##### 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, 2005
 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
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 700 North Central Avenue, Suite 550
Glendale, California 91203
(818) 500-0225
 (Address, including zip code, and telephone number, including area code, of
Registrants principal executive offices)
 þ o
 o þ
    1




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2005
  
 Table of Contents
 PART I Financial Information
    
    
    3Item 1. Financial Statements
    
    
    3Consolidated Balance Sheets as of December 31, 2004 and June 30, 2005 (unaudited)
    
    
    3Consolidated Statements of Operations for the three and six months ended June 30, 2004
and 2005 (unaudited)
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the
six months ended June 30, 2005 (unaudited)
    
    
    5Consolidated Statements of Cash Flows for the six months ended
June 30, 2004 and 2005 (unaudited)
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    23Item 4. Controls and Procedures
    
    
    23PART II
    
    
    24Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    24Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26Index to Exhibits
    
    
    27EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
 2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    June 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    13,826
    
    
    $
    12,591Accounts receivable, net
    
    
    61,679
    
    
    
    69,748Inventories, net
    
    
    6,012
    
    
    
    5,894Deferred taxes
    
    
    1,364
    
    
    
    2,859Prepaid expenses and other current assets
    
    
    7,855
    
    
    
    5,797Total current assets
    
    
    90,736
    
    
    
    96,889Property and equipment, net
    
    
    35,023
    
    
    
    36,430Goodwill
    
    
    231,357
    
    
    
    234,496Other intangible assets, net
    
    
    12,095
    
    
    
    13,231Deferred financing costs, net
    
    
    6,619
    
    
    
    4,778Deferred taxes
    
    
    
    
    
    
    18,442Other assets
    
    
    1,504
    
    
    
    1,407Total assets
    
    $
    377,334
    
    
    $
    405,673Liabilities
and Stockholders Equity (Deficit)Liabilities:Accounts payable
    
    $
    21,170
    
    
    $
    21,625Accrued payroll and payroll-related expenses
    
    
    11,683
    
    
    
    12,159Accrued expenses
    
    
    24,834
    
    
    
    22,348Current portion of long-term debt and capital leases
    
    
    10,276
    
    
    
    11,978Total current liabilities
    
    
    67,963
    
    
    
    68,110Long-term debt and capital leases, net of debt discount
    
    
    310,557
    
    
    
    244,374Mandatorily redeemable preferred membership units
    
    
    27,814
    
    
    
    Deferred taxes
    
    
    5,634
    
    
    
    Other long-term liabilities
    
    
    375
    
    
    
    377Total liabilities

    
    
    412,343
    
    
    
    312,861Commitments
and Contingencies (Note 5)Stockholders equity (deficit):Members deficit
    
    
    (32,688
    )
    
    
    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; zero and 43,931,154 shares issued and
outstanding
    
    
    
    
    
    
    44Additional paid-in capital
    
    
    
    
    
    
    49,730Deferred stock-based compensation
    
    
    (2,527
    )
    
    
    (2,219
    )Retained earnings
    
    
    
    
    
    
    45,032Accumulated other comprehensive income
    
    
    206
    
    
    
    225Total stockholders equity (deficit)
    
    
    (35,009
    )
    
    
    92,812Total liabilities and stockholders equity (deficit)
    
    $
    377,334
    
    
    $
    405,673
  3




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands, except per share data)Reprographics services
    
    $
    87,001
    
    
    $
    94,708
    
    
    $
    170,891
    
    
    $
    182,403Facilities management
    
    
    18,347
    
    
    
    21,076

    
    
    
    35,256
    
    
    
    40,248Equipment and supplies sales
    
    
    10,267
    
    
    
    9,776
    
    
    
    19,986
    
    
    
    19,375Total net sales
    
    
    115,615
    
    
    
    125,560
    
    
    
    226,133
    
    
    
    242,026Cost of sales
    
    
    66,191
    
    
    
    71,906
    
    
    
    130,790
    
    
    
    140,047Gross profit
    
    
    49,424
    
    
    
    53,654
    
    
    
    95,343
    
    
    
    101,979Selling, general and administrative expenses
    
    
    28,363
    
    
    
