we believe there is an opportunity for MPS sales growth in the future due to the value that we bring to our customers and the desire to reduce costs in the AEC/O industry. We intend to continue the expansion of our MPS offering through our regional sales force and through our national accounts group "Global Solutions." Our Global Solutions sales force

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has established long-term contract relationships with 23 of the largest 100 AEC/O firms. MPS services are driven in large part by the number of customer employees at an office as that drives office printing and copying.

AIM. Year-over-year sales of AIM Services declined $0.6 million, or 15.9% for the three months ended September 30, 2016, and increased $0.6 million, or 6.4%, for the nine months ended September 30, 2016. The year-over-year growth that we experienced in the first six months of 2016 was partially offset by delays in completing contracted projects in the third quarter of 2016. Since AIM is one of our newer service offerings, quarterly changes in sales are largely dependent upon the timing of executing on signed contracts, which is driven by the speed at which we can gather our customers' physical documents. We are focused on achieving growth in AIM, as we believe we have developed a valuable solution to offer our existing AEC/O customers and other customers that wish to leverage the benefits of the service, which we believe will result in a long-term growth area for us. We are driving an expansion of our addressable market for AIM by targeting building owners and facilities managers that require on-demand legacy documents to operate their assets efficiently.

Equipment and Supplies Sales. Year-over-year sales of Equipment and Supplies decreased by $0.8 million, or 6.4%, and $1.7 million, or 4.6%, for the three and nine months ended September 30, 2016, respectively. Quarterly changes in Equipment and Supplies Sales are largely driven by the timing of replacements of aging equipment fleets for customers who prefer to own their equipment. Equipment and Supplies Sales represented approximately 11% and 12% of total net sales for the three and nine months ended September 30, 2016, as compared to 11% for both the three and nine months ended September 30, 2015, respectively. Equipment and Supplies Sales derived from UNIS Document Solutions Co. Ltd (“UDS”), our Chinese business venture, were $4.9 million and $14.5 million for the three and nine months ended September 30, 2016, as compared to $5.0 million and $15.2 million for the three and nine months ended September 30, 2015, respectively. In the long term we do not anticipate growth in Equipment and Supplies Sales in the United States or China, as we are placing more focus on growth in AIM and MPS sales and converting sales contracts to MPS agreements.

Gross Profit

During the three months ended September 30, 2016, gross profit and gross margin decreased to $32.7 million, and 32.6% compared to $35.9 million and 33.8%, during the same period in 2015, on a sales decline of $6.0 million.

During the nine months ended September 30, 2016, gross profit and gross margin decreased to $102.9 million, and 33.4% compared to $112.8 million and 34.8%, during the same period in 2015, on a sales decline of $16.4 million.

The decline in our gross margins for the three and nine months ended September 30, 2016 was primarily driven by the impact of lower revenue for the periods reducing our ability to leverage the fixed portion of our overhead and labor costs.

Selling, General and Administrative Expenses

Selling, marketing, general and administrative expenses decreased $0.9 million and $3.7 million for the three and nine months ended September 30, 2016 compared to the same periods in 2015.

General and administrative expenses for the three months ended September 30, 2016 were flat compared to the same period in 2015, and decreased$0.2 million or 0.4% for the nine months ended September 30, 2016 compared to the same period in 2015. The slight reduction in expenses was primarily due to cost reduction initiatives undertaken in 2016 and a decline in stock-based compensation expense, which were partially offset by investments in general and administrative staff to support our new technology-enabled offerings.

Year-over-year sales and marketing expenses decreased$0.9 million and $3.5 million, for the three and nine months ended September 30, 2016, compared to the same periods in 2015. The decrease for the three and nine months ended September 30, 2016 was primarily due to a reduction in sales compensation as a result of our sales decrease.

Amortization of Intangibles

Amortization of intangibles of $1.2 million and $3.7 million for the three and nine months ended September 30, 2016 decreased slightly compared to the same periods in 2015, primarily due to the completed amortization of certain customer relationship intangibles related to historical acquisitions.

Goodwill Impairment

At June 30, 2016, we determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. Our analysis indicated that five of our eight reporting units, four in the United States and one in Canada, had a goodwill impairment as of June 30, 2016. Accordingly, the Company recorded a pretax, non-cash charge for the three months ended June 30, 2016 to

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reduce the carrying value of goodwill by $73.9 million. See Note 3, “Goodwill and other Intangibles Resulting From Business Acquisitions” for further information regarding the process of assessing goodwill impairment.

Restructuring Expense

Restructuring expenses for the nine months ended September 30, 2016 totaled $7 thousand, primarily consisting of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.

Loss on Extinguishment of Debt

As of September 30, 2016, we have paid $48.0 million in aggregate principal of our $175.0 million Term Loan Credit Agreement, which was $17.4 million above our required principal payments since the inception of the credit agreement. Principal payments of $16.0 million during the nine months ended September 30, 2016 resulted in a loss on the early extinguishment of debt of $66 thousand and $0.2 million for the three and nine months ended September 30, 2016.

Interest Expense, Net

Net interest expense totaled $1.6 million and $4.5 million for the three and nine months ended September 30, 2016, compared to $1.7 million and $5.5 million for the same periods in 2015. The decrease was primarily as a result of the early extinguishment of our long-term debt as described above.

Income Taxes

We recorded an income tax provision of $2.2 million in relation to pretax income of $5.1 million for the three months ended September 30, 2016, and an income tax benefit of $5.9 million in relation to pretax loss of $56.2 million for the nine months ended September 30, 2016, which resulted in an effective income tax rate of 42.6% and 10.5%, for the three and nine months ended September 30, 2016, respectively. Our low effective year-to-date tax rate was primarily driven by $41.4 million of goodwill impairment related to historical stock acquisitions which cannot be deducted for income tax purposes until the related stock is disposed of. The income tax benefit for the three and nine months ended September 30, 2015 was due to the reversal of the valuation allowance on certain of our deferred tax assets.

For the three and nine months ended September 30, 2016, our effective income tax rate would have been 40.6% and 39.9%, respectively, excluding the impact of the goodwill impairment, as well as an additional valuation allowance and certain stock-based compensation not deductible for income tax purposes. We continue to carry a $1.3 million valuation allowance against certain deferred tax assets as of September 30, 2016.

Our gross deferred tax assets remain available to us for use in future years until they fully expire, which based on forecasted continuing profitability, we estimate that it is more likely than not that future earnings will be sufficient to realize certain of our deferred tax assets. As of September 30, 2016, we had approximately $82.5 million of consolidated federal, $100.6 million of state and $1.9 million of foreign net operating loss and charitable contribution carryforwards available to offset future taxable income, respectively. The federal net operating loss carryforward began in 2011 and will begin to expire in varying amounts between 2031 and 2034. The charitable contribution carryforward began in 2009 and will begin to expire in varying amounts between 2016 and 2020. The state net operating loss carryforwards expire in varying amounts between 2016 and 2034. The foreign net operating loss carryforwards begun to expire in varying amounts beginning in 2016.

Noncontrolling Interest

Net income attributable to noncontrolling interest represents 35% of the income of UDS and its subsidiaries, which together comprise our Chinese joint-venture operations.

Net Income (Loss) Attributable to ARC

Net income (loss) attributable to ARC was $2.8 million and $(50.5) million, during the three and nine months ended September 30, 2016, as compared to net income attributable to ARC of $80.3 million and $94.0 million in the same periods in 2015. The decrease in net income attributable to ARC for three and nine months ended September 30, 2016 versus the prior year period is primarily due to the goodwill impairment charge in 2016 and the reversal of the valuation allowance on certain of our deferred tax assets in 2015.

EBITDA

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EBITDA margin decreased to 14.4% and (9.1)% for the three and nine months ended September 30, 2016 from 16.0% and 16.4% for the same periods in 2015, respectively. Excluding the effect of the goodwill impairment, loss on extinguishment of debt, legal fees associated with trade secret litigation, restructuring expense and stock-based compensation, adjusted EBITDA margin decreased to 15.1% and 15.6% during the three and nine months ended September 30, 2016, as compared to 16.8% and 17.3% for the same periods in 2015. The decrease in EBITDA margin was due to the declines in revenue and gross margin described above.

Impact of Inflation

We believe inflation has not had a significant effect on our operations. Price increases for raw materials, such as paper and fuel charges, typically have been, and we expect will continue to be, passed on to customers in the ordinary course of business.

Liquidity and Capital Resources

Our principal sources of cash have been operations and borrowings under our debt and lease agreements. Our recent historical uses of cash have been for ongoing operations, payment of principal and interest on outstanding debt obligations, capital expenditures and stock repurchases.

Total cash and cash equivalents as of September 30, 2016 was $19.6 million. Of this amount, $13.5 million was held in foreign countries, with $11.8 million held in China. Repatriation of some of our cash and cash equivalents in foreign countries could be subject to delay for local country approvals and could have potential adverse tax consequences. As a result of holding cash and cash equivalents outside of the U.S., our financial flexibility may be reduced.

Supplemental information pertaining to our historical sources and uses of cash is presented as follows and should be read in conjunction with our interim Condensed Consolidated Statements of Cash Flows and notes thereto included elsewhere in this report.

	Three Months Ended   September 30,						Nine Months Ended   September 30,
(In thousands)	2016			2015			2016			2015
Net cash provided by operating activities	$	12,163		$	20,965		$	34,046		$	43,117
Net cash used in investing activities	$	(2,295	)	$	(3,614	)	$	(6,738	)	$	(11,003	)
Net cash used in financing activities	$	(10,600	)	$	(11,365	)	$	(31,335	)	$	(33,381	)

Operating Activities

Cash flows from operations are primarily driven by sales and net profit generated from these sales, excluding non-cash charges.

Cash flows from operations during the three and nine months ended September 30, 2016, over the same period in 2015 decreased primarily as a result of the decline in profitability, as well as the timing of sales and cash collections, the timing of payables, and the timing of inventory purchases. Adjusted EBITDA for the nine months ended September 30, 2016 has declined $8.2 million compared to the same period in 2015, which approximates the year-to-date decline in cash provided by operations over the same period. Days sales outstanding (“DSO”) remained at 55 days as of September 30, 2016 and 2015. We continue our focus on the timely collection of our accounts receivable.

Investing Activities

Net cash used in investing activities was primarily related to capital expenditures. We incurred capital expenditures totaling $7.6 million and $11.5 million for the nine months ended September 30, 2016 and 2015, respectively. The change in capital expenditures is driven by the timing of new MPS placements, and whether such equipment is leased or purchased with available cash. As we continue to foster our relationships with credit providers and obtain attractive lease rates, we have increasingly chosen to lease rather than purchase equipment in the future.

Financing Activities

Net cash of $31.3 million used in financing activities during the nine months ended September 30, 2016 primarily relates to payments on our debt agreements and capital leases and common stock repurchases made pursuant to our Stock Repurchase Program which commenced during the first quarter of 2016. As of September 30, 2016, we have paid $48.0 million in aggregate principal of our $175.0 million Term Loan Credit Agreement. Principal payments made were $17.4 million greater than the required principal payments since the inception of the agreement, of which $16.0 million in payments were made in 2016. In addition, we

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repurchased approximately 1.3 million shares of the Company's outstanding common stock for $5.3 million pursuant to our Stock Repurchase Plan during the nine months ended September 30, 2016.

