##### 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, 2010
 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
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    20-1700361
(I.R.S. Employer
Identification No.)
 1981 N. Broadway, Suite 385
Walnut Creek, California 94596
(925) 949-5100
(Address, including zip code, and telephone number, including area code, of
Registrants principal executive offices)
 þ o
 o o
  Large accelerated filer oAccelerated filer þNon-accelerated filer o(Do not check if smaller reporting company)Smaller reporting company o o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2010
 Table of Contents
 PART I  Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of June 30, 2010 and December 31, 2009
    
    4Condensed Consolidated Statements of Income for the three and six months ended June 30, 2010 and 2009
    
    5Condensed Consolidated Statements of Equity and Comprehensive Income for the six
months ended June 30, 2010 and 2009
    
    6Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2010 and 2009
    
    7Notes to Condensed Consolidated Financial Statements
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    18Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    30Item 4. Controls and Procedures
    
    30PART II  Other InformationItem 1. Legal Proceedings
    
    31Item 1A. Risk Factors
    
    31Item 6. Exhibits
    
    32SIGNATURES
    
    33Index to Exhibits
    
    34Exhibit 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 (Unaudited)
 AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except per share data)
(Unaudited)
 June 30,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    33,673
    
    
    $
    29,377Accounts receivable, net of allowances for accounts receivable of
$4,130
and $4,685 at June 30, 2010 and December 31, 2009, respectively
    
    
    59,376
    
    
    
    53,919Inventories, net
    
    
    11,840
    
    
    
    10,605Deferred income taxes
    
    
    5,640
    
    
    
    5,568Prepaid expenses and other current assets
    
    
    8,984
    
    
    
    7,011Total current assets
    
    
    119,513
    
    
    
    106,480Property and equipment, net
    
    
    63,313
    
    
    
    74,568Goodwill
    
    
    333,024
    
    
    
    332,518Other intangible assets, net
    
    
    69,022
    
    
    
    74,208Deferred financing costs, net
    
    
    3,312
    
    
    
    4,082Deferred income taxes
    
    
    26,897
    
    
    
    26,987Other assets
    
    
    1,966
    
    
    
    2,111Total assets
    
    $
    617,047
    
    
    $
    620,954Liabilities and EquityCurrent liabilities:Accounts payable
    
    $
    24,296
    
    
    $
    23,355Accrued payroll and payroll-related expenses
    
    
    14,510
    
    
    
    8,804Accrued expenses
    
    
    24,420
    
    
    
    24,540Current portion of long-term debt and capital leases
    
    
    61,344
    
    
    
    53,520Total current liabilities
    
    
    124,570
    
    
    
    110,219Long-term debt and capital leases
    
    
    195,385
    
    
    
    220,711Other long-term liabilities
    
    
    9,650
    
    
    
    8,000Total liabilities
    
    
    329,605
    
    
    
    338,930Commitments and contingencies (Note 9)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;
46,169,859 and 46,112,653 shares issued and 45,722,205 and
45,664,999 shares outstanding in 2010 and 2009, respectively
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    93,082
    
    
    
    89,982Retained earnings
    
    
    203,357
    
    
    
    200,961Accumulated other comprehensive loss
    
    
    (7,397
    )
    
    
    (7,273
    )289,088
    
    
    
    283,716Less cost of common stock in treasury, 447,654 shares in 2010 and
2009
    
    
    7,709
    
    
    
    7,709Total American Reprographics Company stockholders equity
    
    
    281,379
    
    
    
    276,007Noncontrolling interest
    
    
    6,063
    
    
    
    6,017Total equity
    
    
    287,442
    
    
    
    282,024Total liabilities and equity
    
    $
    617,047
    
    
    $
    620,954
   4




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Reprographics services
    
    $
    78,453
    
    
    $
    92,905
    
    
    $
    154,710
    
    
    $
    192,674Facilities management
    
    
    22,627
    
    
    
    24,898
    
    
    
    45,030
    
    
    
    51,763Equipment and supplies sales
    
    
    14,008
    
    
    
    13,251
    
    
    
    27,509
    
    
    
    26,100Total net sales
    
    
    115,088
    
    
    
    131,054
    
    
    
    227,249
    
    
    
    270,537Cost of sales
    
    
    75,633
    
    
    
    81,899
    
    
    
    150,943
    
    
    
    169,403Gross profit
    
    
    39,455
    
    
    
    49,155
    
    
    
