##### 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 1934For The Quarterly Period Ended March 31, 2006oro
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
  
 AMERICAN REPROGRAPHICS COMPANY
  Delaware
    
    20-1700361(State or other jurisdiction of
incorporation or organization)
    
    (I.R.S. Employer
Identification No.)
 700 North Central Avenue, Suite 550
Glendale, California 91203
(818) 500-0225
 (Address, including zip code, and telephone number, including area code, of
Registrants principal executive offices)
 þ o
  o o þ
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2006
 Table of Contents
 PART I
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)
    
    
    3Consolidated Balance Sheets as of December 31, 2005 and March 31, 2006
    
    
    3Consolidated Statements of Operations for the three months ended March 31, 2005 and 2006
    
    
    4Condensed Consolidated Statement of Changes in Stockholders' Equity for the three months ended March 31, 2006
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2005 and 2006
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2.
    
    Management's Discussion and Analysis of Financial Condition and Results of Operations
    
    
    14Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4.
    
    Controls and Procedures
    
    
    30PART IIItem 1A.
    
    Risk Factors
    
    
    31Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 6.
    
    Exhibits
    
    
    31SIGNATURES
    
    
    
    
    32Index to Exhibits
    
    
    
    
    31EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1
  2




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##### Table of Contents



PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 (Unaudited)
 December 31,
    
    
    March 31,2005
    
    
    2006(Dollars in thousands)AssetsCurrent assets:Cash and cash equivalents
    
    $
    22,643
    
    
    $
    11,078Accounts receivable, net
    
    
    71,062
    
    
    
    83,161Inventories, net
    
    
    6,817
    
    
    
    8,152Deferred income taxes
    
    
    4,272
    
    
    
    4,272Prepaid expenses and other current assets
    
    
    6,425
    
    
    
    5,881Total current assets
    
    
    111,219
    
    
    
    112,544Property and equipment, net
    
    
    45,773
    
    
    
    50,403Goodwill
    
    
    245,271
    
    
    
    248,305Other intangible assets, net
    
    
    21,387
    
    
    
    26,478Deferred financing costs, net
    
    
    923
    
    
    
    941Deferred income taxes
    
    
    16,216
    
    
    
    15,290Other assets
    
    
    1,573
    
    
    
    1,569Total assets
    
    $
    442,362
    
    
    $
    455,530Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    20,811
    
    
    $
    23,032Accrued payroll and payroll-related expenses
    
    
    15,486
    
    
    
    14,373Accrued expenses
    
    
    18,684
    
    
    
    22,384Current portion of long-term debt and capital leases
    
    
    20,441
    
    
    
    16,868Total current liabilities
    
    
    75,422
    
    
    
    76,657Long-term debt and capital leases
    
    
    253,371
    
    
    
    249,265Total liabilities
    
    
    328,793
    
    
    
    325,922Commitments and contingencies (Note 6)Stockholders equity:Preferred stock, $.001 par value, 25,000,000 shares
authorized; zero and zero shares issued and
outstanding
    
    
    
    
    
    
    Common stock, $.001 par value, 150,000,000 shares
authorized; 44,598,815 and 44,664,645 shares issued
and outstanding
    
    
    44
    
    
    
    45Additional paid-in capital
    
    
    56,825
    
    
    
    58,247Deferred stock-based compensation
    
    
    (1,903
    )
    
    
    (1,762
    )Retained earnings
    
    
    58,561
    
    
    
    72,936Accumulated other comprehensive income
    
    
    42
    
    
    
    142Total stockholders equity
    
    
    113,569
    
    
    
    129,608Total liabilities and stockholders equity
    
    $
    442,362
    
    
    $
    455,530
  3




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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF OPERATIONS
 (Dollars in thousands, except per share data)
 (Unaudited)
 Three Months EndedMarch 31,2005
    
    
    2006Reprographics services
    
    $
    87,695
    
    
    $
    104,817Facilities management
    
    
    19,172
    
    
    
    22,932Equipment and supplies sales
    
    
    9,599
    
    
    
