##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended June 30, 2007
 or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 001-32407
 AMERICAN REPROGRAPHICS COMPANY
  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
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2007
Table of Contents
 PART I
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets as of December 31, 2006 and June 30, 2007
    
    
    3Consolidated Statements of Income for the three and six months ended June 30, 2006 and 2007
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2007
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2006 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    28Item 4.
    
    Controls and Procedures
    
    
    28PART IIItem 1.
    
    Legal Proceedings
    
    
    29Item 1A.
    
    Risk Factors
    
    
    29Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    29Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    29Item 5.
    
    Other Information
    
    
    30Item 6.
    
    Exhibits
    
    
    30SIGNATURES
    
    
    31Index to Exhibits
    
    
    32Exhibit 10.63Exhibit 31.1Exhibit 31.2Exhibit 32.1
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 
 AMERICAN REPROGRAPHICS COMPANY
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
 December 31,
    
    
    June 30,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,642
    
    
    $
    16,426Restricted cash
    
    
    8,491
    
    
    
    8,697Accounts receivable, net
    
    
    85,277
    
    
    
    102,491Inventories, net
    
    
    7,899
    
    
    
    10,354Deferred income taxes
    
    
    10,963
    
    
    
    10,967Prepaid expenses and other current assets
    
    
    6,796
    
    
    
    9,946Total current assets
    
    
    131,068
    
    
    
    158,881Property and equipment, net
    
    
    60,138
    
    
    
    75,704Goodwill
    
    
    291,290
    
    
    
    351,848Other intangible assets, net
    
    
    50,971
    
    
    
    73,663Deferred financing costs, net
    
    
    895
    
    
    
    1,108Deferred income taxes
    
    
    11,245
    
    
    
    6,748Other assets
    
    
    1,974
    
    
    
    2,100Total assets
    
    $
    547,581
    
    
    $
    670,052Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    33,447
    
    
    $
    33,814Accrued payroll and payroll-related expenses
    
    
    15,666
    
    
    
    19,471Accrued expenses
    
    
    25,810
    
    
    
    25,789Accrued litigation charge
    
    
    13,947
    
    
    
    14,154Current portion of long-term debt and capital leases
    
    
    21,048
    
    
    
    40,332Total current liabilities
    
    
    109,918
    
    
    
    133,560Long-term debt and capital leases
    
    
    252,097
    
    
    
    308,798Other long-term liabilities
    
    
    1,322
    
    
    
    2,477Total liabilities
    
    
    363,337
    
    
    
    444,835Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $.001 par value, 25,000,000 shares authorized;
zero and zero shares issued and outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 150,000,000 shares authorized;
45,346,099 and 45,554,032 shares issued and outstanding
    
    
    45
    
    
    
    45Additional paid-in capital
    
    
    75,465
    
    
    
    79,381Deferred stock-based compensation
    
    
    (1,224
    )
    
    
    (905
    )Retained earnings
    
    
    109,955
    
    
    
    146,412Accumulated other comprehensive income
    
    
    3
    
    
    
    284Total stockholders equity
    
    
    184,244
    
    
    
    225,217Total liabilities and stockholders equity
    
    $
    547,581
    
    
    $
    670,052
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AMERICAN REPROGRAPHICS COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Reprographics services
    
    $
    114,658
    
    
    $
    133,257
    
    
    $
    219,475
    
    
    $
    253,035Facilities management
    
    
    24,691
    
    
    
    28,984
    
    
    
    47,623
    
    
    
    55,340Equipment and supplies sales
    
    
    12,178
    
    
    
    15,542
    
    
    
    25,231
    
    
    
    29,621Total net sales
    
    
    151,527
    
    
    
    177,783
    
    
    
    292,329
    
    
    
    337,996Cost of sales
    
    
    85,713
    
    
    
    102,967
    
    
    
    166,156
    
    
    
    195,401Gross profit
    
    
    65,814
    
    
    
    74,816
    
    
    
    126,173
    
    
    
    142,595Selling, general and administrative expenses
    
    
    33,112
    
    
    
    34,499
    
    
    
    64,598
    
    
    
    68,733Litigation Reserve
    
    
    11,262
    
    
    
    0
    
    
    
    11,262
    
    
    
