##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 Form 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2011
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number: 001-32407
 AMERICAN REPROGRAPHICS COMPANY
 (Exact name of Registrant as specified in its Charter)
 Delaware
    
    20-1700361(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1981 N. Broadway, Suite 385
Walnut Creek, California 94596
(925) 949-5100
 (Address, including zip code, and telephone number, including area code, of Registrants
principal executive offices)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
 Quarterly Report on Form 10-Q
 For the Quarter Ended March 31, 2011
 Table of Contents
 PART IFinancial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)
    
    
    4Condensed Consolidated Balance Sheets as of March 31, 2011 and December 31, 2010
    
    
    4Condensed Consolidated Statements of Operations for the three months ended March 31, 2011 and 2010
    
    
    5Condensed Consolidated Statements of Equity and Comprehensive Loss for the three months ended March 31, 2011 and 2010
    
    
    6Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2011 and 2010
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    40Item 4. Controls and Procedures
    
    
    40PART IIOther InformationItem 1. Legal Proceedings
    
    
    41Item 1A. Risk Factors
    
    
    41Item 6. Exhibits
    
    
    42Signatures
    
    
    43Exhibit Index
    
    
    44Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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FORWARD-LOOKING STATEMENTS
    3




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##### Table of Contents



PART IFINANCIAL INFORMATION
 
 Item 1.
    
    Condensed Consolidated Financial Statements
 AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
 March 31,
    
    
    December 31,2011
    
    
    2010AssetsCurrent assets:Cash and cash equivalents
    
    $
    22,672
    
    
    $
    26,293Accounts receivable, net of allowances for accounts receivable of
$3,935
and $4,030 at March 31, 2011 and December 31, 2010, respectively
    
    
    60,791
    
    
    
    52,619Inventories, net
    
    
    11,824
    
    
    
    10,689Deferred income taxes
    
    
    13,721
    
    
    
    7,157Prepaid expenses and other current assets
    
    
    14,322
    
    
    
    10,944Total current assets
    
    
    123,330
    
    
    
    107,702Property and equipment, net
    
    
    57,862
    
    
    
    59,036Goodwill
    
    
    294,759
    
    
    
    294,759Other intangible assets, net
    
    
    57,941
    
    
    
    62,643Deferred financing costs, net
    
    
    4,862
    
    
    
    4,995Deferred income taxes
    
    
    28,816
    
    
    
    37,835Other assets
    
    
    2,024
    
    
    
    2,115Total assets
    
    $
    569,594
    
    
    $
    569,085Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    22,869
    
    
    $
    23,593Accrued payroll and payroll-related expenses
    
    
    9,801
    
    
    
    7,980Accrued expenses
    
    
    24,121
    
    
    
    30,134Current portion of long-term debt and capital leases
    
    
    33,356
    
    
    
    23,608Total current liabilities
    
    
    90,147
    
    
    
    85,315Long-term debt and capital leases
    
    
    214,485
    
    
    
    216,016Other long-term liabilities
    
    
    3,175
    
    
    
    5,072Total liabilities
    
    
    307,807
    
    
    
    306,403Commitments and contingencies (Note 10)Stockholders equity:American Reprographics Company stockholders equity:Preferred stock, $0.001 par value, 25,000,000 shares authorized;
zero and zero shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 150,000,000 shares authorized;
46,193,156 and 46,183,463 shares issued and 45,745,502 and
45,735,809 shares outstanding in 2011 and 2010, respectively
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    97,795
    
    
    
    96,251Retained earnings
    
    
    169,816
    
    
    
    173,459Accumulated other comprehensive loss
    
    
    (4,330
    )
    
    
    (5,541
    )263,327
    
    
    
    264,215Less cost of common stock in treasury, 447,654 shares in 2011 and
2010
    
    
    7,709
    
    
    
    7,709Total American Reprographics Company stockholders equity
    
    
    255,618
    
    
    
    256,506Noncontrolling interest
    
    
    6,169
    
    
    
    6,176Total equity
    
    
    261,787
    
    
    
    262,682Total liabilities and equity
    
    $
    569,594
    
    
    $
    569,085
   4




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AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Reprographics services
    
    $
    70,022
    
    
    $
    76,257Facilities management
    
    
    24,203
    
    
    
    22,403Equipment and supplies sales
    
    
    12,279
    
    
    
    13,501Total net sales
    
    
    106,504
    
    
    
    112,161Cost of sales
    
    
    73,118
    
    
    
    75,310Gross profit
    
    
    33,386
    
    
    
    36,851Selling, general and administrative expenses
    
    
    27,832
    
    
    
    27,131Amortization of intangible assets
    
    
    4,744
    
    
    
    2,636Income from operations
    
    
    810
    
    
    
    7,084Other income
    
    
    (26
    )
    
    
    (43
    )Interest expense, net
    
    
    8,167
    
    
    
    5,888(Loss) income before income tax (benefit) provision
    
    
    (7,331
    )
    
    
    1,239Income tax (benefit) provision
    
    
    (3,649
    )
    
    
    530Net (loss) income
    
    
    (3,682
    )
    
    
    709Loss attributable to the noncontrolling interest
    
    
    39
    
    
    
    8Net (loss) income attributable to American Reprographics
Company
    
    $
    (3,643
    )
    
    $
    717Earnings per share attributable to American Reprographics
Company shareholders:Basic
    
    $
    (0.08
    )
    
    $
    0.02Diluted
    
    $
    (0.08
    )
    
    $
    0.02Weighted average common shares outstanding:Basic
    
    
    45,322,092
    
    
    
    45,150,483Diluted
    
    
    45,322,092
    
    
    
    45,356,871
   5




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF EQUITY AND COMPREHENSIVE LOSS
(Unaudited)
 American Reprographics Company ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock
    
    
    NoncontrollingShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    in Treasury
    
    
    Interest
    
    
    TotalBalance at December 31, 2009
    
    
    45,664,999
    
    
    $
    46
    
    
    $
    89,982
    
    
    $
    200,961
    
    
    $
    (7,273
    )
    
    $
    (7,709
    )
    
    $
    6,017
    
    
    $
    282,024Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,461Issuance of common stock underEmployee Stock Purchase Plan
    
    
    2,099
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Stock options exercised
    
    
    3,000
    
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16Tax benefit from stock based
compensation
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Comprehensive income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    717
    
    
    
    
    
    
    
    
    
    
    
    (8
    )
    
    
    709Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    116
    
    
    
    
    
    
    
    
    
    
    
    116Loss on derivative, net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (313
    )
    
    
    
    
    
    
    
    
    