    28,140
    
    
    
    55,264
    
    
    
    55,021Amortization of intangible assets
    
    
    422
    
    
    
    431
    
    
    
    852
    
    
    
    815Income from operations
    
    
    20,639
    
    
    
    25,083
    
    
    
    39,227
    
    
    
    46,143Other income
    
    
    (293
    )
    
    
    (106
    )
    
    
    (567
    )
    
    
    (224
    )Interest expense, net
    
    
    8,405
    
    
    
    6,194
    
    
    
    16,530
    
    
    
    14,518Income before income tax provision (benefit)
    
    
    12,527
    
    
    
    18,995
    
    
    
    23,264
    
    
    
    31,849Income tax provision (benefit)
    
    
    2,682
    
    
    
    7,612
    
    
    
    4,981
    
    
    
    (15,097
    )Net income
    
    $
    9,845
    
    
    $
    11,383
    
    
    $
    18,283
    
    
    $
    46,946Earnings per share:Basic
    
    $
    0.28
    
    
    $
    0.26
    
    
    $
    0.52
    
    
    $
    1.13Diluted
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.49
    
    
    $
    1.10Weighted average common shares outstanding:Basic
    
    
    35,487,511
    
    
    
    43,931,154
    
    
    
    35,487,511
    
    
    
    41,690,494Diluted
    
    
    37,437,422
    
    
    
    44,861,155
    
    
    
    37,437,422
    
    
    
    42,771,754
  4




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS EQUITY
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalMembers
    
    
    
    
    
    
    Par
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersDeficit
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income
    
    
    Equity(Unaudited)(Dollars in thousands)Balance at December 31, 2004
    
    $
    (32,688
    )
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    (2,527
    )
    
    $
    
    
    
    $
    206
    
    
    $
    (35,009
    )Amortization of deferred stock-based
compensation for the period from
January 1 to February 9, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    61
    
    
    
    
    
    
    
    
    
    
    
    61Comprehensive income for the period
from January 1 to
February 9, 2005:Net income
    
    
    1,914
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,914Fair value adjustment of derivatives
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    195Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,109Distributions to members
    
    
    (8,244
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,244
    )Reorganization from LLC to C
Corporation
    
    
    39,018
    
    
    
    35,510,011
    
    
    
    35
    
    
    
    (39,053
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock in initial
public offering, net of underwriting
discounts
    
    
    
    
    
    
    7,666,667
    
    
    
    8
    
    
    
    92,682
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    92,690Issuance of common stock in exchange
for warrants exercised upon initial
public offering
    
    
    
    
    
    
    754,476
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Direct costs of initial public offering
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,899
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,899
    )Amortization of deferred stock-based
compensation for the period from
February 10 to June 30, 2005
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    247Comprehensive income for the period
from February 10 to
June 30, 2005:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    45,032
    
    
    
    
    
    
    
    45,032Fair value adjustment of
derivatives, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (176
    )
    
    
    (176
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44,856Balance at June 30, 2005
    
    $
    
    
    
    
    43,931,154
    
    
    $
    44
    
    
    $
    49,730
    
    
    $
    (2,219
    )
    
    $
    45,032
    
    
    $
    225
    
    
    $
    92,812
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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 Six Months EndedJune 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)Operating activitiesNet income
    
    $
    18,283
    
    
    $
    46,946Adjustments to reconcile net income to net cash provided
by operating activities:Accretion of yield on redeemable preferred member units
    
    
    982
    
    
    
    449Allowance for doubtful accounts
    
    
    820
    
    
    
    723Reserve for inventory obsolescence
    
    
    30
    
    
    
    90Depreciation
    
    
    8,569
    
    
    
    8,074Amortization of intangible assets
    
    
    852
    
    
    
    815Amortization of deferred financing costs
    
    
    987
    
    
    
    823Deferred income taxes
    
    
    701
    
    
    
    (25,571
    )Write-off of deferred financing costs
    
    
    
    
    
    
    1,631Amortization of deferred stock-based compensation
    
    
    167
    
    
    
    308Changes in operating assets and liabilities, net of effect of
business acquisitions:Accounts receivable, net
    
    
    (11,424
    )
    