Our cash position, working capital, and debt obligations as of September 30, 2016 and December 31, 2015 are shown below and should be read in conjunction with our Condensed Consolidated Balance Sheets and notes thereto contained elsewhere in this report.

(In thousands)	September 30, 2016		December 31, 2015
Cash and cash equivalents	$	19,640	$	23,963
Working capital	$	46,719	$	40,031
Borrowings from term loan facility (1)	$	125,808	$	141,414
Other debt obligations	33,096		29,978
Total debt obligations	$	158,904	$	171,392

(1) Net of deferred financing fees of $1,192 and $1,586 at September 30, 2016 and December 31, 2015, respectively.

The increase of $6.7 million in working capital in 2016 was primarily due to increased inventory, a reduction in accrued expenses and declines in accrued payroll and payroll-related expenses. These variances were partially offset by a decrease in cash of $4.3 million. The decreases in accrued expenses were primarily due to the timing of trade payables, the timing of income tax payments and the timing of interest payments related to our Term A Loan Facility. The lower accrued payroll and payroll-related expenses was primarily due to the timing of payroll, in addition to the reduction in sales compensation as a result of our sales decline. The increase in inventory was primarily related to the bulk purchase of equipment to take advantage of vendor rebates. To manage our working capital, we chiefly focus on our DSO and monitor the aging of our accounts receivable, as receivables are the most significant element of our working capital.

We believe that our current cash and cash equivalents balance of $19.6 million, availability under our revolving credit facility, availability under our equipment lease lines, and cash flows provided by operations should be adequate to cover the next twelve months of working capital needs, debt service requirements consisting of scheduled principal and interest payments, and planned capital expenditures, to the extent such items are known or are reasonably determinable based on current business and market conditions. In addition, we may elect to finance certain of our capital expenditure requirements through borrowings under our revolving credit facility, which had no debt outstanding as of September 30, 2016, other than contingent reimbursement obligations for undrawn standby letters of credit described below that were issued under this facility. See “Debt Obligations” section for further information related to our revolving credit facility.

We generate the majority of our revenue from sales of services and products to the AEC/O industry. As a result, our operating results and financial condition can be significantly affected by economic factors that influence the AEC/O industry, such as non-residential and residential construction spending. Additionally, a general economic downturn may adversely affect the ability of our customers and suppliers to obtain financing for significant operations and purchases, and to perform their obligations under their agreements with us. We believe that credit constraints in the financial markets could result in a decrease in, or cancellation of, existing business, could limit new business, and could negatively affect our ability to collect our accounts receivable on a timely basis.

While we have not been actively seeking growth through acquisition during the last three years, the executive team continues to selectively evaluate potential acquisitions.

Debt Obligations

Term A Loan Facility

On November 20, 2014 we entered into a Credit Agreement (the “Term A Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.

The Term A Credit Agreement provides for the extension of term loans (“Term Loans”) in an aggregate principal amount of $175.0 million, the entirety of which was disbursed on the Closing Date in order to pay outstanding obligations under the Company’s Term Loan Credit Agreement dated as of December 20, 2013. The Credit Agreement also provides for the extension of revolving loans ("Revolving Loans") in an aggregate principal amount not to exceed $30.0 million. The Revolving Loan facility under the

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Term A Credit Agreement replaces the Company’s Credit Agreement dated as of January 27, 2012. The Company may request incremental commitments to the aggregate principal amount of Term Loans and Revolving Loans available under the Credit Agreement by an amount not to exceed $75.0 million in the aggregate. Unless an incremental commitment to increase the Term Loan or provide a new term loan matures at a later date, the obligations under the Credit Agreement mature on November 20, 2019.

Loans borrowed under the Term A Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus a margin ranging from 1.50% to 2.50%, based on the Company’s Total Leverage Ratio (as defined in the Term A Credit Agreement). Loans borrowed under the Term A Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR rate plus 1.00% per annum, and (C) the rate of interest announced, from time to time, by Wells Fargo Bank, National Association as its “prime rate,” plus (ii) a margin ranging from 0.50% to 1.50%, based on our Company’s Total Leverage Ratio.

We will pay certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.

Subject to certain exceptions, including in certain circumstances, reinvestment rights, the loans extended under the Term A Credit Agreement are subject to customary mandatory prepayment provisions with respect to: the net proceeds from certain asset sales; the net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term A Credit Agreement); the net proceeds from certain issuances of equity securities; and net proceeds of certain insurance recoveries and condemnation events of our Company.

The Term A Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of our Company and its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; sell certain property or assets; engage in mergers or other fundamental changes; consummate acquisitions; make investments; pay dividends, other distributions or repurchase equity interest of our Company or its subsidiaries; change the nature of their business; prepay or amend certain indebtedness; engage in certain transactions with affiliates; amend their organizational documents; or enter into certain restrictive agreements. In addition, the Term A Credit Agreement contains financial covenants which requires us to maintain (i) at all times, a Total Leverage Ratio in an amount not to exceed 3.25 to 1.00 through the Company’s fiscal quarter ending September 30, 2016, and thereafter, in an amount not to exceed 3.00 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the Term A Credit Agreement), as amended on June 24, 2016, the Company is required to maintain, as of the last day of each fiscal quarter, an amount not less than 1.15 to 1.00. The Company was in compliance with its covenants as of September 30, 2016.

On February 5, 2016, the Term A Credit Agreement was amended to exclude up to $15.0 million of stock repurchases from the calculation of the Company's Fixed Charge Coverage Ratio, provided that those stock repurchases are consummated in accordance with the other terms and conditions of the agreement.

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

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

Capital Leases

As of September 30, 2016, we had $33.1 million of capital lease obligations outstanding, with a weighted average interest rate of 5.6% and maturities between 2016 and 2021.

Other Notes Payable

As of September 30, 2016, we had $37.0 thousand of notes payable outstanding, with an interest rate of 10.7% and maturities through 2019. These notes are collateralized by equipment previously purchased.

Off-Balance Sheet Arrangements

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As of September 30, 2016, we did not have any off-balance-sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K.

Contractual Obligations and Other Commitments

Operating Leases. We have entered into various non-cancelable operating leases primarily related to facilities, equipment and vehicles used in the ordinary course of business.

Contingent Transaction Consideration. We have entered into earnout obligations in connection with prior acquisitions. If the acquired businesses generate sales and/or operating profits in excess of predetermined targets, we are obligated to make additional cash payments in accordance with the terms of such earnout obligations. As of September 30, 2016, we recorded liabilities related to future earnout payments consummated subsequent to the adoption of ASC 805, Business Combinations, of $0.5 million. Liabilities related to future earnout payments are carried at fair value, and any changes in fair value at each reporting period, are recognized in our consolidated statement of operations.

Legal Proceedings. On October 21, 2010, a former employee—individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, LLC and American Reprographics Company in the State of California at any time from October 21, 2006 through the settlement date, filed an action against us in the Superior Court of California for the County of Orange. The complaint alleged, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought included damages, restitution, penalties, interest, costs, and attorneys’ fees and such other relief as the court deems proper. On March 15, 2013, we participated in a private mediation session with claimants’ counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. In the second quarter of 2016, the Company settled with the defendants and paid $1.0 million, which had been accrued as of December 31, 2015.

In addition to the matters described above, we are involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. We do not believe that the outcome of any of these matters will have a material effect on our consolidated financial position, results of operations or cash flows.

Critical Accounting Policies

Critical accounting policies are those accounting policies that we believe are important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Our 2015 Annual Report on Form 10-K includes a description of certain critical accounting policies, including those with respect to goodwill, revenue recognition, and income taxes. There have been no material changes to our critical accounting policies described in our 2015 Annual Report on Form 10-K.

Goodwill Impairment

In connection with acquisitions, we apply the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles—Goodwill and Other, we assess goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2016, the Company performed its assessment and determined that goodwill was not impaired.

Our analysis indicated that five of our eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis; however, step two of the analysis was subject to finalization of the implied fair value of goodwill. The preliminary results of step two of the goodwill impairment analysis indicated that our goodwill was impaired by approximately $73.9 million. Accordingly, we recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million. We completed step two of the analysis in the third quarter of 2016 with no change to the previous estimate.

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the second quarter of 2016, in connection with an operationally focused reorganization of certain of our reporting units, one additional reporting unit was added. As such, the goodwill of the former reporting units affected was

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reassigned to the new reporting unit based on their relative fair values and represented less than one percent of the Company's goodwill balance at the time.

Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of our reporting units to their carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

We determine the fair value of our reporting units using an income approach. Under the income approach, we determined fair value based on estimated discounted future cash flows of each reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others.

Our projections are driven, in part, by industry data gathered from third parties, including projected growth rates of the AEC/O industry by segment (i.e. residential and non-residential) and anticipated GDP growth rates, as well as company-specific data such as estimated composition of our customer base (i.e. non-AEC/O vs. AEC/O, residential vs. non- residential), historical revenue trends, and EBITDA margin performance of our reporting units. Our revenue projections for each of ARC’s reporting units include the estimated respective customer composition for each reporting unit, year-to-date revenue at the time of the goodwill impairment analysis, and projected growth rates for the related customer types. Although we rely on a variety of internal and external sources in projecting revenue, our relative reliance on each source or trend changes from year to year. In 2012 and into 2013, we noted a continued divergence between our historic revenue growth rates and AEC/O non-residential construction growth rates, as well as the “dilution” of traditional reprographics as the Company’s dominant business line. Therefore, we increased our reliance upon internal sources for our short-term and long-term revenue forecasts. Once the forecasted revenue was established for each of the reporting units based on the process noted above, using the current year EBITDA margin as a base line, we forecasted future EBITDA margins. In general, our EBITDA margins are significantly affected by (1) revenue trends and (2) cost management initiatives. Revenue trends impact our EBITDA margins because a significant portion of our cost of sales are considered relatively fixed therefore an increase in forecasted revenue (particularly when combined with any cost management or productivity enhancement initiatives) would result in meaningful gross margin expansion. Similarly, a significant portion of our selling, general, and administrative expenses are considered fixed. Hence, in forecasting EBITDA margins, significant reliance was placed on the historical impact of revenue trends on EBITDA margin.

At June 30, 2016, we determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of our reporting units, (2) a revision of our forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The underperformance against plan of our reporting units and the resulting revision of our forecasted future earnings was driven by: (a) a larger than expected decline in our print-related sales which began during the second quarter of 2016 due to an acceleration in the adoption of new technology replacing printed documents in our industry, (b) the lack of new national customer acquisitions, which had been expected based on historical customer acquisition rates, and (c) lower than expected growth derived from our cloud-based digital document management solutions. Based on currently available information, we do not believe that the trend we have identified to replace traditional print-based document reproduction and management with digital document solutions is temporary, and we anticipate that such declines will continue to impact the Company’s net sales in the foreseeable future.

The estimated fair values of our reporting units were based upon their respective projected EBITDA margins, which were anticipated to vary from annual declines to increases up to 100 basis points for the periods analyzed. These cash flows were discounted using a weighted average cost of capital ranging from 10% to 12%, depending upon the size and risk profile of the reporting unit. We considered market information in assessing the reasonableness of the fair value under the income approach described above.