    0Amortization of intangible assets
    
    
    867
    
    
    
    2,451
    
    
    
    1,652
    
    
    
    4,196Income from operations
    
    
    20,573
    
    
    
    37,866
    
    
    
    48,661
    
    
    
    69,666Other income (expense), net
    
    
    472
    
    
    
    0
    
    
    
    801
    
    
    
    0Interest expense, net
    
    
    (7,001
    )
    
    
    (6,642
    )
    
    
    (11,460
    )
    
    
    (11,802
    )Income before income tax provision
    
    
    14,044
    
    
    
    31,224
    
    
    
    38,002
    
    
    
    57,864Income tax provision
    
    
    5,617
    
    
    
    11,612
    
    
    
    15,200
    
    
    
    21,407Net income
    
    $
    8,427
    
    
    $
    19,612
    
    
    $
    22,802
    
    
    $
    36,457Earnings per share:Basic
    
    $
    0.19
    
    
    $
    0.43
    
    
    $
    0.51
    
    
    $
    0.80Diluted
    
    $
    0.18
    
    
    $
    0.43
    
    
    $
    0.50
    
    
    $
    0.80Weighted average common shares outstanding:Basic
    
    
    44,932,873
    
    
    
    45,455,828
    
    
    
    44,779,662
    
    
    
    45,400,380Diluted
    
    
    45,510,158
    
    
    
    45,880,187
    
    
    
    45,312,592
    
    
    
    45,832,024
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AMERICAN REPROGRAPHICS COMPANY
CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS EQUITY
(Dollars in thousands, except per share)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance at December 31, 2006
    
    
    45,346,099
    
    
    $
    45
    
    
    $
    75,465
    
    
    $
    (1,224
    )
    
    $
    109,955
    
    
    $
    3
    
    
    $
    184,244Stock-based compensation
    
    
    40,838
    
    
    
    
    
    
    
    1,250
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    1,569Issuance of common stock under
Employee Stock Purchase Plan
    
    
    1,784
    
    
    
    
    
    
    
    52
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52Stock options exercised
    
    
    165,311
    
    
    
    
    
    
    
    1,080
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,080Tax benefit from exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    1,534
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,534Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,457
    
    
    
    
    
    
    
    36,457Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    215
    
    
    
    215Fair value adjustment of
derivatives, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    66
    
    
    
    66Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36,738Balance at June 30, 2007
    
    
    45,554,032
    
    
    $
    45
    
    
    $
    79,381
    
    
    $
    (905
    )
    
    $
    146,412
    
    
    $
    284
    
    
    $
    225,217
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AMERICAN REPROGRAPHICS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Six Months EndedJune 30,2006
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    22,802
    
    
    $
    36,457Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    10,354
    
    
    
    14,191Amortization of intangible assets
    
    
    1,652
    
    
    
    4,196Amortization of deferred financing costs
    
    
    151
    
    
    
    215Stock-based compensation
    
    
    1,025
    
    
    
    1,569Excess tax benefit related to stock options exercised
    
    
    (3,353
    )
    
    
    (1,534
    )Deferred income taxes
    
    
    (3,315
    )
    
    
    1,840Write-off of deferred financing costs
    
    
    57
    
    
    
    Litigation Charge
    
    
    13,539
    
    
    
    407Other non-cash items, net
    
    
    663
    
    
    
    146Changes in operating assets and liabilities, net of effect of business acquisitions:Accounts receivable
    
    
    (12,675
    )
    
    
    (9,775
    )Inventory
    
    
    (25
    )
    
    
    (362
    )Prepaid expenses and other assets
    
    
    570
    
    
    
    (2,583
    )Income Taxes Payable
    
    
    3,756
    
    
    
    (5,464
    )Accounts payable and accrued expenses
    
    
    7,199
    
    
    
    6,062Net cash provided by operating activities
    
    
    42,400
    
    
    
    45,365Cash flows from investing activitiesCapital expenditures
    
    
    (3,808
    )
    
    
    (5,232
    )Payments for businesses acquired, net of cash acquired and including other cash payments
associated with the acquisitions
    
    
    (16,106
    )
    
    
    (86,546
    )Other
    
    
    (202
    )
    
    
    283Net cash used in investing activities
    
    
    (20,116
    )
    
