##### 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 September 30, 2009
 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
(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 þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if smaller reporting company)
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 2009
 Table of Contents
 PART I  Financial InformationItem 1. Condensed Consolidated Financial Statements (Unaudited)Condensed Consolidated Balance Sheets as of September 30, 2009 and December 31, 2008
    
    
    4Condensed Consolidated Statements of Operations for the three and nine months ended September 30,
2009 and 2008
    
    
    5Condensed Consolidated Statements of Changes in Stockholders Equity for the nine months ended
September 30, 2009 and 2008
    
    
    6Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2009 and 2008
    
    
    7Notes to Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    22Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    38Item 4. Controls and Procedures
    
    
    38PART II  Other InformationItem 1. Legal Proceedings
    
    
    39Item 1A. Risk Factors
    
    
    39Item 6. Exhibits
    
    
    40SIGNATURES
    
    
    41Index to Exhibits
    
    
    42Exhibit 10.1Exhibit 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)
 September 30,
    
    
    December 31,2009
    
    
    2008AssetsCurrent assets:Cash and cash equivalents
    
    $
    59,179
    
    
    $
    46,542Accounts receivable, net of allowances for accounts receivable of $4,842 and
$5,424 at September 30, 2009 and December 31, 2008, respectively
    
    
    63,749
    
    
    
    77,216Inventories, net
    
    
    11,672
    
    
    
    11,097Deferred income taxes
    
    
    5,827
    
    
    
    5,831Prepaid expenses and other current assets
    
    
    9,983
    
    
    
    11,976Total current assets
    
    
    150,410
    
    
    
    152,662Property and equipment, net
    
    
    78,169
    
    
    
    89,712Goodwill
    
    
    330,665
    
    
    
    366,513Other intangible assets, net
    
    
    76,846
    
    
    
    85,967Deferred financing costs, net
    
    
    2,609
    
    
    
    3,537Deferred income taxes
    
    
    25,610
    
    
    
    25,404Other assets
    
    
    2,200
    
    
    
    2,136Total assets
    
    $
    666,509
    
    
    $
    725,931Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    23,159
    
    
    $
    25,171Accrued payroll and payroll-related expenses
    
    
    11,572
    
    
    
    13,587Accrued expenses
    
    
    23,173
    
    
    
    24,913Current portion of long-term debt and capital leases
    
    
    79,064
    
    
    
    59,193Total current liabilities
    
    
    136,968
    
    
    
    122,864Long-term debt and capital leases
    
    
    238,521
    
    
    
    301,847Other long-term liabilities
    
    
    10,465
    
    
    
    13,318Total liabilities
    
    
    385,954
    
    
    
    438,029Commitments and contingencies (Note 10)Stockholders equity:American Reprographics Company stockholders equity:Preferred stock, $0.001 par value, 25,000,000 shares
authorized; zero and zero shares issued and outstanding
    
    
    
    
    
    
    Common stock, $0.001 par value, 150,000,000 shares
authorized; 45,760,397 and 45,674,810 shares issued and 45,312,743
and
45,227,156 shares outstanding in 2009 and 2008, respectively
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    88,806
    
    
    
    85,207Deferred stock-based compensation
    
    
    
    
    
    
    (195
    )Retained earnings
    
    
    201,536
    
    
    
    215,846Accumulated other comprehensive loss
    
    
    (8,206
    )
    
    
    (11,414
    )282,182
    
    
    
    289,490Less cost of common stock in treasury, 447,654 shares in 2009 and 2008
    
    
    7,709
    
    
    
    7,709Total American Reprographics Company stockholders equity
    
    
    274,473
    
    
    
    281,781Noncontrolling interest
    
    
    6,082
    
    
    
    6,121Total stockholders equity
    
    
    280,555
    
    
    
    287,902Total liabilities and stockholders equity
    
    $
    666,509
    
    
    $
    725,931
   4




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AMERICAN REPROGRAPHICS COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Reprographics services
    
    $
    81,989
    
    
    $
    127,455
    
    
    $
    274,663
    
    
    $
    409,162Facilities management
    
    
    23,395
    
    
    
    30,977
    
    
    
    75,158
    
    
    
    91,737Equipment and supplies sales
    
    
    13,966
    
    
    
    16,153
    
    
    
    40,066
    
    
    
    46,070Total net sales
    
    
    119,350
    
    
    
    174,585
    
    
    
    389,887
    
    
    
    546,969Cost of sales
    
    
    78,219
    
    
    
    104,570
    
    
    
    247,622
    
    
    
    318,263Gross profit
    
    
    41,131
    
    
    
    70,015
    
    
    
    142,265
    
    
    
    228,706Selling, general and administrative expenses
    
    
    27,330
    
    
    
    38,800
    
    
    
    88,335
    
    
    
    117,820Amortization of intangible assets
    
    
    2,777
    
    
    
    2,987
    
    
    
    8,674
    
    
    
    8,988Goodwill impairment
    
    
    37,382
    
    
    
    
    
    
    
    37,382
    
    
    
    Impairment of long-lived assets
    
    
    781
    
    
    
    
    
    
    
    781
    
    
    
    (Loss) income from operations
    
    
    (27,139
    )
    
    
    28,228
    
    
    
    7,093
    
    
    
    101,898Other income
    
    
    (41
    )
    
    
    (55
    )
    
    
    (138
    )
    
    
    (300
    )Interest expense, net
    
    
    6,428
    
    
    
    6,180
    
    
    
    18,060
    
    
    
