text:
�|�Consolidated Balance Sheets
�|�Consolidated Balance Sheets (Parenthetical)
�|�Consolidated Statements of Operations
�|�Consolidated Statements of Comprehensive Income...
�|�Consolidated Statements of Equity
�|�Consolidated Statements of Cash Flows
�|�Description of Business and Basis...
�|�Summary of Significant Accounting Policies
�|�Restructuring Expenses
�|�Acquisitions
�|�Goodwill and Other Intangibles Resulting...
�|�Property and Equipment
�|�Long-Term Debt
�|�Commitments and Contingencies
�|�Income Taxes
�|�Employee Stock Purchase Plan and...
�|�Retirement Plans
�|�Derivatives and Hedging Transactions
�|�Fair Value Measurements
�|�Valuation and Qualifying Accounts
�|�Summary of Significant Accounting Policies...
�|�Restructuring Expenses (Tables)
�|�Property and Equipment (Tables)
�|�Long-Term Debt (Tables)
�|�Commitments and Contingencies (Tables)
�|�Income Taxes (Tables)
�|�Derivatives and Hedging Transactions (Tables)
�|�Fair Value Measurements (Tables)
�|�Restructuring Expenses (Narrative) (Detail)
�|�Restructuring Expenses (Schedule of Restructuring...
�|�Acquisitions (Narrative) (Details)
�|�Property and Equipment (Schedule of...
�|�Property and Equipment (Narrative) (Details)
�|�Long-Term Debt (Schedule of Long-Term...
�|�Long-Term Debt (Narrative) (Detail)
�|�Long-Term Debt (Schedule of Minimum...
�|�Commitments and Contingencies (Schedule of...
�|�Commitments and Contingencies (Narrative) (Details)
�|�Income Taxes (Schedule of Income...
�|�Income Taxes (Schedule of Deferred...
�|�Income Taxes (Schedule of Effective...
�|�Income Taxes (Schedule of Unrecognized...
�|�Income Taxes (Narrative) (Detail)
�|�Retirement Plans (Narrative) (Details)
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�|�Derivatives and Hedging Transactions (Cash...
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�|�Fair Value Measurements (Fair Value...
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�|�Valuation and Qualifying Accounts (Details)
Document and Entity Information�(USD $)
12 Months Ended
Document Document And Entity Information [Abstract]
10-K�
Amendment Flag
false�
Document Period End Date
Dec. 31, 2015�
Document Fiscal Year Focus
2015�
Document Fiscal Period Focus
FY�
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
47,029,171�
Entity Current Reporting Status
Yes�
Entity Voluntary Filers
No�
Entity Well-known Seasoned Issuer
Entity Public Float
$�317,943,707�
Consolidated Balance Sheets�(USD $)
In Thousands, unless otherwise specified
$�23,963�
Accounts receivable, net of allowances for accounts receivable of $2,094 and $2,413
60,085�
0�
278�
4,555�
109,706�
Property and equipment, net of accumulated depreciation of $202,457 and $214,697
Other intangible assets, net
Deferred financing fees, net
Accrued payroll and payroll-related expenses
Current portion of long-term debt and capital leases
Long-term debt and capital leases
Commitments and contingencies (Note 8)
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; 47,130 and 46,800 shares issued and 47,029 and 46,723 shares outstanding
Total stockholders equity before adjustment of treasury stock
Less cost of common stock in treasury, 101 and 77 shares
Total ARC Document Solutions, Inc. stockholders� equity
Noncontrolling interest
Total liabilities and equity
$�476,124�
Consolidated Balance Sheets (Parenthetical)�(USD $)
In Thousands, except Share data, unless otherwise specified
Statement of Financial Position [Abstract]
Allowances for accounts receivable
$�2,094�
Accumulated depreciation on property and equipment
Preferred stock, par value (in dollars per share)
$�0.001�
Preferred stock, shares authorized (in shares)
Preferred stock, shares issued (in shares)
Preferred stock, shares outstanding (in shares)
Common stock, par value (in dollars per share)
Common stock, shares authorized (in shares)
150,000,000�
Common stock, shares issued (in shares)
Common stock, shares outstanding (in shares)
Treasury stock, shares (in shares)
Consolidated Statements of Operations�(USD $)
In Thousands, except Per Share data, unless otherwise specified
Income Statement [Abstract]
Service sales
Equipment and supplies sales
Restructuring expense
Income (loss) before income tax (benefit) provision
Income tax (benefit) provision
Income attributable to noncontrolling interest
Net income (loss) attributable to ARC Document Solutions, Inc. shareholders
$�(15,323)
Earnings (loss) per share attributable to ARC Document Solutions, Inc. shareholders:
Basic (dollars per share)
$�2.08�
$�(0.33)
Diluted (dollars per share)
Basic (shares)
Diluted (shares)
Consolidated Statements of Comprehensive Income (Loss)�(USD $)
Statement of Comprehensive Income [Abstract]
Other comprehensive (loss) income, net of tax
Foreign currency translation adjustments
Fair value adjustment of derivatives, net of tax
Comprehensive income (loss)
Comprehensive (loss) income attributable to noncontrolling interest
Comprehensive income (loss) attributable to ARC Document Solutions, Inc. shareholders
Consolidated Statements of Equity�(USD $)
Common Stock [Member]
Additional Paid-in Capital [Member]
Retained Earnings (Deficit) [Member]
Accumulated Other Comprehensive Income (Loss) [Member]
Common Stock in Treasury [Member]
Noncontrolling Interest [Member]
Beginning Balance at Dec. 31, 2012
$�46�
$�695�
$�(44)
Beginning Balance, shares (in shares) at Dec. 31, 2012
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation, shares (in shares)
Issuance of common stock under Employee Stock Purchase Plan, shares (in shares)
Issuance of common stock under Employee Stock Purchase Plan
Stock options exercised, shares (in shares)
Stock options exercised
Dividends paid to noncontrolling interest
Treasury shares (in shares)
Comprehensive (loss) income
Ending Balance at Dec. 31, 2013
Ending Balance, shares (in shares) at Dec. 31, 2013
Tax deficiency from stock-based compensation
$�(2,097)
$�(612)
Consolidated Statements of Cash Flows�(USD $)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Allowance for accounts receivable
Amortization of deferred financing costs
Amortization of discount on long-term debt
Deferred tax valuation allowance
Restructuring expense, non-cash portion
Loss on early extinguishment of debt
Other non-cash items, net
Changes in operating assets and liabilities, net of effect of business acquisitions:
Accounts payable and accrued expenses
Payments for businesses acquired, net of cash acquired
Proceeds from stock option exercises
Proceeds from issuance of common stock under Employee Stock Purchase Plan
Share repurchases - shares surrendered for tax withholding
Contingent consideration on prior acquisitions
Proceeds from borrowings on long-term debt agreements
Payments of debt extinguishment costs
Early extinguishment of long-term debt
Payments on long-term debt agreements and capital leases
Net (repayments) borrowings under revolving credit facilities
Payment of deferred financing costs
Payment of hedge premium
Net cash used in financing activities
Effect of foreign currency translation on cash balances
Net change in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplemental disclosure of cash flow information:
Cash paid for interest
Income taxes paid (received), net
Noncash financing activities:
Capital lease obligations incurred
Liabilities in connection with the acquisition of businesses
Liabilities in connection with deferred financing costs
$�0�
Description of Business and Basis of Presentation
ARC Document Solutions, Inc. ("ARC Document Solutions," "ARC" or the "Company") is a leading document solutions company serving businesses of all types, with an emphasis on the non-residential segment of the architecture, engineering and construction ("AEC") industry. 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 Consolidated Financial Statements include the accounts of the Company and its subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the 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 Consolidated Financial Statements.