The results of step one of the goodwill impairment test, as of September 30, 2016, were as follows:

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(Dollars in thousands)	Number of Reporting Units	Representing Goodwill of
No goodwill balance	5	$	—
Reporting unit failing step one that continues to carry a goodwill balance	1	17,637
Fair value of reporting units exceeds their carrying values by more than 100%	2	121,051
	8	$	138,688

The goodwill balances reflected above are inclusive of the $73.9 million goodwill impairment recognized in the second quarter of 2016.

Based upon a sensitivity analysis, a reduction of approximately 50 basis points of projected EBITDA in 2017 and beyond, assuming all other assumptions remain constant, no additional reporting units would proceed to step two of the analysis, although the change would result in an additional impairment charge of approximately $1.1 million.

Based upon a separate sensitivity analysis, a 50 basis point increase to the weighted average cost of capital would result in no additional reporting units proceeding to step two of the analysis, although the change would result in a further impairment of approximately $2.4 million.

Given the current economic environment and the changing document and printing needs of our customers and the uncertainties regarding the effect on our business, there can be no assurance that the estimates and assumptions made for purposes of our goodwill impairment testing in 2016 will prove to be accurate predictions of the future. If our assumptions, including forecasted EBITDA of certain reporting units, are not achieved, we may be required to record additional goodwill impairment charges in future periods, whether in connection with our next annual impairment testing in the third quarter of 2017, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles - Goodwill and Other) outside of the quarter when we regularly perform our annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

Income Taxes

Deferred tax assets and liabilities reflect temporary differences between the amount of assets and liabilities for financial and tax reporting purposes. Such amounts are adjusted, as appropriate, to reflect changes in tax rates expected to be in effect when the temporary differences reverse. A valuation allowance is recorded to reduce our deferred tax assets to the amount that is more likely than not to be realized. Changes in tax laws or accounting standards and methods may affect recorded deferred taxes in future periods.

In accordance with ASC 740-10, Income Taxes, we evaluate 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. We consider 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.

It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. We utilize a rolling three years of actual and current year anticipated results as the primary measure of cumulative losses in recent years. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in our financial statements or tax returns and future profitability.

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Our accounting for deferred tax consequences represents our best estimate of those future events. Changes in our current estimates, due to unanticipated events or otherwise, could have a material effect on our financial condition and results of operations. At September 30, 2015 as a result of sustained profitability in the U.S. evidenced by three years of earnings and forecasted continuing profitability despite the downward revision of our forecasted results described under Goodwill Impairment above, we determined it was more likely than not future earnings will be sufficient to realize deferred tax assets in the U.S. Accordingly we reversed most of our U.S. valuation allowance resulting in non-cash income tax benefit of $80.7 million for the year ended December 31, 2015. We continue to carry a $1.3 million valuation allowance against certain deferred tax assets as of September 30, 2016.

Our gross deferred tax assets remain available to us for use in future years until they fully expire, which based on forecasted continuing profitability, we estimate that it is more likely than not that future earnings will be sufficient to realize certain of our deferred tax assets. In future quarters we will continue to evaluate our historical results for the preceding twelve quarters and our future projections to determine whether we will generate sufficient taxable income to utilize our deferred tax assets, and whether a partial or full valuation allowance is required. Should we generate sufficient taxable income, however, we may reverse a portion or all of the then current valuation allowance.

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

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

The amount of taxable income or loss we report to the various tax jurisdictions is subject to ongoing audits by federal, state and foreign tax authorities. Our estimate of the potential outcome of any uncertain tax issue is subject to management’s assessment of relevant risks, facts, and circumstances existing at that time. We use a more-likely-than-not threshold for financial statement recognition and measurement of tax positions taken or expected to be taken in a tax return. We record a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on our tax return. To the extent that our assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. We had no unrecognized tax benefits as of September 30, 2016. We report tax-related interest and penalties as a component of income tax expense.

For further information regarding the accounting policies that we believe to be critical accounting policies and that affect our more significant judgments and estimates used in preparing our interim condensed consolidated financial statements see our 2015 Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 1, “Description of Business and Basis of Presentation” to our interim condensed consolidated financial statements for disclosure on recent accounting pronouncements.

Item 3.Quantitative and Qualitative Disclosures About Market Risk

Our primary exposure to market risk is interest rate risk associated with our debt instruments. We use both fixed and variable rate debt as sources of financing. In 2014, we entered into a $175.0 million Term A Credit Agreement. Borrowings under the Term A Credit Agreement bear interest at a rate equal to an applicable margin plus a variable rate. As such, our Term A Credit Agreement exposes us to market risk for changes in interest rates. To manage our exposure to interest rate volatility associated with borrowings under our Term A Credit Agreement, we entered into interest rate cap agreements in the first quarter of 2015. We have not, and do not plan to, enter into any derivative financial instruments for trading or speculative purposes.

As of September 30, 2016, we had $160.1 million of total debt and capital lease obligations, of which approximately 21% was at a fixed rate, with the remainder at variable rates. Given our outstanding indebtedness at September 30, 2016, the effect of a 100 basis point increase in LIBOR on our interest expense would be approximately $1.0 million annually.

Although we have international operating entities, our exposure to foreign currency rate fluctuations is not significant to our financial condition or results of operations.

Item 4.Controls and Procedures

Disclosure Controls and Procedures

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We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, or the Exchange Act, are recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of September 30, 2016. Based on that evaluation, our Chief Executive Officer and our Chief Financial Officer concluded that as of September 30, 2016, our disclosure controls and procedures were effective.

Changes in Internal Control over Financial Reporting

There were no changes to internal control over financial reporting during the three months ended September 30, 2016, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1.Legal Proceedings

This information is included under the caption “Legal Proceedings” in Note 6 to our Condensed Consolidated Financial Statements in Part 1, Item 1 of this Quarterly Report on Form 10-Q.

Item 1A.Risk Factors

Information concerning certain risks and uncertainties appears in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2015. You should carefully consider those risks and uncertainties, which could materially affect our business, financial condition and results of operations. There have been no material changes to the risk factors disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

(In thousands, except for price per share)	(a) Total Number of Shares Purchased (1)	(b) Average Price Paid per Share ($)		(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	(d) Approximate Dollar Value of Shares That May Yet Be Purchased Under The Plans or Programs (1)
Period
July 1, 2016—July 31, 2016	—	$	—	—	$	—
August 1, 2016—August 31, 2016	—	$	—	—	$	—
September 1, 2016—September 30, 2016	58	$	3.44	58	$	9,636
Total	58			58

(1) On February 8, 2016, we announced that the Company's Board of Directors approved a stock repurchase program that authorizes the Company to purchase up to $15.0 million of the Company's outstanding common stock through December 31, 2017.

37

Item 6.Exhibits

Exhibit Number	Description
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase *
101.DEF	XBRL Taxonomy Extension Definition Linkbase *
101.LAB	XBRL Taxonomy Extension Label Linkbase *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase *

* Filed herewith

38

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: November 4, 2016

ARC DOCUMENT SOLUTIONS, INC.

/s/ KUMARAKULASINGAM SURIYAKUMAR

Kumarakulasingam Suriyakumar

Chairman, President and Chief Executive Officer

/s/ JORGE AVALOS

Jorge Avalos

Chief Financial Officer

39

EXHIBIT INDEX

Exhibit Number	Description
31.1	Certification of Principal Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
31.2	Certification of Principal Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS	XBRL Instance Document *
101.SCH	XBRL Taxonomy Extension Schema *
101.CAL	XBRL Taxonomy Extension Calculation Linkbase *
101.DEF	XBRL Taxonomy Extension Definition Linkbase *
101.LAB	XBRL Taxonomy Extension Label Linkbase *
101.PRE	XBRL Taxonomy Extension Presentation Linkbase *

* Filed herewith

40

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Kumarakulasingam Suriyakumar, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ARC Document Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 4, 2016

/s/ KUMARAKULASINGAM SURIYAKUMAR

Kumarakulasingam Suriyakumar

Chairman, President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO RULE 13A-14(A) AND RULE 15D-14(A)

OF THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jorge Avalos, certify that:

1. I have reviewed this quarterly report on Form 10-Q of ARC Document Solutions, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls over financial reporting.

Date: November 4, 2016

/s/ JORGE AVALOS

Jorge Avalos

Chief Financial Officer

(Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Kumarakulasingam Suriyakumar, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ARC Document Solutions, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents in all material respects the financial condition and results of operations of the Company.

Date: November 4, 2016

/s/ KUMARAKULASINGAM SURIYAKUMAR

Kumarakulasingam Suriyakumar

Chairman, President and Chief Executive Officer (Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Jorge Avalos, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report of ARC Document Solutions, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 4, 2016

/s/ JORGE AVALOS

Jorge Avalos

Chief Financial Officer

(Principal Financial Officer)

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2016	Oct. 28, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Entity Registrant Name	ARC Document Solutions, Inc.
Entity Central Index Key	0001305168
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		45,974,642

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 19,640	$ 23,963
Accounts receivable, net of allowances for accounts receivable of $2,007 and $2,094	61,373	60,085
Inventories, net	19,981	16,972
Prepaid expenses	4,689	4,555
Other current assets	3,485	4,131
Total current assets	109,168	109,706
Property and equipment, net of accumulated depreciation of $208,749 and $202,457	56,923	57,590
Goodwill	138,688	212,608
Other intangible assets, net	14,393	17,946
Deferred income taxes	74,138	74,196
Other assets	2,255	2,492
Total assets	395,565	474,538
Current liabilities:
Accounts payable	22,534	23,989
Accrued payroll and payroll-related expenses	10,196	12,118
Accrued expenses	16,793	19,194
Current portion of long-term debt and capital leases	12,926	14,374
Total current liabilities	62,449	69,675
Long-term debt and capital leases	145,978	157,018
Deferred income taxes	29,845	35,933
Other long-term liabilities	2,482	2,778
Total liabilities	240,754	265,404
Commitments and contingencies (Note 6)
ARC Document Solutions, Inc. stockholders’ equity:
Preferred stock, $0.001 par value, 25,000 shares authorized; 0 shares issued and outstanding	0	0
Common stock, $0.001 par value, 150,000 shares authorized; 47,415 and 47,130 shares issued and 45,975 and 47,029 shares outstanding	47	47
Additional paid-in capital	117,264	115,089
Retained earnings	39,198	89,687
Accumulated other comprehensive loss	(2,831)	(2,097)
Total stockholders equity before adjustment of treasury stock	153,678	202,726
Less cost of common stock in treasury, 1,440 and 101 shares	5,909	612
Total ARC Document Solutions, Inc. stockholders’ equity	147,769	202,114
Noncontrolling interest	7,042	7,020
Total equity	154,811	209,134
Total liabilities and equity	$ 395,565	$ 474,538

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Statement of Financial Position [Abstract]
Allowances for accounts receivable	$ 2,007	$ 2,094
Accumulated depreciation on property and equipment	$ 208,749	$ 202,457
Preferred stock, par value (in usd per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized (in shares)	25,000	25,000
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	150,000
Common stock, shares issued (in shares)	47,415	47,130
Common stock, shares outstanding	45,975	47,029
Treasury stock, (in shares)	1,440	101