    19,885Income before income tax (benefit) provision
    
    
    (33,526
    )
    
    
    22,103
    
    
    
    (10,829
    )
    
    
    82,313Income tax (benefit) provision
    
    
    (5,334
    )
    
    
    7,041
    
    
    
    3,520
    
    
    
    29,877Net (loss) income
    
    
    (28,192
    )
    
    
    15,062
    
    
    
    (14,349
    )
    
    
    52,436Loss attributable to the noncontrolling interest
    
    
    28
    
    
    
    5
    
    
    
    39
    
    
    
    5Net (loss) income attributable to American
Reprographics Company
    
    $
    (28,164
    )
    
    $
    15,067
    
    
    $
    (14,310
    )
    
    $
    52,441Earnings per share attributable to American
Reprographics
Company shareholders:Basic
    
    $
    (0.62
    )
    
    $
    0.33
    
    
    $
    (0.32
    )
    
    $
    1.16Diluted
    
    $
    (0.62
    )
    
    $
    0.33
    
    
    $
    (0.32
    )
    
    $
    1.15Weighted average common shares outstanding:Basic
    
    
    45,138,446
    
    
    
    45,066,654
    
    
    
    45,115,059
    
    
    
    45,054,425Diluted
    
    
    45,138,446
    
    
    
    45,413,747
    
    
    
    45,115,059
    
    
    
    45,413,948
   5




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AMERICAN REPROGRAPHICS COMPANY



CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
 American Reprographics Company ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock in
    
    
    NoncontrollingShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Loss
    
    
    Treasury
    
    
    Interest
    
    
    TotalBalance at December 31, 2007
    
    
    45,114,119
    
    
    $
    46
    
    
    $
    81,153
    
    
    $
    (673
    )
    
    $
    179,092
    
    
    $
    (258
    )
    
    $
    (7,709
    )
    
    $
    
    
    
    $
    251,651Stock-based compensation
    
    
    78,250
    
    
    
    
    
    
    
    2,772
    
    
    
    371
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,143Issuance of common stock under Employee Stock Purchase Plan
    
    
    1,812
    
    
    
    
    
    
    
    27
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    27Stock Options exercised
    
    
    31,700
    
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    177Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    102
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Noncontrolling interest resulting from
business combinations
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,062
    
    
    
    6,062Comprehensive Income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,441
    
    
    
    
    
    
    
    
    
    
    
    (5
    )
    
    
    52,436Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (387
    )
    
    
    
    
    
    
    
    
    
    
    (387
    )Gain (loss) on derivative, net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (780
    )
    
    
    
    
    
    
    
    
    
    
    (780
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,269Balance at September 30, 2008
    
    
    45,225,881
    
    
    $
    46
    
    
    $
    84,231
    
    
    $
    (302
    )
    
    $
    231,533
    
    
    $
    (1,425
    )
    
    $
    (7,709
    )
    
    $
    6,057
    
    
    $
    312,431
 American Reprographics Company ShareholdersAccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    OtherCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock in
    
    
    NoncontrollingShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Loss
    
    
    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
    
    
    
    
    
    
    
    3,351
    
    
    
    195
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,546Issuance of common stock under
Employee Stock Purchase Plan
    
    
    27,275
    
    
    
    
    
    
    
    167
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    167Stock Options exercised
    
    
    11,800
    
    
    
    
    
    
    
    63
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    18
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    18Comprehensive Income:Net income (loss)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,310
    )
    
    
    
    
    
    
    
    
    
    
    (39
    )
    
    
    (14,349
    )Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    732
    
    
    
    
    
    
    
    
    
    
    
    732Gain (loss) on derivative, net of
tax effect
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,476
    
    
    
    
    
    
    
    
    
    
    
    2,476Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,141
    )Balance at September 30, 2009
    
    
    45,312,743
    
    
    $
    46
    
    
    $
    88,806
    
    
    $
    
    
    
    $
    201,536
    
    
    $
    (8,206
    )
    
    $
    (7,709
    )
    
    $
    6,082
    
    
    $
    280,555
   6




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AMERICAN REPROGRAPHICS COMPANY


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2009
    
    
    2008Cash flows from operating activitiesNet (loss) income
    
    $
    (14,349
    )
    
    $
    52,436Adjustments to reconcile net (loss) income to net cash provided by operating activities:Allowance for accounts receivable
    
    
    2,842
    
    
    
    3,164Depreciation
    
    
    28,977
    
    
    
    28,193Amortization of intangible assets
    
    
    8,674
    
    
    
    8,988Amortization of deferred financing costs
    
    
    972
    
    
    
    936Goodwill impairment
    
    
    37,382
    
    
    
    Impairment of long-lived assets
    
    
    781
    
    
    
    Stock-based compensation
    
    
    3,564
    
    
    
    3,143Excess tax benefit related to stock options exercised
    
    
    (18
    )
    
    
    (102
    )Deferred income taxes
    
    
    (2,258
    )
    
    
    6,498Write-off of deferred financing costs
    
    
    
    
    
    
    313Other non-cash items, net
    
    
    (54
    )
    
    
    (401
    )Changes in operating assets and liabilities, net of effect of
business acquisitions:Accounts receivable
    
    
    11,237
    
    
    
    1,900Inventory
    
    
    355
    
    
    
    1,251Prepaid expenses and other assets
    
    
    3,675
    
    
    
    (4,795
    )Accounts payable and accrued expenses
    
    
    (6,416
    )
    
    
    (6,261
    )Net cash provided by operating activities
    
    
    75,364
    
    
    