Risk and Uncertainties
The Company generates the majority of its revenue from sales of services and products to customers in the AEC industry. As a result, the Company's operating results and financial condition can be significantly affected by economic factors that influence the AEC industry, such as non-residential construction spending, GDP growth, interest rates, unemployment rates, and office vacancy rates. Reduced activity (relative to historic levels) in the AEC industry would diminish demand for some of ARC's services and products, and would therefore negatively affect revenues and have a material adverse effect on its business, operating results and financial condition.
As part of the Company's growth strategy, ARC intends to continue to offer and grow a variety of service offerings that are relatively new to the Company. The success of the Company's efforts will be affected by its ability to acquire new customers for the Company's new service offerings, as well as to sell the new service offerings to existing customers. The Company's inability to successfully market and execute these relatively new service offerings could significantly affect its business and reduce its long term revenue, resulting in an adverse effect on its results of operations and financial condition.
Cash Equivalents
Cash equivalents include demand deposits and short-term investments with a maturity of three months or less when purchased.
The Company maintains its cash deposits at numerous banks located throughout the United States, Canada, India, Australia, the United Kingdom and China, which at times, may exceed federally insured limits. UDS, the Company's operations in China, held $13.7 million of the Company's cash and cash equivalents as of December 31, 2015. The Company has not experienced any losses in such accounts and believes it is not exposed to any significant risk on cash and cash equivalents.
As of December 31, 2014, the Company had restricted cash of $1.4 million related to a government grant received by UNIS Document Solutions Co. Ltd., ("UDS"), the Company's joint-venture in China, which was included in other current assets. Restrictions on the cash were removed in 2015 upon approval by the governmental agency of project-based expenditures supporting technology investments made by UDS.
Concentrations of Credit Risk and Significant Vendors
Concentrations of credit risk with respect to trade receivables are limited due to a large, diverse customer base. No individual customer represented more than 4% of net sales during the years ended December 31, 2015, 2014 and 2013.
The Company has geographic concentration risk as sales in California, as a percent of total sales, were approximately 31%, 30% and 31% for the years ended December 31, 2015, 2014 and 2013, respectively.
The Company contracts with various suppliers. Although there are a limited number of suppliers that could supply the Company's inventory, management believes any shortfalls from existing suppliers would be absorbed from other suppliers on comparable terms. However, a change in suppliers could cause a delay in sales and adversely affect results.
Purchases from the Company's three largest vendors during the years ended December 31, 2015, 2014 and 2013 comprised approximately 37%, 33%, and 36% respectively, of the Company's total purchases of inventory and supplies.
Allowance for Doubtful Accounts
The Company performs periodic credit evaluations of the financial condition of its customers, monitors collections and payments from customers, and generally does not require collateral. The Company provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. The Company writes off an account when it is considered uncollectible. The Company estimates the allowance for doubtful accounts based on historical experience, aging of accounts receivable, and information regarding the credit worthiness of its customers. Additionally, the Company provides an allowance for returns and discounts based on historical experience. In 2015, 2014, and 2013 the Company recorded expenses of $0.3 million, $0.5 million and $0.6 million, respectively, related to the allowance for doubtful accounts.
Inventories are valued at the lower of cost (determined on a first-in, first-out basis; or average cost) or market. Inventories primarily consist of reprographics materials for use and resale, and equipment for resale. On an ongoing basis, inventories are reviewed and adjusted for estimated obsolescence or unmarketable inventories to reflect the lower of cost or market. Charges to increase inventory reserves are recorded as an increase in cost of sales. Estimated inventory obsolescence has been provided for in the financial statements and has been within the range of management's expectations. As of December 31, 2015 and 2014, the reserves for inventory obsolescence was $0.9 million.
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 the Company's 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.
When establishing a valuation allowance, the Company considers future sources of taxable income such as future reversals of existing taxable temporary differences, future taxable income exclusive of reversing temporary differences and carryforwards and tax planning strategies. A tax planning strategy is an action that: is prudent and feasible; an enterprise ordinarily might not take, but would take to prevent an operating loss or tax credit carryforward from expiring unused; and would result in realization of deferred tax assets. In the event the Company determines that its deferred tax assets, more likely than not, will not be realized in the future, the valuation adjustment to the deferred tax assets will be charged to earnings in the period in which the Company makes such a determination.
At September 30, 2015 as a result of sustained profitability in the U.S. evidenced by three years of earnings and forecasted continuing profitability (as defined by Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 740-10, Income Taxes), the Company determined it was more likely than not future earnings would be sufficient to realize 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 December 31, 2015.
In future quarters the Company will continue to evaluate its historical results for the preceding twelve quarters and its future projections to determine whether the Company will generate sufficient taxable income to utilize its deferred tax assets, and whether a valuation allowance is required. Should the Company generate sufficient taxable income, however, a portion or all of the then current valuation allowance may be reversed.
The Company calculates its 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 the Company reports to the various tax jurisdictions is subject to ongoing audits by federal, state and foreign tax authorities. The Company's 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. The Company uses 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. The Company records a liability for the difference between the benefit recognized and measured and tax position taken or expected to be taken on its tax return. To the extent that the Company's assessment of such tax positions changes, the change in estimate is recorded in the period in which the determination is made. The Company reports tax-related interest and penalties as a component of income tax expense.
The Company's effective income tax rate differs from the statutory tax rate primarily due to the valuation allowance on certain of the Company's deferred tax assets, state income taxes, stock-based compensation, goodwill and other identifiable intangibles, and other discrete items. See Note 9 "Income Taxes" for further information.
Income tax deficiencies and benefits affecting stockholders' equity are primarily related to employee stock-based compensation.
Property and Equipment
Property and equipment are stated at cost and are depreciated using the straight-line method over their estimated useful lives, as follows:
10-20 years or lease term, if shorter
Furniture and fixtures
Assets acquired under capital lease arrangements are included in machinery and equipment, are recorded at the present value of the minimum lease payments, and are depreciated using the straight-line method over the life of the asset or term of the lease, whichever is shorter. Expenses for repairs and maintenance are charged to expense as incurred, while renewals and betterments are capitalized. Gains or losses on the sale or disposal of property and equipment are reflected in operating income.