    76,306
    
    
    
    101,134Selling, general and administrative expenses
    
    
    28,169
    
    
    
    30,039
    
    
    
    55,300
    
    
    
    61,005Amortization of intangible assets
    
    
    2,557
    
    
    
    2,914
    
    
    
    5,193
    
    
    
    5,897Income from operations
    
    
    8,729
    
    
    
    16,202
    
    
    
    15,813
    
    
    
    34,232Other income
    
    
    (34
    )
    
    
    (38
    )
    
    
    (77
    )
    
    
    (97
    )Interest expense, net
    
    
    5,754
    
    
    
    5,836
    
    
    
    11,642
    
    
    
    11,632Income before income tax provision
    
    
    3,009
    
    
    
    10,404
    
    
    
    4,248
    
    
    
    22,697Income tax provision
    
    
    1,276
    
    
    
    4,096
    
    
    
    1,806
    
    
    
    8,854Net income
    
    
    1,733
    
    
    
    6,308
    
    
    
    2,442
    
    
    
    13,843(Income) loss attributable to the
noncontrolling interest
    
    
    (54
    )
    
    
    (1
    )
    
    
    (46
    )
    
    
    11Net income attributable to American
Reprographics Company
    
    $
    1,679
    
    
    $
    6,307
    
    
    $
    2,396
    
    
    $
    13,854Earnings per share attributable to American
Reprographics
Company shareholders:Basic
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.05
    
    
    $
    0.31Diluted
    
    $
    0.04
    
    
    $
    0.14
    
    
    $
    0.05
    
    
    $
    0.31Weighted average common shares outstanding:Basic
    
    
    45,196,318
    
    
    
    45,116,358
    
    
    
    45,173,527
    
    
    
    45,103,150Diluted
    
    
    45,511,579
    
    
    
    45,243,171
    
    
    
    45,422,029
    
    
    
    45,157,874
   5




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AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF
 EQUITY AND COMPREHENSIVE INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 American Reprographics Company ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock
    
    
    NoncontrollingShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Loss
    
    
    in Treasury
    
    
    Interest
    
    
    TotalBalance at December 31, 2008
    
    
    45,227,156
    
    
    $
    46
    
    
    $
    85,207
    
    
    $
    (195
    )
    
    $
    215,846
    
    
    $
    (11,414
    )
    
    $
    (7,709
    )
    
    $
    6,121
    
    
    $
    287,902Stock-based compensation
    
    
    46,512
    
    
    
    
    
    
    
    1,972
    
    
    
    176
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,148Issuance of common stock under
Employee Stock Purchase Plan
    
    
    23,432
    
    
    
    
    
    
    
    130
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    130Stock options exercised
    
    
    3,100
    
    
    
    
    
    
    
    17
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17Tax benefit from exercise of
stock options
    
    
    
    
    
    
    
    
    
    
    5
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5Comprehensive Income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    13,854
    
    
    
    
    
    
    
    
    
    
    
    (11
    )
    
    
    13,843Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    355
    
    
    
    
    
    
    
    
    
    
    
    355Gain on derivative, net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,187
    
    
    
    
    
    
    
    
    
    
    
    2,187Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,385Balance at June 30, 2009
    
    
    45,300,200
    
    
    $
    46
    
    
    $
    87,331
    
    
    $
    (19
    )
    
    $
    229,700
    
    
    $
    (8,872
    )
    
    $
    (7,709
    )
    
    $
    6,110
    
    
    $
    306,587
 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
    
    
    29,100
    
    
    
    
    
    
    
    2,918
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,918Issuance of common stock under
Employee Stock Purchase Plan
    
    
    4,856
    
    
    
    
    
    
    
    36
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    36Stock options exercised
    
    
    23,250
    
    
    
    
    
    
    
    125
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    125Tax benefit from stock based
compensation
    
    
    
    
    
    
    
    
    
    
    21
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,396
    
    
    
    
    
    
    
    
    
    
    
    46
    
    
    
    2,442Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50
    
    
    
    
    
    
    
    
    
    
    
    50Loss on derivative, net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (174
    )
    
    
    
    
    
    
    
    
    
    
    (174
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,318Balance at June 30, 2010
    
    
    45,722,205
    
    
    $
    46
    
    
    $
    93,082
    
    
    $
    203,357
    
    
    $
    (7,397
    )
    
    $
    (7,709
    )
    