    
    (91,495
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    1,665
    
    
    
    1,080Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    238
    
    
    
    52Excess tax benefit related to stock options exercised
    
    
    3,353
    
    
    
    1,534Proceeds from borrowings under debt agreements
    
    
    5,000
    
    
    
    70,000Payments on debt agreements and capital leases
    
    
    (31,943
    )
    
    
    (21,323
    )Payment of loan fees
    
    
    (141
    )
    
    
    (429
    )Net cash (used in) provided by financing activities
    
    
    (21,828
    )
    
    
    50,914Net change in cash and cash equivalents
    
    
    456
    
    
    
    4,784Cash and cash equivalents at beginning of period
    
    
    22,643
    
    
    
    11,642Cash and cash equivalents at end of period
    
    $
    23,099
    
    
    $
    16,426Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    12,222
    
    
    $
    19,589Issuance of subordinated notes in connection with the acquisition of businesses
    
    $
    8,815
    
    
    $
    4,550Change in fair value of derivatives
    
    $
    281
    
    
    $
    66
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AMERICAN REPROGRAPHICS COMPANY
Notes to Consolidated Financial Statements
(Unaudited)
 1. Description of Business and Basis of Presentation
  Reorganization and Initial Public Offering
   Basis of Presentation
    Reclassifications
  2. Stock-Based Compensation
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th
    3. Employee Stock Purchase Plan
   4. Acquisitions
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Dollars in thousands, except per share data)Net sales
    
    $
    170,037
    
    
    $
    182,927
    
    
    $
    329,536
    
    
    $
    359,980Net income
    
    
    9,385
    
    
    
    19,864
    
    
    
    25,542
    
    
    
    38,023Earnings per share  basic
    
    $
    0.21
    
    
    $
    0.44
    
    
    $
    0.57
    
    
    $
    0.84Earnings per share  diluted
    
    $
    0.21
    
    
    $
    0.43
    
    
    $
    0.56
    
    
    $
    0.83
  (In thousands)Tangible assets, exclusive of cash
    
    $
    15,791Intangible assets
    
    
    26,235Goodwill
    
    
    51,009Liabilities assumed
    
    
    (4,845
    )Debt and capital leases assumed
    
    
    (2,702
    )Cost of acquisition, net of cash acquired
    
    $
    85,488
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##### Table of Contents



Reporting Revenue Gross as a
Principal versus Net as an Agent .
 5. Goodwill and Other Intangibles Resulting from Business Acquisitions
   Goodwill(Dollars inthousands)Balance at December 31, 2006
    
    $
    291,290Additions
    
    $
    60,558Balance at June 30, 2007
    
    $
    351,848
     December 31, 2006
    
    
    June 30, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(Dollars in thousands)
    
    
    (Dollars in thousands)Amortizable other intangible assets:Customer relationships
    
    $
    55,685
    
    
    $
    10,799
    
    
    $
    44,886
    
    
    $
    74,824
    
    
    $
    14,559
    
    
    $
    60,265Trade names and trademarks
    
    $
    5,886
    
    
    $
    566
    
    
    $
    5,320
    
    
    $
    6,686
    
    
    $
    759
    
    
    $
    5,927Non-Compete Agreements
    
    $
    1,025
    
    
    $
    260
    
    
    $
    765
    
    
    $
    1,574
    
    
    $
    503
    
    
    $
    1,071$
    62,596
    
    
    $
    11,625
    
    
    $
    50,971
    
    
    $
    83,084
    
    
    $
    15,821
    
    
    $
    67,263
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2007
    
    $
    4,5272008
    
    
    8,4362009
    
    
    7,5672010
    
    
    6,6152011
    
    
    5,906Thereafter
    
    
    34,212$
    67,263
 6. Long-Term Debt
  December 31,
    
    
    June 30,2006
    
    
    2007(Unaudited)(Dollars in thousands)Borrowings from
senior secured First
Priority  Revolving
Credit Facility;
variable interest
payable monthly (7.9%
weighted average
interest rate at June
30, 2007); any unpaid
principal and
interest due December
18, 2008
    
    $
    
    
    