XML

Condensed Consolidated Statements of Operations - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Income Statement [Abstract]
Service sales	$ 89,178	$ 94,384	$ 272,394	$ 287,045
Equipment and supplies sales	11,265	12,034	35,369	37,081
Total net sales	100,443	106,418	307,763	324,126
Cost of sales	67,713	70,475	204,904	211,303
Gross profit	32,730	35,943	102,859	112,823
Selling, general and administrative expenses	24,893	25,816	76,752	80,403
Amortization of intangible assets	1,160	1,375	3,705	4,306
Goodwill impairment	0	0	73,920	0
Restructuring expense	0	4	7	89
Income (loss) from operations	6,677	8,748	(51,525)	28,025
Other income, net	(16)	(25)	(54)	(81)
Loss on extinguishment of debt	66	96	156	193
Interest expense, net	1,563	1,679	4,535	5,475
Income (loss) before income tax provision (benefit)	5,064	6,998	(56,162)	22,438
Income tax provision (benefit)	2,162	(73,338)	(5,884)	(71,766)
Net income (loss)	2,902	80,336	(50,278)	94,204
Income attributable to the noncontrolling interest	(61)	(50)	(211)	(225)
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders	$ 2,841	$ 80,286	$ (50,489)	$ 93,979
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:
Basic (dollars per share)	$ 0.06	$ 1.72	$ (1.10)	$ 2.02
Diluted (dollars per share)	$ 0.06	$ 1.69	$ (1.10)	$ 1.98
Weighted average common shares outstanding:
Basic (shares)	45,599	46,698	46,055	46,601
Diluted (shares)	46,189	47,557	46,055	47,541

XML

Condensed Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 2,902	$ 80,336	$ (50,278)	$ 94,204
Other comprehensive loss, net of tax
Foreign currency translation adjustments, net of tax	(250)	(1,434)	(873)	(1,524)
Fair value adjustment of derivatives, net of tax	47	(69)	(50)	(263)
Other comprehensive loss, net of tax	(203)	(1,503)	(923)	(1,787)
Comprehensive income (loss)	2,699	78,833	(51,201)	92,417
Comprehensive income (loss) attributable to noncontrolling interest	36	(237)	22	(30)
Comprehensive income (loss) attributable to ARC Document Solutions, Inc. shareholders	$ 2,663	$ 79,070	$ (51,223)	$ 92,447

XML

Condensed Consolidated Statements of Equity - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Common Stock in Treasury [Member]	Noncontrolling Interest [Member]
Beginning Balance at Dec. 31, 2014	$ 109,838	$ 47	$ 110,650	$ (7,353)	$ (161)	$ (408)	$ 7,063
Beginning Balance, shares at Dec. 31, 2014		46,800
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	3,009		3,009
Stock-based compensation, shares		131
Issuance of common stock under Employee Stock Purchase Plan	83		83
Issuance of common stock under Employee Stock Purchase Plan, shares		13
Stock options exercised	562		562
Stock options exercised, shares		125
Treasury shares	(204)					(204)
Comprehensive loss:
Net income	94,204			93,979			225
Foreign currency translation adjustments, net of tax	(1,524)				(1,269)		(255)
Fair value adjustment of derivatives, net of tax	(263)				(263)
Comprehensive income (loss)	92,417
Ending Balance at Sep. 30, 2015	$ 205,705	$ 47	114,304	86,626	(1,693)	(612)	7,033
Ending Balance, shares at Sep. 30, 2015		47,093
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury Stock, (in shares)		24
Treasury Stock, (in shares)	101
Beginning Balance at Dec. 31, 2015	$ 209,134	$ 47	115,089	89,687	(2,097)	(612)	7,020
Beginning Balance, shares at Dec. 31, 2015	47,130	47,130
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation	$ 2,073		2,073
Stock-based compensation, shares		229
Issuance of common stock under Employee Stock Purchase Plan	96		96
Issuance of common stock under Employee Stock Purchase Plan, shares		28
Stock options exercised	76		76
Tax deficiency from stock based compensation	(70)		(70)
Stock options exercised, shares		28
Treasury shares	(5,297)					(5,297)
Comprehensive loss:
Net income	(50,278)			(50,489)			211
Foreign currency translation adjustments, net of tax	(873)				(684)		(189)
Fair value adjustment of derivatives, net of tax	(50)				(50)
Comprehensive income (loss)	(51,201)
Ending Balance at Sep. 30, 2016	$ 154,811	$ 47	$ 117,264	$ 39,198	$ (2,831)	$ (5,909)	$ 7,042
Ending Balance, shares at Sep. 30, 2016	47,415	47,415
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury Stock, (in shares)	1,440	0

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Cash flows from operating activities
Net income (loss)	$ 2,902	$ 80,336	$ (50,278)	$ 94,204
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Allowance for accounts receivable	324	110	644	292
Depreciation	6,697	7,040	20,032	21,184
Amortization of intangible assets	1,160	1,375	3,705	4,306
Amortization of deferred financing costs	111	138	344	460
Goodwill impairment	0	0	73,920	0
Stock-based compensation	650	735	2,073	2,739
Deferred income taxes	2,299	2,198	(6,018)	8,221
Deferred tax valuation allowance	(1)	(76,091)	(16)	(80,882)
Loss on extinguishment of debt	66	96	156	193
Other non-cash items, net	(87)	(73)	(540)	(357)
Changes in operating assets and liabilities:
Accounts receivable	(897)	2,996	(2,285)	(3,637)
Inventory	(429)	1,083	(3,196)	(1,775)
Prepaid expenses and other assets	1,179	1,224	513	2,941
Accounts payable and accrued expenses	(1,811)	(202)	(5,008)	(4,772)
Net cash provided by operating activities	12,163	20,965	34,046	43,117
Cash flows from investing activities
Capital expenditures	(2,430)	(3,880)	(7,580)	(11,517)
Other	135	266	842	514
Net cash used in investing activities	(2,295)	(3,614)	(6,738)	(11,003)
Cash flows from financing activities
Proceeds from stock option exercises	46	1	76	562
Proceeds from issuance of common stock under Employee Stock Purchase Plan	26	25	96	83
Share repurchases	(200)	0	(5,297)	(204)
Contingent consideration on prior acquisitions	(86)	(360)	(453)	(360)
Early extinguishment of long-term debt	(7,000)	(3,625)	(16,000)	(10,875)
Payments on long-term debt agreements and capital leases	(3,310)	(7,262)	(9,651)	(20,042)
Net repayments under revolving credit facilities	0	(144)	0	(1,888)
Payment of deferred financing costs	(76)	0	(106)	(25)
Payment of hedge premium	0	0	0	(632)
Net cash used in financing activities	(10,600)	(11,365)	(31,335)	(33,381)
Effect of foreign currency translation on cash balances	(80)	(598)	(296)	(545)
Net change in cash and cash equivalents	(812)	5,388	(4,323)	(1,812)
Cash and cash equivalents at beginning of period	20,452	15,436	23,963	22,636
Cash and cash equivalents at end of period	19,640	20,824	19,640	20,824
Noncash investing and financing activities
Capital lease obligations incurred	3,738	2,625	12,345	9,667
Contingent liabilities in connection with acquisition of businesses	$ 0	$ 0	$ 85	$ 0

XML

Description of Business and Basis of Presentation

9 Months Ended

Sep. 30, 2016

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 Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the accompanying interim Condensed Consolidated Financial Statements presented reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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 2015 Form 10-K.

Recent Accounting Pronouncements

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

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the statement of operations when share-based awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company's statement of cash flows, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-09 on its condensed consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Codification (“ASC”) 842, Leases. The new guidance replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASC 842 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value and amends existing guidance which requires inventory be measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for financial statement preparers. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-11 on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the existing revenue recognition requirements in “Revenue Recognition (Topic 605).” The new guidance requires entities to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The new guidance amends Accounting Standards Codification ("ASC") 350-40, Intangibles - Goodwill and Other, Internal-Use Software, to provide guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-05 on January 1, 2016. The adoption of ASU 2015-05 did not have a material impact to the Company's condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of deferred financing fees in an entity's financial statements. Under the ASU, deferred financing fees are to be presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-03 as of January 1, 2016. In conjunction with the adoption of ASU 2015-03, the Company reclassified net deferred financing fees of $1.6 million at December 31, 2015 from an asset to a direct deduction from the related debt liability to conform to the current period presentation.

Segment Reporting

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

Net sales of the Company’s principal services and products were as follows:

	Three Months Ended   September 30,				Nine Months Ended   September 30,
	2016		2015		2016		2015
Service Sales
CDIM	$	53,228	$	54,710	$	161,753	$	168,187
MPS	32,796		35,923		100,082		108,934
AIM	3,154		3,751		10,559		9,924
Total service sales	89,178		94,384		272,394		287,045
Equipment and supplies sales	11,265		12,034		35,369		37,081
Total net sales	$	100,443	$	106,418	$	307,763	$	324,126

Risk and Uncertainties

The Company generates the majority of its revenue from sales of services and products to customers in the architectural, engineering, construction and building owner/operator (AEC/O) industry. As a result, the Company’s operating results and financial condition can be significantly affected by economic factors that influence the AEC/O industry, such as non-residential construction spending, GDP growth, interest rates, unemployment rates, and office vacancy rates. Reduced activity (relative to historic levels) in the AEC/O industry would diminish demand for some of ARC’s services and products, and would therefore negatively affect revenues and have a material adverse effect on its business, operating results and financial condition.

As part of the Company’s growth strategy, ARC intends to continue to offer and grow a variety of service offerings, some of which are relatively new to the Company. The success of the Company’s efforts will be affected by its ability to acquire new customers for the Company’s new service offerings, as well as to sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition.

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Earnings Per Share

9 Months Ended

Sep. 30, 2016

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 common shares outstanding for the period. Diluted earnings per common share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if common shares subject to outstanding options and acquisition rights had been issued and if the additional common shares were dilutive. Common share equivalents are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2016, stock options of 3.0 million and 4.4 million common shares were excluded from the calculation of diluted net income (loss) attributable to ARC per common share, respectively, because they were anti-dilutive. For the three and nine months ended September 30, 2015, stock options of 2.1 million and 1.5 million common shares were excluded from the calculation of diluted net income attributable to ARC per common share, respectively, because they were anti-dilutive. The Company's common share equivalents consist of stock options issued under the Company's stock plan.

Basic and diluted weighted average common shares outstanding were calculated as follows for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2016	2015	2016	2015
Weighted average common shares outstanding during the period—basic	45,599	46,698	46,055	46,601
Effect of dilutive stock options	590	859	—	940
Weighted average common shares outstanding during the period—diluted	46,189	47,557	46,055	47,541

Stock Repurchase Program

On February 8, 2016, the Company announced that the Company's Board of Directors had approved a stock repurchase program that authorizes the Company to purchase up to $15.0 million of the Company's outstanding common stock through December 31, 2017. Under the repurchase program, purchases of shares of common stock may be made from time to time in the open market, or in privately negotiated transactions, in compliance with applicable state and federal securities laws. The stock repurchase program does not obligate the company to acquire any specific number of shares in any period, and may be expanded, extended, modified or discontinued at any time without prior notice. See Part II, Item 2., “Unregistered Sales of Equity Securities and Use of Proceeds” of this report for additional information on the stock repurchase program.