    $
    6,063
    
    
    $
    287,442
   6




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Six Months EndedJune 30,2010
    
    
    2009Cash flows from operating activitiesNet income
    
    $
    2,442
    
    
    $
    13,843Adjustments to reconcile net income to net cash provided by operating activities:Allowance for accounts receivable
    
    
    317
    
    
    
    2,543Depreciation
    
    
    17,571
    
    
    
    19,569Amortization of intangible assets
    
    
    5,193
    
    
    
    5,897Amortization of deferred financing costs
    
    
    770
    
    
    
    655Stock-based compensation
    
    
    2,918
    
    
    
    2,161Excess tax benefit related to stock-based compensation
    
    
    (38
    )
    
    
    (5
    )Deferred income taxes
    
    
    164
    
    
    
    1,671Other non-cash items, net
    
    
    (314
    )
    
    
    (91
    )Changes in operating assets and liabilities, net of effect of
business acquisitions:Accounts receivable
    
    
    (5,784
    )
    
    
    5,734Inventory
    
    
    (1,285
    )
    
    
    918Prepaid expenses and other assets
    
    
    (1,934
    )
    
    
    5,154Accounts payable and accrued expenses
    
    
    7,726
    
    
    
    (2,251
    )Net cash provided by operating activities
    
    
    27,746
    
    
    
    55,798Cash flows from investing activitiesCapital expenditures
    
    
    (2,777
    )
    
    
    (3,924
    )Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions
    
    
    
    
    
    
    (921
    )Other
    
    
    845
    
    
    
    442Net cash used in investing activities
    
    
    (1,932
    )
    
    
    (4,403
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    125
    
    
    
    17Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    16
    
    
    
    46Excess tax benefit related to stock-based compensation
    
    
    38
    
    
    
    5Payments on long-term debt agreements and capital leases
    
    
    (21,596
    )
    
    
    (41,206
    )Net (repayments) borrowings under revolving credit facility
    
    
    (123
    )
    
    
    Payment of loan fees
    
    
    
    
    
    
    (44
    )Net cash used in financing activities
    
    
    (21,540
    )
    
    
    (41,182
    )Effect of foreign currency translation on cash balances
    
    
    22
    
    
    
    131Net change in cash and cash equivalents
    
    
    4,296
    
    
    
    10,344Cash and cash equivalents at beginning of period
    
    
    29,377
    
    
    
    46,542Cash and cash equivalents at end of period
    
    $
    33,673
    
    
    $
    56,886Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    4,394
    
    
    $
    9,723Issuance of subordinated notes in connection with the
acquisition of businesses
    
    $
    
    
    
    $
    246Accrued liabilities in connection with acquisition of businesses
    
    $
    500
    
    
    $
    500(Loss) gain on derivative, net of tax effect
    
    $
    (174
    )
    
    $
    2,187
   7




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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
   Fair Value Measurements and Disclosures, improving
disclosures about Fair Value Measurements
 Risk and Uncertainties
  2. Stock-Based Compensation
   8




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AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
     3. Employee Stock Purchase Plan
   4. Goodwill and Other Intangibles Resulting from Business Acquisitions
 Goodwill
 Business Combinations,
     9




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AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
    Accumulated
    
    
    Net CarryingGross Goodwill
    
    
    Impairment Loss
    
    
    AmountJanuary 1, 2009
    
    $
    401,667
    
    
    $
    35,154
    
    
    $
    366,513Additions
    
    
    3,136
    
    
    
    
    
    
    
    3,136Goodwill impairment
    
    
    
    
    
    
    37,382
    
    
    
    (37,382
    )Translation adjustment
    
    
    251
    
    
    
    
    
    
    
    251December 31, 2009
    
    
    405,054
    
    
    
    72,536
    
    
    
    332,518Additions
    
    
    500
    
    
    
    
    
    
    
    500Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    Translation adjustment
    
    
    6
    
    
    
    
    
    
    
    6June 30, 2010
    
    $
    405,560
    
    
    $
    72,536
    
    
    $
    333,024
  Long-lived assets
 Accounting for the Impairment or Disposal
of Long-lived Assets
    June 30, 2010
    
    
    December 31, 2009Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAmortizable other
intangible assets:Customer relationships
    
    $
    96,222
    
    
    $
    43,882
    
    
    $
    52,340
    
    
    $
    96,219
    
    
    $
    39,243
    
    
    $
    56,976Trade names and trademarks
    
    
    20,294
    
    
    