    $
    13,000Borrowings from
senior secured First
Priority  Term Loan
Credit Facility;
variable interest
payable quarterly (
weighted average 7.1%
interest rate at
December 31, 2006 and
June 30, 2007 );
principal payable in
varying quarterly
installments; any
unpaid principal and
interest due June 18,
2009
    
    
    215,651
    
    
    
    264,449Various subordinated
notes payable;
interest ranging from
5% to 7.1%; principal
and interest payable
monthly through June
2012
    
    
    20,103
    
    
    
    22,113Various capital
leases; interest
rates ranging to
24.5%; principal and
interest payable
monthly through June
2013
    
    
    37,391
    
    
    
    49,568273,145
    
    
    
    349,130Less current portion
    
    
    (21,048
    )
    
    
    (40,332
    )$
    252,097
    
    
    $
    308,798
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##### Table of Contents




    
    Eliminating the aggregate purchase price limitation for
business acquisitions in favor of permitting the Company to
incur New Term Loan Commitments at any time, subject to the
achievement of a Leverage Ratio on a pro forma basis after
giving effect to such New Term Loan Commitments of less
than 3.00:1.00 (together with certain existing conditions);
    
    An increase in the threshold for capital lease obligations;
    
    An increase in the threshold for subordinated notes payable;
    
    An increase in the threshold for investments; and
    
    Elimination of capital lease obligations from the
definition of Consolidated Capital Expenditures in
conjunction with a reduction of the threshold for
Consolidated Capital Expenditures.
   7. Income Taxes
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8. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Autodesk Agreement
 Louis Frey Case.
 Other Litigation .
 FIN 48 Liability.
   - 12 -




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9. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Unaudited)(Dollars in thousands)Net income
    
    $
    8,427
    
    
    $
    19,612
    
    
    $
    22,802
    
    
    $
    36,457Foreign currency translation adjustments
    
    
    (31
    )
    
    
    344
    
    
    
    (31
    )
    
    
    215Increase in fair value of financial derivative instruments, net of tax effects
    
    
    181
    
    
    
    107
    
    
    
    281
    
    
    
    66Comprehensive income
    
    $
    8,577
    
    
    $
    20,063
    
    
    $
    23,052
    
    
    $
    36,738
  10. Earnings Per Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Unaudited)Weighted average common shares
outstanding during the period 
basic
    
    
    44,932,873
    
    
    
    45,455,828
    
    
    
    44,779,662
    
    
    
    45,400,380Effect of dilutive stock options
    
    
    577,285
    
    
    
    424,359
    
    
    
    532,930
    
    
    
    431,644Weighted average common shares
outstanding during the period 
diluted
    
    
    45,510,158
    
    
    
    45,880,187
    
    
    
    45,312,592
    
    
    
    45,832,024
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11. Recent Accounting Pronouncements
   Fair Value Measurements.
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115
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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our consolidated financial
statements and the related notes and other financial information appearing elsewhere in this
report as well as Managements Discussion and Analysis included in our 2006 Annual Report on
Form 10-K, our final prospectus for our recent secondary offering, dated March 8, 2007, and our
2007 first quarter report on Form 10-Q dated May 10, 2007.
 In addition to historical information, this report on Form 10-Q contains certain
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. These statements relate to future events or future financial performance, and
include statements regarding the Companys business strategy, timing of, and plans for, the
introduction of new products and enhancements, future sales, market growth and direction,
competition, market share, revenue growth, operating margins and profitability. All
forward-looking statements involve known and unknown risks, uncertainties and other factors that
may cause our actual results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or achievements, expressed or
implied, by these forward looking statements. In some cases, you can identify forward-looking
statements by terminology such as may, will, should, expects, intends, plans,
anticipates, believes, estimates, predicts, potential, continue, or the negative of
these terms or other comparable terminology. These statements are only predictions and are based
upon information available to the Company as of the date of this report. We undertake no
on-going obligation, other than that imposed by law, to update these forward-looking statements.
 Actual results could differ materially from our current expectations. Factors that could
cause actual results to differ materially from current expectations, include among others, the
following: (i) general economic conditions, such as changes in construction spending, GDP
growth, interest rates, employment rates, office vacancy rates, and government expenditures;
(ii) a downturn in the architectural, engineering and construction industry; (iii) competition
in our industry and innovation by our competitors; (iv) our failure to anticipate and adapt to
future changes in our industry; (v) failure to continue to develop and introduce new products
and services successfully; (vi) our inability to charge for value-added services we provide our
customers to offset potential declines in print volume; (vii) adverse developments affecting the
State of California, including general and local economic conditions, macroeconomic trends, and
natural disasters; (viii) our inability to successfully identify and manage our acquisitions or
open new branches; (ix) our inability to successfully monitor and manage the business operations
of our subsidiaries and uncertainty regarding the effectiveness of financial and management
policies and procedures we established to improve accounting controls; (x) adverse developments
concerning our relationships with certain key vendors; and (xi) the loss of key personnel and
qualified technical staff.
 Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
These forward-looking statements are subject to numerous risks and uncertainties, including, but
not limited to, the risks and uncertainties described in the Risk Factors section of our 2006
Annual Report on Form 10-K . You are urged to carefully consider these factors. All
forward-looking statements attributable to us are expressly qualified in their entirety by the
foregoing cautionary statements.
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##### Table of Contents