    95,263Cash flows from investing activitiesCapital expenditures
    
    
    (5,852
    )
    
    
    (6,359
    )Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions
    
    
    (2,023
    )
    
    
    (18,216
    )Restricted cash
    
    
    
    
    
    
    (1,022
    )Other
    
    
    716
    
    
    
    946Net cash used in investing activities
    
    
    (7,159
    )
    
    
    (24,651
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    63
    
    
    
    177Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    116
    
    
    
    27Excess tax benefit related to stock options exercised
    
    
    18
    
    
    
    102Proceeds from borrowings under debt agreements
    
    
    
    
    
    
    Payments on long-term debt agreements and capital leases
    
    
    (55,838
    )
    
    
    (38,507
    )Net (repayments) borrowings under revolving credit facility
    
    
    
    
    
    
    (22,000
    )Payment of loan fees
    
    
    (44
    )
    
    
    (726
    )Net cash used in financing activities
    
    
    (55,685
    )
    
    
    (60,927
    )Effect of foreign currency translation on cash balances
    
    
    117
    
    
    
    142Net change in cash and cash equivalents
    
    
    12,637
    
    
    
    9,827Cash and cash equivalents at beginning of period
    
    
    46,542
    
    
    
    24,802Cash and cash equivalents at end of period
    
    $
    59,179
    
    
    $
    34,629Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    12,134
    
    
    $
    26,611Issuance of subordinated notes in connection with the
acquisition of businesses
    
    $
    246
    
    
    $
    7,653Gain (loss) on derivative, net of tax effect
    
    $
    2,476
    
    
    $
    (780
    )Contribution from noncontrolling interest
    
    $
    
    
    
    $
    6,062
   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
   Business Combinations Effective Date of FASB Statement No. 157 Noncontrolling Interests in Consolidated Financial Statements  an Amendment of ARB
No. 51 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No. 133 Subsequent Events The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles,
 Risk and Uncertainties
   8




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 2. Stock-Based Compensation
  Stock Option Exchange Program.
 Shared-Based Payment
   Assumptions used:Risk free interest rate
    
    
    2.0
    %Expected volatility
    
    
    37.0
    %Expected dividend yield
    
    
    0.0
    %Expected term
    
    6.0 years
    9




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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. Acquisitions
  5. Goodwill and Other Intangibles Resulting from Business Acquisitions
 Goodwill
 , Business Combinations,
   10




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
     GoodwillBalance at December 31, 2008
    
    $
    366,513Additions
    
    
    1,283Goodwill impairment
    
    
    (37,382
    )Translation adjustment
    
    
    251Balance at September 30, 2009
    
    $
    330,665
  Long-lived assets
 , Accounting for the Impairment or
Disposal of Long-lived Assets.
  11




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
     September 30, 2009
    
    
    December 31, 2008Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    AmountAmortizable other
intangible
assets:Customer relationships
    
    $
    96,139
    
    
    $
    36,829
    
    
    $
    59,310
    
    
    $
    96,574
    
    
    $
    29,233
    
    
    $
    67,341Trade names and
trademarks
    
    
    20,294
    
    
    
    2,886
    
    
    
    17,408
    
    
    
    20,359
    
    
    
    2,126
    
    
    
    18,233Non-Compete Agreements
    
    
    303
    
    
    
    175
    
    
    
    128
    
    
    
    1,278
    
    
    
    885
    
    
    
    393$
    116,736
    
    
    $
    39,890
    
    
    $
    76,846
    
    
    $
    118,211
    
    
    $
    32,244
    
    
    $
    85,967
  2009
    
    $
    2,6902010
    
    
    10,0642011
    
    
    9,1152012
    
    
    8,2162013
    
    
    7,317Thereafter
    
    
    39,444$
    76,846
  12




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 6. Long-Term Debt
  September 30,
    
    
    December 31,2009
    
    
    2008Borrowings from senior secured First Priority  Term Loan Credit
Facility; interest payable quarterly (5.9% and 5.4% weighted average
interest
rate, inclusive of interest rate swap, at September 30, 2009 and
December 31, 2008, respectively); principal payable in varying
quarterly
installments; any unpaid principal and interest due December 6, 2012
    
    $
    245,782
    
    
    $
    261,250Various subordinated notes payable; weighted average 6.2%
interest rate at September 30, 2009 and December 31,
2008; principal and interest payable monthly through June 2012
    
    
    25,003
    
    
    
    35,376Various capital leases; weighted average 9.4% and 9.1% interest rate
at September 30, 2009, and December 31, 2008,
respectively; principal and interest payable monthly through February 2015
    
    
    46,800
    
    
    
    64,414317,585
    
    
    
    361,040Less current portion
    
    
    (79,064
    )
    
    
    (59,193
    )$
    238,521
    
    
    $
    301,847
 Credit and Guaranty Agreement
       13




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
  Interest Rate Swap Transaction
   7. Derivatives and Hedging Transactions
  Accounting
for Derivative Instruments and Hedging Activities
   Fair ValueBalance Sheet
    
    
    September 30,
    
    
    December 31,Classification
    
    
    2009
    
    
    2008Derivative designated as hedging instrument
under ASC 815Swap Transaction  current portion
    
    Accrued expenses
    
    $
    5,995
    
    
    $
    5,953Swap Transaction  long term portion
    
    Other long-term liabilities
    
    
    7,253
    
    
    
    10,531Total derivatives designated as hedging
    
    
    
    
    