    
    (313
    )Comprehensive income:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    512Balance at March 31, 2010
    
    
    45,670,098
    
    
    $
    46
    
    
    $
    91,478
    
    
    $
    201,678
    
    
    $
    (7,470
    )
    
    $
    (7,709
    )
    
    $
    6,009
    
    
    $
    284,032
 American Reprographics Company ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock
    
    
    NoncontrollingShares
    
    
    Par Value
    
    
    Capital
    
    
    Earnings
    
    
    Loss
    
    
    in Treasury
    
    
    Interest
    
    
    TotalBalance at December 31, 2010
    
    
    45,735,809
    
    
    $
    46
    
    
    $
    96,251
    
    
    $
    173,459
    
    
    $
    (5,541
    )
    
    $
    (7,709
    )
    
    $
    6,176
    
    
    $
    262,682Stock-based compensation
    
    
    1,444
    
    
    
    
    
    
    
    1,489
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,489Issuance of common stock underEmployee Stock Purchase Plan
    
    
    1,249
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Stock options exercised
    
    
    7,000
    
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    41Tax benefit from stock based
compensation
    
    
    
    
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3Comprehensive loss:Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,643
    )
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (3,682
    )Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    257
    
    
    
    
    
    
    
    32
    
    
    
    289Amortization of derivative,
net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    954
    
    
    
    
    
    
    
    
    
    
    
    954Comprehensive loss:
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,439
    )Balance at March 31, 2011
    
    
    45,745,502
    
    
    $
    46
    
    
    $
    97,795
    
    
    $
    169,816
    
    
    $
    (4,330
    )
    
    $
    (7,709
    )
    
    $
    6,169
    
    
    $
    261,787
   6




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
 Three Months EndedMarch 31,2011
    
    
    2010Cash flows from operating activitiesNet (loss) income
    
    $
    (3,682
    )
    
    $
    709Adjustments to reconcile net (loss) income to net cash provided by operating activities:Allowance for accounts receivable
    
    
    180
    
    
    
    261Depreciation
    
    
    7,742
    
    
    
    9,020Amortization of intangible assets
    
    
    4,744
    
    
    
    2,636Amortization of deferred financing costs
    
    
    216
    
    
    
    384Amortization of bond discount
    
    
    132
    
    
    
    Stock-based compensation
    
    
    1,489
    
    
    
    1,461Excess tax benefit related to stock-based compensation
    
    
    (8
    )
    
    
    (3
    )Deferred income taxes
    
    
    2,318
    
    
    
    274Amortization of derivative, net of tax effect
    
    
    954
    
    
    
    Other non-cash items, net
    
    
    (130
    )
    
    
    (191
    )Changes in operating assets and liabilities, net of effect of
business acquisitions:Accounts receivable
    
    
    (8,268
    )
    
    
    (5,419
    )Inventory
    
    
    (1,191
    )
    
    
    156Prepaid expenses and other assets
    
    
    (3,228
    )
    
    
    (2,515
    )Accounts payable and accrued expenses
    
    
    3,321
    
    
    
    2,695Net cash provided by operating activities
    
    
    4,589
    
    
    
    9,468Cash flows from investing activitiesCapital expenditures
    
    
    (4,136
    )
    
    
    (1,217
    )Payment for swap transaction
    
    
    (9,729
    )
    
    
    Other
    
    
    378
    
    
    
    551Net cash used in investing activities
    
    
    (13,487
    )
    
    
    (666
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    41
    
    
    
    16Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    23
    
    
    
    0Excess tax benefit related to stock-based compensation
    
    
    8
    
    
    
    3Payments on long-term debt agreements and capital leases
    
    
    (7,540
    )
    
    
    (11,202
    )Net borrowings (repayments) under revolving credit facility
    
    
    12,800
    
    
    
    (814
    )Payment of loan fees
    
    
    (164
    )
    
    
    Net cash provided by (used in) financing activities
    
    
    5,168
    
    
    
    (11,997
    )Effect of foreign currency translation on cash balances
    
    
    109
    
    
    
    1Net change in cash and cash equivalents
    
    
    (3,621
    )
    
    
    (3,194
    )Cash and cash equivalents at beginning of period
    
    
    26,293
    
    
    
    29,377Cash and cash equivalents at end of period
    
    $
    22,672
    
    
    $
    26,183Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    2,461
    
    
    $
    1,930Net loss on derivative, net of tax effect
    
    $
    
    
    
    $
    (313
    )
   7




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 1. Description of Business and Basis of Presentation
  Basis of Presentation
   Multiple-Deliverable Revenue Arrangements a
consensus of the FASB Emerging Issues Task Force Intangibles-Goodwill and Other Business Combinations-
Disclosure of Supplementary Pro Forma Information for Business Combinations,
 Risk and Uncertainties
  2. Stock-Based Compensation
   8




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
     3. Employee Stock Purchase Plan
   4. Goodwill and Other Intangibles Resulting from Business Acquisitions
 Goodwill
      9




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
      Accumulated
    
    
    Net CarryingGross Goodwill
    
    
    Impairment Loss
    
    
    AmountJanuary 1, 2010
    
    $
    405,054
    
    
    $
    72,536
    
    
    $
    332,518Additions
    
    
    500
    
    
    
    
    
    
    
    500Goodwill impairment
    
    
    
    
    
    
    38,263
    
    
    
    (38,263
    )Translation adjustment
    
    
    4
    
    
    
    
    
    
    
    4December 31, 2010
    
    
    405,558
    
    
    
    110,799
    
    
    
    294,759Additions
    
    
    
    
    
    
    
    
    
    
    Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Translation adjustment
    
    
    
    
    
    
    
    
    
    
    March 31, 2011
    
    $
    405,558
    
    
    $
    110,799
    
    
    $
    294,759
  Long-lived Assets
 Accounting for the Impairment or Disposal of Long-lived
Assets
    10




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
     March 31, 2011
    
    
    December 31, 2010Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAmortizable other
intangible assets:Customer relationships
    
    $
    96,433
    
    
    $
    50,449
    
    
    $
    45,984
    
    
    $
    96,359
    
    
    $
    48,301
    
    
    $
    48,058Trade names and trademarks
    
    
    20,294
    
    
    
    8,359
    
    
    
    11,935
    
    
    
    20,294
    
    
    
    5,736
    
    
    
    14,558Non-competition agreements
    
    
    100
    
    
    
    78
    
    
    
    22
    
    
    
    100
    
    
    
    73
    
    
    
    27$
    116,827
    
    
    $
    58,886
    
    
    $
    57,941
    
    
    $
    116,753
    
    
    $
    54,110
    
    
    $
    62,643
  2011
    
    $
    13,8692012
    
    
    10,7482013
    
    
    6,3582014
    
    
    5,5472015
    
    
    5,033Thereafter
    
    
    16,386$
    57,941
 5. Long-Term Debt
  March 31,
    
    
    December 31,2011
    
    
    2010Borrowings from Revolving Credit Facility; 2.3% interest rate at
March 31, 2011
    
    $
    12,800
    
    
    $
    10.5% Senior Notes due 2016, net of bond discount of $4,176 and
$4,308 at March 31, 2011 and December 31, 2010, respectively.
    