Executive Summary
   
    
    Document management;
    
    Document distribution & logistics;
    
    Print-on-demand; and
    
    On-site services, frequently referred to as facilities
management, or FMs, (any combination of the above services
supplied at a customers location).
    .
  Evaluating our Performance.
 
    
    Creating consistent, profitable revenue growth;
    
    Maintaining our industry leadership as measured by our
geographical footprint, market share and revenue
generation;
    
    Continuing to develop and invest in our products, services,
and technology to meet the changing needs of our customers;
    
    Maintaining the lowest cost structure in the industry; and
    
    Maintaining a flexible capital structure that provides for
both responsible debt service and the pursuit of
acquisitions and other high-return investments.
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##### Table of Contents



Primary Financial Measures
  Other Common Financial Measures
 
    
    Net income and earnings per share;
    
    EBIT;
    
    EBITDA;
    
    Material costs as a percentage of net sales; and
    
    Days Sales Outstanding/Days Sales Inventory/Days Accounts Payable.
    Acquisitions
    1.
    
    Standalone Acquisitions. Post-acquisition, these businesses
maintain their existing local brand 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 are equivalent to our
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, for 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.
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##### Table of Contents



Economic Factors Affecting Financial Performance.
 Non-GAAP Measures
      
    
    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.
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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Dollars in thousands)Cash flows provided by operating activities
    
    $
    27,222
    
    
    $
    33,959
    
    
    $
    42,400
    
    
    $
    45,365Changes in operating assets and liabilities
    
    
    (15,430
    )
    
    
    (2,711
    )
    
    
    1,175
    
    
    
    12,121Non-cash (expenses) income, including
depreciation and amortization
    
    
    (3,365
    )
    
    
    (11,636
    )
    
    
    (20,773
    )
    
    
    (21,029
    )Income tax provision
    
    
    5,617
    
    
    
    11,612
    
    
    
    15,200
    
    
    
    21,407Interest expense
    
    
    7,001
    
    
    
    6,642
    
    
    
    11,460
    
    
    
    11,802EBIT
    
    
    21,045
    
    
    
    37,866
    
    
    
    49,462
    
    
    
    69,666Depreciation and amortization
    
    
    6,371
    
    
    
    10,029
    
    
    
    12,006
    
    
    
    18,387EBITDA
    
    
    27,416
    
    
    
    47,895
    
    
    
    61,468
    
    
    
    88,053Interest expense
    
    
    (7,001
    )
    
    
    (6,642
    )
    
    
    (11,460
    )
    
    
    (11,802
    )Income tax provision
    
    
    (5,617
    )
    
    
    (11,612
    )
    
    
    (15,200
    )
    
    
    (21,407
    )Depreciation and amortization
    
    
    (6,371
    )
    
    
    (10,029
    )
    
    
    (12,006
    )
    
    
    (18,387
    )Net income
    
    $
    8,427
    
    
    $
    19,612
    
    
    $
    22,802
    
    
    $
    36,457
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Dollars in thousands)Net income
    
    $
    8,427
    
    
    $
    19,612
    
    
    $
    22,802
    
    
    $
    36,457Interest expense, net
    
    
    7,001
    
    
    
    6,642
    
    
    
    11,460
    
    
    