The Company accounts for software costs developed for internal use in accordance with ASC 350-40, Intangibles – Goodwill and Other, which requires companies to capitalize certain qualifying costs incurred during the application development stage of the related software development project. The primary use of this software is for internal use and, accordingly, such capitalized software development costs are depreciated on a straight-line basis over the economic lives of the related products not to exceed three years. The Company's machinery and equipment (see Note 6 "Property and Equipment") includes $0.6 million and $0.1 million of capitalized software development costs as of December 31, 2015 and 2014, net of accumulated amortization of $17.7 million and $17.5 million as of December 31, 2015 and 2014, respectively. Depreciation expense includes the amortization of capitalized software development costs which amounted to $0.2 million, $0.2 million and $0.3 million during the years ended December 31, 2015, 2014 and 2013, respectively.
Impairment of 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 had no long-lived asset impairments in 2015, 2014 or 2013.
Goodwill and Other Intangible Assets
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.
Goodwill impairment testing is performed at the reporting unit level. Goodwill is assigned to reporting units at the date the goodwill is initially recorded. Once goodwill has been assigned to reporting units, it no longer retains its association with a particular acquisition, and all of the activities within a reporting unit, whether acquired or internally generated, are available to support the value of the goodwill.
Goodwill impairment testing is a two-step process. Step one involves comparing the fair value of the reporting units to its carrying amount. If the carrying amount of a reporting unit is greater than zero and its fair value is greater than its carrying amount, there is no impairment. If the reporting unit's carrying amount is greater than the fair value, the second step must be completed to measure the amount of impairment, if any. Step two involves calculating the implied fair value of goodwill by deducting the fair value of all tangible and intangible assets, excluding goodwill, of the reporting unit from the fair value of the reporting unit as determined in step one. The implied fair value of goodwill determined in this step is compared to the carrying value of goodwill. If the implied fair value of goodwill is less than the carrying value of goodwill, an impairment loss is recognized equal to the difference.
The Company determines the fair value of its reporting units using an income approach. Under the income approach, the Company determined fair value based on estimated discounted future cash flows of each reporting unit. The cash flows are discounted by an estimated weighted-average cost of capital, which is intended to reflect the overall level of inherent risk of a reporting unit. Determining the fair value of a reporting unit is judgmental in nature and requires the use of significant estimates and assumptions, including revenue growth rates and EBITDA margins, discount rates and future market conditions, among others. The Company considered market information in assessing the reasonableness of the fair value under the income approach outlined above.
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.
Deferred Financing Costs
Direct costs incurred in connection with debt agreements are capitalized as incurred and amortized based on the effective interest method for the Company's borrowings under its term loan credit agreement ("Term A Credit Agreement"). At December 31, 2015 and 2014, the Company had deferred financing costs of $1.6 million and $2.4 million, respectively, net of accumulated amortization of $1.0 million and $0.1 million, respectively.
In 2014, the Company added $2.5 million of deferred financing costs related to its Term A Credit Agreement. In addition, the Company wrote off $2.4 million of deferred financing costs due to the extinguishment, in full, of its previous credit agreements.
Derivative Financial Instruments
In January 2015, the Company entered into three 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.
As of and for the year ended December 31, 2014 the Company was not party to any derivative or hedging transactions.
Historically, the Company enters into derivative instruments to manage its exposure to changes in interest rates. These instruments allow the Company to raise funds at floating rates and effectively swap them into fixed rates, without the exchange of the underlying principal amount. Such agreements are designated and accounted for under ASC 815, Derivatives and Hedging. Derivative instruments are recorded at fair value as either assets or liabilities in the Consolidated Balance Sheets.
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 Consolidated Balance Sheet were $6.3 million and $9.2 million as of December 31, 2015 and 2014, respectively, and are carried at cost and approximate fair value due to the relatively short period to maturity of these instruments.
Interest rate cap contracts: 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. Interest rate cap contracts reported in the Company's Consolidated Balance Sheet were $0.2 million as of December 31, 2015.
Contingent Liabilities: The Company recognizes liabilities for future earnout obligations on business acquisitions at their fair value based on discounted projected payments on such obligations. The inputs to the valuation, which are level 3 inputs within the fair value hierarchy, are projected sales to be provided by the acquired businesses based on historical sales trends for which earnout amounts are contractually based. Liabilities for future earnout obligations totaled $1.1 million as of December 31, 2015.
Short- and long-term debt: The carrying amount of the Company's capital leases reported in the 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 Consolidated Balance Sheet as of December 31, 2015 for borrowings under its Term Loan Credit Agreement is $143.0 million. The Company has determined, utilizing observable market quotes, that the fair value of borrowings under its Term Loan Credit Agreement is $143.0 million, as of December 31, 2015.
Insurance Liability
The Company maintains a high deductible insurance policy for a significant portion of its risks and associated liabilities with respect to workers' compensation. The Company's deductible is $250 thousand per individual. The accrued liabilities associated with this program are based on the Company's estimate of the ultimate costs to settle known claims, as well as claims incurred but not yet reported to the Company, as of the balance sheet date. The Company's estimated liability is not discounted and is based upon an actuarial report obtained from a third party. The actuarial report uses information provided by the Company's insurance brokers and insurers, combined with the Company's judgments regarding a number of assumptions and factors, including the frequency and severity of claims, claims development history, case jurisdiction, applicable legislation, and the Company's claims settlement practices.
The Company is self-insured for healthcare benefits provided to approximately 35% of its employees, with a stop-loss at $250 thousand per individual. Liabilities associated with the risks that are retained by the Company are estimated, in part, by considering historical claims experience, demographic factors, severity factors and other actuarial assumptions. The Company's results could be materially affected by claims and other expenses related to such plans if future occurrences and claims differ from these assumptions and historical trends. Other employees are covered by other offered healthcare benefits.
In the normal course of business, the Company estimates potential future loss accruals related to legal, workers' compensation, healthcare, tax and other contingencies. These accruals require management's judgment on the outcome of various events based on the best available information. However, due to changes in facts and circumstances, the ultimate outcomes could differ from management's estimates.
The Company applies the provisions of ASC 605, Revenue Recognition. In general, the Company recognizes revenue when (i) persuasive evidence of an arrangement exists, (ii) delivery of products has occurred or services have been rendered, (iii) the sales price charged is fixed or determinable and (iv) collection is reasonably assured. Net sales include an allowance for estimated sales returns and discounts.
The Company recognizes service revenue when services have been rendered, while revenues from the resale of equipment and supplies are recognized upon delivery to the customer or upon customer pickup. Revenue from equipment service agreements are recognized over the term of the service agreement.
The Company has established contractual pricing for certain large national customer accounts ("Global Solutions"). These contracts generally establish uniform pricing at all operating segments for Global Solutions. Revenues earned from the Company's Global Solutions are recognized in the same manner as non-Global Solutions revenues.
Included in revenues are fees charged to customers for shipping, handling, and delivery services. Such revenues amounted to $11.2 million, $11.6 million, and $12.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Revenues from hosted software licensing activities are recognized ratably over the term of the license. Revenues from software licensing activities comprise less than 1% of the Company's consolidated revenues during the years ended December 31, 2015, 2014 and 2013.