    13,053Total net sales
    
    
    116,466
    
    
    
    140,802Cost of sales
    
    
    68,141
    
    
    
    80,443Gross profit
    
    
    48,325
    
    
    
    60,359Selling, general and administrative expenses
    
    
    26,881
    
    
    
    31,486Amortization of intangible assets
    
    
    384
    
    
    
    785Income from operations
    
    
    21,060
    
    
    
    28,088Other income
    
    
    118
    
    
    
    329Interest expense, net
    
    
    (8,324
    )
    
    
    (4,459
    )Income before income tax provision (benefit)
    
    
    12,854
    
    
    
    23,958Income tax provision (benefit)
    
    
    (22,709
    )
    
    
    9,583Net income
    
    $
    35,563
    
    
    $
    14,375Earnings per share:Basic
    
    $
    0.87
    
    
    $
    0.32Diluted
    
    $
    0.85
    
    
    $
    0.32Weighted average common shares outstanding:Basic
    
    
    40,749,833
    
    
    
    44,624,748Diluted
    
    
    41,901,845
    
    
    
    45,185,691
  4




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AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENT OF
 CHANGES IN STOCKHOLDERS EQUITY
 (Dollars in thousands)
 (Unaudited)
 AccumulatedCommon Stock
    
    
    Additional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    TotalMembers
    
    
    
    
    
    
    Par
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    StockholdersDeficit
    
    
    Shares
    
    
    Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance at December 31, 2005
    
    $
    
    
    
    
    44,598,815
    
    
    $
    44
    
    
    $
    56,825
    
    
    $
    (1,903
    )
    
    $
    58,561
    
    
    $
    42
    
    
    $
    113,569Amortization of stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    141
    
    
    
    
    
    
    
    
    
    
    
    141Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    319Issuance of common stock under
Employee Stock Purchase Plan
    
    
    
    
    
    
    6,530
    
    
    
    
    
    
    
    190
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    190Stock options exercised
    
    
    
    
    
    
    59,300
    
    
    
    1
    
    
    
    303
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    304Tax benefit from exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    610Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,375
    
    
    
    
    
    
    
    14,375Fair value adjustment of
derivatives, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    100
    
    
    
    100Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,475Balance at March 31, 2006
    
    $
    
    
    
    
    44,664,645
    
    
    $
    45
    
    
    $
    58,247
    
    
    $
    (1,762
    )
    
    $
    72,936
    
    
    $
    142
    
    
    $
    129,608
  5




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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
 (Unaudited)
 Three Months EndedMarch 31,2005
    
    
    2006Operating activitiesNet income
    
    $
    35,563
    
    
    $
    14,375Adjustments to reconcile net income to net cash provided
by operating activities:Accretion of yield on redeemable preferred member units
    
    
    449
    
    
    
    Allowance for doubtful accounts
    
    
    335
    
    
    
    187Reserve for inventory obsolescence
    
    
    52
    
    
    
    (95
    )Depreciation
    
    
    4,046
    
    
    
    4,850Amortization of intangible assets
    
    
    384
    
    
    
    785Amortization of deferred financing costs
    
    
    418
    
    
    
    71Write-off of deferred financing costs
    
    
    1,503
    
    
    
    38Stock-based compensation
    
    
    167
    
    
    
    460Deferred income taxes
    
    
    (26,646
    )
    
    
    926Changes in operating assets and liabilities, net of effect of business acquisitions:Accounts receivable, net
    
    
    (8,287
    )
    
    
    (10,713
    )Inventory
    
    
    (167
    )
    
    
    (195
    )Prepaid expenses and other assets
    
    
    (912
    )
    
    
    861Accounts payable and accrued expenses
    
    
    (4,346
    )
    
    
    3,628Net cash provided by operating activities
    
    
    2,559
    
    
    
    15,178Investing activitiesCapital expenditures
    
    
    (1,303
    )
    
    
    (1,489
    )Payments for businesses acquired, net of cash acquired and including other cash
payments associated with acquisitions
    