    $
    13,248
    
    
    $
    16,484
  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)
  Amount of Gain or (Loss) Recognized in AOCL on DerivativeThree Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Derivative in ASC 815 Cash Flow Hedging
RelationshipSwap Transaction
    
    $
    452
    
    
    $
    (1,244
    )
    
    $
    4,196
    
    
    $
    (1,241
    )Tax effect
    
    
    (163
    )
    
    
    467
    
    
    
    (1,720
    )
    
    
    461Swap Transaction, net of tax effect
    
    $
    289
    
    
    $
    (777
    )
    
    $
    2,476
    
    
    $
    (780
    )
  Amount of Gain or (Loss) Reclassified from AOCL into Income(effective portion)
    
    
    (ineffective portion)Three Months Ended
    
    
    Nine Months Ended
    
    
    Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,
    
    
    September 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008
    
    
    2009
    
    
    2008Location of Gain or (Loss)
Reclassified
from AOCL into IncomeInterest expense
    
    $
    (2,252
    )
    
    $
    (908
    )
    
    $
    (5,844
    )
    
    $
    (1,860
    )
    
    $
    (960
    )
    
    $
    
    
    
    $
    (960
    )
    
    $
    
 8. Fair
Value Measurements
 Fair Value Measurements,
 Level 1  inputs to the valuation methodology are quoted prices (unadjusted) for identical
assets or liabilities in active markets.
 Level 2  inputs to the valuation methodology include quoted prices for similar assets and
liabilities in active markets, and inputs that are observable for the asset or liability,
either directly or indirectly, for substantially the full term of the financial instrument.
 Level 3  inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
   15




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 Level 2September 30,
    
    
    December 31,2009
    
    
    2008Recurring Fair Value MeasureSwap Transaction
    
    $
    13,248
    
    
    $
    16,484
  Fair Values of Financial Instruments.
 Cash and cash equivalents:
 Short- and long-term debt:
 Interest rate hedge agreements:
 9. Income Taxes
     16




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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)
 10. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Uncertain Tax Position Liability.
 Legal Proceedings.
 11. Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Net (loss) income
    
    $
    (28,192
    )
    
    $
    15,062
    
    
    $
    (14,349
    )
    
    $
    52,436Foreign currency translation adjustments
    
    
    377
    
    
    
    (196
    )
    
    
    732
    
    
    
    (387
    )Gain (loss) on derivative, net of tax effect
    
    
    289
    
    
    
    (777
    )
    
    
    2,476
    
    
    
    (780
    )Comprehensive (loss) income
    
    
    (27,526
    )
    
    
    14,089
    
    
    
    (11,141
    )
    
    
    51,269Comprehensive loss attributable to the
noncontrolling interest
    
    
    (28
    )
    
    
    (5
    )
    
    
    (39
    )
    
    
    (5
    )Comprehensive (loss) income attributable to
ARC
    
    $
    (27,498
    )
    
    $
    14,094
    
    
    $
    (11,102
    )
    
    $
    51,274
  12. Earnings per Share
 Earnings per Share
  17




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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)
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008Weighted average common shares
outstanding during the period
 basic
    
    
    45,138,446
    
    
    
    45,066,654
    
    
    
    45,115,059
    
    
    
    45,054,425Effect of dilutive stock options
    
    
    
    
    
    
    347,093
    
    
    
    
    
    
    
    359,523Weighted average common shares
outstanding during the period
 diluted
    
    
    45,138,446
    
    
    
    45,413,747
    
    
    
    45,115,059
    
    
    
    45,413,948
 13. Subsequent Events
   
    
    Add a new definition of Creditable Excess Cash and amend the definition of Fixed
Charge Coverage Ratio to allow for an adjustment of Creditable Excess Cash;
 
    
    Defer $36.1 million to the maturity date of December 6, 2012 in amortization payments
that would have been due in 2011 to consenting lenders that have agreed to provide new
Class B term loan commitments under the Amended Credit Agreement;
 
    
    Increase the applicable rate by 200 basis points for initial term loans and 300 basis
points for Class B term loans for purposes of calculating interest on loans outstanding
under the Amended Credit Agreement;
 
    
    Reduce the total revolving commitments under the Credit Agreement from $74.5 million
to $49.5 million;
 
    
    Provide for a $35.0 million prepayment to be applied on the business day following the
effective date of the Amended Credit Agreement to reduce initial term loan installments
due on March 31, 2010, June 30, 2010 and September 30, 2010 on a pro rata basis;
    
    Amend the interest coverage ratio under the Credit Agreement as follows:
 
    
    2.00:1.00 for quarter ending December 31, 2009
    
    1.75:1.00 for quarters ending March 31, 2010 through September 30, 2010
    
    2.00:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    2.50:1.00 for quarter ending December 31, 2011
    
    3.00:1.00 for quarters ending March 31, 2012 through maturity;
  18




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 
 
    
    Amend the fixed charge coverage ratio under the Credit Agreement to be 1.00:1.00 for
the fiscal quarter ending December 31, 2009 through maturity;
    
    Amend the maximum leverage ratio under the Credit Agreement as follows:
 
    
    3.25:1.00 for fiscal quarter ending December 31, 2009
    
    3.50:1.00 for fiscal quarter ending March 31, 2010
    
    3.85:1.00 for fiscal quarters ending June 30, 2010 through September 30, 2010
    
    3.25:1.00 for fiscal quarter ending December 31, 2010
    
    3.00:1.00 for fiscal quarters ending March 31, 2011 through maturity;
 
    
    Amend the maximum senior secured leverage ratio under the Credit Agreement as follows:
 