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Goodwill and Other Intangibles Resulting from Business Acquisitions

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangibles Resulting from Business Acquisitions

Goodwill and Other Intangibles Resulting from Business Acquisitions

Goodwill

In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles-Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2016, the Company performed its assessment and determined that goodwill was not impaired.

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the second quarter of 2016, in connection with an operationally focused reorganization of certain of the Company's reporting units, one additional reporting unit was added. As such, the goodwill of the former reporting units affected was reassigned to the new reporting unit based on their relative fair values and represented less than one percent of the Company's goodwill balance at the time.

Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.

At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company performed its preliminary assessment as of June 30, 2016 and noted that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis; however, step two of the analysis was subject to finalization of the implied fair value of goodwill. The preliminary results of step two of the Company's goodwill impairment analysis indicated that the Company's goodwill was impaired by approximately $73.9 million. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million. The Company completed step two of the analysis in the third quarter of 2016 with no change to the previous estimate.

Given the current economic environment, the changing document and printing needs of the Company’s customers, and the uncertainties regarding the related impact on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim goodwill impairment test in 2016 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, the Company may be required to record additional goodwill impairment charges in future periods, whether in connection with the Company’s next annual impairment testing in the third quarter of 2017, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.

The changes in the carrying amount of goodwill from January 1, 2015 through September 30, 2016 are summarized as follows:

	Gross Goodwill		Accumulated Impairment Loss		Net Carrying Amount
January 1, 2015	$	405,558	$	192,950	$	212,608
Additions	—		—		—
Goodwill impairment	—		—		—
December 31, 2015	405,558		192,950		212,608
Additions	—		—		—
Goodwill impairment	—		73,920		(73,920		)
September 30, 2016	$	405,558	$	266,870	$	138,688

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 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 its long-lived assets for possible impairment during the nine months ended September 30, 2016 and concluded that its long-lived assets were not impaired.

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, 2016 and December 31, 2015 which continue to be amortized:

	September 30, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable other intangible assets
Customer relationships	$	99,227	$	85,265	$	13,962	$	99,050	$	81,572	$	17,478
Trade names and trademarks	20,312		19,881		431		20,329		19,861		468
	$	119,539	$	105,146	$	14,393	$	119,379	$	101,433	$	17,946

Based on current information, estimated future amortization expense of amortizable intangible assets for the remainder of the 2016 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:

2016 (excluding the nine months ended September 30, 2016)	$	1,135
2017	4,267
2018	3,855
2019	3,134
2020	1,523
Thereafter	479
	$	14,393

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Income Taxes

9 Months Ended

Sep. 30, 2016

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 rate in conjunction with the recognition of any discrete items within the quarter.

The Company recorded an income tax provision of $2.2 million in relation to pretax income of $5.1 million for the three months ended September 30, 2016, and an income tax benefit of $5.9 million in relation to pretax loss of $56.2 million for the nine months ended September 30, 2016, which resulted in an effective income tax rate of 42.6% and 10.5%, for the three and nine months ended September 30, 2016, respectively. The Company's low effective income tax rate for the nine months ended September 30, 2016 was primarily due to the $41.4 million goodwill impairment related to historical stock acquisitions which cannot be deducted for income tax purposes until the related stock is disposed of. The Company recorded income tax benefits of $73.3 million and $71.8 million in relation to pretax income of $7.0 million and $22.4 million for the three and nine months ended September 30, 2015.

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.

It is difficult to conclude a valuation allowance is not required when there is significant objective and verifiable negative evidence, such as cumulative losses in recent years. The Company utilizes a rolling three years of actual and current year anticipated results as the primary measure of cumulative losses in recent years, excluding permanent differences. The evaluation of deferred tax assets requires judgment in assessing the likely future tax consequences of events that have been recognized in the Company's financial statements or tax returns and future profitability. The Company's accounting for deferred tax consequences represents its best estimate of those future events. Changes in the Company's current estimates, due to unanticipated events or otherwise, could have a material effect on its financial condition and results of operations. At September 30, 2015, as a result of sustained profitability in the U.S. evidenced by three years of earnings and forecasted continuing profitability, the Company determined it was more likely than not that future earnings would be sufficient to realize certain of its deferred tax assets in the U.S. Accordingly the Company reversed most of its U.S. valuation allowance, resulting in non-cash income tax benefit of $80.7 million for the year ended December 31, 2015. The Company continues to carry a $1.3 million valuation allowance against certain deferred tax assets as of September 30, 2016.

Based on the Company’s current assessment, the remaining net deferred tax assets as of September 30, 2016 are considered more likely than not to be realized. The valuation allowance of $1.3 million may be increased or reduced as conditions change or if the Company is unable to implement certain available tax planning strategies. The realization of the Company’s net deferred tax assets ultimately depend on future taxable income, reversals of existing taxable temporary differences or through a loss carry back.

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Long-Term Debt

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Long-Term Debt

Long-Term Debt

Long-term debt consists of the following:

	September 30, 2016			December 31, 2015
Term A loan facility maturing 2019 net of deferred financing fees of $1,192 and $1,586; 2.59% and 2.50% interest rate at September 30, 2016 and December 31, 2015	$	125,808		$	141,414
Various capital leases; weighted average interest rate of 5.6% and 5.8% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through September 2021	33,059			29,866
Various other notes payable with a weighted average interest rate of 10.7% and 8.5% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through November 2019	37			112
	158,904			171,392
Less current portion	(12,926		)	(14,374		)
	$	145,978		$	157,018

Term A Loan Facility

On November 20, 2014 the Company entered into a Credit Agreement (the “Term A Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent and the lenders party thereto.

The Term A Credit Agreement provides for the extension of term loans (“Term Loans”) in an aggregate principal amount of $175.0 million, the entirety of which was disbursed on the Closing Date in order to pay outstanding obligations under the Company’s Term Loan Credit Agreement dated as of December 20, 2013. The Term A Credit Agreement also provides for the extension of revolving loans (“Revolving Loans”) in an aggregate principal amount not to exceed $30.0 million. The Revolving Loan facility under the Term A Credit Agreement replaces the Company’s Credit Agreement dated as of January 27, 2012. The Company may request incremental commitments to the aggregate principal amount of Term Loans and Revolving Loans available under the Term A Credit Agreement by an amount not to exceed $75.0 million in the aggregate. Unless an incremental commitment to increase the Term Loan or provide a new term loan matures at a later date, the obligations under the Term A Credit Agreement mature on November 20, 2019. As of September 30, 2016, the Company's borrowing availability under the Term A Credit Agreement was $28.2 million, which was the maximum borrowing limit of $30.0 million reduced by outstanding letters of credit of $1.8 million.

Loans borrowed under the Term A Credit Agreement bear interest, in the case of LIBOR rate loans, at a per annum rate equal to the applicable LIBOR rate, plus a margin ranging from 1.50% to 2.50%, based on the Company’s Total Leverage Ratio (as defined in the Term A Credit Agreement). Loans borrowed under the Term A Credit Agreement that are not LIBOR rate loans bear interest at a per annum rate equal to (i) the greatest of (A) the Federal Funds Rate plus 0.50%, (B) the one month LIBOR rate plus 1.00%, and (C) the rate of interest announced, from time to time, by Wells Fargo Bank, National Association as its “prime rate,” plus (ii) a margin ranging from 0.50% to 1.50%, based on the Company’s Total Leverage Ratio.

The Company will pay certain recurring fees with respect to the credit facility, including administration fees to the administrative agent.

Subject to certain exceptions, including in certain circumstances, reinvestment rights, the loans extended under the Term A Credit Agreement are subject to customary mandatory prepayment provisions with respect to: the net proceeds from certain asset sales; the net proceeds from certain issuances or incurrences of debt (other than debt permitted to be incurred under the terms of the Term A Credit Agreement); the net proceeds from certain issuances of equity securities; and net proceeds of certain insurance recoveries and condemnation events of the Company.

The Term A Credit Agreement contains customary representations and warranties, subject to limitations and exceptions, and customary covenants restricting the ability (subject to various exceptions) of the Company and its subsidiaries to: incur additional indebtedness (including guarantee obligations); incur liens; sell certain property or assets; engage in mergers or other fundamental changes; consummate acquisitions; make investments; pay dividends, other distributions or repurchase equity interest of the Company or its subsidiaries; change the nature of their business; prepay or amend certain indebtedness; engage in certain transactions with affiliates; amend their organizational documents; or enter into certain restrictive agreements. In addition, the Term A Credit Agreement contains financial covenants which requires the Company to maintain (i) at all times, a Total Leverage Ratio in an amount not to exceed 3.25 to 1.00 through the Company’s fiscal quarter ending September 30, 2016, and thereafter, in an amount not to exceed 3.00 to 1.00; and (ii) a Fixed Charge Coverage Ratio (as defined in the Term A Credit Agreement), as amended on June 24, 2016, the Company is required to maintain, as of the last day of each fiscal quarter, an amount not less than 1.15 to 1.00. On February 5, 2016, the Term A Credit Agreement was amended to exclude up to $15.0 million of stock repurchases from the calculation of the Company's Fixed Charge Coverage Ratio, provided that those stock repurchases are consummated in accordance with the other terms and conditions of the agreement.

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

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

As of September 30, 2016, the Company has paid $48.0 million in aggregate principal on its $175.0 million Term Loan Credit Agreement, which was $17.4 million above the required payments from inception to date. Principal payments on the Term Loan Credit Agreement of $16.0 million in 2016 resulted in a loss on extinguishment of debt of $66 thousand and $156 thousand for the three and nine months ended September 30, 2016.

Other Notes Payable

Includes notes payable collateralized by equipment previously purchased.

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Operating Leases. The Company has entered into various non-cancelable operating leases primarily related to facilities, equipment and vehicles used in the ordinary course of business.

Legal Proceedings. On October 21, 2010, a former employee, individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, L.L.C. and American Reprographics Company in the State of California at any time from October 21, 2006 through the settlement date, filed an action against the Company in the Superior Court of California for the County of Orange. The complaint alleged, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought included damages, restitution, penalties, interest, costs, and attorneys’ fees and such other relief as the court deems proper. On March 15, 2013, the Company participated in a private mediation session with claimants’ counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. In the second quarter of 2016, the Company settled with the defendants and paid $1.0 million, which had been accrued as of December 31, 2015.

In addition to the matter described above, the Company is involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or cash flows.

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Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Stock-Based Compensation

At the Company's annual meeting of stockholders held on May 1, 2014, the Company's stockholders approved the Company's 2014 Stock Plan (the “2014 Stock Plan”) as adopted by the Company's board of directors. The 2014 Stock Plan replaces the American Reprographics Company 2005 Stock Plan (the "2005 Plan"). The 2014 Stock Plan provides for the grant of incentive and non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, stock bonuses and other forms of awards granted or denominated in the Company's common stock or units of the Company's common stock, as well as cash bonus awards to employees, directors and consultants of the Company. The 2014 Stock Plan authorizes the Company to issue up to 3.5 million shares of common stock. As of September 30, 2016, 1.6 million shares remain available for issuance under the Stock Plan.