    
    (1,273
    )
    
    
    (7,331
    )Other
    
    
    (71
    )
    
    
    (43
    )Net cash used in investing activities
    
    
    (2,647
    )
    
    
    (8,863
    )Financing activitiesProceeds from initial public offering, net of underwriting discounts
    
    
    92,690
    
    
    
    Direct costs of initial public offering
    
    
    (1,463
    )
    
    
    Proceeds from stock option exercises
    
    
    
    
    
    
    303Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    
    
    
    
    190Redemption of preferred member units
    
    
    (28,263
    )
    
    
    Excess tax benefit related to stock options exercised
    
    
    
    
    
    
    610Proceeds from borrowings under debt agreements
    
    
    13,000
    
    
    
    5,000Payments on long-term debt under debt agreements
    
    
    (73,616
    )
    
    
    (23,856
    )Payment of loan fees
    
    
    (123
    )
    
    
    (127
    )Member distributions
    
    
    (8,244
    )
    
    
    Net cash used in financing activities
    
    
    (6,019
    )
    
    
    (17,880
    )Net decrease in cash and cash equivalents
    
    
    (6,107
    )
    
    
    (11,565
    )Cash and cash equivalents at beginning of period
    
    
    13,826
    
    
    
    22,643Cash and cash equivalents at end of period
    
    $
    7,719
    
    
    $
    11,078Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    1,052
    
    
    $
    5,995Issuance of subordinated notes in connection with the acquisition of businesses
    
    $
    245
    
    
    $
    4,585Change in fair value of derivatives
    
    $
    308
    
    
    $
    (100
    )
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AMERICAN REPROGRAPHICS COMPANY
 
 Notes to Consolidated Financial Statements
 (Unaudited)
 1.
    
    Description of Business and Basis of Presentation
  Reorganization and Initial Public Offering
   Basis of Presentation
    7




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2.
    
    Stock-Based Compensation
       8




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Three Months EndedMarch 31, 2005(Dollars in thousands,except per share data)Net income:As reported
    
    $
    35,563Equity-based employee compensation cost, net of related tax effects, included in as reported net income
    
    
    99Equity-based employee compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value method had been applied
    
    
    (139
    )Proforma
    
    $
    35,523Basic earnings per share:As reported
    
    $
    0.87Equity-based employee compensation cost, net of related tax effects, included in as reported net income
    
    
    Equity-based employee compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value method had been applied
    
    
    Proforma
    
    $
    0.87Diluted earnings per share:As reported
    
    $
    0.85Equity-based employee compensation cost, net of related tax effects, included in as reported net income
    
    
    Equity-based employee compensation cost, net of related tax effects, that would have been included in
the determination of net income if the fair value method had been applied
    
    
    Proforma
    
    $
    0.85
  st
  9




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Three Months EndedMarch 31, 2006Weighted AverageExercise
    
    
    Aggregate IntrinsicShares
    
    
    Price
    
    
    ValueOutstanding at beginning of the period
    
    
    1,422,585
    
    
    $
    5.90Granted
    
    
    495,000
    
    
    
    25.95Exercised
    
    
    (59,300
    )
    
    
    (5.07
    )Outstanding at end of the period
    
    
    1,858,285
    
    
    $
    11.27
    
    
    $
    41,721Exercisable at end of the period
    
    
    1,045,113
    
    
    $
    5.86
    
    
    $
    30,132
   Options Outstanding
    
    
    
    
    
    Options ExercisableWeighted AverageRemaining
    
    Weighted Average
    
    
    
    
    
    Weighted AverageContractual Life
    
    Exercise
    
    
    
    
    
    ExerciseRange of Exercise Prices
    
    Shares
    
    (in years)
    
    Price
    
    Shares
    
    Price$4.75  $5.58
    
    
    1,036,900
    
    
    
    5.5
    
    
    $
    5.10
    
    
    
    926,800
    
    
    $
    5.08$5.61  $6.85
    
    
    277,115
    
    
    
    8.2
    
    
    
    5.91
    
    
    
    78,283
    
    
    
    5.84$23.85  $25.95
    
    
    544,270
    
    
    
    9.9
    
    
    
    25.76
    
    
    
    40,030
    
    
    
    23.85$4.75  $25.95
    
    
    1,858,285
    
    
    
    7.3
    
    
    
    11.27
    
    
    
    1,045,113
    
    
    
    5.86
 3.
    