    
    3.00:1.00 for fiscal quarter ending December 31, 2009
    
    3.25:1.00 for fiscal quarter ending March 31, 2010
    
    3.65:1.00 for fiscal quarters ending June 30, 2010 through September 30, 2010
    
    3.00:1.00 for fiscal quarters ending December 31, 2010 through March 31, 2011
    
    2.50:1.00 for fiscal quarters ending June 30, 2011 through maturity.
  14. Recent Accounting Pronouncements
 Multiple-Deliverable Revenue Arrangements a consensus of the FASB Emerging Issues Task Force Revenue
Recognition
 The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles The Hierarchy of Generally Accepted Accounting Principles
    19




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
 Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly
  Accounting for Assets
Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.
 Interim Disclosures about Fair Value of Financial Instruments Interim Financial Reporting,
 Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities.
 Determination of the
Useful Life of Intangible Asset,
  20




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AMERICAN REPROGRAPHICS COMPANY
Notes to Condensed Consolidated Financial Statements (Continued)
(Dollars in thousands, except per share data)
(Unaudited)
    21




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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 2008 Annual Report on Form 10-K and our Quarterly Reports
on Form 10-Q for the first and second quarters of 2009.
 Executive Summary
    
    
    Document management;
    
    Document distribution and logistics;
    
    Print-on-demand; and
    
    On-site services, frequently referred to as facilities management
(FMs), which is any combination of the above services supplied at
a customers location.
        22




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##### Table of Contents



Evaluating our Performance .
  
    
    Creating consistent, profitable growth, or in the absence of growth
due to market conditions beyond our control, stable margins
superior to commonly understood industry benchmarks;
    
    Maintaining our industry leadership as measured by our geographical
footprint, market share and revenue generation;
    
    Continuing to develop and invest in our products, services, and
technology to meet the changing needs of our customers;
    
    Maintaining 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 costs as a percentage of net sales; and
    
    Days Sales Outstanding/Days Sales Inventory/Days Payable Outstanding.
    Acquisitions .
   23




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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 .
    24




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##### Table of Contents




    
    They do not reflect our cash expenditures, or future requirements for capital
expenditures and contractual commitments;
    
    They do not reflect changes in, or cash requirements for, our working capital needs;
    
    They do not reflect the significant interest expense, or the cash requirements
necessary, to service interest or principal payments on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements; and
    
    Other companies, including companies in our industry, may calculate these measures
differently than we do, limiting their usefulness as comparative measures.
    25




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Cash flows provided by operating activities
    
    $
    19,566
    
    
    $
    33,778
    
    
    $
    75,364
    
    
    $
    95,263Changes in operating assets and liabilities
    
    
    704
    
    
    
    1,086
    
    
    
    (8,851
    )
    
    
    7,905Non-cash (expenses) income, including
depreciation and amortization
    
    
    (48,462
    )
    
    
    (19,802
    )
    
    
    (80,862
    )
    
    
    (50,732
    )Income tax (benefit) provision
    
    
    (5,334
    )
    
    
    7,041
    
    
    
    3,520
    
    
    
    29,877Interest expense, net
    
    
    6,428
    
    
    
    6,180
    
    
    
    18,060
    
    
    
    19,885Net loss attributable to the noncontrolling
interest
    
    
    28
    
    
    
    5
    
    
    
    39
    
    
    
    5EBIT
    
    
    (27,070
    )
    
    
    28,288
    
    
    
    7,270
    
    
    
    102,203Depreciation and amortization
    
    
    12,185
    
    
    
    12,848
    
    
    
    37,651
    
    
    
    37,181EBITDA
    
    
    (14,885
    )
    
    
    41,136
    
    
    
    44,921
    
    
    
    139,384Interest expense, net
    
    
    (6,428
    )
    
    
    (6,180
    )
    
    
    (18,060
    )
    
    
    (19,885
    )Income tax benefit (provision)
    
    
    5,334
    
    
    
    (7,041
    )
    
    
    (3,520
    )
    
    
    (29,877
    )Depreciation and amortization
    
    
    (12,185
    )
    
    
    (12,848
    )
    
    
    (37,651
    )
    
    
    (37,181
    )Net (loss) income attributable to ARC
    
    $
    (28,164
    )
    
    $
    15,067
    
    
    $
    (14,310
    )
    
    $
    52,441
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands)Net (loss) income attributable to ARC
    
    $
    (28,164
    )
    
    $
    15,067
    
    
    $
    (14,310
    )
    
    $
    52,441Interest expense, net
    
    
    6,428
    
    
    
    6,180
    
    
    
    18,060
    
    
    
    19,885Income tax (benefit) provision
    
    
    (5,334
    )
    
    
    7,041
    
    
    
    3,520
    
    
    
    29,877EBIT
    
    
    (27,070
    )
    
    
    28,288
    
    
    
    7,270
    
    
    
    102,203Depreciation and amortization
    
    
    12,185
    
    
    
    12,848
    
    
    
    37,651
    
    
    
    37,181EBITDA
    
    
    (14,885
    )
    
    
    41,136
    
    
    
    44,921
    
    
    
    139,384Special items:Goodwill impairment
    
    
    37,382
    
    
    
    
    
    
    
    37,382
    
    
    
    Impairment of long-lived assets
    
    
    781
    
    
    
    
    
    
    
    781
    
    
    
    Adjusted EBITDA
    
    $
    23,278
    
    
    $
    41,136
    
    
    $
    83,084
    
    
    $
    139,384
  26




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Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008 (1)
    