    
    (7,527
    )Inventory
    
    
    (161
    )
    
    
    200Prepaid expenses and other assets
    
    
    (928
    )
    
    
    720Accounts payable and accrued expenses
    
    
    9,805
    
    
    
    (3,092
    )Net cash provided by operating activities
    
    
    28,683
    
    
    
    24,589Investing activitiesCapital expenditures
    
    
    (3,427
    )
    
    
    (2,476
    )Payments for businesses acquired, net of cash acquired and
including other cash payments associated with acquisitions
    
    
    (1,880
    )
    
    
    (4,076
    )Other
    
    
    (115
    )
    
    
    (209
    )Net cash used in investing activities
    
    
    (5,422
    )
    
    
    (6,761
    )Financing activitiesProceeds from initial public offering, net of underwriting discounts
    
    
    
    
    
    
    92,690Direct costs of initial public offering
    
    
    
    
    
    
    (1,487
    )Redemption of preferred member units
    
    
    
    
    
    
    (28,263
    )Proceeds from borrowings under debt agreements
    
    
    1,000
    
    
    
    13,000Payments on long-term debt under debt agreements
    
    
    (21,367
    )
    
    
    (86,636
    )Payment of loan fees
    
    
    (355
    )
    
    
    (123
    )Member distributions
    
    
    (3,045
    )
    
    
    (8,244
    )Net cash used in financing activities
    
    
    (23,767
    )
    
    
    (19,063
    )Net decrease in cash and cash equivalents
    
    
    (506
    )
    
    
    (1,235
    )Cash and cash equivalents at beginning of period
    
    
    17,315
    
    
    
    13,826Cash and cash equivalents at end of period
    
    $
    16,809
    
    
    $
    12,591Supplemental
disclosure of cash flow information
Noncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    4,696
    
    
    $
    6,104Issuance of subordinated notes in connection with the acquisition
of businesses
    
    $
    250
    
    
    $
    1,974Change in fair value of derivatives
    
    $
    1,031
    
    
    $
    19
  6




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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
  7




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##### Table of Contents



2. Accounting for Equity-Based Compensation
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands, except per share data)Net income:As reported
    
    $
    9,845
    
    
    $
    11,383
    
    
    $
    18,283
    
    
    $
    46,946Equity-based employee
compensation cost, net of
related tax effects,
included in as reported
net income
    
    
    90
    
    
    
    83
    
    
    
    90
    
    
    
    182Equity-based employee
compensation cost, net of
related tax effects,
that would have been
included in the
determination of net
income if the fair value
method had been applied
    
    
    (147
    )
    
    
    (106
    )
    
    
    (169
    )
    
    
    (244
    )Proforma
    
    $
    9,788
    
    
    $
    11,360
    
    
    $
    18,204
    
    
    $
    46,884Basic earnings per share:As reported
    
    $
    0.28
    
    
    $
    0.26
    
    
    $
    0.52
    
    
    $
    1.13Equity-based employee
compensation cost, net of
related tax effects,
included in as reported
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity-based employee
compensation cost, net of
related tax effects, that
would have been included
in the determination of
net income if the fair
value method had been
applied
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Proforma
    
    $
    0.28
    
    
    $
    0.26
    
    
    $
    0.52
    
    
    $
    1.12Diluted earnings per share:As reported
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.49
    
    
    $
    1.10Equity-based employee
compensation cost, net of
related tax effects,
included in as reported
net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Equity-based employee
compensation cost, net of
related tax effects, that
would have been included
in the determination of
net income if the fair
value method had been
applied
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.01
    )Proforma
    
    $
    0.26
    
    
    $
    0.25
    
    
    $
    0.49
    
    
    $
    1.09
  8




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##### Table of Contents



3. Long-Term Debt
  December 31,
    
    
    June 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)Borrowings from senior secured First Priority 
Revolving Credit Facility; any unpaid principal and
interest due December 18, 2008
    
    $
    
    
    
    $
    Borrowings from senior secured First Priority  Term
Loan Credit Facility; variable interest payable
quarterly (5.26% and 6.16% interest rate at
December 31, 2004 and June 30, 2005, respectively);
principal payable in varying quarterly installments;
any unpaid principal and interest due June 18, 2009
    