    11,802Income tax provision
    
    
    5,617
    
    
    
    11,612
    
    
    
    15,200
    
    
    
    21,407EBIT
    
    $
    21,045
    
    
    $
    37,866
    
    
    
    49,462
    
    
    
    69,666Depreciation and amortization
    
    
    6,371
    
    
    
    10,029
    
    
    
    12,006
    
    
    
    18,387EBITDA
    
    $
    27,416
    
    
    $
    47,895
    
    
    $
    61,468
    
    
    $
    88,053
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net income margin
    
    
    5.6
    %
    
    
    11.0
    %
    
    
    7.8
    %
    
    
    10.8
    %Interest expense, net
    
    
    4.6
    %
    
    
    3.7
    %
    
    
    3.9
    %
    
    
    3.5
    %Income tax provision
    
    
    3.7
    %
    
    
    6.5
    %
    
    
    5.2
    %
    
    
    6.3
    %EBIT margin
    
    
    13.9
    %
    
    
    21.3
    %
    
    
    16.9
    %
    
    
    20.6
    %Depreciation and amortization
    
    
    4.2
    %
    
    
    5.6
    %
    
    
    4.1
    %
    
    
    5.5
    %EBITDA margin
    
    
    18.1
    %
    
    
    26.9
    %
    
    
    21.0
    %
    
    
    26.1
    %
  - 19 -




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##### Table of Contents



Results of Operations for the Three and Six Months Ended June 30, 2007 and 2006
  As Percentage of Net SalesThree Months Ended June 30,
    
    
    Six Months Ended June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    56.6
    
    
    
    57.9
    
    
    
    56.8
    
    
    
    57.8Gross profit
    
    
    43.4
    
    
    
    42.1
    
    
    
    43.2
    
    
    
    42.2Selling, general and administrative expenses
    
    
    21.8
    
    
    
    19.4
    
    
    
    22.1
    
    
    
    20.3Litigation Reserve
    
    
    7.4
    
    
    
    
    
    
    
    3.9
    
    
    
    Amortization of intangibles
    
    
    0.6
    
    
    
    1.4
    
    
    
    0.6
    
    
    
    1.2Income from operations
    
    
    13.6
    
    
    
    21.3
    
    
    
    16.6
    
    
    
    20.6Other income
    
    
    0.3
    
    
    
    
    
    
    
    0.3
    
    
    
    Interest expense, net
    
    
    (4.6
    )
    
    
    (3.7
    )
    
    
    (3.9
    )
    
    
    (3.5
    )Income before income tax provision (benefit)
    
    
    9.3
    
    
    
    17.6
    
    
    
    13.0
    
    
    
    17.1Income tax provision (benefit)
    
    
    3.7
    
    
    
    6.5
    
    
    
    5.2
    
    
    
    6.3Net income
    
    
    5.6
    %
    
    
    11.0
    %
    
    
    7.8
    %
    
    
    10.8
    %
 Three and Six Months Ended June 30, 2007 Compared to Three and Six Months Ended June 30, 2006
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Increase (decrease)
    
    
    June 30,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)
    
    
    2006
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)(In millions)
    
    
    (In millions)Reprographics services
    
    $
    114.6
    
    
    $
    133.3
    
    
    $
    18.7
    
    
    
    16.3
    %
    
    $
    219.5
    
    
    $
    253.0
    
    
    $
    33.5
    
    
    
    15.3
    %Facilities management
    
    
    24.7
    
    
    
    29.0
    
    
    
    4.3
    
    
    
    17.4
    %
    
    
    47.6
    
    
    
    55.3
    
    
    
    7.7
    
    
    
    16.2
    %Equipment and supplies sales
    
    
    12.2
    
    
    
    15.5
    
    
    
    3.3
    
    
    
    27.0
    %
    
    
    25.2
    
    
    
    29.6
    
    
    
    4.4
    
    
    
    17.5
    %Total net sales
    
    
    151.5
    
    
    
    177.8
    
    
    
    26.3
    
    
    
    17.3
    %
    
    
    292.3
    
    
    
    338.0
    
    
    
    45.7
    
    
    
    15.6
    %Gross profit
    
    
    65.8
    
    
    
    74.8
    
    
    
    9.0
    
    
    