    3,646
    
    
    
    16,648
    
    
    
    20,294
    
    
    
    3,139
    
    
    
    17,155Non-compete agreements
    
    
    100
    
    
    
    66
    
    
    
    34
    
    
    
    303
    
    
    
    226
    
    
    
    77$
    116,616
    
    
    $
    47,594
    
    
    $
    69,022
    
    
    $
    116,816
    
    
    $
    42,608
    
    
    $
    74,208
  10




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AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
  2010
    
    $
    4,8852011
    
    
    9,1222012
    
    
    8,2272013
    
    
    7,3232014
    
    
    6,514Thereafter
    
    
    32,951$
    69,022
 5. Long-Term Debt
  June 30,
    
    
    December 31,2010
    
    
    2009Borrowings from foreign revolving credit facilities; 6.0% interest
rate at June 30, 2010 and December 31, 2009, respectively; principal
payable through July 2010
    
    $
    1,400
    
    
    $
    1,523Borrowings from senior secured term loan credit facility;
interest payable quarterly (weighted average 8.2% and 8.1% interest
rate
at June 30, 2010 and December 31, 2009, respectively, inclusive of
amended swap transaction); principal payable in varying quarterly
installments; any unpaid principal and interest due December 6, 2012
    
    
    201,457
    
    
    
    205,625Various subordinated notes payable; weighted average 6.2% interest
rate at June 30, 2010 and December 31, 2009, respectively;
principal and interest payable monthly through June 2012
    
    
    14,701
    
    
    
    21,755Various capital leases; weighted average 8.8% and 9.2% interest rate
at June 30, 2010 and December 31, 2009, respectively; principal and
interest payable monthly through May 2015
    
    
    39,171
    
    
    
    45,328256,729
    
    
    
    274,231Less current portion
    
    
    (61,344
    )
    
    
    (53,520
    )$
    195,385
    
    
    $
    220,711
 Amended Credit and Guaranty Agreement
    
    
    The interest coverage ratio is 2.00:1.00 for the period ended December 31, 2009;
1.75:1.00 for the periods ending March 31, 2010 through September 30, 2010; 2.00:1.00 for
the periods ending December 31, 2010 through September 30, 2011; 2.50:1.00 for the period
ending December 31, 2011; and 3.00:1.00 for all periods thereafter.
    
    The fixed charge coverage ratio is 1.00:1.00 for the period ended December 31, 2009
through maturity.
  11




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AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 
    
    The leverage ratio is 3.25:1.00 for the period ended December 31, 2009; 3.50:1.00 for
the period ended March 31, 2010; 3.85:1.00 for the periods ending June 30, 2010 through
September 30, 2010; 3.25:1.00 for the period ending December 31, 2010; and 3.00:1.00 for
all periods thereafter.
    
    The senior secured leverage ratio is 3.00:1.00 for the period ended December 31, 2009;
3.25:1.00 for the period ended March 31, 2010; 3.65:1.00 for the periods ending June 30,
2010 through September 30, 2010; 3.00:1.00 for the periods ending December 31, 2010 through
March 31, 2011; and 2.50:1.00 for all periods thereafter.
        Foreign Credit Facilities
  Amended Swap Transaction
   12




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##### Table of Contents



AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
  6. Derivatives and Hedging Transactions
 Accounting for Derivative
Instruments and Hedging Activities
   Fair ValueBalance Sheet
    
    
    June 30,
    
    
    December 31,Classification
    
    
    2010
    
    
    2009Derivative designated as hedging instrument under ASC 815Amended Swap Transaction  current portion
    
    Accrued expenses
    
    $
    6,392
    
    
    $
    6,908Amended Swap Transaction  long term portion
    
    Other long-term liabilities
    
    
    4,958
    
    
    
    4,010Total derivatives designated as hedging
    
    
    
    
    
    $
    11,350
    
    
    $
    10,918
  Amount of Gain or (Loss) Recognized in AOCL on DerivativeThree Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Derivative in ASC 815 Cash Flow Hedging
RelationshipAmended Swap Transaction
    
    $
    222
    
    
    $
    3,066
    
    
    $
    (326
    )
    
    $
    3,744Tax effect
    
    
    (83
    )
    
    
    (1,314
    )
    
    
    152
    
    
    
    (1,557
    )Amended Swap
Transaction, net of tax
effect
    
    $
    139
    
    
    $
    1,752
    
    
    $
    (174
    )
    