Stock options granted under the 2014 Stock Plan generally expire no later than ten years from the date of grant. Options generally vest and become fully exercisable over a period of three to four years from date of award, except that options granted to non-employee directors may vest over a shorter time period. The exercise price of options must be equal to at least 100% of the fair market value of the Company’s common stock on the date of grant. The Company allows for cashless exercises of vested outstanding options.

During the nine months ended September 30, 2016, the Company granted options to acquire a total of 528 thousand shares of the Company's common stock to certain key employees with an exercise price equal to the fair market value of the Company’s common stock on the date of grant. During the nine months ended September 30, 2016, the Company granted 130 thousand shares of restricted stock to certain key employees at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The granted stock options and restricted stock vest annually over three years from the grant date. In addition, the Company granted approximately 14 thousand shares of restricted stock to each of the Company's seven non-employee members of its board of directors at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The restricted stock vests on the one-year anniversary of the grant date.

The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $0.7 million for the both the three months ended September 30, 2016 and 2015.

The impact of stock-based compensation before income taxes on the interim Condensed Consolidated Statements of Operations was $2.1 million and $2.7 million for the nine months ended September 30, 2016 and 2015, respectively.

As of September 30, 2016, total unrecognized compensation cost related to unvested stock-based payments totaled $3.4 million and is expected to be recognized over a weighted-average period of approximately 1.8 years.

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Derivatives and Hedging Transactions

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivatives and Hedging Transactions

Derivatives and Hedging Transactions

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

In January 2015, the Company entered into threeone-year interest rate cap contracts to hedge against its exposure to interest rate volatility: (1) $80.0 million notional interest rate cap effective in 2015, (2) $65.0 million notional forward interest rate cap effective in 2016, and (3) $50.0 million notional forward interest rate cap effective in 2017. Over the next twelve months, the Company expects to reclassify $0.4 million from AOCL to interest expense.

The following table summarizes the fair value and classification on the Condensed Consolidated Balance Sheets of the Company's derivatives as of September 30, 2016 and December 31, 2015:

		Fair Value
	Balance Sheet Classification	September 30, 2016		December 31, 2015
Derivative designated as hedging instrument under ASC 815
Interest rate cap contracts - current portion	Other current assets	$	12	$	48
Interest rate cap contracts - long-term portion	Other assets	11		191
Total derivatives designated as hedging instruments		$	23	$	239

The following table summarizes the income (loss) recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the three and nine months ended September 30, 2016 and 2015:

	Amount of Income (Loss) Recognized in AOCL on Derivative
	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016			2015
Derivative in ASC 815 Cash Flow Hedging Relationship
Interest rate cap contracts, net of tax	$	47	$	(69	)	$	(50	)	$	(263	)

The following table summarizes the effect of the interest rate cap on the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015:

	Amount of Loss Reclassified from AOCL into Income
	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2016				2015				2016				2015
	Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion
Location of Loss Reclassified from AOCL into Income
Interest expense	$	68	$	—	$	9	$	—	$	132	$	—	$	10	$	—

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Fair Value Measurements

9 Months Ended

Sep. 30, 2016

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 as set forth below. If the inputs used to measure fair value fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement. The three levels of the hierarchy are defined as follows:

Level 1-inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2-inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3-inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a nonrecurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016:

	Significant Other Unobservable Inputs
	September 30, 2016
	Level 3		Total Losses
Nonrecurring Fair Value Measure
Goodwill	$	138,688	$	73,920

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

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016 and as of and for the year ended December 31 2015:

		Significant Other Unobservable Inputs
		September 30, 2016						December 31, 2015
		Level 2		Level 3		Total Losses		Level 2		Level 3		Total Losses
Recurring Fair Value Measure
	Interest rate cap contracts	$	23	$	—	$	—	$	239	$	—	$	—
	Contingent purchase price consideration for acquired businesses	$	—	$	541	$	—	$	—	$	1,059	$	—

The Company determines the fair value of its interest rate cap contracts based on observable interest rate yield curves and represent the expected discounted cash flows underlying the financial instruments.

The Company recognizes liabilities for future earnout obligations on business acquisitions, or contingent purchase price consideration for acquired businesses, at their fair value based on discounted projected payments on such obligations. The inputs to the valuation, which are level 3 inputs within the fair value hierarchy, are projected sales to be provided by the acquired businesses based on historical sales trends for which earnout amounts are contractually based. Based on the Company's assessment as of September 30, 2016, the estimated contractually required earnout amounts would be achieved.

The following table presents the change in the Level 3 contingent purchase price consideration liability for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Beginning balance	$	604		$	1,479		$	1,059		$	1,768
Additions related to acquisitions	—			—			104			—
Payments	(86		)	(360		)	(453		)	(502		)
Adjustments included in earnings	15			32			(180		)	2
Foreign currency translation adjustments	8			(34		)	11			(151		)
Ending balance	$	541		$	1,117		$	541		$	1,117

Fair Values of Financial Instruments. The following methods and assumptions were used by the Company in estimating the fair value of its financial instruments for disclosure purposes:

Cash equivalents: Cash equivalents are time deposits with maturity of three months or less when purchased, which are highly liquid and readily convertible to cash. Cash equivalents reported in the Company’s Condensed Consolidated Balance Sheets were $8.3 million and $6.3 million as of September 30, 2016 and December 31, 2015, respectively, and are carried at cost and approximate fair value due to the relatively short period to maturity of these instruments.

Short and long-term debt: The carrying amount of the Company’s capital leases reported in the Condensed Consolidated Balance Sheets approximates fair value based on the Company’s current incremental borrowing rate for similar types of borrowing arrangements. The carrying amount reported in the Company’s Condensed Consolidated Balance Sheet as of September 30, 2016 for borrowings under its Term Loan Credit Agreement is $127.0 million, excluding unamortized deferred financing fees. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its Term Loan Credit Agreement is $127.0 million as of September 30, 2016.

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Description of Business and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2016

Accounting Policies [Abstract]

Goodwill

Goodwill

In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles-Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2016, the Company performed its assessment and determined that goodwill was not impaired.

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the second quarter of 2016, in connection with an operationally focused reorganization of certain of the Company's reporting units, one additional reporting unit was added. As such, the goodwill of the former reporting units affected was reassigned to the new reporting unit based on their relative fair values and represented less than one percent of the Company's goodwill balance at the time.

Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.

At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company performed its preliminary assessment as of June 30, 2016 and noted that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis; however, step two of the analysis was subject to finalization of the implied fair value of goodwill. The preliminary results of step two of the Company's goodwill impairment analysis indicated that the Company's goodwill was impaired by approximately $73.9 million. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million. The Company completed step two of the analysis in the third quarter of 2016 with no change to the previous estimate.

Given the current economic environment, the changing document and printing needs of the Company’s customers, and the uncertainties regarding the related impact on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim goodwill impairment test in 2016 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, the Company may be required to record additional goodwill impairment charges in future periods, whether in connection with the Company’s next annual impairment testing in the third quarter of 2017, 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.

Business Combinations

Goodwill

In connection with acquisitions, the Company applies the provisions of ASC 805, Business Combinations, using the acquisition method of accounting. The excess purchase price over the assessed fair value of net tangible assets and identifiable intangible assets acquired is recorded as goodwill.

In accordance with ASC 350, Intangibles-Goodwill and Other, the Company assesses goodwill for impairment annually as of September 30, and more frequently if events and circumstances indicate that goodwill might be impaired. At September 30, 2016, the Company performed its assessment and determined that goodwill was not impaired.

Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill. During the second quarter of 2016, in connection with an operationally focused reorganization of certain of the Company's reporting units, one additional reporting unit was added. As such, the goodwill of the former reporting units affected was reassigned to the new reporting unit based on their relative fair values and represented less than one percent of the Company's goodwill balance at the time.

Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit’s carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.

The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.

At June 30, 2016, the Company determined that there were sufficient indicators to trigger an interim goodwill impairment analysis. The indicators included, among other factors: (1) the underperformance against plan of the Company's reporting units, (2) a revision of the Company's forecasted future earnings, and (3) a decline in the Company's market capitalization in 2016. The Company performed its preliminary assessment as of June 30, 2016 and noted that five of its eight reporting units, four in the United States and one in Canada, failed step one of the impairment analysis; however, step two of the analysis was subject to finalization of the implied fair value of goodwill. The preliminary results of step two of the Company's goodwill impairment analysis indicated that the Company's goodwill was impaired by approximately $73.9 million. Accordingly, the Company recorded a pretax, non-cash charge for the three and six months ended June 30, 2016 to reduce the carrying value of goodwill by $73.9 million. The Company completed step two of the analysis in the third quarter of 2016 with no change to the previous estimate.

Given the current economic environment, the changing document and printing needs of the Company’s customers, and the uncertainties regarding the related impact on the Company’s business, there can be no assurance that the estimates and assumptions made for purposes of the Company’s interim goodwill impairment test in 2016 will prove to be accurate predictions of the future. If the Company’s assumptions, including forecasted EBITDA of certain reporting units, are not achieved, the Company may be required to record additional goodwill impairment charges in future periods, whether in connection with the Company’s next annual impairment testing in the third quarter of 2017, 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.

Earnings Per Share

Earnings per Share

The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share is computed by dividing net income attributable to ARC by the weighted-average number of common shares outstanding for the period. Diluted earnings per common share is computed similarly to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if common shares subject to outstanding options and acquisition rights had been issued and if the additional common shares were dilutive. Common share equivalents are excluded from the computation if their effect is anti-dilutive. For the three and nine months ended September 30, 2016, stock options of 3.0 million and 4.4 million common shares were excluded from the calculation of diluted net income (loss) attributable to ARC per common share, respectively, because they were anti-dilutive. For the three and nine months ended September 30, 2015, stock options of 2.1 million and 1.5 million common shares were excluded from the calculation of diluted net income attributable to ARC per common share, respectively, because they were anti-dilutive.

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 Securities and Exchange Commission (SEC). As permitted under those rules, certain footnotes or other financial information required by GAAP for complete financial statements have been condensed or omitted. In management’s opinion, the accompanying interim Condensed Consolidated Financial Statements presented reflect all adjustments of a normal and recurring nature that are necessary to fairly present the interim Condensed Consolidated Financial Statements. All material intercompany accounts and transactions have been eliminated in consolidation. The operating results for the three and nine months ended September 30, 2016 are not necessarily indicative of the results that may be expected for the year ending December 31, 2016.

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 2015 Form 10-K.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

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

In March 2016, the FASB issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting. The new guidance requires excess tax benefits and tax deficiencies to be recorded in the statement of operations when share-based awards vest or are settled. In addition, cash flows related to excess tax benefits will no longer be separately classified as a financing activity apart from other income tax cash flows. The standard also allows the Company to repurchase more of an employee’s shares for tax withholding purposes without triggering liability accounting, clarifies that all cash payments made on an employee’s behalf for withheld shares should be presented as a financing activity on the Company's statement of cash flows, and provides an accounting policy election to account for forfeitures as they occur. ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2016-09 on its condensed consolidated financial statements.