Management provides for returns, discounts and allowances based on historic experience and adjusts such allowances as considered necessary. To date, such provisions have been within the range of management's expectations.
The Company's comprehensive income (loss) includes foreign currency translation adjustments and the fair value adjustment of derivatives, net of taxes.
Asset and liability accounts of international operations are translated into the Company's functional currency, U.S. dollars, at current rates. Revenues and expenses are translated at the weighted-average currency rate for the fiscal year.
Segment and Geographic 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, 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:
Total services sales
The Company recognizes revenues in geographic areas based on the location to which the product was shipped or services have been rendered. Operations outside the United States have been small but growing. See table below for revenues and long-lived assets, net, excluding intangible assets, attributable to the Company's U.S. operations and foreign operations.
Revenues from external customers
Long-lived assets, net, excluding intangible assets
Advertising and Shipping and Handling Costs
Advertising costs are expensed as incurred and approximated $2.0 million, $1.7 million, and $1.4 million during the years ended December 31, 2015, 2014 and 2013, respectively. Shipping and handling costs incurred by the Company are included in cost of sales.
The Company applies the Black-Scholes valuation model in determining the fair value of share-based payments to employees, which is then amortized on a straight-line basis over the requisite service period.
Total stock-based compensation for the years ended December 31, 2015, 2014 and 2013, was $3.5 million, $3.8 million and $3.2 million, respectively and was recorded in selling, general, and administrative expenses, consistent with the classification of the underlying salaries. In accordance with ASC 718, Income Taxes, any excess tax benefit resulting from stock-based compensation, in the Consolidated Statements of Cash Flows, are classified as financing cash inflows.
The weighted average fair value at the grant date for options issued in the fiscal years ended December 31, 2015, 2014 and 2013, was $4.88, $3.69 and $1.57 respectively. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model using the following weighted average assumptions for the years ended December 31, 2015 and 2014 and 2013:
Weighted average assumptions used:
Risk free interest rate
Expected volatility
Expected dividend yield
Using historical exercise data as a basis, the Company determined that the expected term for stock options issued in 2015, 2014 and 2013 was 6.4 years, 7.1 years and 7.0 years, respectively.
For fiscal years 2015, 2014 and 2013, expected stock price volatility is based on the Company's historical volatility for a period equal to the expected term. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant with an equivalent remaining term. The Company has not paid dividends in the past and does not currently plan to pay dividends in the near future. The Company assumed a forfeiture rate of 4% in 2015, 3% in 2014 and 3% in 2013. The Company's assumed forfeiture rate is based on the historical forfeiture rate for employees at similar levels in the Company. The Company reviews its forfeiture rate at least on an annual basis.
As of December 31, 2015, total unrecognized stock-based compensation expense related to nonvested stock-based compensation was approximately $3.8 million, which is expected to be recognized over a weighted average period of approximately 2.0 years.
For additional information, see Note 10 "Employee Stock Purchase Plan and Stock Plan."
Research and development activities relate to costs associated with the design and testing of new technology or enhancements and maintenance to existing technology. Such costs are expensed as incurred are primarily recorded to cost of sales. In total, research and development amounted to $5.8 million, $6.3 million and $5.5 million during the fiscal years ended December 31, 2015, 2014 and 2013, respectively.
The Company accounted for its investment in UNIS Document Solutions Co. Ltd., ("UDS") under the purchase method of accounting, in accordance with ASC 805, Business Combinations. UDS has been consolidated in the Company's financial statements from the date of acquisition. Noncontrolling interest, which represents the 35 percent non-controlling interest in UDS, is reflected on the Company's Consolidated Financial Statements.
The Company bills sales taxes, as applicable, to its customers. The Company acts as an agent and bills, collects, and remits the sales tax to the proper government jurisdiction. The sales taxes are accounted for on a net basis, and therefore are not included as part of the Company's revenue.
The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share are 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. There were 2.0 million, 1.5 million and 2.1 million common stock options excluded as their effect would have been anti-dilutive for the years ended December 31, 2015, 2014 and 2013, respectively. 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 years ended December 31, 2015, 2014 and 2013:
Weighted average common shares outstanding during the period — basic
Effect of dilutive stock options
Weighted average common shares outstanding during the period — diluted
Recent Accounting Pronouncements
On February 25, 2016, the FASB issued Accounting Standards Codification ("ASC") 842 ("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 November 2015, the FASB issued Accounting Standards Update ("ASU") 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The new guidance requires that deferred tax assets and liabilities be classified as noncurrent in a classified balance sheet in order to simplify the presentation of deferred income taxes. ASU 2015-17 is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early adoption is permitted and the update may be applied either prospectively to all deferred tax assets and liabilities or retrospectively to all periods presented. The Company elected to early adopt ASU 2015-17 as of December 31, 2015 on a prospective basis.
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 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. Early adoption is permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2015-05 on its 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. Early adoption is permitted. The Company expects to adopt ASU 2015-03 for the quarterly report on Form 10-Q for the three months ended March 31, 2016.
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 not permitted. The Company is currently in the process of evaluating the impact of the adoption of ASU 2014-09 on its consolidated financial statements.
Restructuring Expenses
To ensure that the Company's costs and resources were in line with demand for its current portfolio of services and products, management initiated a restructuring plan in the fourth quarter of 2012. Restructuring activities associated with the plan concluded in the fourth quarter of 2013. Through December 31, 2013, the restructuring plan included the closure or downsizing of 56 of the Company's service centers, which represented more than 25% of its total number of service center locations. In addition, as part of the restructuring plan, the Company reduced headcount and middle management associated with its service center locations, streamlined the senior operational management team, and allocated more resources into growing sales categories such as MPS. The reduction in headcount totaled approximately 300 full-time employees, which represented approximately 10% of the Company's total workforce. To date, the Company has incurred $6.7 million of expense related to its restructuring plan.
Restructuring expenses include employee termination costs, estimated lease termination and obligation costs, and other restructuring expenses. The Company's restructuring efforts included service center closures in both 2012 and 2013. The Company closed or downsized 23 service center locations in 2013, in addition to 33 service center locations in 2012. Restructuring expenses in 2015 primarily consisted of revised estimated lease termination and obligation costs resulting from facilities closed in 2013.
The following table summarizes restructuring expenses incurred in 2015, 2014 and 2013:
Employee termination costs
Estimated lease termination and obligation costs
Other restructuring expenses
Total restructuring expenses
The changes in the restructuring liability from December 31, 2013 through December 31, 2015 are summarized as follows:
Balance, December 31, 2013
During 2015 the Company had no business acquisitions.
During 2014, the Company acquired five businesses. Consideration for the purchase of the five businesses included earnout liabilities of $2.1 million, of which $0.6 million and $0.3 million were paid in cash in 2015 and 2014, respectively, with a remaining earnout liabilities balance of $1.1 million as of December 31, 2015. The Company's requirement to pay these earnout liabilities is contingent upon the future financial growth of the acquired businesses. The results of operations of the companies acquired have been included in the Consolidated Financial Statements from their respective dates of acquisition. The acquisitions, individually and in aggregate, were not material to the Company's consolidated results of operations.