    
    94,800
    
    
    
    77,300Borrowings from senior secured Second Priority 
Term Loan Credit Facility; variable interest payable
quarterly (8.92% and 10.24% interest rate at
December 31, 2004 and June 30, 2005, respectively);
any unpaid principal and interest due December 18,
2009
    
    
    208,231
    
    
    
    157,500Various subordinated notes payable; interest ranging
from 5% to 11%; principal and interest payable
monthly through January 2007
    
    
    4,833
    
    
    
    5,103Various capital leases; interest rates ranging to
15.9%; principal and interest payable monthly
through June 2010
    
    
    14,688
    
    
    
    17,681322,552
    
    
    
    257,584Less debt discount on Second Priority Credit Facility
    
    
    (1,719
    )
    
    
    (1,232
    )320,833
    
    
    
    256,352Less current portion
    
    
    (10,276
    )
    
    
    (11,978
    )$
    310,557
    
    
    $
    244,374
  9




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##### Table of Contents




    
    The Companys existing First Priority Revolving Credit Facility and First Priority Term
Loan Credit Facility were restructured into a new senior secured credit facility aggregating
up to $122.3 million, consisting of a $77.3 million Tranche C Term Loan Facility, a $30
million Revolving Credit Facility, and permits the Company, as needed for the purpose of
financing any future business acquisitions, to request the establishment of one or more new
term loan commitments in an amount not to exceed $15 million in the aggregate. The terms
and provisions of any such new term loans will be identical to the Tranche C Term Loan
Facility, including, without limitation, with respect to amortization, interest and
maturity.
    
    Borrowings under the new Tranche C Term Loan Facility will bear an interest rate
calculated at either (i) a Eurodollar rate plus 1.75% per annum, or (ii) an Index Rate, as
defined in the Amended Credit Agreement, plus 0.75% per annum. This represents a 125-basis
point reduction in the annual interest rate as compared to the annual interest rate on the
Companys borrowings under the existing First Priority Term Loan Credit Facility which,
prior to July 5, 2005, were subject to an interest rate equal to either (i) a Eurodollar
rate plus 3.0% per annum, or (ii) an Index Rate, as defined in the existing credit
agreement, plus 2.0% per annum.
    
    Certain debt covenant thresholds were adjusted to make them less restrictive and thereby
providing the Company with greater operating flexibility. Such adjustments include the
following:
 
    
    An increase in the aggregate purchase price limitation for business
acquisitions for the fiscal year ending December 31, 2005;
    
    An increase in the limitation for the aggregate amount of new seller
notes payable that may be issued in connection with business acquisitions;
    
    An increase in the annual threshold for earnout obligations that the
Company may undertake in connection with business acquisitions;
    
    An increase in the threshold for capital expenditures during any trailing twelve-month period;
    
    An increase in the limitation on capital lease obligations outstanding;
    
    A reduction in the maximum leverage ratio threshold, as defined in the
Amended Credit Agreement, from 4.90 to 3.75;
    
    Elimination of the scheduled increase in the fixed charge coverage ratio
threshold. In accordance with the Amended Credit Agreement, the fixed charge
coverage ratio threshold will remain constant at 1.10.
   10




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##### Table of Contents



4. Income Taxes
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands)Current:Federal
    
    $
    1,744
    
    
    $
    5,435
    
    
    $
    3,403
    
    
    $
    8,611State
    
    
    411
    
    
    
    1,102
    
    
    
    877
    
    
    
    1,8632,155
    
    
    
    6,537
    
    
    
    4,280
    
    
    
    10,474Deferred:Deferred income tax provision, excluding the effects of the Reorganization.
    