    13.7
    %
    
    
    126.2
    
    
    
    142.6
    
    
    
    16.4
    
    
    
    13.0
    %Selling, general and
administrative expenses
    
    
    33.1
    
    
    
    34.5
    
    
    
    1.4
    
    
    
    4.2
    %
    
    
    64.6
    
    
    
    68.7
    
    
    
    4.1
    
    
    
    6.3
    %Litigation Reserve
    
    
    11.3
    
    
    
    
    
    
    
    (11.3
    )
    
    
    -100.0
    %
    
    
    11.3
    
    
    
    
    
    
    
    (11.3
    )
    
    
    -100.0
    %Amortization of intangibles
    
    
    0.9
    
    
    
    2.5
    
    
    
    1.6
    
    
    
    177.7
    %
    
    
    1.7
    
    
    
    4.2
    
    
    
    2.5
    
    
    
    147.1
    %Interest expense, net
    
    
    7.0
    
    
    
    6.6
    
    
    
    (0.4
    )
    
    
    -5.7
    %
    
    
    11.4
    
    
    
    11.8
    
    
    
    0.4
    
    
    
    3.5
    %Income taxes
    
    
    5.6
    
    
    
    11.6
    
    
    
    6.0
    
    
    
    107.1
    %
    
    
    15.2
    
    
    
    21.4
    
    
    
    6.2
    
    
    
    40.8
    %Net Income
    
    
    8.4
    
    
    
    19.6
    
    
    
    11.2
    
    
    
    133.3
    %
    
    
    22.8
    
    
    
    36.5
    
    
    
    13.7
    
    
    
    60.0
    %EBITDA
    
    
    27.4
    
    
    
    47.9
    
    
    
    20.5
    
    
    
    74.8
    %
    
    
    61.5
    
    
    
    88.1
    
    
    
    26.6
    
    
    
    43.3
    %
  - 20 -




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##### Table of Contents



Net Sales.
     Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2007
    
    
    2006
    
    
    2007(Dollars in Thousands)Northern California Divisions
    
    
    25,080
    
    
    
    27,229
    
    
    
    47,980
    
    
    
    52,955Pacific Northwest Divisions
    
    
    8,869
    
    
    
    10,576
    
    
    
    15,957
    
    
    
    19,679Southern Divisions
    
    
    31,001
    
    
    
    43,666
    
    
    
    56,835
    
    
    
    78,018Midwest Divisions
    
    
    20,594
    
    
    
    20,338
    
    
    
    40,905
    
    
    
    39,949Northeast Divisions
    
    
    21,120
    
    
    
    27,495
    
    
    
    41,735
    
    
    
    51,329Southern California Divisions
    
    
    44,863
    
    
    
    48,479
    
    
    
    88,917
    
    
    
    96,067Total Revenue
    
    
    151,527
    
    
    
    177,783
    
    
    
    292,329
    
    
    
    337,996
 Reprographics services.
   Facilities management
 Equipment and supplies sales.
   - 21 -




---



##### Table of Contents



Gross Profit.
    Selling, General and Administrative Expenses.
      - 22 -




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##### Table of Contents



Litigation Reserve.
  Amortization of Intangibles.
   Interest Expense, Net.
   Income Taxes.
  Net Income.
   - 23 -




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##### Table of Contents



EBITDA.
  Impact of Inflation
  Liquidity and Capital Resources
  Six Months Ended June 30,2006
    
    
    2007(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    42,400
    
    
    $
    45,365Net cash used in investing activities
    
    
    ($20,116
    )
    
    
    ($91,495
    )Net cash (used in) provided by financing activities
    
    
    ($21,828
    )
    
    $
    50,914
 Operating Activities
  Investing Activities
   - 24 -




---



##### Table of Contents



Financing Activities
   December 31,
    
    
    June 30,2006
    
    
    2007(Unaudited)(Dollars in thousands)Cash and cash equivalents
    
    $
    11,642
    
    
    $
    16,426Working capital
    
    
    21,150
    
    
    
    25,321Borrowings from senior secured credit facilities
    
    
    215,651
    
    
    
    277,449Other debt obligations
    
    
    57,494
    
    
    