    $
    2,187
  Amount of Gain or (Loss) Reclassified from AOCL into Income(effective portion)
    
    
    (ineffective portion)Three Months Ended
    
    
    Six Months Ended
    
    
    Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,
    
    
    June 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009
    
    
    2010
    
    
    2009Location of Gain or
(Loss) Reclassified from
AOCL into IncomeInterest expense
    
    $
    (1,968
    )
    
    $
    (1,869
    )
    
    $
    (3,934
    )
    
    $
    (3,592
    )
    
    $
    (34
    )
    
    $
    
    
    
    $
    (106
    )
    
    $
    
  13




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##### Table of Contents



AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 7. Fair Value Measurements
 Fair Value Measurements
     Significant OtherObservable InputsLevel 2June 30,
    
    
    December 31,Description
    
    2010
    
    
    2009Recurring Fair Value MeasureAmended Swap Transaction
    
    $
    11,350
    
    
    $
    10,918
   Fair Values of Financial Instruments.
 Cash and cash equivalents:
 Short- and long-term debt:
 Interest rate hedge agreements:
  14




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##### Table of Contents



AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 8. Income Taxes
   9. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Uncertain
Tax Position Liability.
 Legal Proceedings.
 10. Comprehensive Income
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net income
    
    $
    1,733
    
    
    $
    6,308
    
    
    $
    2,442
    
    
    $
    13,843Foreign currency translation adjustments
    
    
    (66
    )
    
    
    494
    
    
    
    50
    
    
    
    355(Loss) gain on derivative, net of tax effect
    
    
    139
    
    
    
    1,752
    
    
    
    (174
    )
    
    
    2,187Comprehensive income
    
    
    1,806
    
    
    
    8,554
    
    
    
    2,318
    
    
    
    16,385Comprehensive income (loss) attributable
to the noncontrolling interest
    
    
    54
    
    
    
    1
    
    
    
    46
    
    
    
    (11
    )Comprehensive income attributable to ARC
    
    $
    1,752
    
    
    $
    8,553
    
    
    $
    2,272
    
    
    $
    16,396
   15




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##### Table of Contents



AMERICAN
REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial
Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 11. Earnings per Share
 Earnings per Share
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Weighted average common shares outstanding during the period  basic
    
    
    45,196,318
    
    
    
    45,116,358
    
    
    
    45,173,527
    
    
    
    45,103,150Effect of dilutive stock options
    
    
    315,261
    
    
    
    126,813
    
    
    
    248,502
    
    
    
    54,724Weighted average common shares outstanding during the period  diluted
    
    
    45,511,579
    
    
    
    45,243,171
    
    
    
    45,422,029
    
    
    
    45,157,874
 12. Segment and Geographic Reporting
 Disclosures about Segments of an Enterprise and
Related Information
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Foreign
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    Foreign
    
    
    
    
    
    
    
    
    
    
    ForeignU.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    TotalRevenues from
external
customers
    
    $
    106,491
    
    
    $
    8,597
    
    
    $
    115,088
    
    
    $
    124,328
    
    
    $
    6,726
    
    
    $
    131,054
    
    
    $
    210,568
    
    
    $
    16,681
    
    
    $
    227,249
    
    
    $
    258,221
    
    
    $
    12,316
    
    
    $
    270,537
 June 30, 2010
    
    
    December 31, 2009Foreign
    
    
    
    
    
    
    
    
    
    
    ForeignU.S.
    
    
    Countries
    
    
    Total
    
    
    U.S.
    
    
    Countries
    
    
    TotalLong-lived assets,
net
    
    $
    462,042
    
    
    $
    8,595
    
    
    $
    470,637
    
    
    $
    478,489
    
    
    $
    8,998
    
    
    $
    487,487
  16




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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)
 13. Recent Accounting Pronouncements
 Fair Value Measurements and Disclosures
 Multiple-Deliverable Revenue Arrangements a
consensus of the FASB Emerging Issues Task Force Revenue Recognition,
  17




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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 2009 Annual Report on Form 10-K and our Quarterly Report on Form 10-Q
for the first quarter of fiscal year 2010.
 Executive Summary
    
    
    Document management. Document management typically entails storing,
tracking and providing authorized access to documents we maintain on
our customers behalf. This activity 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 entails the transfer of 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 usually entails quick-turnaround
digital printing of documents in black and white and color, and in a
wide variety of sizes and formats
    
    On-site services, frequently referred to as facilities management
(FMs), which is any combination of the above services supplied at a
customers location. On-site services typically entail placing
equipment and sometimes staff in our customers location to provide
convenience printing and other reprographic services. This category is
evolving to include the management of entire print networks in our
customers offices, and we often refer to it as managed print
services or MPS.
     Evaluating our Performance .
 