    Employee Stock Purchase Plan
   10




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4.
    
    Long-Term Debt
  December 31,
    
    
    March 31,2005
    
    
    2006(Dollars in thousands)Borrowings from senior secured First
Priority  Revolving Credit Facility;
variable interest payable quarterly (0%
interest rate at March 31, 2006); any
unpaid principal and interest due
December 18, 2008
    
    $
    5,000
    
    
    $
    Borrowings from senior secured First
Priority  Term Loan Credit Facility;
variable interest payable quarterly
(7.25% and 9.25% interest rate at
December 31, 2005 and March 31, 2006,
respectively); principal payable in
varying quarterly installments; any
unpaid principal and interest due June
18, 2009
    
    
    230,423
    
    
    
    221,472Various subordinated notes payable;
interest ranging from 5% to 8%;
principal and interest payable monthly
through March 2011
    
    
    11,262
    
    
    
    14,778Various capital leases; interest rates
ranging to 15.9%; principal and interest
payable monthly through May 2012
    
    
    27,127
    
    
    
    29,883273,812
    
    
    
    266,133Less current portion
    
    
    (20,441
    )
    
    
    16,868$
    253,371
    
    
    $
    249,265
     5.
    
    Income Taxes
  11




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6.  Commitments and Contingencies
  Nine MonthsEndingDecember 31,
    
    
    Twelve Months Ending December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter(Dollars in thousands)Debt obligations
    
    $
    4,310
    
    
    $
    5,271
    
    
    $
    116,425
    
    
    $
    107,474
    
    
    $
    2,380
    
    
    $
    390Capital lease obligations
    
    
    8,341
    
    
    
    9,782
    
    
    
    6,861
    
    
    
    2,932
    
    
    
    1,430
    
    
    
    537Operating lease obligations
    
    
    21,936
    
    
    
    22,019
    
    
    
    15,127
    
    
    
    9,924
    
    
    
    6,908
    
    
    
    16,824Total
    
    $
    34,587
    
    
    $
    37,072
    
    
    $
    138,413
    
    
    $
    120,330
    
    
    $
    10,718
    
    
    $
    17,751
 Operating Leases.
 Contingent Transaction Consideration.
 State Sales Tax.
 Louis Frey case.
 12




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7.
    
    Comprehensive Income
  Three Months EndedMarch 31,2005
    
    
    2006(Unaudited)(Dollars in thousands)Net income
    
    $
    35,563
    
    
    $
    14,375Increase (Decrease) in fair value of
financial derivative instruments, net of
tax effects
    
    
    308
    
    
    
    100Comprehensive income
    
    $
    35,871
    
    
    $
    14,475
 8.
    
    Earnings Per Share
   Three Months EndedMarch 31,2005
    
    
    2006(Unaudited)Weighted average common shares outstanding during the period  basic
    
    
    40,749,833
    
    
    
    44,624,748Effect of dilutive stock options
    
    
    898,349
    
    
    
    560,943Effect of dilutive warrants
    
    
    253,663
    
    
    
    Weighted average common shares outstanding during the period  diluted
    
    
    41,901,845
    
    
    
    45,185,691
 9.
    
    Recent Accounting Pronouncements
   13




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10.
    