    
    2009 (1)
    
    
    2008Net (loss) income margin
    
    
    (23.6
    )%
    
    
    8.6
    %
    
    
    (3.7
    )%
    
    
    9.6
    %Interest expense, net
    
    
    5.4
    
    
    
    3.5
    
    
    
    4.6
    
    
    
    3.6Income tax (benefit) provision
    
    
    (4.5
    )
    
    
    4.0
    
    
    
    0.9
    
    
    
    5.5EBIT margin
    
    
    (22.7
    )
    
    
    16.2
    
    
    
    1.9
    
    
    
    18.7Depreciation and amortization
    
    
    10.2
    
    
    
    7.4
    
    
    
    9.7
    
    
    
    6.8EBITDA margin
    
    
    (12.5
    )
    
    
    23.6
    
    
    
    11.5
    
    
    
    25.5Special items:Goodwill impairment
    
    
    31.3
    
    
    
    
    
    
    
    9.6
    
    
    
    Impairment of long-lived
assets
    
    
    0.7
    
    
    
    
    
    
    
    0.2
    
    
    
    Adjusted EBITDA margin
    
    
    19.5
    %
    
    
    23.6
    %
    
    
    21.3
    %
    
    
    25.5
    %
 (1)
    
    column does not foot due to rounding  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008
    
    
    2009
    
    
    2008(Dollars in thousands, except share and per share data)Net (loss) income attributable to ARC
    
    $
    (28,164
    )
    
    $
    15,067
    
    
    $
    (14,310
    )
    
    $
    52,441Goodwill impairment
    
    
    37,382
    
    
    
    
    
    
    
    37,382
    
    
    
    Impairment of long-lived assets
    
    
    781
    
    
    
    
    
    
    
    781
    
    
    
    Ineffective portion of Swap Transaction
    
    
    960
    
    
    
    
    
    
    
    960Income tax benefit
    
    
    (8,041
    )
    
    
    
    
    
    
    (8,041
    )
    
    
    Unaudited adjusted net income
attributable to ARC
    
    $
    2,918
    
    
    $
    15,067
    
    
    $
    16,772
    
    
    $
    52,441Earnings per share attributable to ARC shareholders (actual):Basic
    
    $
    (0.62
    )
    
    $
    0.33
    
    
    $
    (0.32
    )
    
    $
    1.16Diluted
    
    $
    (0.62
    )
    
    $
    0.33
    
    
    $
    (0.32
    )
    
    $
    1.15Weighted average common shares
outstanding:Basic
    
    
    45,138,446
    
    
    
    45,066,654
    
    
    
    45,115,059
    
    
    
    45,054,425Diluted
    
    
    45,138,446
    
    
    
    45,413,747
    
    
    
    45,115,059
    
    
    
    45,413,948Earnings per share attributable to ARC shareholders (adjusted):Basic
    
    $
    0.06
    
    
    $
    0.33
    
    
    $
    0.37
    
    
    $
    1.16Diluted
    
    $
    0.06
    
    
    $
    0.33
    
    
    $
    0.37
    
    
    $
    1.15Weighted average common shares
outstanding:Basic
    
    
    45,138,446
    
    
    
    45,066,654
    
    
    
    45,115,059
    
    
    
    45,054,425Diluted
    
    
    45,352,608
    
    
    
    45,413,747
    
    
    
    45,229,386
    
    
    
    45,413,948
  27




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##### Table of Contents



Results of Operations for the Three and Nine Months Ended September 30, 2009 and 2008
  As Percentage of Net Sales
    
    
    As Percentage of Net SalesThree Months Ended September 30,
    
    
    Nine Months Ended September 30,2009
    
    
    2008 (1)
    
    
    2009
    
    
    2008 (1)Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    65.5
    
    
    
    59.9
    
    
    
    63.5
    
    
    
    58.2Gross profit
    
    
    34.5
    
    
    
    40.1
    
    
    
    36.5
    
    
    
    41.8Selling, general and administrative expenses
    
    
    22.9
    
    
    
    22.2
    
    
    
    22.7
    
    
    
    21.5Amortization of intangibles
    
    
    2.3
    
    
    
    1.7
    
    
    
    2.2
    
    
    
    1.6Goodwill impairment
    
    
    31.3
    
    
    
    
    
    
    
    9.6
    
    
    
    Impairment of long-lived assets
    
    
    0.7
    
    
    
    
    
    
    
    0.2
    
    
    
    (Loss) income from operations
    
    
    (22.7
    )
    
    
    16.2
    
    
    
    1.8
    
    
    
    18.6Other income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (0.1
    )Interest expense, net
    
    
    5.4
    
    
    
    3.5
    
    
    
    4.6
    
    
    
    3.6Income before income tax (benefit) provision
    
    
    (28.1
    )
    
    
    12.7
    
    
    
    (2.8
    )
    
    
    15.0Income tax (benefit) provision
    
    
    (4.5
    )
    
    
    4.0
    
    
    
    0.9
    
    
    
    5.5Net (loss) income
    
    
    (23.6
    )
    
    
    8.6
    
    
    
    (3.7
    )
    
    
    9.6Loss attributable to the noncontrolling
interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net (loss) income attributable to ARC
    
    
    (23.6
    )%
    
    
    8.6
    %
    
    
    (3.7
    )%
    
    
    9.6
    %
 (1)
    
    column does not foot due to rounding Three and Nine Months Ended September 30, 2009 Compared to Three and Nine Months Ended September 30, 2008
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Increase (decrease)
    