Goodwill and Other Intangibles Resulting from Business Acquisitions
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, 2015, the Company performed its preliminary assessment and noted that one reporting unit 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 Company completed step two of the analysis in the fourth quarter of 2015 with no change to the previous estimate that there was no goodwill impairment as of September 30, 2015.
Given the current economic environment, the changing document and printing needs of the Company's customers, and the uncertainties regarding the related impact on the Company's business, there can be no assurance that the estimates and assumptions made for purposes of the Company's goodwill impairment testing in 2015 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 2016, or on an interim basis, if any such change constitutes a triggering event (as defined under ASC 350, Intangibles-Goodwill and Other ) outside of the quarter when the Company regularly performs its annual goodwill impairment test. It is not possible at this time to determine if any such future impairment charge would result or, if it does, whether such charge would be material.
There was no change in the carrying amount of goodwill from January 1, 2014 through December 31, 2015.
Other intangible assets that have finite lives are amortized over their useful lives. Customer relationships are amortized using the accelerated method, based on customer attrition rates, over their estimated useful lives of 13 (weighted average) years. The Company acquired five businesses during 2014 and recorded customer relationship intangibles of $2.1 million related to the acquisitions.
The following table sets forth the Company's other intangible assets resulting from business acquisitions as of December 31, 2015 and December 31, 2014 which continue to be amortized:
Accumulated
Amortizable other intangible assets
Trade names and trademarks
Based on current information, estimated future amortization expense of other intangible assets for each of the next five fiscal years and thereafter are as follows:
Thereafter
Property and equipment consist of the following:
Buildings and leasehold improvements
Less accumulated depreciation
Depreciation expense was $28.0 million, $28.1 million, and $28.1 million for the years ended December 31, 2015, 2014 and 2013, respectively.
Long-term debt consists of the following:
Term A loan facility maturing 2019; 2.50% and 2.74% interest rate at December 31, 2015 and December 31, 2014
Various capital leases; weighted average interest rate of 5.8% and 6.8% at December 31, 2015 and December 31, 2014; principal and interest payable monthly through November 2020
Borrowings from foreign revolving credit facilities; 0.6% interest rate at December 31, 2014
Various other notes payable with a weighted average interest rate of 8.5% and 6.5% at December 31, 2015 and December 31, 2014; principal and interest payable monthly through November 2019
Less current portion
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 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 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 December 31, 2015, the Company's borrowing availability under the Term A Credit Agreement was $28.1 million, which was the maximum borrowing limit of $30.0 million reduced by outstanding letters of credit of $1.9 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% 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.
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 of the last day of each fiscal quarter, in an amount not less than 1.25 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 December 31, 2015, the Company paid $32.0 million in aggregate principal on its $175.0 million Term Loan Credit Agreement, which was $14.5 million above the required principal payments. The $14.5 million early pay down of the term loan resulted in a loss on extinguishment of debt of $0.3 million in 2015.
Term B Loan Facility
On December 20, 2013, we entered into a Term Loan Credit Agreement (the "Term B Loan Credit Agreement") among ARC, as borrower, JPMorgan Chase Bank., N.A, as administrative agent and as collateral agent, and the lenders party thereto. Concurrently with the Company's entry into the Term A Credit Agreement described above, the Company paid in full and terminated the Term B Loan Credit Agreement resulting in a loss on early extinguishment of debt of $5.6 million in 2014.
The credit facility provided under the Term B Loan Credit Agreement consisted of an initial term loan facility of $200.0 million, the entirety of which was disbursed in order to pay for the purchase of the Notes that were accepted under a cash tender offer and the subsequent redemption of the remaining outstanding Notes and to pay associated fees and expenses in connection with the cash tender offer and redemption.
10.5% Senior Notes
On December 1, 2010, the Company completed a private placement of 10.5% senior unsecured notes due 2016 (the "Notes"). During the third and fourth quarters of 2013, the Company repurchased $12.3 million in aggregate principal amount of the Notes in the open market using available cash. In December 2013 the Company commenced a cash tender offer and consent solicitation for all of the remaining outstanding Notes and accepted for payment all Notes that were validly tendered, followed by a redemption of all Notes which remained outstanding following the tender offer. In addition, the Company discharged all of its obligations under the indenture governing the Notes by causing to be delivered a notice of redemption to holders of the remaining outstanding Notes and the Company deposited funds sufficient to pay and discharge all remaining indebtedness on the Notes, including accrued and unpaid interest. The purchase and redemption of the Notes resulted in a loss on early extinguishment of debt of $16.3 million in 2013.
Foreign Credit Agreement
In the third quarter of 2014, in conjunction with its Chinese operations, UNIS Document Solutions Co. Ltd. ("UDS"), the Company's Chinese business venture with Beijing-based Unisplendour, entered into a revolving credit facility with a term of 12 months. The credit agreement expired in September 2015.
Other Notes Payable
Includes notes payable collateralized by equipment previously purchased.
Minimum future maturities of long-term debt and capital lease obligations as of December 31, 2015 are as follows:
Capital Lease Obligations
Year ending December 31:
The Company leases machinery, equipment, and office and operational facilities under non-cancelable operating lease agreements. Certain lease agreements for the Company's facilities generally contain renewal options and provide for annual increases in rent based on the local Consumer Price Index. The following is a schedule of the Company's future minimum lease payments as of December 31, 2015:
Related Party
Total rent expense under operating leases, including month-to-month rentals, amounted to $24.0 million, $23.4 million, and $24.1 million during the years ended December 31, 2015, 2014 and 2013, respectively. Under certain lease agreements, the Company is responsible for other costs such as property taxes, insurance, maintenance, and utilities.
The Company leased several of its facilities under lease agreements with entities owned by certain of its current and former executive officers which expire through December 2023. The rental payments on these facilities amounted to $0.5 million, $0.5 million and $0.9 million during the years ended December 31, 2015, 2014 and 2013, respectively.
The Company has entered into indemnification agreements with each director and named executive officer which provide indemnification under certain circumstances for acts and omissions which may not be covered by any directors' and officers' liability insurance. The indemnification agreements may require the Company, among other things, to indemnify its officers and directors against certain liabilities that may arise by reason of their status or service as officers and directors (other than liabilities arising from willful misconduct of a culpable nature), to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified, and to obtain officers' and directors' insurance if available on reasonable terms. There have been no events to date which would require the Company to indemnify its officers or directors.