    
    527
    
    
    
    1,075
    
    
    
    701
    
    
    
    2,130Income tax provision, excluding the effects of the Reorganization
    
    
    2,682
    
    
    
    7,612
    
    
    
    4,981
    
    
    
    12,604Deferred income tax benefit as a result of the Reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,701
    )Income tax provision (benefit)
    
    $
    2,682
    
    
    $
    7,612
    
    
    $
    4,981
    
    
    $
    (15,097
    )
  11




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##### Table of Contents



December 31,
    
    
    June 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)Deferred tax assets (liabilities):Current portion:Financial statement accruals not currently deductible
    
    $
    1,206
    
    
    $
    2,700State taxes
    
    
    158
    
    
    
    159Net current deferred tax assets
    
    
    1,364
    
    
    
    2,859Non-current portion:Excess of income tax basis over net book value for
financial reporting purposes of intangible assets
    
    
    
    
    
    
    32,435Excess of income tax basis over net book value for
financial reporting purposes of property, plant and
equipment
    
    
    
    
    
    
    510Deferred stock-based compensation
    
    
    
    
    
    
    359Excess of net book value for financial reporting
purposes over income tax basis of property, plant
and equipment
    
    
    (1,653
    )
    
    
    Excess of net book value for financial reporting
purposes over income tax basis of intangible assets
    
    
    (3,981
    )
    
    
    (14,862
    )Net non-current deferred tax assets (liabilities)
    
    
    (5,634
    )
    
    
    18,442Net deferred tax assets (liabilities)
    
    $
    (4,270
    )
    
    $
    21,301
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands)Statutory federal income tax rate
    
    
    34.0
    %
    
    
    35.0
    %
    
    
    34.0
    %
    
    
    35.0
    %State taxes
    
    
    3.8
    %
    
    
    4.8
    %
    
    
    3.8
    %
    
    
    4.8
    %Income of the LLC not taxed at the LLC level
    
    
    (18.2
    )%
    
    
    
    
    
    
    (18.2
    )%
    
    
    (0.5
    )%Other
    
    
    1.8
    %
    
    
    0.3
    %
    
    
    1.8
    %
    
    
    0.3
    %Effective income tax rate before non-recurring income tax benefit due to Reorganization.
    
    
    21.4
    %
    
    
    40.1
    %
    
    
    21.4
    %
    
    
    39.6
    %Non-recurring income tax benefit due to reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (87.0
    )%Effective income tax rate
    
    
    21.4
    %
    
    
    40.1
    %
    
    
    21.4
    %
    
    
    (47.4
    )%
 5. Commitments and Contingencies
  12




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##### Table of Contents



6. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands)Net income
    
    $
    9,845
    
    
    $
    11,383
    
    
    $
    18,283
    
    
    $
    46,946Increase
(Decrease) in
fair value of
financial
derivative
instruments, net
of tax effects
    
    
    2,272
    
    
    
    (289
    )
    
    
    1,031
    
    
    
    19Comprehensive income
    
    $
    12,117
    
    
    $
    11,094
    
    
    $
    19,314
    
    
    $
    46,965
 7. Earnings Per Share
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)Weighted average common shares outstanding during the period  basic
    
    
    35,487,511
    
    
    
    43,931,154
    
    
    
    35,487,511
    
    
    
    41,690,494Effect of dilutive stock options
    
    
    1,117,842
    
    
    
    930,001
    
    
    
    1,117,842
    
    
    
    930,001Effect of dilutive warrants
    
    
    832,069
    
    
    
    
    
    
    
    832,069
    
    
    
    151,259Weighted average common shares outstanding during the period  diluted
    
    
    37,437,422
    
    
    
    44,861,155
    
    
    
    37,437,422
    
    
    
    42,771,754
 8. Recent Accounting Pronouncements
  13




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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 consolidated financial
statements and the related notes included in this report, as well as Managements Discussion and
Analysis included in our 2004 Annual Report on Form 10-K .
 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 non-residential 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 2004
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.
 Overview
  14




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Non-GAAP Measures
    15




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##### Table of Contents



Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands)Cash flows provided by operating activities
    
    $
    20,129
    
    
    $
    22,030
    
    
    $
    28,683
    
    
    $
    24,589Changes in operating assets and liabilities
    
    
    (3,730
    )
    
    
    (4,013
    )
    
    
    2,708
    
    
    
    9,699Non-cash expenses, including depreciation
and amortization, and excluding
deferred income taxes
    
    
    (6,027
    )
    
    
    (5,559
    )
    
    
    (12,407
    )
    