    
    195,824
    
    
    
    195,692Various subordinated notes payable; weighted average 6.2%
interest
rate at March 31, 2011 and December 31, 2010, respectively;
principal and interest payable monthly through November 2013
    
    
    6,153
    
    
    
    8,635Various capital leases; weighted average 8.9% and 8.8% interest
rate
at March 31, 2011 and December 31, 2010, respectively;
principal and interest payable monthly through February 2016
    
    
    33,064
    
    
    
    35,297247,841
    
    
    
    239,624Less current portion
    
    
    (33,356
    )
    
    
    (23,608
    )$
    214,485
    
    
    $
    216,016
  11




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 10.5% Senior Notes due 2016
    Optional Redemption
 Repurchase upon Change of Control.
 Other Covenants
 Events of Default
 2010 Credit Agreement
    12




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
    
    
    Maximum consolidated leverage ratio as follows:
 
    
    4.35:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    4.25:1.00 for quarters ending December 31, 2011 through September 30, 2012
    
    4.15:1.00 for quarters ending December 31, 2012 through September 30, 2013
    
    4.00:1.00 for quarters ending December 31, 2013 through maturity;
 
    
    Maximum consolidated senior secured debt leverage ratio not
greater than 1.50:1.00, determined on the last day of each fiscal
quarter through maturity;
    
    Minimum consolidated interest coverage ratio as follows:
 
    
    1.70:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    1.75:1.00 for quarters ending December 31, 2011 through maturity;
      13




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 2007 Credit Agreement
    Interest Rate Swap Transaction
     6. CONDENSED FINANCIAL STATEMENTS
   14




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Consolidating Condensed Balance Sheet  March 31, 2011
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    10,620
    
    
    $
    12,052
    
    
    $
    
    
    
    $
    22,672Restricted cash
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Accounts receivable, net
    
    
    
    
    
    
    56,027
    
    
    
    4,764
    
    
    
    
    
    
    
    60,791Intercompany operations
    
    
    295
    
    
    
    3,564
    
    
    
    (3,859
    )
    
    
    
    
    
    
    Inventories, net
    
    
    
    
    
    
    8,259
    
    
    
    3,565
    
    
    
    
    
    
    
    11,824Deferred income taxes
    
    
    
    
    
    
    13,721
    
    
    
    
    
    
    
    
    
    
    
    13,721Prepaid expenses and other current assets
    
    
    52
    
    
    
    12,070
    
    
    
    2,200
    
    
    
    
    
    
    
    14,322Total current assets
    
    
    347
    
    
    
    104,261
    
    
    
    18,722
    
    
    
    
    
    
    
    123,330Property and equipment, net
    
    
    
    
    
    
    50,754
    
    
    
    7,108
    
    
    
    
    
    
    
    57,862Goodwill
    
    
    
    
    
    
    294,759
    
    
    
    
    
    
    
    
    
    
    
    294,759Investment in subsidiaries
    
    
    262,692
    
    
    
    15,680
    
    
    
    
    
    
    
    (278,372
    )
    
    
    Other intangible assets, net
    
    
    
    
    
    
    55,907
    
    
    
    2,034
    
    
    
    
    
    
    
    57,941Deferred financing costs, net
    
    
    4,862
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,862Deferred income taxes
    
    
    2,853
    
    
    
    23,373
    
    
    
    2,590
    
    
    
    
    
    
    
    28,816Other assets
    
    
    
    
    
    
    1,946
    
    
    
    78
    
    
    
    
    
    
    
    2,024Total assets
    
    $
    270,754
    
    
    $
    546,680
    
    
    $
    30,532
    
    
    $
    (278,372
    )
    
    $
    569,594Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    20,840
    
    
    $
    2,029
    
    
    $
    
    
    
    $
    22,869Accrued payroll and payroll-related expenses
    
    
    
    
    
    
    9,398
    
    
    
    403
    
    
    
    
    
    
    
    9,801Accrued expenses
    
    
    7,061
    
    
    
    15,121
    
    
    
    1,939
    
    
    
    
    
    
    
    24,121Intercompany loans
    
    
    (200,549
    )
    
    
    200,445
    
    
    
    104
    
    
    
    
    
    
    
    Current portion of long-term debt and
capital leases
    
    
    12,800
    
    
    
    19,545
    
    
    
    1,011
    
    
    
    
    
    
    
    33,356Total current liabilities
    
    
    (180,688
    )
    
    
    265,349
    
    
    
    5,486
    
    
    
    
    
    
    
    90,147Long-term debt and capital leases
    
    
    195,824
    
    
    
    17,049
    
    
    
    1,612
    
    
    
    
    
    
    
    214,485Other long-term liabilities
    
    
    
    
    
    
    1,590
    
    
    
    1,585
    
    
    
    
    
    
    
    3,175Total liabilities
    
    
    15,136
    
    
    
    283,988
    
    
    
    8,683
    
    
    
    
    
    
    
    307,807Commitments and contingenciesTotal equity
    
    
    255,618
    
    
    
    262,692
    
    
    
    21,849
    
    
    
    (278,372
    )
    
    
    261,787Total liabilities and equity
    
    $
    270,754
    
    
    $
    546,680
    
    
    $
    30,532
    
    
    $
    (278,372
    )
    
    $
    569,594
  15




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Consolidating Condensed Balance Sheet
December 31, 2010
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalAssetsCurrent assets:Cash and cash equivalents
    
    $
    
    
    
    $
    12,587
    
    
    $
    13,706
    
    
    $
    
    
    
    $
    26,293Accounts receivable, net
    
    
    
    
    
    
    48,283
    
    
    
    4,336
    
    
    
    
    
    
    
    52,619Intercompany operations
    
    
    295
    
    
    
    2,717
    
    
    
    (3,012
    )
    
    
    
    
    
    
    Inventories, net
    
    
    
    
    
    
    8,090
    
    
    
    2,599
    
    
    
    
    
    
    
    10,689Deferred income taxes
    
    
    
    
    