On October 21, 2010, a former employee, individually and on behalf of a purported class consisting of all non-exempt employees who work or worked for American Reprographics Company, L.L.C. and American Reprographics Company in the State of California at any time from October 21, 2006 through the present, filed an action against the Company in the Superior Court of California for the County of Orange. The complaint alleges, among other things, that the Company violated the California Labor Code by failing to (i) provide meal and rest periods, or compensation in lieu thereof, (ii) timely pay wages due at termination, and (iii) that those practices also violate the California Business and Professions Code. The relief sought includes damages, restitution, penalties, interest, costs, and attorneys' fees and such other relief as the court deems proper. On March 15, 2013, the Company participated in a private mediation session with claimants' counsel which did not result in resolution of the claim. Subsequent to the mediation session, the mediator issued a proposal that was accepted by both parties. The Company has received preliminary court approval of the settlement, and awaits final court approval. The Company has a liability $0.9 million as of December 31, 2015 related to the claim, which represents management's best estimate based on information available. As such, the ultimate resolution of the claim could result in a loss different than the estimated loss recorded.
On February 1, 2013, ARC filed a civil complaint against a competitor and a former employee in the Superior Court of California for Orange County, which alleged, among other claims, the misappropriation of ARC trade secrets; namely, proprietary customer lists that were used to communicate with ARC customers in an attempt to unfairly acquire their business. In prior litigation with the competitor based on related facts, in 2007 the competitor entered into a settlement agreement and stipulated judgment, which included an injunction. ARC instituted this suit to stop the defendant from using similar unfair business practices against it in the Southern California market. The case proceeded to trial in May 2014, and a jury verdict was entered for the defendants. In the first quarter of 2015, the Company settled with the defendants and paid $1.0 million, which had been accrued as of December 31, 2014.
In addition to the matters described above, the Company is involved in various additional legal proceedings and other legal matters from time to time in the normal course of business. The Company does not believe that the outcome of any of these matters will have a material effect on its consolidated financial position, results of operations or cash flows.
The following table includes the consolidated income tax provision for federal, state, and foreign income taxes related to the Company's total earnings before taxes for 2015, 2014 and 2013:
Deferred:
The Company's foreign earnings before taxes were $1.1 million, $0.3 million and $2.3 million for 2015, 2014 and 2013, respectively.
The consolidated deferred tax assets and liabilities consist of the following:
Deferred tax assets:
Financial statement accruals not currently deductible
Accrued vacation
Goodwill and other identifiable intangibles
Federal tax net operating loss carryforward
State tax net operating loss carryforward, net
State tax credits, net
Foreign tax credit carryforward
Foreign tax net operating loss carryforward
Federal alternative minimum tax
Interest rate hedge
Gross deferred tax assets
Less: valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Net deferred tax assets (liabilities)
A reconciliation of the statutory federal income tax rate to the Company's effective tax rate is as follows:
Statutory federal income tax rate
State taxes, net of federal benefit
Foreign taxes
Valuation allowance
Non-deductible expenses and other
Section 162(m) limitation
Discrete item for state taxes
Discrete items for other
Effective income tax rate
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. 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 will 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 December 31, 2015.
Based on the Company's assessment, the remaining net deferred tax assets as of December 31, 2015 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. The Company has income tax receivables of $20 thousand as of December 31, 2015 included in other current assets in its Consolidated Balance Sheet primarily related to income tax refunds for prior years.
As of December 31, 2015, the Company had approximately $83.1 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 begin to expire in varying amounts beginning in 2016.
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2010. In 2010, the IRS commenced an examination of the Company's U.S. income tax return for 2008, which was completed in February of 2011. The IRS did not propose any adjustments to the Company's 2008 U.S. income tax return. In 2011, the IRS commenced an examination of the Company's 2009 and 2010 U.S. income tax returns. The IRS did not propose any significant adjustments to the Company's 2009 and 2010 U.S. income tax returns as of December 31, 2015.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Beginning balance at January 1,
Additions based on tax positions related to the current year
Reductions based on tax positions related to the prior year
Reductions for tax positions due to expiration of statute of limitations
Ending balance at December 31,
There were no unrecognized tax benefits as of and for the year ended December 31, 2015.
Employee Stock Purchase Plan and Stock Plan
Under the Company's Employee Stock Purchase Plan (the "ESPP") eligible employees may purchase up to a calendar year maximum per eligible employee of the lesser of (i) 2,500 shares of common stock, or (ii) a number of shares of common stock having an aggregate fair market value of $25 thousand as determined on the date of purchase at 85% of the fair market value of such shares of common stock on the applicable purchase date. The compensation expense in connection with the ESPP in 2015, 2014, and 2013 was $19 thousand, $15 thousand and $5 thousand, respectively.
Employees purchased the following shares in the periods presented:
Shares purchased
Average price per share
Stock Plan
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. At December 31, 2015, 2.3 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 years ended December 31, 2015 and 2014, the Company granted options to acquire a total of 526 thousand shares and 579 thousand shares, respectively, 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. The granted stock options vest annually over three to four years from the grant date and expire 10 years after the date of grant.
The following is a further breakdown of the stock option activity under the Stock Plan:
Weighted
(In years)
Outstanding at December 31, 2013
Forfeited/Cancelled
Vested or expected to vest at December 31, 2015
Exercisable at December 31, 2015
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price on December 31, 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all the option holders exercised their options on December 31, 2015. This amount changes based on the fair market value of the common stock. Total intrinsic value of options exercised during the years ended December 31, 2015, 2014 and 2013 was $0.6 million, $0.4 million and $27 thousand, respectively.
A summary of the Company's non-vested stock options as of December 31, 2015, and changes during the fiscal year then ended is as follows:
Average Grant Date
Non-vested Options
Non-vested at December 31, 2014
The following table summarizes certain information concerning outstanding options at December 31, 2015:
Range of Exercise Price
Options Outstanding at
The Stock Plan provides for automatic grants of restricted stock awards to non-employee directors of the Company, as of each annual meeting of the Company's stockholders having a then fair market value equal to $60 thousand.
In 2015, the Company granted 116 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 restricted stock vests annually over three to four years from the grant date. In addition, the Company granted 7 thousand shares of restricted stock to each of the Company's six non-employee members of its board of directors at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The restricted stock vests on the one-year anniversary of the grant date.
In 2014, the Company granted 144 thousand shares of restricted stock to the Company's Chief Executive Officer. The restricted stock vests annually over four years after the date of grant. In addition, the Company granted 9 thousand shares of restricted stock to each of the Company's six non-employee members of its board of directors at a price per share equal to the closing price of the Company's common stock on the date the restricted stock was granted. The restricted stock vests on the one-year anniversary of the grant date.
In 2013, the Company granted 15 thousand shares of restricted stock to each of the Company's six non-employee members of its Board of Directors at a price per share equal to the closing price of the Company's common stock on the respective dates the restricted stock was granted. The shares of restricted stock granted to the non-employee board members vested on the one-year anniversary of the grant date.
A summary of the Company's non-vested restricted stock as of December 31, 2015, and changes during the fiscal year then ended is as follows:
Non-vested Restricted Stock
The total fair value of restricted stock awards vested during the years ended December 31, 2015, 2014 and 2013 was $1.6 million, $1.8 million and $0.8 million, respectively.