    
    (12,913
    )Deferred income taxes
    
    
    (527
    )
    
    
    (1,075
    )
    
    
    (701
    )
    
    
    25,571Income tax provision (benefit)
    
    
    2,682
    
    
    
    7,612
    
    
    
    4,981
    
    
    
    (15,097
    )Interest expense
    
    
    8,405
    
    
    
    6,194
    
    
    
    16,530
    
    
    
    14,518EBIT
    
    
    20,932
    
    
    
    25,189
    
    
    
    39,794
    
    
    
    46,367Depreciation and amortization
    
    
    4,907
    
    
    
    4,459
    
    
    
    9,421
    
    
    
    8,889EBITDA
    
    
    25,839
    
    
    
    29,648
    
    
    
    49,215
    
    
    
    55,256Interest expense
    
    
    (8,405
    )
    
    
    (6,194
    )
    
    
    (16,530
    )
    
    
    (14,518
    )Income tax (provision) benefit
    
    
    (2,682
    )
    
    
    (7,612
    )
    
    
    (4,981
    )
    
    
    15,097Depreciation and amortization
    
    
    (4,907
    )
    
    
    (4,459
    )
    
    
    (9,421
    )
    
    
    (8,889
    )Net income
    
    $
    9,845
    
    
    $
    11,383
    
    
    
    18,283
    
    
    $
    46,946
 16




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands)Net income
    
    $
    9,845
    
    
    $
    11,383
    
    
    $
    18,283
    
    
    $
    46,946Interest expense, net
    
    
    8,405
    
    
    
    6,194
    
    
    
    16,530
    
    
    
    14,518Income tax provision (benefit)
    
    
    2,682
    
    
    
    7,612
    
    
    
    4,981
    
    
    
    (15,097
    )EBIT
    
    
    20,932
    
    
    
    25,189
    
    
    
    39,794
    
    
    
    46,367Depreciation and amortization
    
    
    4,907
    
    
    
    4,459
    
    
    
    9,421
    
    
    
    8,889EBITDA
    
    $
    25,839
    
    
    $
    29,648
    
    
    $
    49,215
    
    
    $
    55,256
 The following is a reconciliation of our net income margin to our EBIT margin and EBITDA
margin:
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)Net income margin
    
    
    8.5
    %
    
    
    9.1
    %
    
    
    8.1
    %
    
    
    19.4
    %Interest expense, net
    
    
    7.3
    %
    
    
    4.9
    %
    
    
    7.3
    %
    
    
    6.0
    %Income tax provision (benefit)
    
    
    2.3
    %
    
    
    6.1
    %
    
    
    2.2
    %
    
    
    (6.2
    %)EBIT margin
    
    
    18.1
    %
    
    
    20.1
    %
    
    
    17.6
    %
    
    
    19.2
    %Depreciation and amortization
    
    
    4.2
    %
    
    
    3.6
    %
    
    
    4.2
    %
    
    
    3.7
    %EBITDA margin
    
    
    22.3
    %
    
    
    23.7
    %
    
    
    21.8
    %
    
    
    22.9
    %
 Impact of Conversion from an LLC to a Corporation
   Income Taxes
  17




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(Unaudited)(Dollars in thousands, except per share data)Net income
    
    $
    9,845
    
    
    $
    11,383
    
    
    $
    18,283
    
    
    $
    46,946Deferred income tax benefit due to Reorganization
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (27,701
    )Proforma net income, excluding deferred income
tax benefit due to Reorganization
    
    
    9,845
    
    
    
    11,383
    
    
    
    18,283
    
    
    
    19,245Unaudited pro forma incremental
income tax provision
    
    
    (2,981
    )
    
    
    
    
    
    
    (5,536
    )
    
    
    (333
    )Unaudited pro forma net income
    
    $
    6,864
    
    
    $
    11,383
    
    
    $
    12,747
    
    
    $
    18,912Unaudited pro forma earnings per share:Basic
    
    $
    0.19
    
    
    $
    0.26
    
    
    $
    0.36
    
    
    $
    0.45Diluted
    
    $
    0.18
    
    
    $
    0.25
    
    
    $
    0.34
    
    
    $
    0.44
 Results of Operations
  As a Percentage of Net SalesThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Reprographics services
    