    
    Creating consistent, profitable-growth, or in the absence of growth
due to market conditions beyond our control, stable margins superior
to commonly understood industry benchmarks;
  18




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##### Table of Contents




    
    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; and
    
    Days sales outstanding/days sales inventory/days payable outstanding.
    Acquisitions .
    19




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##### Table of Contents



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 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 .
      
    
    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;
  20




---



##### Table of Contents




    
    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 June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Cash flows provided by operating activities
    
    $
    18,278
    
    
    $
    33,522
    
    
    $
    27,746
    
    
    $
    55,798Changes in operating assets and liabilities
    
    
    (3,806
    )
    
    
    (11,477
    )
    
    
    1,277
    
    
    
    (9,555
    )Non-cash (expenses) income, including
depreciation and amortization
    
    
    (12,739
    )
    
    
    (15,737
    )
    
    
    (26,581
    )
    
    
    (32,400
    )Income tax provision
    
    
    1,276
    
    
    
    4,096
    
    
    
    1,806
    
    
    
    8,854Interest expense, net
    
    
    5,754
    
    
    
    5,836
    
    
    
    11,642
    
    
    
    11,632Net (income) loss attributable to the
noncontrolling interest
    
    
    (54
    )
    
    
    (1
    )
    
    
    (46
    )
    
    
    11EBIT
    
    
    8,709
    
    
    
    16,239
    
    
    
    15,844
    
    
    
    34,340Depreciation and amortization
    
    
    11,108
    
    
    
    12,751
    
    
    
    22,764
    
    
    
    25,466Stock-based compensation
    
    
    1,457
    
    
    
    1,228
    
    
    
    2,918
    
    
    
    2,161EBITDA
    
    
    21,274
    
    
    
    30,218
    
    
    
    41,526
    
    
    
    61,967Interest expense, net
    
    
    (5,754
    )
    
    
    (5,836
    )
    
    
    (11,642
    )
    
    
    (11,632
    )Income tax provision
    
    
    (1,276
    )
    
    
    (4,096
    )
    
    
    (1,806
    )
    
    
    (8,854
    )Depreciation and amortization
    
    
    (11,108
    )
    
    
    (12,751
    )
    
    
    (22,764
    )
    
    
    (25,466
    )Stock-based compensation
    
    
    (1,457
    )
    
    
    (1,228
    )
    
    
    (2,918
    )
    
    
    (2,161
    )Net income attributable to ARC
    
    $
    1,679
    
    
    $
    6,307
    
    
    $
    2,396
    
    
    $
    13,854
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009(Dollars in thousands)Net income attributable to ARC
    
    $
    1,679
    
    
    $
    6,307
    
    
    $
    2,396
    
    
    $
    13,854Interest expense, net
    
    
    5,754
    
    
    
    5,836
    
    
    
    11,642
    
    
    
    11,632Income tax provision
    
    
    1,276
    
    
    
    4,096
    
    
    
    1,806
    
    
    
    8,854EBIT
    
    
    8,709
    
    
    
    16,239
    
    
    
    15,844
    
    
    
    34,340Depreciation and amortization
    
    
    11,108
    
    
    
    12,751
    
    
    
    22,764
    
    
    
    25,466Stock-based compensation
    
    
    1,457
    
    
    
    1,228
    
    
    
    2,918
    
    
    
    2,161EBITDA
    
    $
    21,274
    
    
    $
    30,218
    
    
    $
    41,526
    
    
    $
    61,967
  21




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##### Table of Contents



Three Months Ended June 30,
    
    
    Six Months Ended June 30,2010 (1)
    
    
    2009
    
    
    2010
    
    
    2009Net income margin
    
    
    1.5
    %
    
    
    4.8
    %
    
    
    1.1
    %
    
    
    5.1
    %Interest expense, net
    
    
    5.0
    
    
    
    4.5
    
    
    
    5.1
    
    
    
    4.3Income tax provision
    
    
    1.1
    
    
    
    3.1
    
    
    
    0.8
    
    
    
    3.3EBIT margin
    
    
    7.6
    
    
    