The Company sponsors a 401(k) Plan, which covers substantially all employees of the Company who have attained age 21. Under the Company's 401(k) Plan, eligible employees may contribute up to 75% of their annual eligible compensation (or in the case of highly compensated employees, up to 6% of their annual eligible compensation), subject to contribution limitations imposed by the Internal Revenue Service. During a portion of 2009, the Company made an employer matching contribution equal to 20% of an employee's contributions, up to a total of 4% of that employee's compensation. In July 2009, the Company amended its 401(k) Plan to eliminate the mandatory company contribution and to provide for discretionary company contributions. In 2013, the Company reinstated the mandatory company contribution. An independent third party administers the Company's 401(k) Plan. The Company's total expense under these plans amounted to $0.4 million, $80 thousand and $50 thousand during the years ended December 31, 2015, 2014 and 2013, respectively.
Derivatives and Hedging Transactions
The Company uses derivative financial instruments to hedge its exposure to interest rate volatility related to its Term A Loan Facility. The Company does not use derivative financial instruments for speculative or trading purposes. Such derivatives are designated as cash flow hedges and accounted for under ASC 815, Derivatives and Hedging. Derivative instruments are recorded at fair value as either assets or liabilities in the interim condensed consolidated balance sheets. Changes in fair value of cash flow hedges that are designated as effective hedging instruments are deferred in equity as a component of accumulated other comprehensive loss ("AOCL"). Any ineffectiveness in such cash flow hedges is immediately recognized in earnings. Changes in the fair value of hedges that are not designated as effective hedging instruments are immediately recognized in earnings. Cash flows from the Company's derivative instruments are classified in the condensed consolidated statements of cash flows in the same category as the items being hedged.
In January 2015, the Company entered into three 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 $0.2 million from AOCL to interest expense.
The following table summarizes the fair value and classification on the Consolidated Balance Sheets of the Company's derivatives as of December 31, 2015:
Balance Sheet Classification
Derivative designated as hedging instrument under ASC 815
Interest rate cap contracts - current portion
Interest rate cap contracts - long-term portion
Total derivatives designated as hedging instruments
The following table summarizes the loss recognized in AOCL of derivatives, designated and qualifying as cash flow hedges for the year ended December 31, 2015, 2014 and 2013:
Amount of Loss Recognized in AOCL on Derivative
Derivative in ASC 815 Cash Flow Hedging Relationship
Interest rate cap contracts, net of tax
The following table summarizes the effect of the interest rate cap on the Consolidated Statements of Operations for the year ended December 31, 2015, 2014 and 2013:
Amount of Gain or (Loss)
Reclassified from AOCL into Income
Recognized in Income
(effective portion)
(ineffective portion)
Location of Loss Reclassified from AOCL into Income
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 recurring basis in the consolidated financial statements as of and for the year ended December 31, 2015 and 2014:
Significant Other Unobservable Inputs
Total Losses
Recurring Fair Value Measure
Interest rate cap contracts
Contingent purchase price consideration for
acquired businesses
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 December 31, 2015, 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 year ended December 31, 2015 and 2014:
Beginning balance
Additions related to acquisitions
Adjustments included in earnings
Valuation and Qualifying Accounts�(USD $)
Valuation and Qualifying Accounts [Abstract]
Valuation and Qualifying Accounts
Text�Block�
Valuation and Qualifying Accounts�
Schedule II
ARC DOCUMENT SOLUTIONS, INC. AND SUBSIDIARIES
Balance at
of Period
Charges to
Cost and
End of
Deductions represent uncollectible accounts written-off net of recoveries.
Basis of Presentation�
Risk And Uncertainties�
Cash Equivalents�
Restricted Cash�
Concentrations of Credit Risk and Significant Vendors�
Allowance for Doubtful Accounts�
The Company performs periodic credit evaluations of the financial condition of its customers, monitors collections and payments from customers, and generally does not require collateral. The Company provides for the possible inability to collect accounts receivable by recording an allowance for doubtful accounts. The Company writes off an account when it is considered uncollectible. The Company estimates the allowance for doubtful accounts based on historical experience, aging of accounts receivable, and information regarding the credit worthiness of its customers. Additionally, the Company provides an allowance for returns and discounts based on historical experience.
Inventories�
Inventories are valued at the lower of cost (determined on a first-in, first-out basis; or average cost) or market. Inventories primarily consist of reprographics materials for use and resale, and equipment for resale. On an ongoing basis, inventories are reviewed and adjusted for estimated obsolescence or unmarketable inventories to reflect the lower of cost or market. Charges to increase inventory reserves are recorded as an increase in cost of sales. Estimated inventory obsolescence has been provided for in the financial statements and has been within the range of management's expectations.
Income Taxes�
Property and Equipment�
The Company accounts for software costs developed for internal use in accordance with ASC 350-40, Intangibles – Goodwill and Other, which requires companies to capitalize certain qualifying costs incurred during the application development stage of the related software development project. The primary use of this software is for internal use and, accordingly, such capitalized software development costs are depreciated on a straight-line basis over the economic lives of the related products not to exceed three years.
Impairment of Long-Lived Assets�
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.
Goodwill and Other Intangible Assets�
Deferred Financing Costs�
Derivative Financial Instruments�
Fair Values of Financial Instruments�
Insurance Liability�
Commitments and Contingencies�
Revenue Recognition�
Comprehensive Income (Loss)�
Segment and Geographic Reporting�
Advertising and Shipping and Handling Costs�
Stock-Based Compensation�
Research and Development Expenses�
Research and development activities relate to costs associated with the design and testing of new technology or enhancements and maintenance to existing technology. Such costs are expensed as incurred are primarily recorded to cost of sales.
Noncontrolling Interest�
The Company accounted for its investment in UNIS Document Solutions Co. Ltd., ("UDS") under the purchase method of accounting, in accordance with ASC 805, Business Combinations. UDS has been consolidated in the Company's financial statements from the date of acquisition.
Sales Taxes�
Earnings Per Share�
The Company accounts for earnings per share in accordance with ASC 260, Earnings Per Share. Basic earnings per share are 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.
Recent Accounting Pronouncements�
Summary of Significant Accounting Policies (Tables)
Schedule of Useful Lives of Property and Equipment�
Schedule of Net Sales of Principle Services and Products�
Schedule of Segment and Geographic Reporting�
See table below for revenues and long-lived assets, net, excluding intangible assets, attributable to the Company's U.S. operations and foreign operations.

redpajama_set_name: RedPajamaCommonCrawl


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Home » Health & Beauty » Woman In US Dies After Superbug Picked Up In India, 13 Antibiotics Failed, Say Doctors
Woman In US Dies After Superbug Picked Up In India, 13 Antibiotics Failed, Say Doctors
WASHINGTON: A woman in the US died after being infected by a superbug most likely during her visit to India, say doctors who found that the "nightmare" bacteria was resistant to all available antibiotics.
The infection was caused by carbapenem-resistant Enterobacteriaceae (CRE), a multidrug-resistant organism associated with high mortality.