    
    75.2
    %
    
    
    75.4
    %
    
    
    75.6
    %
    
    
    75.4
    %Facilities management
    
    
    15.9
    
    
    
    16.8
    
    
    
    15.6
    
    
    
    16.6Equipment and supplies sales
    
    
    8.9
    
    
    
    7.8
    
    
    
    8.8
    
    
    
    8.0Total net sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    57.3
    
    
    
    57.3
    
    
    
    57.8
    
    
    
    57.9Gross profit
    
    
    42.7
    
    
    
    42.7
    
    
    
    42.2
    
    
    
    42.1Selling, general and administrative expenses
    
    
    24.5
    
    
    
    22.4
    
    
    
    24.4
    
    
    
    22.7Amortization of intangibles
    
    
    0.4
    
    
    
    0.3
    
    
    
    0.4
    
    
    
    0.3Income from operations
    
    
    17.8
    
    
    
    20.0
    
    
    
    17.4
    
    
    
    19.1Other income
    
    
    0.3
    
    
    
    0.1
    
    
    
    0.2
    
    
    
    0.1Interest expense, net
    
    
    (7.3
    )
    
    
    (4.9
    )
    
    
    (7.3
    )
    
    
    (6.0
    )Income before income tax provision (benefit)
    
    
    10.8
    
    
    
    15.2
    
    
    
    10.3
    
    
    
    13.2Income tax provision (benefit)
    
    
    2.3
    
    
    
    6.1
    
    
    
    2.2
    
    
    
    (6.2
    )Net income
    
    
    8.5
    %
    
    
    9.1
    %
    
    
    8.1
    %
    
    
    19.4
    %
 18




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Three and Six Months Ended June 30, 2005 Compared to Three and Six Months Ended June 30, 2004
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Incr (Decr)
    
    
    June 30,
    
    
    Incr (Decr)2004
    
    
    2005
    
    
    $
    
    
    %
    
    
    2004
    
    
    2005
    
    
    $
    
    
    %Reprographics services
    
    
    87.0
    
    
    
    94.7
    
    
    
    7.7
    
    
    
    8.9
    %
    
    
    170.9
    
    
    
    182.4
    
    
    
    11.5
    
    
    
    6.7
    %Facilities management
    
    
    18.3
    
    
    
    21.1
    
    
    
    2.8
    
    
    
    15.3
    %
    
    
    35.2
    
    
    
    40.2
    
    
    
    5.0
    
    
    
    14.2
    %Equipment and supplies sales
    
    
    10.3
    
    
    
    9.8
    
    
    
    (0.5
    )
    
    
    -4.9
    %
    
    
    20.0
    
    
    
    19.4
    
    
    
    (0.6
    )
    
    
    -3.0
    %Total net sales
    
    
    115.6
    
    
    
    125.6
    
    
    
    10.0
    
    
    
    8.7
    %
    
    
    226.1
    
    
    
    242.0
    
    
    
    15.9
    
    
    
    7.0
    %Gross profit
    
    
    49.4
    
    
    
    53.7
    
    
    
    4.3
    
    
    
    8.7
    %
    
    
    95.3
    
    
    
    102.0
    
    
    
    6.7
    
    
    
    7.0
    %Selling, general and administrative expenses
    
    
    28.4
    
    
    
    28.1
    
    
    
    (0.3
    )
    
    
    -1.1
    %
    
    
    55.3
    
    
    
    55.0
    
    
    
    (0.3
    )
    
    
    -0.5
    %Interest expense, net
    
    
    8.4
    
    
    
    6.2
    
    
    
    (2.2
    )
    
    
    -26.2
    %
    
    
    16.5
    
    
    
    14.5
    
    
    
    (2.0
    )
    
    
    -12.1
    %Income tax provision (benefit)
    
    
    2.7
    
    
    
    7.6
    
    
    
    4.9
    
    
    
    181.5
    %
    
    
    5.0
    
    
    
    (15.1
    )
    
    
    (20.1
    )
    
    
    -402.0
    %Net income
    
    
    9.8
    
    
    