    71,681Total debt obligations
    
    $
    273,145
    
    
    $
    349,130
   .
 Debt Obligations
 Senior Secured Credit Facilities.
   - 25 -




---



##### Table of Contents




    
    Eliminating the aggregate purchase price limitation for
business acquisitions in favor of permitting the Company to
incur New Term Loan Commitments at any time, subject to the
achievement of a Leverage Ratio on a pro forma basis after
giving effect to such New Term Loan Commitments of less
than 3.00:1.00 (together with certain existing conditions);
    
    An increase in the threshold for capital lease obligations;
    
    An increase in the threshold for subordinated notes payable;
    
    An increase in the threshold for investments; and
    
    Elimination of capital lease obligations from the
definition of Consolidated Capital Expenditures in
conjunction with a reduction of the threshold for
Consolidated Capital Expenditures.
   Seller Notes.
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 Autodesk Agreement
 FIN 48 Liability.
  - 26 -




---



##### Table of Contents



Critical Accounting Policies
   Recent Accounting Pronouncements
   Fair Value Measurements.
 The Fair Value Option for Financial Assets
and Financial Liabilities  Including an Amendment of FASB Statement No. 115
  - 27 -




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risk
     
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Controls over Financial Reporting
   - 28 -




---



##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
 Louis Frey Case.
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 4. Submission of Matters to a Vote of Security Holders
   VOTE FOR
    
    
    VOTE WITHHELDSathiyamurthy Chandramohan
    
    
    42,433,579
    
    
    
    453,517Kumarakulasingam Suriyakumar
    
    
    42,616,229
    
    
    
    270,867Thomas J. Formolo
    
    
    40,719,563
    
    
    
    2,167,533Dewitt Kerry McCluggage
    
    
    42,631,737
    
    
    
    255,359Mark W. Mealy
    
    
    42,025,424
    
    
    
    861,672Manuel Perez de la Mesa
    
    
    42,704,223
    
    
    
    182,873Eriberto R. Scocimara
    
    
    42,300,137
    
    
    
    586,959
  - 29 -




---



##### Table of Contents



For:
    
    
    42,876,641Against:
    
    
    6,631Abstain:
    
    
    3,824
  
 Item 5. Other Information:
  
 Item 6. Exhibits
  Number
    
    Description10.63
    
    Amendment No. 1 to American
Reprographics Company 2005 Stock Plan
dated May 22, 2007.*ˆ10.64
    
    Third Amendment to Employment
Agreement between American
Reprographics Company and Mr.
Kumarakulasingam Suriyakumar, dated
July 27, 2007
(incorporated by reference to
Exhibit 99.1 to the
Registrants Form 8-K filed on
August 1, 2007). ˆ31.1
    
    Certification by the Chief
Executive Officer pursuant to
Rules 13a-14(a)/15d-14(a) of
the Securities Exchange Act of
1934. *31.2
    
    Certification by the Chief
Financial Officer pursuant to
Rules 13a-14(a)/15d-14(a) of
the Securities Exchange Act of
1934. *32.1
    
    Certification by the Chief
Executive Officer and 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 herewithˆ
    
    Indicates management contract or compensatory plan or agreement
  - 30 -




---



##### Table of Contents



SIGNATURE PAGE
  AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Kumarakulasingam SuriyakumarPresident and Chief Executive OfficerBy:
    /s/ Jonathan R. MatherChief Financial Officer and Secretary  - 31 -




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description10.63
    
    Amendment No. 1 to American
Reprographics Company 2005 Stock Plan
dated May 22, 2007.*^10.64
    
    Third Amendment to Employment
Agreement between American
Reprographics Company and Mr.
Kumarakulasingam Suriyakumar,
dated July 27, 2007
(incorporated by reference to
Exhibit 99.1 to the
Registrants Form 8-K filed on
August 1, 2007). ^31.1
    
    Certification by the Chief
Executive Officer pursuant to
Rules 13a-14(a)/15d-14(a) of
the Securities Exchange Act of
1934. *31.2
    
    Certification by the Chief
Financial Officer pursuant to
Rules 13a-14(a)/15d-14(a) of
the Securities Exchange Act of
1934. *32.1
    
    Certification by the Chief
Executive Officer and 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^
    
    Indicates management contract or compensatory plan or agreement
  - 32 -