In February 2016, the FASB issued Accounting Standards Codification (“ASC”) 842, Leases. The new guidance replaces the existing guidance in ASC 840, Leases. ASC 842 requires a dual approach for lessee accounting under which a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leases will result in the lessee recognizing a right-of-use (ROU) asset and a corresponding lease liability. For finance leases the lessee would recognize interest expense and amortization of the ROU asset and for operating leases the lessee would recognize a straight-line total lease expense. ASC 842 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. The Company is currently in the process of evaluating the impact of the adoption of ASC 842 on its consolidated financial statements.

In July 2015, the FASB issued ASU 2015-11, Simplifying the Measurement of Inventory. The new guidance requires that inventory be measured at the lower of cost or net realizable value and amends existing guidance which requires inventory be measured at the lower of cost or market. Replacing the concept of market with the single measurement of net realizable value is intended to create efficiencies for financial statement preparers. ASU 2015-11 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-11 on its condensed consolidated financial statements.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes the existing revenue recognition requirements in “Revenue Recognition (Topic 605).” The new guidance requires entities to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. Early adoption is permitted for annual reporting periods beginning after December 15, 2016, including interim reporting periods within that reporting period. The Company is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-05, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. The new guidance amends Accounting Standards Codification ("ASC") 350-40, Intangibles - Goodwill and Other, Internal-Use Software, to provide guidance on determining whether a cloud computing arrangement contains a software license that should be accounted for as internal-use software. ASU 2015-05 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-05 on January 1, 2016. The adoption of ASU 2015-05 did not have a material impact to the Company's condensed consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Interest—Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs, which changes the presentation of deferred financing fees in an entity's financial statements. Under the ASU, deferred financing fees are to be presented in the balance sheet as a direct deduction from the related debt liability rather than as an asset. ASU 2015-03 is effective for annual reporting periods beginning after December 15, 2015, including interim periods within that reporting period. The Company adopted ASU 2015-03 as of January 1, 2016. In conjunction with the adoption of ASU 2015-03, the Company reclassified net deferred financing fees of $1.6 million at December 31, 2015 from an asset to a direct deduction from the related debt liability to conform to the current period presentation.

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. Reduced activity (relative to historic levels) in the AEC/O industry would diminish demand for some of ARC’s services and products, and would therefore negatively affect revenues and have a material adverse effect on its business, operating results and financial condition.

As part of the Company’s growth strategy, ARC intends to continue to offer and grow a variety of service offerings, some of which are relatively new to the Company. The success of the Company’s efforts will be affected by its ability to acquire new customers for the Company’s new service offerings, as well as to sell the new service offerings to existing customers. The Company’s inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition.

Long-Lived Assets

Long-lived Assets

The Company periodically assesses potential impairments of its long-lived assets in accordance with the provisions of ASC 360, Accounting for the Impairment or Disposal of Long-lived Assets. An impairment review is performed whenever events or changes in circumstances indicate that the carrying value of the assets may not be recoverable. The Company groups its assets at the lowest level for which identifiable cash flows are largely independent of the cash flows of the other assets and liabilities. 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 its long-lived assets for possible impairment during the nine months ended September 30, 2016 and concluded that its long-lived assets were not impaired.

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, 2016 and December 31, 2015 which continue to be amortized:

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Description of Business and Basis of Presentation (Tables)

9 Months Ended

Sep. 30, 2016

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,
	2016		2015		2016		2015
Service Sales
CDIM	$	53,228	$	54,710	$	161,753	$	168,187
MPS	32,796		35,923		100,082		108,934
AIM	3,154		3,751		10,559		9,924
Total service sales	89,178		94,384		272,394		287,045
Equipment and supplies sales	11,265		12,034		35,369		37,081
Total net sales	$	100,443	$	106,418	$	307,763	$	324,126

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Earnings Per Share (Tables)

9 Months Ended

Sep. 30, 2016

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, 2016 and 2015:

	Three Months Ended   September 30,		Nine Months Ended   September 30,
	2016	2015	2016	2015
Weighted average common shares outstanding during the period—basic	45,599	46,698	46,055	46,601
Effect of dilutive stock options	590	859	—	940
Weighted average common shares outstanding during the period—diluted	46,189	47,557	46,055	47,541

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Goodwill and Other Intangibles Resulting from Business Acquisitions (Tables)

9 Months Ended

Sep. 30, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The changes in the carrying amount of goodwill from January 1, 2015 through September 30, 2016 are summarized as follows:

	Gross Goodwill		Accumulated Impairment Loss		Net Carrying Amount
January 1, 2015	$	405,558	$	192,950	$	212,608
Additions	—		—		—
Goodwill impairment	—		—		—
December 31, 2015	405,558		192,950		212,608
Additions	—		—		—
Goodwill impairment	—		73,920		(73,920		)
September 30, 2016	$	405,558	$	266,870	$	138,688

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, 2016 and December 31, 2015 which continue to be amortized:

	September 30, 2016						December 31, 2015
	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Amortizable other intangible assets
Customer relationships	$	99,227	$	85,265	$	13,962	$	99,050	$	81,572	$	17,478
Trade names and trademarks	20,312		19,881		431		20,329		19,861		468
	$	119,539	$	105,146	$	14,393	$	119,379	$	101,433	$	17,946

Estimated Future Amortization Expense of Amortizable Intangible Assets

Based on current information, estimated future amortization expense of amortizable intangible assets for the remainder of the 2016 fiscal year, each of the subsequent four fiscal years and thereafter are as follows:

2016 (excluding the nine months ended September 30, 2016)	$	1,135
2017	4,267
2018	3,855
2019	3,134
2020	1,523
Thereafter	479
	$	14,393

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Long-Term Debt (Tables)

9 Months Ended

Sep. 30, 2016

Debt Disclosure [Abstract]

Long-Term Debt

Long-term debt consists of the following:

	September 30, 2016			December 31, 2015
Term A loan facility maturing 2019 net of deferred financing fees of $1,192 and $1,586; 2.59% and 2.50% interest rate at September 30, 2016 and December 31, 2015	$	125,808		$	141,414
Various capital leases; weighted average interest rate of 5.6% and 5.8% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through September 2021	33,059			29,866
Various other notes payable with a weighted average interest rate of 10.7% and 8.5% at September 30, 2016 and December 31, 2015; principal and interest payable monthly through November 2019	37			112
	158,904			171,392
Less current portion	(12,926		)	(14,374		)
	$	145,978		$	157,018

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Derivatives and Hedging Transactions (Tables)

9 Months Ended

Sep. 30, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Cash Flow Hedges Included in Accumulated Other Comprehensive Income (Loss)

The following table summarizes the fair value and classification on the Condensed Consolidated Balance Sheets of the Company's derivatives as of September 30, 2016 and December 31, 2015:

		Fair Value
	Balance Sheet Classification	September 30, 2016		December 31, 2015
Derivative designated as hedging instrument under ASC 815
Interest rate cap contracts - current portion	Other current assets	$	12	$	48
Interest rate cap contracts - long-term portion	Other assets	11		191
Total derivatives designated as hedging instruments		$	23	$	239

Schedule of Derivative Instruments, Effect on Other Comprehensive Income (Loss)

The following table summarizes the income (loss) recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the three and nine months ended September 30, 2016 and 2015:

	Amount of Income (Loss) Recognized in AOCL on Derivative
	Three Months Ended   September 30,					Nine Months Ended   September 30,
	2016		2015			2016			2015
Derivative in ASC 815 Cash Flow Hedging Relationship
Interest rate cap contracts, net of tax	$	47	$	(69	)	$	(50	)	$	(263	)

Derivative Instruments, Gain (Loss)

The following table summarizes the effect of the interest rate cap on the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015:

	Amount of Loss Reclassified from AOCL into Income
	Three Months Ended   September 30,								Nine Months Ended   September 30,
	2016				2015				2016				2015
	Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion		Effective Portion		Ineffective Portion
Location of Loss Reclassified from AOCL into Income
Interest expense	$	68	$	—	$	9	$	—	$	132	$	—	$	10	$	—

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Fair Value Measurements Tables (Tables)

9 Months Ended

Sep. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value, Assets Measured on Recurring and Nonrecurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a nonrecurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016:

	Significant Other Unobservable Inputs
	September 30, 2016
	Level 3		Total Losses
Nonrecurring Fair Value Measure
Goodwill	$	138,688	$	73,920

Fair Value, Assets Measured on Recurring Basis

The following table summarizes the bases used to measure certain assets and liabilities at fair value on a recurring basis in the condensed consolidated financial statements as of and for the nine months ended September 30, 2016 and as of and for the year ended December 31 2015:

		Significant Other Unobservable Inputs
		September 30, 2016						December 31, 2015
		Level 2		Level 3		Total Losses		Level 2		Level 3		Total Losses
Recurring Fair Value Measure
	Interest rate cap contracts	$	23	$	—	$	—	$	239	$	—	$	—
	Contingent purchase price consideration for acquired businesses	$	—	$	541	$	—	$	—	$	1,059	$	—

Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation

The following table presents the change in the Level 3 contingent purchase price consideration liability for the three and nine months ended September 30, 2016 and 2015:

	Three Months Ended   September 30,						Nine Months Ended   September 30,
	2016			2015			2016			2015
Beginning balance	$	604		$	1,479		$	1,059		$	1,768
Additions related to acquisitions	—			—			104			—
Payments	(86		)	(360		)	(453		)	(502		)
Adjustments included in earnings	15			32			(180		)	2
Foreign currency translation adjustments	8			(34		)	11			(151		)
Ending balance	$	541		$	1,117		$	541		$	1,117

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Description of Business and Basis of Presentation - Net Sales of Principal Services and Products (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Service Sales
Service sales	$ 89,178	$ 94,384	$ 272,394	$ 287,045
Equipment and supplies sales	11,265	12,034	35,369	37,081
Total net sales	100,443	106,418	307,763	324,126
CDIM [Member]
Service Sales
Service sales	53,228	54,710	161,753	168,187
MPS [Member]
Service Sales
Service sales	32,796	35,923	100,082	108,934
AIM [Member]
Service Sales
Service sales	$ 3,154	$ 3,751	$ 10,559	$ 9,924
Accounting Standards Update 2015-03 [Member]
Segment Reporting Information [Line Items]
Deferred finance costs					$ 1,600

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Earnings Per Share - Additional Information (Detail) - USD ($) shares in Millions	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Feb. 08, 2016	Feb. 05, 2016
Class of Stock [Line Items]
Common stock options excluded for anti-dilutive (in shares)	3.0	2.1	4.4	1.5
Stock repurchase program, authorized amount						$ 15,000,000.0
Common Stock [Member]
Class of Stock [Line Items]
Stock repurchase program, authorized amount					$ 15,000,000.0

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Earnings Per Share - Basic and Diluted Earnings Per Share (Detail) - shares shares in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Earnings Per Share [Abstract]
Weighted average common shares outstanding during the period—basic (in shares)	45,599	46,698	46,055	46,601
Effect of dilutive stock options (in shares)	590	859	0	940
Weighted average common shares outstanding during the period—diluted (in shares)	46,189	47,557	46,055	47,541