    
    7,157
    
    
    
    
    
    
    
    
    
    
    
    7,157Prepaid expenses and other current assets
    
    
    72
    
    
    
    8,741
    
    
    
    2,131
    
    
    
    
    
    
    
    10,944Total current assets
    
    
    367
    
    
    
    87,575
    
    
    
    19,760
    
    
    
    
    
    
    
    107,702Property and equipment, net
    
    
    
    
    
    
    52,376
    
    
    
    6,660
    
    
    
    
    
    
    
    59,036Goodwill
    
    
    
    
    
    
    294,759
    
    
    
    
    
    
    
    
    
    
    
    294,759Investment in subsidiaries
    
    
    257,838
    
    
    
    16,065
    
    
    
    
    
    
    
    (273,903
    )
    
    
    Other intangible assets, net
    
    
    
    
    
    
    60,585
    
    
    
    2,058
    
    
    
    
    
    
    
    62,643Deferred financing costs, net
    
    
    4,995
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,995Deferred income taxes
    
    
    708
    
    
    
    34,453
    
    
    
    2,674
    
    
    
    
    
    
    
    37,835Other assets
    
    
    
    
    
    
    1,978
    
    
    
    137
    
    
    
    
    
    
    
    2,115Total assets
    
    $
    263,908
    
    
    $
    547,791
    
    
    $
    31,289
    
    
    $
    (273,903
    )
    
    $
    569,085Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    
    
    
    $
    21,137
    
    
    $
    2,456
    
    
    $
    
    
    
    $
    23,593Accrued payroll and payroll-related expenses
    
    
    
    
    
    
    7,643
    
    
    
    337
    
    
    
    
    
    
    
    7,980Accrued expenses
    
    
    2,210
    
    
    
    25,563
    
    
    
    2,361
    
    
    
    
    
    
    
    30,134Intercompany loans
    
    
    (190,500
    )
    
    
    190,241
    
    
    
    259
    
    
    
    
    
    
    
    Current portion of long-term debt and
capital leases
    
    
    
    
    
    
    22,787
    
    
    
    821
    
    
    
    
    
    
    
    23,608Total current liabilities
    
    
    (188,290
    )
    
    
    267,371
    
    
    
    6,234
    
    
    
    
    
    
    
    85,315Long-term debt and capital leases
    
    
    195,692
    
    
    
    19,201
    
    
    
    1,123
    
    
    
    
    
    
    
    216,016Other long-term liabilities
    
    
    
    
    
    
    3,381
    
    
    
    1,691
    
    
    
    
    
    
    
    5,072Total liabilities
    
    
    7,402
    
    
    
    289,953
    
    
    
    9,048
    
    
    
    
    
    
    
    306,403Commitments and contingenciesTotal equity
    
    
    256,506
    
    
    
    257,838
    
    
    
    22,241
    
    
    
    (273,903
    )
    
    
    262,682Total liabilities and equity
    
    $
    263,908
    
    
    $
    547,791
    
    
    $
    31,289
    
    
    $
    (273,903
    )
    
    $
    569,085
  16




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Consolidating Condensed Statement of Operations
March 31, 2011
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    97,990
    
    
    $
    8,514
    
    
    
    
    
    
    $
    106,504Cost of sales
    
    
    
    
    
    
    66,615
    
    
    
    6,503
    
    
    
    
    
    
    
    73,118Gross profit
    
    
    
    
    
    
    31,375
    
    
    
    2,011
    
    
    
    
    
    
    
    33,386Selling, general and administrative expenses
    
    
    
    
    
    
    25,827
    
    
    
    2,005
    
    
    
    
    
    
    
    27,832Amortization of intangible assets
    
    
    
    
    
    
    4,678
    
    
    
    66
    
    
    
    
    
    
    
    4,744Income (loss) from operations
    
    
    
    
    
    
    870
    
    
    
    (60
    )
    
    
    
    
    
    
    810Other income
    
    
    
    
    
    
    (26
    )
    
    
    
    
    
    
    
    
    
    
    (26
    )Interest expense (income), net
    
    
    5,740
    
    
    
    2,442
    
    
    
    (15
    )
    
    
    
    
    
    
    8,167Loss before equity in earnings of
subsidiaries and income tax benefit
    
    
    (5,740
    )
    
    
    (1,546
    )
    
    
    (45
    )
    
    
    
    
    
    
    (7,331
    )Equity in earnings of subsidiaries
    
    
    50
    
    
    
    (2
    )
    
    
    
    
    
    
    (48
    )
    
    
    Income tax benefit
    
    
    (2,147
    )
    
    
    (1,494
    )
    
    
    (8
    )
    
    
    
    
    
    
    (3,649
    )Net (loss) income
    
    
    (3,643
    )
    
    
    (50
    )
    
    
    (37
    )
    
    
    48
    
    
    
    (3,682
    )Loss attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    39
    
    
    
    
    
    
    
    39Net (loss) income attributable to AmericanReprographics Company
    
    $
    (3,643
    )
    
    $
    (50
    )
    
    $
    2
    
    
    $
    48
    
    
    $
    (3,643
    )
 Consolidating Condensed Statement of Operations
March 31, 2010
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalNet sales
    
    $
    
    
    
    $
    104,088
    
    
    $
    8,073
    
    
    
    
    
    
    $
    112,161Cost of sales
    
    
    
    
    
    
    69,023
    
    
    
    6,287
    
    
    
    
    
    
    
    75,310Gross profit
    
    
    
    
    
    
    35,065
    
    
    
    1,786
    
    
    
    
    
    
    
    36,851Selling, general and administrative expenses
    
    
    
    
    
    
    25,427
    
    
    
    1,704
    
    
    
    
    
    
    
    27,131Amortization of intangible assets
    
    
    
    
    
    
    2,564
    
    
    
    72
    
    
    
    
    
    
    
    2,636Income from operations
    
    
    
    
    
    
    7,074
    
    
    
    10
    
    
    
    
    
    
    
    7,084Other (income) expense, net
    
    
    
    
    
    
    (43
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Interest expense, net
    
    
    
    
    
    
    5,882
    
    
    
    6
    
    
    
    
    
    
    
    5,888Income (loss) before equity in earnings of subsidiaries
and income tax benefit
    
    
    
    
    
    
    1,235
    
    
    
    4
    
    
    
    
    
    
    
    1,239Equity in earnings of subsidiaries
    
    
    (717
    )
    
    
    
    
    
    
    
    
    
    
    717
    
    
    
    Income tax (benefit) provision
    
    
    
    
    
    
    518
    
    
    
    12
    
    
    
    
    
    
    