    12.4
    
    
    
    7.0
    
    
    
    12.7Depreciation and amortization
    
    
    9.7
    
    
    
    9.7
    
    
    
    10.0
    
    
    
    9.4Stock-based compensation
    
    
    1.3
    
    
    
    0.9
    
    
    
    1.3
    
    
    
    0.8EBITDA margin
    
    
    18.5
    %
    
    
    23.0
    %
    
    
    18.3
    %
    
    
    22.9
    %
 (1)
    
    column does not foot due to rounding Results of Operations for the Three and Six Months Ended June 30, 2010 and 2009
  As Percentage of Net Sales
    
    
    As Percentage of Net SalesThree Months Ended June 30,
    
    
    Six Months Ended June 30,2010
    
    
    2009
    
    
    2010
    
    
    2009Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    65.7
    
    
    
    62.5
    
    
    
    66.4
    
    
    
    62.6Gross profit
    
    
    34.3
    
    
    
    37.5
    
    
    
    33.6
    
    
    
    37.4Selling, general and administrative expenses
    
    
    24.5
    
    
    
    22.9
    
    
    
    24.3
    
    
    
    22.5Amortization of intangibles
    
    
    2.2
    
    
    
    2.2
    
    
    
    2.3
    
    
    
    2.2Income from operations
    
    
    7.6
    
    
    
    12.4
    
    
    
    7.0
    
    
    
    12.7Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Interest expense, net
    
    
    5.0
    
    
    
    4.5
    
    
    
    5.1
    
    
    
    4.3Income before income tax provision
    
    
    2.6
    
    
    
    7.9
    
    
    
    1.9
    
    
    
    8.4Income tax provision
    
    
    1.1
    
    
    
    3.1
    
    
    
    0.8
    
    
    
    3.3Net income
    
    
    1.5
    
    
    
    4.8
    
    
    
    1.1
    
    
    
    5.1(Income) loss attributable to the
noncontrolling interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net income attributable to ARC
    
    
    1.5
    %
    
    
    4.8
    %
    
    
    1.1
    %
    
    
    5.1
    %
 Three and Six Months Ended June 30, 2010 Compared to Three and Six Months Ended June 30, 2009
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Increase (decrease)
    
    
    June 30,
    
    
    Increase (decrease)2010
    
    
    2009
    
    
    (In dollars)
    
    
    (Percent)
    
    
    2010
    
    
    2009
    
    
    (In dollars)
    
    
    (Percent)(In millions)
    
    
    
    
    
    
    
    
    
    
    
    (In millions)Reprographics services
    
    $
    78.5
    
    
    $
    92.9
    
    
    $
    (14.4
    )
    
    
    -15.5
    %
    
    $
    154.7
    
    
    $
    192.7
    
    
    $
    (38.0
    )
    
    
    -19.7
    %Facilities management
    
    
    22.6
    
    
    
    24.9
    
    
    
    (2.3
    )
    
    
    -9.2
    
    
    
    45.0
    
    
    
    51.8
    
    
    
    (6.8
    )
    
    
    -13.1
    %Equipment and supplies sales
    
    
    14.0
    
    
    
    13.3
    
    
    
    0.7
    
    
    
    5.3
    
    
    
    27.5
    
    
    
    26.1
    
    
    
    1.4
    
    
    
    5.4
    %Total net sales
    
    $
    115.1
    
    
    $
    131.1
    
    
    $
    (16.0
    )
    
    
    -12.2
    %
    
    
    227.2
    
    
    $
    270. 6
    
    
    
    (43.4
    )
    
    
    -16.0
    %Gross profit
    
    $
    39.5
    
    
    $
    49.2
    
    
    $
    (9.7
    )
    
    
    -19.7
    %
    
    $
    76.3
    
    
    $
    101.1
    
    
    $
    (24.8
    )
    
    
    -24.5
    %Selling, general and
administrative expenses
    
    
    28.2
    
    
    
    30.0
    
    
    
    (1.8
    )
    
    
    -6.0
    
    
    
    55.3
    
    
    
    61.0
    
    
    
    (5.7
    )
    
    
    -9.3
    %Amortization of intangibles
    
    
    2.6
    
    
    
    2.9
    
    
    
    (0.3
    )
    
    
    -10.3
    
    
    
    5.2
    
    
    
    5.9
    
    
    
    (0.7
    )
    
    
    -11.9
    %Interest expense, net
    
    
    5.8
    
    
    