    11.4
    
    
    
    1.6
    
    
    
    16.3
    %
    
    
    18.3
    
    
    
    46.9
    
    
    
    28.6
    
    
    
    156.3
    %EBITDA
    
    
    25.8
    
    
    
    29.6
    
    
    
    3.8
    
    
    
    14.7
    %
    
    
    49.2
    
    
    
    55.3
    
    
    
    6.1
    
    
    
    12.4
    %
 Net Sales
  Gross Profit.
 19




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##### Table of Contents



Selling, General and Administrative Expenses.
 Interest Expense.
 Income Taxes.
   20




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##### Table of Contents



Net Income.
 EBITDA.
 Liquidity and Capital Resources
  Six Months EndedJune 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    28,683
    
    
    $
    24,589Net cash used in investing activities
    
    $
    (5,422
    )
    
    $
    (6,761
    )Net cash used in financing activities
    
    $
    (23,767
    )
    
    $
    (19,063
    )
    21




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##### Table of Contents



December 31,
    
    
    June 30,2004
    
    
    2005(Unaudited)(Dollars in thousands)Cash and cash equivalents
    
    $
    13,826
    
    
    $
    12,591Working capital
    
    
    22,773
    
    
    
    28,779Debt obligations:Borrowings from senior secured credit facilities
    
    
    301,312
    
    
    
    233,568Mandatorily redeemable preferred membership units
    
    
    27,814
    
    
    
    Other debt obligations
    
    
    19,521
    
    
    
    22,784Total debt obligations
    
    $
    348,647
    
    
    $
    256,352
     Off-Balance Sheet Arrangements
  22




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Contractual Obligations and Other Commitments
  Six Months EndingDecember 31,
    
    
    Twelve Months Ending December 31,2005
    
    
    2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    Thereafter(Unaudited)(Dollars in thousands)Debt obligations
    
    $
    1,978
    
    
    $
    2,063
    
    
    $
    1,030
    
    
    $
    38,177
    
    
    $
    195,252
    
    
    $
    171Capital lease obligations
    
    
    3,783
    
    
    
    5,903
    
    
    
    4,249
    
    
    
    2,228
    
    
    
    1,089
    
    
    
    429Operating lease obligations
    
    
    16,168
    
    
    
    24,028
    
    
    
    16,951
    
    
    
    10,742
    
    
    
    7,047
    
    
    
    14,341Total
    
    $
    21,929
    
    
    $
    31,994
    
    
    $
    22,230
    
    
    $
    51,147
    
    
    $
    203,388
    
    
    $
    14,941
 
 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
  23




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##### Table of Contents



PART II
 
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  24




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Item 6. Exhibits
 
  Number
    
    Description10.1
    
    
    Amended and Restated Credit and Guaranty Agreement dated as of June
30, 2005 by and among American Reprographics Company, American
Reprographics Company, L.L.C., American Reprographics Holdings,
L.L.C., certain subsidiaries of American Reprographics Company,
L.L.C., or guarantors, the lenders named therein, Goldman Sachs
Credit Partners L.P., as lead arranger, sole bookrunner and
syndication agent, and General Electric Capital Corporation, as
administrative agent and collateral agent. *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. **
 
 *
    
    Incorporated by reference to Exhibit No. 10.1 to the Companys Form 8-K filed July 7, 2005**
    
    Filed herewith 25




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SIGNATURE PAGE
  AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Sathiyamurthy ChandramohanChairman of the Board of Directors andChief Executive Officer By:
    /s/ Mark W. LeggChief Financial Officer and Secretary 26




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##### Table of Contents



EXHIBIT NUMBER
    
    DESCRIPTION10.1
    
    Amended and Restated Credit and Guaranty Agreement
dated as of June 30, 2005 by and among American
Reprographics Company; American Reprographics Company,
L.L.C., American Reprographics Holdings, L.L.C.,
certain subsidiaries of American Reprographics Company,
L.L.C., or guarantors, the lenders named therein,
Goldman Sachs Credit Partners L.P., as lead arranger,
sole bookrunner and syndication agent, and General
Electric Capital Corporation, as administrative agent
and collateral agent.*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.**