    530Net income (loss)
    
    
    717
    
    
    
    717
    
    
    
    (8
    )
    
    
    (717
    )
    
    
    709Loss attributable to noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    8Net income (loss) attributable to American ReprographicsCompany
    
    $
    717
    
    
    $
    717
    
    
    $
    
    
    
    $
    (717
    )
    
    $
    717
  17




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Consolidating Condensed Statement of Cash Flows
March 31, 2011
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash (used in) provided by operating activities
    
    $
    (2,587
    )
    
    $
    7,220
    
    
    $
    (44
    )
    
    $
    
    
    
    $
    4,589Cash flows from investing activitiesCapital expenditures
    
    
    
    
    
    
    (3,851
    )
    
    
    (285
    )
    
    
    
    
    
    
    (4,136
    )Payment for swap transaction
    
    
    
    
    
    
    (9,729
    )
    
    
    
    
    
    
    
    
    
    
    (9,729
    )Other
    
    
    
    
    
    
    319
    
    
    
    59
    
    
    
    
    
    
    
    378Net cash used in investing activities
    
    
    
    
    
    
    (13,261
    )
    
    
    (226
    )
    
    
    
    
    
    
    (13,487
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    
    
    
    
    41
    
    
    
    
    
    
    
    
    
    
    
    41Proceeds from issuance of common stock under Employee
Stock Purchase Plan
    
    
    
    
    
    
    23
    
    
    
    
    
    
    
    
    
    
    
    23Excess tax benefit related to stock-based compensation
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    
    
    
    
    8Payments on long-term debt agreements and capital leases
    
    
    
    
    
    
    (7,049
    )
    
    
    (491
    )
    
    
    
    
    
    
    (7,540
    )Net borrowings under revolving credit facility
    
    
    12,800
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,800Payment of deferred financing fees
    
    
    (164
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (164
    )Advances to/from subsidiaries
    
    
    (10,049
    )
    
    
    11,051
    
    
    
    (1,002
    )
    
    
    
    
    
    
    Net cash provided by (used in) financing activities
    
    
    2,587
    
    
    
    4,074
    
    
    
    (1,493
    )
    
    
    
    
    
    
    5,168Effect of foreign currency translation on cash balances
    
    
    
    
    
    
    
    
    
    
    109
    
    
    
    
    
    
    
    109Net change in cash and cash equivalents
    
    
    
    
    
    
    (1,967
    )
    
    
    (1,654
    )
    
    
    
    
    
    
    (3,621
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    12,587
    
    
    
    13,706
    
    
    
    
    
    
    
    26,293Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    10,620
    
    
    $
    12,052
    
    
    $
    
    
    
    $
    22,672
  18




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Consolidating Condensed Statement of Cash Flows
March 31, 2010
 AmericanReprographics
    
    
    Guarantor
    
    
    Non-GuarantorCompany
    
    
    Subsidiaries
    
    
    Subsidiaries
    
    
    Eliminations
    
    
    TotalCash flows from operating activitiesNet cash provided by operating activities
    
    $
    
    
    
    $
    9,292
    
    
    $
    176
    
    
    $
    
    
    
    $
    9,468Cash flows from investing activitiesCapital expenditures
    
    
    
    
    
    
    (1,118
    )
    
    
    (99
    )
    
    
    
    
    
    
    (1,217
    )Other
    
    
    
    
    
    
    524
    
    
    
    27
    
    
    
    
    
    
    
    551Net cash used in investing activities
    
    
    
    
    
    
    (594
    )
    
    
    (72
    )
    
    
    
    
    
    
    (666
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    
    
    
    
    16
    
    
    
    
    
    
    
    
    
    
    
    16Excess tax benefit related to stock-based compensation
    
    
    
    
    
    
    3
    
    
    
    
    
    
    
    
    
    
    
    3Payments on long-term debt agreements and capital
leases
    
    
    
    
    
    
    (10,924
    )
    
    
    (278
    )
    
    
    
    
    
    
    (11,202
    )Net payments under revolving credit facility
    
    
    
    
    
    
    
    
    
    
    (814
    )
    
    
    
    
    
    
    (814
    )Advances to/from subsidiaries
    
    
    
    
    
    
    687
    
    
    
    (687
    )
    
    
    
    
    
    
    Net cash used in financing activities
    
    
    
    
    
    
    (10,218
    )
    
    
    (1,779
    )
    
    
    
    
    
    
    (11,997
    )Effect of foreign currency translation on cash balances
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Net change in cash and cash equivalents
    
    
    
    
    
    
    (1,520
    )
    
    
    (1,674
    )
    
    
    
    
    
    
    (3,194
    )Cash and cash equivalents at beginning of period
    
    
    
    
    
    
    15,319
    
    
    
    14,058
    
    
    
    
    
    
    
    29,377Cash and cash equivalents at end of period
    
    $
    
    
    
    $
    13,799
    
    
    $
    12,384
    
    
    $
    
    
    
    $
    26,183
 7. Derivatives and Hedging Transactions
     19




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
  Fair ValueBalance Sheet
    
    December 31,Classification
    
    2010Derivative not designated as hedging
instrument under ASC 815Amended Swap Transaction
    
    Accrued expenses
    
    $
    9,729
  Amount of Gain or(Loss) Recognized inAOCL on DerivativeThree Months EndedMarch 31,2010Derivative in ASC 815 Cash Flow Hedging
RelationshipAmended Swap Transaction
    
    $
    (548
    )Tax effect
    
    
    235Amended Swap Transaction,
net of tax effect
    
    $
    (313
    )
  Amount of Gain or (Loss) Reclassified from AOCL into Income(effective portion)
    
    
    (ineffective portion)Three Months Ended
    
    
    Three Months EndedMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011
    
    
    2010Location of Gain or (Loss)
Reclassified
from AOCL into IncomeInterest expense
    
    $
    (1,523
    )
    
    $
    (1,966
    )
    
    $
    
    
    
    $
    (72
    )
  20




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
  Amount of LossRecognized inIncome onDerivativeThree Months EndedMarch 31,2011Derivative not designated as hedging instrument
under ASC 815Amended Swap Transaction
    
    $
    (120
    )Tax effect
    
    
    45Amended Swap Transaction, net of tax effect
    
    $
    (75
    )
 8. Fair Value Measurements
  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.
  Significant Other Observable InputsLevel 2December 31,2010Recurring Fair Value MeasureAmended Swap Transaction
    
    $
    9,729
   Fair Values of Financial Instruments.
 Cash equivalents:
  21




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
 Short- and long-term debt:
 Interest rate hedge agreements:
 9. Income Taxes
    Income Taxes,
 10. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Legal Proceedings.
  11. Comprehensive Loss
   22