    
    September 30,
    
    
    Increase (decrease)2009
    
    
    2008 (1)
    
    
    (In dollars)
    
    

    (Percent)
    
    
    2009
    
    
    2008
    
    
    (In dollars)
    
    
    (Percent)(In millions)


    
    

    (In millions)Reprographics services
    
    $
    82.0
    
    
    $
    127.5
    
    
    $
    (45.5
    )
    
    
    -35.7
    %
    
    $
    274.7
    
    
    $
    409.2
    
    
    $
    (134.5
    )
    
    
    -32.9
    %Facilities management
    
    
    23.4
    
    
    
    31.0
    
    
    
    (7.6
    )
    
    
    -24.5
    
    
    
    75.2
    
    
    
    91.7
    
    
    
    (16.5
    )
    
    
    -18.0
    %Equipment and supplies sales
    
    
    14.0
    
    
    
    16.2
    
    
    
    (2.2
    )
    
    
    -13.6
    
    
    
    40.1
    
    
    
    46.1
    
    
    
    (6.0
    )
    
    
    -13.0
    %Total net sales
    
    $
    119.4
    
    
    $
    174.6
    
    
    $
    (55.2
    )
    
    
    -31.6
    %
    
    
    390.0
    
    
    
    547.0
    
    
    
    (157.0
    )
    
    
    -28.7
    %Gross profit
    
    $
    41.1
    
    
    $
    70.0
    
    
    $
    (28.9
    )
    
    
    -41.3
    %
    
    $
    142.3
    
    
    $
    228.7
    
    
    $
    (86.4
    )
    
    
    -37.8
    %Selling, general and administrative expenses
    
    
    27.3
    
    
    
    38.8
    
    
    
    (11.5
    )
    
    
    -29.6
    
    
    
    88.3
    
    
    
    117.8
    
    
    
    (29.5
    )
    
    
    -25.0
    %Amortization of intangibles
    
    
    2.8
    
    
    
    3.0
    
    
    
    (0.2
    )
    
    
    -6.7
    
    
    
    8.7
    
    
    
    9.0
    
    
    
    (0.3
    )
    
    
    -3.3
    %Goodwill impairment
    
    
    37.4
    
    
    
    
    
    
    
    37.4
    
    
    
    100.0
    
    
    
    37.4
    
    
    
    
    
    
    
    37.4
    
    
    
    100.0
    %Impairment of long-lived assets
    
    
    0.8
    
    
    
    
    
    
    
    0.8
    
    
    
    100.0
    
    
    
    0.8
    
    
    
    
    
    
    
    0.8
    
    
    
    100.0
    %Interest expense, net
    
    
    6.4
    
    
    
    6.2
    
    
    
    0.2
    
    
    
    3.2
    
    
    
    18.1
    
    
    
    19.9
    
    
    
    (1.8
    )
    
    
    -9.0
    %Income tax (benefit) provision
    
    
    (5.3
    )
    
    
    7.0
    
    
    
    (12.3
    )
    
    
    -175.7
    
    
    
    3.5
    
    
    
    29.9
    
    
    
    (26.4
    )
    
    
    -88.3
    %Net (loss) income attributable
to ARC
    
    
    (28.2
    )
    
    
    15.1
    
    
    
    (43.3
    )
    
    
    -286.8
    
    
    
    (14.3
    )
    
    
    52.4
    
    
    
    (66.7
    )
    
    
    -127.3
    %EBITDA
    
    
    (14.9
    )
    
    
    41.1
    
    
    
    (56.0
    )
    
    
    -136.3
    
    
    
    44.9
    
    
    
    139.4
    
    
    
    (94.5
    )
    
    
    -67.8
    %
 (1)
    
    column does not foot due to rounding  28




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##### Table of Contents



Net Sales
   Reprographics services.
   Facilities management .
 Equipment and supplies sales.
 
  29




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##### Table of Contents



Gross Profit
    Selling, General and Administrative Expenses
      
  30




---



##### Table of Contents



Amortization of Intangibles
  Goodwill Impairment
     Impairment of Long-Lived Assets
 , Accounting for the Impairment or Disposal of
Long-lived Assets.
  31




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##### Table of Contents



Other Income
  Interest Expense, Net
  Income Taxes
   Noncontrolling Interest
  Net (Loss) Income Attributable to ARC
  EBITDA
   32




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##### Table of Contents



Impact of Inflation
  Liquidity and Capital Resources
  Nine Months EndedSeptember 30,2009
    
    
    2008(Dollars in thousands)Net cash provided by operating activities
    
    $
    75,364
    
    
    $
    95,263Net cash used in investing activities
    
    $
    (7,159
    )
    
    $
    (24,651
    )Net cash used in financing activities
    
    $
    (55,685
    )
    
    $
    (60,927
    )
 Operating Activities
  Investing Activities
  Financing Activities
    33




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##### Table of Contents



September 30, 2009
    
    
    December 31, 2008(Dollars in thousands)Cash and cash equivalents
    
    $
    59,179
    
    
    $
    46,542Working capital
    
    
    13,442
    
    
    
    29,798Borrowings from senior secured
credit facilities
    
    $
    245,782
    
    
    $
    261,250Other debt obligations
    
    
    71,803
    
    
    
    99,790Total debt obligations
    
    $
    317,585
    
    
    $
    361,040
      34




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##### Table of Contents



Debt Obligations
 Senior Secured Credit Facilities.
     