    Goodwill and Other Intangibles
   GoodwillBalance at December 31, 2005
    
    $
    245,271Additions
    
    
    3,034Balance at March 31, 2006
    
    $
    248,305
    2006
    
    $
    2,6632007
    
    
    3,1022008
    
    
    2,7662009
    
    
    2,4032010
    
    
    2,152Thereafter
    
    
    13,392$
    26,478
 
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our consolidated financial
statements and the related notes and other financial information appearing elsewhere in this report
as well as Managements
 14




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Discussion and Analysis included in our 2005 Annual Report on Form 10-K and our final
prospectus for our recent secondary offering dated April 5, 2006.
 In addition to historical information, this report on Form 10-Q contains certain
forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of
1934, as amended. These statements relate to future events or future financial performance, and
include statements regarding the Companys business strategy, timing of, and plans for, the
introduction of new products and enhancements, future sales, market growth and direction,
competition, market share, revenue growth, operating margins and profitability. All forward-looking
statements involve known and unknown risks, uncertainties and other factors that may cause our
actual results, levels of activity, performance or achievements to be materially different from any
future results, levels of activity, performance or achievements, expressed or implied, by these
forward looking statements. In some cases, you can identify forward-looking statements by
terminology such as may, will, should, expects, intends, plans, anticipates,
believes, estimates, predicts, potential, continue, or the negative of these terms or
other comparable terminology. These statements are only predictions and are based upon information
available to the Company as of the date of this report. We undertake no on-going obligation, other
than that imposed by law, to update these forward-looking statements.
 Actual results could differ materially from our current expectations. Factors that could cause
actual results to differ materially from current expectations, include among others, the following:
(i) general economic conditions, such as changes in non-residential construction spending, GDP
growth, interest rates, employment rates, office vacancy rates, and government expenditures; (ii) a
downturn in the architectural, engineering and construction industry; (iii) competition in our
industry and innovation by our competitors; (iv) our failure to anticipate and adapt to future
changes in our industry; (v) failure to continue to develop and introduce new products and services
successfully; (vi) our inability to charge for value-added services we provide our customers to
offset potential declines in print volume; (vii) adverse developments affecting the State of
California, including general and local economic conditions, macroeconomic trends, and natural
disasters; (viii) our inability to successfully identify and manage our acquisitions or open new
branches; (ix) our inability to successfully monitor and manage the business operations of our
subsidiaries and uncertainty regarding the effectiveness of financial and management policies and
procedures we established to improve accounting controls; (x) adverse developments concerning our
relationships with certain key vendors; and (xi) the loss of key personnel and qualified technical
staff.
 Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements.
These forward-looking statements are subject to numerous risks and uncertainties, including, but
not limited to, the risks and uncertainties described in the Risk Factors section of our 2005
Annual Report on Form 10-K . You are urged to carefully consider these factors. All forward-looking
statements attributable to us are expressly qualified in their entirety by the foregoing cautionary
statements.
 Executive Summary
   
    
    Document management;
    
    Document distribution & logistics;
    
    Print-on-demand; and
    
    On-site services, frequently referred to as facilities management, or FMs, (any
combination of the above services supplied at a customers location).
  15




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Evaluating our Performance.
 
    
    Creating consistent, profitable growth;
    
    Maintaining our industry leadership as measured by our geographical footprint,
market share and revenue generation;
    
    Continuing to develop and invest in our products, services, and technology to
meet the changing needs of our customers;
    
    Maintaining the lowest cost structure in the industry; and
    
    Maintaining a flexible capital structure that provides for both responsible debt
service and pursuit of acquisitions and other high-return investments.
 Primary Financial Measures
 Net Sales .
    16




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Costs and Expenses .
    Operating Cash .
 Other Common Financial Measures .
 
    
    Net income and earnings per share;
    
    EBIT;
    
    EBITDA;
    
    Revenue per geographical region;
    
    Material costs as a percentage of net sales; and
 17




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##### Table of Contents




    
    Days Sales Outstanding/Days Sales Inventory/Days Accounts Payable.
   Measuring revenue by other means.
   
    
    East Coast  includes New England and the Mid-Atlantic states;
    
    Midwest  includes Canadian operations as well as commonly considered Midwestern states;
    
    Southern  our broadest region, spans Florida to Texas and north into Las Vegas;
    
    Southern California  with the Monterey Bay area as a rough dividing line;
    
    Northern California  includes Silicon Valley, the San Francisco Bay Area and
the Greater Sacramento/Central Valley area; and
    
    Pacific Northwest  includes Oregon, Washington and British Columbia, Canada.
 