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share data)
(Unaudited)
  Three Months EndedMarch 31,2011
    
    
    2010Net (loss) income
    
    $
    (3,682
    )
    
    $
    709Foreign currency translation adjustments
    
    
    289
    
    
    
    116Gain (loss) on derivative, net of tax effect
    
    
    954
    
    
    
    (313
    )Comprehensive (loss) income
    
    
    (2,439
    )
    
    
    512Comprehensive loss attributable to the
noncontrolling interest
    
    
    (7
    )
    
    
    (8
    )Comprehensive (loss) income attributable to ARC
    
    $
    (2,432
    )
    
    $
    520
  12. Earnings per Share
 Earnings per Share
  Three Months EndedMarch 31,2011
    
    
    2010Weighted average common shares outstanding
during the period  basic
    
    
    45,322,092
    
    
    
    45,150,483Effect of dilutive stock options
    
    
    
    
    
    
    206,388Weighted average common shares outstanding
during the period  diluted
    
    
    45,322,092
    
    
    
    45,356,871
 13. Segment and Geographic Reporting
 Disclosures about Segments of an Enterprise and Related
Information
  23




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (concluded)
(Dollars in thousands, except per share data)
(Unaudited)
  Three Months EndedMarch 31,2011
    
    
    2010Foreign
    
    
    
    
    
    
    
    
    
    
    ForeignU.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    TotalRevenues from external
customers
    
    $
    97,990
    
    
    $
    8,514
    
    
    $
    106,504
    
    
    $
    104,088
    
    
    $
    8,073
    
    
    $
    112,161
 March 31, 2011
    
    
    December 31, 2010Foreign
    
    
    
    
    
    
    
    
    
    
    ForeignU.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    TotalLong-lived assets, net
    
    $
    408,228
    
    
    $
    9,220
    
    
    $
    417,448
    
    
    $
    414,693
    
    
    $
    8,855
    
    
    $
    423,548
 
 14. Recent Accounting Pronouncements
 Business Combinations,
 Intangibles-Goodwill and Other
 Revenue Recognition,
  24




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our interim Condensed
Consolidated Financial Statements and the related notes and other financial information appearing
elsewhere in this report as well as Managements Discussion and Analysis of Financial Condition and
Results of Operations included in our 2010 Annual Report on Form 10-K .
 Executive Summary
    
    
    Document management. Document management involves storing,
tracking and providing authorized access to documents we
maintain on our customers behalf. This is largely
accomplished through digital database management as
documents enter our digital infrastructure and are
maintained on our production workstations, servers and
networks.
    
    Document distribution and logistics. Document distribution
and logistics involves transferring digital documents
throughout our local and wide-area computer networks, and
over the internet, as well as the pickup, delivery and
shipping of hardcopy documents to and from locations around
the world.
    
    Print-on-demand. Print-on-demand involves quick-turnaround
digital printing in black and white and color, and in a
wide variety of sizes and formats
    
    Facilities management. On-site services, frequently
referred to as FMs, is any combination of the above
services supplied at a customers location. On-site
services involve placing equipment and sometimes staff in
our customers location to provide convenience printing and
other reprographics services. Our FM service offering is
evolving to include the management of entire print networks
in our customers offices, which we refer to as managed
print services or MPS.
       25




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##### Table of Contents



Evaluating our Performance.
 
    
    Creating consistent, profitable-growth, or in the absence
of growth due to market conditions beyond our control,
margins superior to commonly understood industry
benchmarks;
    
    Maintaining our industry leadership position as measured by
our geographical footprint, market share and revenue
generation capabilities;
    
    Continuing to develop and invest in our products, services,
and technology to meet the changing needs of our customers;
    
    Maintaining a low cost structure; and
    
    Maintaining a flexible capital structure that provides for
both responsible debt service and pursuit of acquisitions
and other high-return investments.
 Primary Financial Measures.
   Other Common Financial Measures.
 
    
    Net income and earnings per share;
    
    Material and labor costs as a percentage of net sales;
    
    Days sales outstanding/days sales inventory/days payable outstanding; and
    
    Cash flows from operations.
    Acquisitions.
   26




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##### Table of Contents



1.
    
    Standalone Acquisitions. Post-acquisition, these businesses
maintain their management team and act as strategic
platforms for the Company to acquire market share in and
around the specific geographical location.2.
    
    Branch/Fold-in Acquisitions. These acquisitions are
equivalent to opening a new or greenfield branch. They
support an outlying portion of a larger market and rely on
a larger centralized production facility nearby for
strategic management, load balancing, providing specialized
services, and for administrative and other back office
support. We maintain the staff and equipment of these
businesses to a minimum to serve a small market or a single
large customer, or we may physically integrate (fold-in)
staff and equipment into a larger nearby production
facility.
  Economic Factors Affecting Financial Performance.
 Non-GAAP Financial Measures.
      27




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##### Table of Contents




    
    They do not reflect our cash expenditures, or future requirements for capital
expenditures and contractual commitments;
    
    They do not reflect changes in, or cash requirements for, our working capital needs;
    
    They do not reflect the significant interest expense, or the cash requirements
necessary, to service interest or principal payments on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements; and
    
    Other companies, including companies in our industry, may calculate these measures
differently than we do, limiting their usefulness as comparative measures.
      Three Months Ended March 31,2011
    
    
    2010(Dollars in thousands)Cash flows provided by operating activities
    
    $
    4,589
    
    
    $
    9,468Changes in operating assets and liabilities,
net of effect of business acquisitions
    
    
    9,366
    
    
    
    5,083Non-cash (expenses) income, including
depreciation and amortization
    
    
    (17,637
    )
    
    
    (13,842
    )Income tax (benefit) provision
    
    
    (3,649
    )
    
    
    530Interest expense, net
    
    
    8,167
    
    
    
    5,888Net loss attributable to the
noncontrolling interest
    
    
    39
    
    
    
    8EBIT
    
    
    875
    
    
    
    7,135Depreciation and amortization
    
    
    12,486
    
    
    
    11,656EBITDA
    
    
    13,361
    
    
    
    18,791Interest expense, net
    
    
    (8,167
    )
    
    
    (5,888
    )Income tax benefit (provision)
    
    
    3,649
    
    
    
    (530
    )Depreciation and amortization
    
    
    (12,486
    )
    
    
    (11,656
    )Net (loss) income attributable to ARC
    
    $
    (3,643
    )
    
    $
    717
  28




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##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010(Dollars in thousands)Net (loss) income attributable to ARC
    