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Goodwill and Other Intangibles Resulting from Business Acquisitions - Additional Information (Detail) $ in Thousands		3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Jun. 30, 2016 Unit	Sep. 30, 2016 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Jun. 30, 2016 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($)
Finite-Lived Intangible Assets [Line Items]
Reporting units with impaired goodwill	5
Number of reporting units	8
Goodwill impairment | $		$ 0	$ 73,900	$ 0	$ 73,900	$ 73,920	$ 0	$ 0
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated period for amortization						13 years
UNITED STATES
Finite-Lived Intangible Assets [Line Items]
Reporting units with impaired goodwill	4
CANADA
Finite-Lived Intangible Assets [Line Items]
Reporting units with impaired goodwill	1

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Goodwill and Other Intangibles Resulting from Business Acquisitions Goodwill and Other Intangibles Resulting from Business Acquisitions - Schedule of Goodwill (Detail) (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Goodwill [Roll Forward]
Gross Goodwill				$ 405,558	$ 405,558	$ 405,558	$ 405,558
Accumulated Impairment Loss				192,950	192,950	192,950	192,950
Net Carrying Amount				212,608	212,608	212,608	212,608
Additions					0		0
Goodwill impairment	$ 0	$ (73,900)	$ 0	$ (73,900)	(73,920)	$ 0	0
Gross Goodwill	405,558				405,558		405,558
Accumulated Impairment Loss	266,870				266,870		192,950
Net Carrying Amount	$ 138,688				$ 138,688		$ 212,608

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Goodwill and Other Intangibles Resulting from Business Acquisitions - Other Intangible Assets Resulting from Business Acquisitions (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	$ 119,539	$ 119,379
Accumulated Amortization	105,146	101,433
Net Carrying Amount	14,393	17,946
Customer Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	99,227	99,050
Accumulated Amortization	85,265	81,572
Net Carrying Amount	13,962	17,478
Trade Names and Trademarks [Member]
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	20,312	20,329
Accumulated Amortization	19,881	19,861
Net Carrying Amount	$ 431	$ 468

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Goodwill and Other Intangibles Resulting from Business Acquisitions - Estimated Future Amortization Expense of Amortizable Intangible Assets (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
2016 (excluding the nine months ended September 30, 2016)	$ 1,135
2017	4,267
2018	3,855
2019	3,134
2020	1,523
Thereafter	479
Net Carrying Amount	$ 14,393	$ 17,946

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Income Taxes - Additional Information (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Income Tax Disclosure [Abstract]
Income tax (benefit) provision	$ (2,162)	$ 73,338	$ 5,884	$ 71,766
Pretax gain amount	$ 5,064	6,998	$ (56,162)	22,438
Effective income tax rate reconciliation, percent	42.60%		10.50%
Temporary tax asset, goodwill impairment	$ 41,400		$ 41,400
Deferred tax valuation allowance	(1)	$ (76,091)	(16)	$ (80,882)	$ 80,700
Valuation allowance	$ 1,300		$ 1,300

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Long-Term Debt - Long-Term Debt (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Long-term Debt and Capital Lease Obligations, Including Current Maturities	$ 158,904	$ 171,392
Current portion of long-term debt and capital leases	(12,926)	(14,374)
Long-term debt and capital leases	145,978	157,018
Capital Lease Obligations [Member]
Debt Instrument [Line Items]
Capital Lease Obligations	$ 33,059	$ 29,866
Weighted average interest rate	5.60%	5.80%
Notes Payable, Other Payables [Member]
Debt Instrument [Line Items]
Long-term Debt	$ 37	$ 112
Weighted average interest rate	10.70%	8.50%
Term A Loan Facility [Member] | Line of Credit [Member]
Debt Instrument [Line Items]
Long-term Debt	$ 125,808	$ 141,414
Interest rate, effective percentage	2.59%	2.50%
Deferred Financing Fees	$ 1,192	$ 1,586

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Long-Term Debt Narrative (Details)		3 Months Ended		9 Months Ended		22 Months Ended
	Nov. 20, 2014 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($)	Feb. 05, 2016 USD ($)
Debt Instrument [Line Items]
Stock repurchase program, authorized amount							$ 15,000,000.0
Early extinguishment of long-term debt		$ 7,000,000	$ 3,625,000	$ 16,000,000	$ 10,875,000
Loss on extinguishment of debt		66,000	$ 96,000	156,000	$ 193,000
Line of Credit [Member] | Term A Loan Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	$ 175,000,000.0
Repayments of lines of credit				48,000,000
Early extinguishment of long-term debt				16,000,000		$ 17,400,000
Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	30,000,000.0	30,000,000.0		30,000,000.0		30,000,000.0
Long-term line of credit		28,200,000		28,200,000		28,200,000
Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member]
Debt Instrument [Line Items]
Line of credit facility, agreement terms, amount that can be requested as incremental commitments	$ 75,000,000.0
Covenant term, total leverage ratio	3.00
Fixed charged coverage ratio	1.15
Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	1.00%
Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | Federal Funds Effective Swap Rate [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	0.50%
Revolving Credit Facility [Member] | Letter of Credit [Member] | Term A Loan Facility [Member]
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity		$ 1,800,000.0		$ 1,800,000.0		$ 1,800,000.0
Minimum [Member] | Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	1.50%
Minimum [Member] | Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	0.50%
Maximum [Member] | Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | London Interbank Offered Rate (LIBOR) [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	2.50%
Maximum [Member] | Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member] | Prime Rate [Member]
Debt Instrument [Line Items]
Basis spread on variable rate	1.50%
Fiscal Quarter, Through September 30, 2016 [Member] | Revolving Credit Facility [Member] | Line of Credit [Member] | Term A Loan Facility Agreement [Member]
Debt Instrument [Line Items]
Covenant term, total leverage ratio	3.25

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Commitments and Contingencies - Additional Information (Detail) $ in Millions	3 Months Ended
	Jun. 30, 2016 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Loss on accrued liability	$ 1.0

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Stock-Based Compensation - Additional Information (Detail) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016 USD ($) shares	Sep. 30, 2015 USD ($)	Sep. 30, 2016 USD ($) employee shares	Sep. 30, 2015 USD ($)
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Authorization to issue number of common stock (in shares)	3,500,000.0		3,500,000.0
Shares available for issuance (in shares)	1,600,000		1,600,000
Stock option expiration period			10 years
Stock-based compensation | $	$ 650	$ 735	$ 2,073	$ 2,739
Exercise price of options, percentage of fair market value of Company's common stock			100.00%
Stock options granted to acquire common stock (in shares)			528,000
Total unrecognized compensation cost related to unvested stock-based payments | $	$ 3,400		$ 3,400
Expected weighted-average period to recognize compensation cost			1 year 9 months
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			4 years
Key Employees [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Share-based compensation, grants in period (in shares)			130,000
Non employee Board Members [Member] | Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Share-based compensation, grants in period (in shares)			14,000
Number of employee | employee			7

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Derivatives and Hedging Transactions Textuals (Detail)	1 Months Ended	9 Months Ended
	Jan. 31, 2015 USD ($) contract	Sep. 30, 2016 USD ($)
Derivative [Line Items]
Number of instruments held | contract	3
Derivative instruments, gain (loss) reclassification from Accumulated OCI to Income, estimate of time to transfer		12 months
Interest Rate Cap [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, term of contract	1 year
Derivative, notional amount	$ 80,000,000.0
Interest Rate Cap 2 [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, notional amount	65,000,000.0
Interest Rate Cap 3 [Member] | Designated as Hedging Instrument [Member]
Derivative [Line Items]
Derivative, notional amount	$ 50,000,000.0
Interest Expense [Member]
Derivative [Line Items]
Derivative instruments, gain (loss) reclassification from Accumulated OCI to Income, estimated net amount to be transferred		$ 400,000

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Derivatives and Hedging Transactions (Balance Sheet Classification) (Detail) - Interest Rate Cap [Member] - USD ($) $ in Thousands	Sep. 30, 2016	Dec. 31, 2015
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value	$ 0	$ 0
Designated as Hedging Instrument [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value	23	239
Designated as Hedging Instrument [Member] | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value	12	48
Designated as Hedging Instrument [Member] | Other Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value	$ 11	$ 191

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Derivatives and Hedging Transactions (Cash Flow Hedging Relationship) (Detail) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in AOCL on Derivative	$ 47	$ (69)	$ (50)	$ (263)
Cash Flow Hedging [Member] | Designated as Hedging Instrument [Member] | Interest Rate Cap [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Amount of Income (Loss) Recognized in AOCL on Derivative	$ 47	$ (69)	$ (50)	$ (263)

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Derivatives and Hedging Transactions (Location of Loss Reclassified from AOCL into Income) (Detail) - Designated as Hedging Instrument [Member] - Interest Expense [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Derivative [Line Items]
Fair value adjustment of derivatives, net of tax	$ 68	$ 9	$ 132	$ 10
Derivative instruments, gain recognized in Income, ineffective portion and amount excluded from effectiveness testing	$ 0	$ 0	$ 0	$ 0

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Fair Value Measurements - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014
Fair Value Disclosures [Abstract]
Goodwill	$ 138,688				$ 138,688		$ 212,608	$ 212,608
Goodwill impairment	$ 0	$ 73,900	$ 0	$ 73,900	$ 73,920	$ 0	$ 0

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Fair Value Measurements - (Detail) - USD ($) $ in Thousands	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Dec. 31, 2014
Contingent Consideration [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent purchase price consideration for acquired businesses	$ 0		$ 0
Contingent Consideration [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent purchase price consideration for acquired businesses	0		0
Contingent Consideration [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Contingent purchase price consideration for acquired businesses	541	$ 604	1,059	$ 1,117	$ 1,479	$ 1,768
Interest Rate Cap [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate cap contracts	0		0
Interest Rate Cap [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate cap contracts	23		239
Interest Rate Cap [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Interest rate cap contracts	$ 0		$ 0

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Fair Value Measurements - Liabilities (Detail) - Contingent Consideration [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2016	Sep. 30, 2015	Sep. 30, 2016	Sep. 30, 2015
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance			$ 0
Ending balance	$ 0		0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Beginning balance	604	$ 1,479	1,059	$ 1,768
Additions related to acquisitions	0	0	104	0
Payments	(86)	(360)	(453)	(502)
Adjustments included in earnings	15	32	(180)	2
Foreign currency translation adjustments	8	(34)	11	(151)
Ending balance	$ 541	$ 1,117	$ 541	$ 1,117

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Fair Value Measurements - Textuals (Detail) - USD ($) $ in Thousands	3 Months Ended			6 Months Ended	9 Months Ended		12 Months Ended
	Sep. 30, 2016	Jun. 30, 2016	Sep. 30, 2015	Jun. 30, 2016	Sep. 30, 2016	Sep. 30, 2015	Dec. 31, 2015
Debt Instrument [Line Items]
Goodwill, fair value disclosure		$ 138,700		$ 138,700
Goodwill impairment	$ 0	$ 73,900	$ 0	$ 73,900	$ 73,920	$ 0	$ 0
Cash and cash equivalents	8,300				8,300		$ 6,300
Term A Loan Facility [Member] | Line of Credit [Member]
Debt Instrument [Line Items]
Long-term debt	127,000				127,000
Notes payable	$ 127,000				$ 127,000