    5.8
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    11.6
    
    
    
    11.6
    
    
    
    0.0
    
    
    
    0.0
    %Income tax provision
    
    
    1.3
    
    
    
    4.1
    
    
    
    (2.8
    )
    
    
    -68.3
    
    
    
    1.8
    
    
    
    8.9
    
    
    
    (7.1
    )
    
    
    -79.8
    %Net income attributable to ARC
    
    
    1.7
    
    
    
    6.3
    
    
    
    (4.6
    )
    
    
    -73.0
    
    
    
    2.4
    
    
    
    13.9
    
    
    
    (11.5
    )
    
    
    -82.7
    %EBITDA
    
    
    21.3
    
    
    
    30.2
    
    
    
    (8.9
    )
    
    
    -29.5
    
    
    
    41.5
    
    
    
    62.0
    
    
    
    (20.5
    )
    
    
    -33.1
    %
  22




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##### Table of Contents



Net Sales
   Reprographics services .
     Facilities management .
 Equipment and supplies sales.
  23




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##### Table of Contents



Gross Profit
    Selling, General and Administrative Expenses
      Amortization of Intangibles
  Interest Expense, Net
   24




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##### Table of Contents



Income Taxes
  Noncontrolling Interest
  Net Income Attributable to ARC
  EBITDA
  Impact of Inflation
  Liquidity and Capital Resources
  Six Months EndedJune 30,2010
    
    
    2009(Dollars in thousands)Net cash provided by operating activities
    
    $
    27,746
    
    
    $
    55,798Net cash used in investing activities
    
    $
    (1,932
    )
    
    $
    (4,403
    )Net cash used in financing activities
    
    $
    (21,540
    )
    
    $
    (41,182
    )
 Operating Activities
   25




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##### Table of Contents



Investing Activities
  Financing Activities
   June 30, 2010
    
    
    December 31, 2009(Dollars in thousands)Cash and cash equivalents
    
    $
    33,673
    
    
    $
    29,377Working capital
    
    $
    (5,057
    )
    
    $
    (3,739
    )Borrowings from senior secured credit facilities
    
    $
    201,457
    
    
    $
    205,625Other debt obligations
    
    
    55,272
    
    
    
    68,606Total debt obligations
    
    $
    256,729
    
    
    $
    274,231
      26




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##### Table of Contents



Debt Obligations
 Senior Secured Credit Facilities.
   
    
    The interest coverage ratio is 2.00:1.00 for the period ended December 31, 2009,
1.75:1.00 for the periods ending March 31, 2010 through September 30, 2010, 2.00:1.00 for
the periods ending December 31, 2010 through September 30, 2011, 2.50:1.00 for the period
ending December 31, 2011 and 3.00:1.00 for all periods thereafter.
    
    The fixed charge coverage ratio is 1.00:1.00 for the period ended December 31, 2009
through maturity.
    
    The leverage ratio is 3.25:1.00 for the period ended December 31, 2009, 3.50:1.00 for
the period ended March 31, 2010, 3.85:1.00 for the periods ending June 30, 2010 through
September 30, 2010, 3.25:1.00 for the period ending December 31, 2010 and 3.00:1.00 for all
periods thereafter.
    
    The senior secured leverage ratio is 3.00:1.00 for the period ended December 31, 2009,
3.25:1.00 for the period ended March 31, 2010, 3.65:1.00 for the periods ending June 30,
2010 through September 30, 2010, 3.00:1.00 for the periods ending December 31, 2010 through
March 31, 2011 and 2.50:1.00 for all periods thereafter.
   27




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##### Table of Contents



Capital Leases .
 Seller Notes .
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 Uncertain
Tax Position Liability.
 Legal Proceedings.
  28




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##### Table of Contents



Critical Accounting Policies
  Fair Value Measurements and Disclosures, improving
disclosures about Fair Value Measurements
 Recent Accounting Pronouncements
   29




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##### Table of Contents



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
   30




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
   31




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##### Table of Contents



Item 6. Exhibits
 Exhibit Number
    
    Description31.1
    
    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  32




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##### Table of Contents



SIGNATURES
   AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Kumarakulasingam SuriyakumarKumarakulasingam SuriyakumarChairman, President and Chief Executive OfficerBy:
    /s/ Jonathan R. MatherJonathan R. MatherChief Financial Officer and Secretary  33




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##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    Description31.1
    
    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  34