    $
    (3,643
    )
    
    $
    717Interest expense, net
    
    
    8,167
    
    
    
    5,888Income tax (benefit) provision
    
    
    (3,649
    )
    
    
    530EBIT
    
    
    875
    
    
    
    7,135Depreciation and amortization
    
    
    12,486
    
    
    
    11,656EBITDA
    
    
    13,361
    
    
    
    18,791Stock-based compensation
    
    
    1,489
    
    
    
    1,461Adjusted EBITDA
    
    $
    14,850
    
    
    $
    20,252
  Three Months Ended March 31,2011 (1)
    
    
    2010 (1)Net (loss) income margin attributable
to ARC
    
    
    (3.4
    )%
    
    
    0.6
    %Interest expense, net
    
    
    7.7
    
    
    
    5.2Income tax provision
    
    
    (3.4
    )
    
    
    0.5EBIT margin
    
    
    0.8
    
    
    
    6.4Depreciation and amortization
    
    
    11.7
    
    
    
    10.4EBITDA margin
    
    
    12.5
    
    
    
    16.8Stock-based compensation
    
    
    1.4
    
    
    
    1.3Adjusted EBITDA margin
    
    
    13.9
    %
    
    
    18.1
    %
 (1)
    
    column does not foot due to rounding  29




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Three Months Ended March 31,2011
    
    
    2010Net (loss) income attributable to ARC
    
    $
    (3,643
    )
    
    $
    717Change in trade name impact to
amortization
    
    
    2,369Interest rate swap related costs
    
    
    1,523
    
    
    
    Income tax benefit, related
to above items
    
    
    (1,382
    )
    
    
    Tax discrete items
    
    
    (978
    )Unaudited adjusted net (loss) income
attributable to ARC
    
    $
    (2,111
    )
    
    $
    717Earnings per share attributable
to ARC shareholders (actual):Basic
    
    $
    (0.08
    )
    
    $
    0.02Diluted
    
    $
    (0.08
    )
    
    $
    0.02Weighted average common shares
outstanding:Basic
    
    
    45,322,092
    
    
    
    45,150,483Diluted
    
    
    45,322,092
    
    
    
    45,356,871Earnings per share attributable
to ARC shareholders (adjusted):Basic
    
    $
    (0.05
    )
    
    $
    0.02Diluted
    
    $
    (0.05
    )
    
    $
    0.02Weighted average common shares
outstanding:Basic
    
    
    45,322,092
    
    
    
    45,150,483Diluted
    
    
    45,322,092
    
    
    
    45,356,871
  30




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Results of Operations for the Three Months Ended March 31, 2011 and 2010
  As Percentage of Net SalesThree Months Ended March 31,2011 (1)
    
    
    2010Net Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    68.7
    
    
    
    67.1Gross profit
    
    
    31.3
    
    
    
    32.9Selling, general and administrative expenses
    
    
    26.1
    
    
    
    24.2Amortization of intangibles
    
    
    4.5
    
    
    
    2.4Income from operations
    
    
    0.8
    
    
    
    6.3Other income
    
    
    
    
    
    
    Interest expense, net
    
    
    7.7
    
    
    
    5.2(Loss) income before income tax (benefit)
provision
    
    
    (6.9
    )
    
    
    1.1Income tax (benefit) provision
    
    
    (3.4
    )
    
    
    0.5Net (loss) income
    
    
    (3.5
    )
    
    
    0.6Loss attributable to the
noncontrolling interest
    
    
    
    
    
    
    Net (loss) income attributable to ARC
    
    
    (3.4
    )%
    
    
    0.6
    %
 (1)
    
    column does not foot due to rounding Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Three Months EndedMarch 31,
    
    
    Increase (decrease)2011
    
    
    2010
    
    
    (In dollars)
    
    
    (Percent)(In millions)Reprographics services
    
    $
    70.0
    
    
    $
    76.3
    
    
    $
    (6.3
    )
    
    
    -8.3
    %Facilities management
    
    
    24.2
    
    
    
    22.4
    
    
    
    1.8
    
    
    
    8.0
    %Equipment and supplies sales
    
    
    12.3
    
    
    
    13.5
    
    
    
    (1.2
    )
    
    
    -8.9
    %Total net sales
    
    $
    106.5
    
    
    $
    112.2
    
    
    $
    (5.7
    )
    
    
    -5.1
    %Gross profit
    
    $
    33.4
    
    
    $
    36.9
    
    
    $
    (3.5
    )
    
    
    -9.5
    %Selling, general and administrative expenses
    
    
    27.8
    
    
    
    27.1
    
    
    
    0.7
    
    
    
    2.6
    %Amortization of intangibles
    
    
    4.7
    
    
    
    2.6
    
    
    
    2.1
    
    
    
    80.8
    %Interest expense, net
    
    
    8.2
    
    
    
    5.9
    
    
    
    2.3
    
    
    
    39.0
    %Income tax (benefit) provision
    
    
    (3.6
    )
    
    
    0.5
    
    
    
    (4.1
    )
    
    
    -820.0
    %Net (loss) income
attributable to ARC
    
    
    (3.6
    )
    
    
    0.7
    
    
    
    (4.3
    )
    
    
    -614.3
    %EBITDA
    
    
    13.4
    
    
    
    18.8
    
    
    
    (5.4
    )
    
    
    -28.7
    %
  31




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##### Table of Contents



Net Sales
   Reprographics services.
    Facilities management.
  Equipment and supplies sales.
 Gross Profit
   Selling, General and Administrative Expenses
   32




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Amortization of Intangibles
  Interest Expense, Net
  Income Taxes
   Noncontrolling Interest
  Net Loss Attributable to ARC
  EBITDA
  Impact of Inflation
   33




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Liquidity and Capital Resources
   Three Months EndedMarch 31,2011
    
    
    2010(Dollars in thousands)Net cash provided by operating activities
    
    $
    4,589
    
    
    $
    9,468Net cash used in investing activities
    
    $
    (13,487
    )
    
    $
    (666
    )Net cash provided by (used in) financing activities
    
    $
    5,168
    
    
    $
    (11,997
    )
 Operating Activities
  Investing Activities
  Financing Activities
   March 31, 2011
    
    
    December 31, 2010(Dollars in thousands)Cash and cash equivalents
    
    $
    22,672
    
    
    $
    26,293Working capital
    
    $
    33,183
    
    
    $
    22,387Borrowings from senior secured
credit facilities and Notes (1)
    
    $
    208,624
    
    
    $
    195,692Other debt obligations
    
    
    39,217
    
    
    