    
    Add a new definition of Creditable Excess Cash and amend the definition of Fixed
Charge Coverage Ratio to allow for an adjustment of Creditable Excess Cash;
 
    
    Defer to December 6, 2012 the $36.1 million in amortization payments that would have
been due in 2011 to consenting lenders that have agreed to provide new Class B term loan
commitments under the Amended Credit Agreement;
 
    
    Increase the applicable rate by 200 basis points for initial term loans and 300 basis
points for Class B term loans for purposes of calculating interest on loans outstanding
under the Amended Credit Agreement;
 
    
    Reduce the total revolving commitments under the Credit Agreement from $74.5 million
to $49.5 million;
 
    
    Provide for a $35.0 million prepayment to be applied on the business day following the
effective date of the Amended Credit Agreement to reduce initial term loan installments
due on March 31, 2010, June 30, 2010 and September 30, 2010 on a pro rata basis;
  35




---



##### Table of Contents




    
    Amend the interest coverage ratio under the Credit Agreement as follows:
 
    
    2.00:1.00 for fiscal quarter ending December 31, 2009
    
    1.75:1.00 for quarters ending March 31, 2010 through September 30, 2010
    
    2.00:1.00 for quarters ending December 31, 2010 through September 30, 2011
    
    2.50:1.00 for quarter ending December 31, 2011
    
    3.00:1.00 for quarters ending March 31, 2012 through maturity;
 
    
    Amend the fixed charge coverage ratio under the Credit Agreement to be 1.00:1.00 for
the fiscal quarter ending December 31, 2009 through maturity;
    
    Amend the maximum leverage ratio under the Credit Agreement as follows:
 
    
    3.25:1.00 for fiscal quarter ending December 31, 2009
    
    3.50:1.00 for fiscal quarter ending March 31, 2010
    
    3.85:1.00 for fiscal quarters ending June 30, 2010 through September 30, 2010
    
    3.25:1.00 for fiscal quarter ending December 31, 2010
    
    3.00:1.00 for fiscal quarters ending March 31, 2011 through maturity;
 
    
    Amend the maximum senior secured leverage ratio under the Credit Agreement as follows:
 
    
    3.00:1.00 for fiscal quarter ending December 31, 2009
    
    3.25:1.00 for fiscal quarter ending March 31, 2010
    
    3.65:1.00 for fiscal quarters ending June 30, 2010 through September 30, 2010
    
    3.00:1.00 for fiscal quarters ending December 31, 2010 through March 31, 2011
    
    2.50:1.00 for fiscal quarters ending June 30, 2011 through maturity.
      Capital Leases .
 Seller Notes .
  36




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##### Table of Contents



Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration. Business
Combinations,
 Uncertain Tax Position Liability.
 Legal Proceedings.
 Critical Accounting Policies
  Effective Date
of FASB Statement No. 157 Noncontrolling Interests in Consolidated Financial Statements  an Amendment of ARB No. 51 Disclosures about Derivative Instruments and Hedging
Activities  an amendment of FASB Statement No.133 Subsequent
Events The FASB Accounting Standards Codification and
the Hierarchy of Generally Accepted Accounting Principles,
  37




---



##### Table of Contents



Recent Accounting Pronouncements
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
      
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Control over Financial Reporting
   38




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  Downgrades in our credit rating may adversely affect our business, financial condition and
results of operations.
  Although we have adjusted certain financial ratio covenants in our credit agreement, we may not
be able to comply with the adjusted covenants in the future.
   39




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##### Table of Contents



Item 6. Exhibits
 Exhibit Number
    
    
    Description10.1*
    
    
    American
Reprographics Company
2005 Employee Stock
Purchase Plan,
amended and restated
as of July 30, 2009.31.1
    
    
    Certification of
Principal Executive
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a) under
the Securities
Exchange Act of 1934,
as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of
2002. *31.2
    
    
    Certification of
Principal Financial
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a) under
the Securities
Exchange Act of 1934,
as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of
2002. *32.1
    
    
    Certification of
Chief Executive
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act of
2002. *32.2
    
    
    Certification of
Chief Financial
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act of
2002. *
 *
    
    Filed herewith
    
    Indicates management contract or compensatory plan or arrangement  40




---



##### Table of Contents



SIGNATURES
  Date: November 9, 2009AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Kumarakulasingam SuriyakumarKumarakulasingam SuriyakumarChairman, President and Chief Executive OfficerBy:
    /s/ Jonathan R. MatherJonathan R. MatherChief Financial Officer and Secretary  41




---



##### Table of Contents



EXHIBIT INDEX
 Exhibit Number
    
    
    Description10.1*
    
    
    American
Reprographics Company
2005 Employee Stock
Purchase Plan,
amended and restated
as of July 30, 2009.31.1
    
    
    Certification of
Principal Executive
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a) under
the Securities
Exchange Act of 1934,
as adopted pursuant
to Section 302 of the
Sarbanes-Oxley Act of
2002. *31.2
    
    
    Certification of
Principal Financial
Officer pursuant to
Rule 13a-14(a) and
Rule 15d-14(a) of the
Securities Exchange
Act of 1934, as
adopted pursuant to
Section 302 of the
Sarbanes-Oxley Act of
2002. *32.1
    
    
    Certification of
Chief Executive
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act of
2002. *32.2
    
    
    Certification of
Chief Financial
Officer pursuant to
18 U.S.C. Section
1350, as adopted
pursuant to Section
906 of the
Sarbanes-Oxley Act of
2002. *
 *
    
    Filed herewith
    
    Indicates management contract or compensatory plan or arrangement  42