While CRE are not new to the United States, what was new in this case was that the infection was resistant or non-susceptible to all available antimicrobial drugs, researchers said.
The 70-year-old patient in the US was admitted to an acute care hospital last year after an extended trip to India.
She was given a primary diagnosis of systemic inflammatory response syndrome, likely resulting from an infected right hip seroma. The infection was serious; none of the 14 antibiotics physicians used to treat the woman worked.
After the CRE – identified as Klebsiella pneumoniae – was confirmed by lab testing, an isolate from a wound specimen was sent to the CDC for further susceptibility testing and to determine the mechanism of resistance.
That testing confirmed the presence of New Delhi metallo-beta-lactamase (NDM-1), an enzyme that directly breaks down carbapenems, a powerful class of antibiotics that are often used to treat multidrug-resistant infections.
The US Centres for Disease Control and Prevention's antimicrobial testing showed the isolate was resistant to 26 different antibiotics, including all aminoglycosides and polymixins – another class of last-resort antibiotics.
It was also intermittently resistant to tigecycline, an antibiotic developed specifically to overcome drug-resistant organisms. Essentially, there were no treatment options.
Meanwhile, the patient's condition was deteriorating quickly. She died of septic shock in early September last year, less than two months after admission.
The woman had been in India for two years and had been hospitalised at least four times there for a right femur fracture and a subsequent hip fracture.
"We feel comfortable saying that she most likely obtained the bug in India," said Lei Chen, senior epidemiologist with the Washoe County Health District in the US.
CRE have been labelled as a "nightmare" bacteria not only because they are already resistant to most antibiotics, but also because they spread easily in hospital settings.
The enzymes that enable resistance are carried on mobile pieces of DNA known as plasmids that can spread to other types of bacteria. NDM-1 enzyme is particularly mobile, researchers said.
"It's what we call a promiscuous plasmid, that seems to move easily between species," said Alex Kallen, a CDC medical epidemiologist.
When CRE bacteria enter the bloodstream, they can be deadly. CRE bacteria kill up to half of patients who get bloodstream infections from them.
NDM-1 was originally identified in 2009 in a Swedish patient who had been hospitalised in India. The research was published in CDC's Morbidity and Mortality Weekly Report (MMWR).
Once the bacteria was identified in Nevada, the patient was isolated to prevent the infection from spreading in the hospital.
Postmortem tests showed her infection might have responded to a treatment called fosfomycin, which is not approved in the United States.
Paul Hoskisson, a researcher at the University of Strathclyde, in Scotland, said that several European countries, including Britain, license fosfomycin for intravenous use in such cases.
"This is important because we are seeing increasing numbers of drug-resistant infections, and this is one of the first cases for Klebsiella where no drug options were open to the medical staff."
Multi-drug-resistant Klebsiella pneumoniae has been described by the World Health Organization as "an urgent threat to human health."
According to Nick Thomson, leader of the bacterial genomics and evolution group at the Wellcome Trust Sanger Institute in England, this bacteria is likely to become more and more resistant.
"The report highlights international travel and treatment overseas as a feature in the introduction of this pan-resistant isolate into the USA," he said.
"Since we live in such an interconnected society, this is important because this isolate represents a truly untreatable infection" which leaves health-care professionals with few options but to seek to prevent further transmission.
Laura Piddock, a professor of microbiology at the University of Birmingham, said the case shows that doctors "need the flexibility to use antibiotics licensed for use in other countries and shown to be active in the laboratory against the patient's infecting bacterium."
bug in India nightmare bacteria presence of New Delhi metallo-beta-lactamase (NDM-1) Woman In US Dies After Superbug Picked Up In India	2017-01-16
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Accommodation in Lagos
Expats are likely to have their accommodation in Lagos arranged through their employer.
Ownership of property in Nigeria is highly regulated by the government and it's rare for expats living there to buy. Most expats live in rented apartments or houses in Lagos and most companies not only finance their foreign employee's accommodation, but also secure it and assume responsibility for any leasing logistics.
For those who are not having their accommodation arranged and paid for by their employer, it's best to work with a real estate agent or relocation specialist who will assist in the house-hunting process.
Lagos has been named amongst the most expensive cities in the world for expats to live in and the prices of rental properties reflect this. Landlords often demand a two- to three-year lease be signed and this is sometimes expected to be paid upfront. Expats should ensure that they factor this into any employment contract negotiations for their relocation to Nigeria.
Due to shortages of accommodation, it's not unusual for expats who arrive to work in Lagos to initially stay in a hotel, before being transferred to their permanent accommodation at a later stage. Expats staying in Nigeria short-term are often housed in hotels for the duration of their stay.
Types of housing in Lagos
Fully furnished, semi-furnished and completely unfurnished housing is available in Lagos. In some cases, companies own properties specifically designed to accommodate their expat employees.
Those living in compounds often find themselves in very insular expat communities, far removed from the reality of life in Lagos. Company compounds, apartment blocks and established private and gated housing complexes for expats in Lagos are usually located on Victoria Island and Ikoyi, just east of Lagos Island. Most international schools are also located within these areas.
Factors to consider when house-hunting in Lagos
Security is an important consideration when deciding where to live in Lagos. Many complexes have 24-hour security, which may include armed guards, security cameras and access control into and out of the complex. On-site amenities, including wireless internet, satellite television, gyms, tennis courts and swimming pools are also common.
Nigeria is notorious for its incredibly temperamental power and water supply, including in Lagos; no matter where one lives in the city, boreholes and generators are a must.
If possible, it's best to live close to one's office or, if living in Lagos with children, close to their school. Traffic can be nightmarish, and expats can expect to spend hours commuting to and from work each day. Most expats hire a personal driver to navigate the traffic; this is often paid for by their employer.
►For information on expat-friendly neighbourhoods, see Areas and Suburbs in Lagos.
►For an overview of the cost of basic goods and services in the city, see Cost of Living in Nigeria.


The student loan process is a very complicated financing process. Understanding who is legally responsible for the loan repayment is extremely important to know before signing the note. For undergraduate degrees the amount the student can actually borrow in their name is very limited.
To qualify for the federal student loans each year, you need to submit the FAFSA every year with your new financial information. No matter how financially strong your family is by just completing the FAFSA form the student will receive access to the Stafford Loan. The type of loans you will receive are determined by the cost of attendance (COA) of the college and the expected family contribution (EFC). This may vary by each school.
In your planning you may also want to plan on taking the federal student loans early. The federal student loans are the legal responsibility of the student. There is no financial recourse to the parents with the federal student loans. This is just one advantage. The other advantage is the federal student loans have better repayment and loan forgiveness options.
Private student loans work a little different. These loans can be in the student's name but will normally need a co-signer. These loans also have a variable rate based on the co-signers credit score. Repayment options are very limited with private student loans. Some private student loans offer a release for the co-signer after a period of on-time payments.
Understanding the best ways to finance your education requires knowledge of the student loan process. To get professional college financial aid help with the entire college funding process, please contact us. We can help you avoid common mistakes and maximize your tuition dollars.