    43,932Total debt obligations
    
    $
    247,841
    
    
    $
    239,624
 (1)
    
    Notes, net of discount of $4,176 and $4,308 at March 31, 2011 and December 31,
2010, respectively.   34




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##### Table of Contents



Debt Obligations
 10.5% Senior Notes due 2016
    Optional Redemption
 Repurchase upon Change of Control
  35




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##### Table of Contents



Other Covenants
 Events of Default
 2010 Credit Agreement
      
    
    Maximum consolidated leverage ratio:
 
    
    4.35:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    4.25:1.00 for quarters ending December 31, 2011 through September 30, 2012
    
    4.15:1.00 for quarters ending December 31, 2012 through September 30, 2013
    
    4.00:1.00 for quarters ending December 31, 2013 through maturity;
 
    
    Maximum consolidated senior secured debt leverage ratio not greater than 1.50:1.00, determined on the
last day of each fiscal quarter through maturity;
    
    Minimum consolidated interest coverage ratio:
 
    
    1.70:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    1.75:1.00 for quarters ending December 31, 2011 through maturity;
    36




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##### Table of Contents



2007 Credit Agreement
   Interest Rate Swap Transaction
     Capital Leases
  Seller Notes
  Off-Balance Sheet Arrangements
   37




---



##### Table of Contents



Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 Legal Proceedings.
  Critical Accounting Policies
  Goodwill Impairment
       38




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##### Table of Contents



Number ofReporting
    
    
    RepresentingAs of September 30, 2010
    
    Units
    
    
    Goodwill ofNo Goodwill Balance
    
    
    12
    
    
    $
    Reporting units failing step one, that continue to carry a goodwill balance
    
    
    12
    
    
    
    90,812Fair value of reporting unit exceeds its carrying value by 8% - 20%
    
    
    3
    
    
    
    23,034Fair value of reporting unit exceeds its carrying value by 20% - 40%
    
    
    3
    
    
    
    39,972Fair value of reporting unit exceeds its carrying value by more than 40%
    
    
    15
    
    
    
    140,94145
    
    
    $
    294,759
    Income Taxes
    39




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##### Table of Contents



Multiple-Deliverable Revenue Arrangements a consensus of the FASB
Emerging Issues Task Force Intangibles-Goodwill and Other Business Combinations- Disclosure of Supplementary Pro
Forma Information for Business Combinations,
 Recent Accounting Pronouncements
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
 Item 4.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   40




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##### Table of Contents



PART IIOTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
 Item 1A.
    
    Risk Factors
   41




---



##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNumber
    
    Description10.1
    
    
    Amended and
Restated Executive
Employment
Agreement, dated
March 21, 2011, by
and between
American
Reprographics
Company and
Kumarakulasingam
Suriyakumar
(incorporated by
reference to
Exhibit 10.1 to the
Current Report on
Form 8-K filed on
March 21, 2011).10.2
    
    
    Amended and
Restated Executive
Employment
Agreement, dated
March 21, 2011, by
and between
American
Reprographics
Company and Rahul
K. Roy
(incorporated by
reference to
Exhibit 10.2 to the
Current Report on
Form 8-K filed on
March 21, 2011).10.3
    
    
    Amended and
Restated Executive
Employment
Agreement, dated
March 21, 2011, by
and between
American
Reprographics
Company and
Dilantha Wijesuriya
(incorporated by
reference to
Exhibit 10.3 to the
Current Report on
Form 8-K filed on
March 21, 2011).10.4
    
    
    Executive
Employment
Agreement, dated
April 14, 2011, by
and between
American
Reprographics
Company and Jorge
Avalos
(incorporated by
reference to
Exhibit 10.1 to the
Current Report on
Form 8-K filed on
April 15, 2011).10.5
    
    
    Separation
Agreement, by and
between American
Reprographics
Company and
Jonathan Mather
(incorporated by
reference to
Exhibit 10.1 to the
Current Report on
Form 8-K filed on
April 21, 2011).31.1
    
    
    Certification of
Principal Executive
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a)
under the
Securities Exchange
Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002.*31.2
    
    
    Certification of
Principal Financial
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a)
under the
Securities Exchange
Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act
of 2002.*32.1
    
    
    Certification of
Chief Executive
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act
of 2002.*32.2
    
    
    Certification of
Chief Financial
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act
of 2002.*
 *
    
    Filed herewith  42




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##### Table of Contents



SIGNATURES
   AMERICAN REPROGRAPHICS COMPANY/s/ KUMARAKULASINGAM SURIYAKUMARKumarakulasingam SuriyakumarChairman, President and Chief Executive Officer/s/ JONATHAN R. MATHERJonathan R. MatherChief Financial Officer and Secretary  43




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNumber
    
    Description10.1
    
    
    Amended and Restated Executive
Employment Agreement, dated March
21, 2011, by and between American
Reprographics Company and
Kumarakulasingam Suriyakumar
(incorporated by reference to
Exhibit 10.1 to the Current
Report on Form 8-K filed on March
21, 2011).10.2
    
    
    Amended and Restated Executive
Employment Agreement, dated March
21, 2011, by and between American
Reprographics Company and Rahul
K. Roy (incorporated by reference
to Exhibit 10.2 to the Current
Report on Form 8-K filed on March
21, 2011).10.3
    
    
    Amended and Restated Executive
Employment Agreement, dated March
21, 2011, by and between American
Reprographics Company and
Dilantha Wijesuriya (incorporated
by reference to Exhibit 10.3 to
the Current Report on Form 8-K
filed on March 21, 2011).10.4
    
    
    Executive Employment Agreement,
dated April 14, 2011, by and
between American Reprographics
Company and Jorge Avalos
(incorporated by reference to
Exhibit 10.1 to the Current
Report on Form 8-K filed on April
15, 2011).10.5
    
    
    Separation Agreement, by and
between American Reprographics
Company and Jonathan Mather
(incorporated by reference to
Exhibit 10.1 to the Current
Report on Form 8-K filed on April
21, 2011).31.1
    
    
    Certification of Principal
Executive Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a)
under the Securities Exchange Act
of 1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002.*31.2
    
    
    Certification of Principal
Financial Officer pursuant to
Rule 13a-14(a) and Rule 15d-14(a)
of the Securities Exchange Act of
1934, as adopted pursuant to
Section 302 of the Sarbanes-Oxley
Act of 2002.*32.1
    
    
    Certification of Chief Executive
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002.*32.2
    
    
    Certification of Chief Financial
Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant
to Section 906 of the
Sarbanes-Oxley Act of 2002.*
 *
    
    Filed herewith  44