 Acquisitions.
 18




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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 locations.2.
    
    Branch/Fold-in Acquisitions. These are equivalent to our opening a new or greenfield
branch. They support an outlying portion of a larger market and rely on a larger
centralized production facility nearby for management, load balancing, for
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.
  Recent Developments.
  Economic
Factors Affecting Financial Performance.
 19




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##### Table of Contents



Non-GAAP Measures
      
    
    They do not reflect our cash expenditures, or future requirements for capital
expenditures and contractual commitments;
    
    They do not reflect changes in, or cash requirements for, our working capital
needs;
    
    They do not reflect the significant interest expense, or the cash requirements
necessary, to service interest or principal payments on our debt;
    
    Although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and EBITDA
does not reflect any cash requirements for such replacements; and
    
    Other companies, including companies in our industry, may calculate these
measures differently than we do, limiting their usefulness as comparative measures.
  20




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##### Table of Contents



Three months Ended March 312005
    
    
    2006(Dollars in thousands)Cash flows provided by operating activities
    
    $
    2,559
    
    
    $
    15,178Changes in operating assets and liabilities
    
    
    13,712
    
    
    
    6,419Non-cash (expenses) income, including
    
    
    19,292
    
    
    
    (7,222
    )depreciation and amortization
Income tax provision (benefit)
    
    
    (22,709
    )
    
    
    9,583Interest expense
    
    
    8,324
    
    
    
    4,459EBIT
    
    
    21,178
    
    
    
    28,417Depreciation and amortization
    
    
    4,430
    
    
    
    5,635EBITDA
    
    
    25,608
    
    
    
    34,052Interest expense
    
    
    (8,324
    )
    
    
    (4,459
    )Income tax
(provision) benefit
    
    
    22,709
    
    
    
    (9,583
    )Depreciation and amortization
    
    
    (4,430
    )
    
    
    (5,635
    )Net income
    
    $
    35,563
    
    
    $
    14,375
  Three Months Ended March 31,2005
    
    
    2006(Dollars in thousands)Net income
    
    $
    35,563
    
    
    $
    14,375Interest expense, net
    
    
    8,324
    
    
    
    4,459Income tax
provision (benefit)
    
    
    (22,709
    )
    
    
    9,583EBIT
    
    
    21,178
    
    
    
    28,417Depreciation and amortization
    
    
    4,430
    
    
    
    5,635EBITDA
    
    $
    25,608
    
    
    $
    34,052
  Three Months Ended March 31,2005
    
    
    2006Net income margin
    
    
    30.5
    %
    
    
    10.2
    %Interest expense, net
    
    
    7.2
    %
    
    
    3.2
    %Income tax
provision (benefit)
    
    
    (19.5
    )%
    
    
    6.8
    %EBIT margin
    
    
    18.2
    %
    
    
    20.2
    %Depreciation and amortization
    
    
    3.8
    %
    
    
    4.0
    %EBITDA margin
    
    
    22.0
    %
    
    
    24.2
    %
 21




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##### Table of Contents



Results of Operations
  As a Percentage of Net SalesThree Months ended March 31,2005
    
    
    2006Net sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    58.5
    
    
    
    57.1Gross profit
    
    
    41.5
    
    
    
    42.9Selling, general and administrative expenses
    
    
    23.1
    
    
    
    22.4Amortization of intangibles
    
    
    0.3
    
    
    
    0.6Income from operations
    
    
    18.1
    
    
    
    19.9Other income
    
    
    (0.1
    )
    
    
    (0.2
    )Interest expense, net
    
    
    7.2
    
    
    
    3.1Income before income tax provision
    
    
    11.0
    
    
    
    17.0Income tax provision (benefit)
    
    
    (19.5
    )
    
    
    6.8Net income
    
    
    30.5
    %
    
    
    10.2
    %
 Three Months Ended March 31, 2006 Compared to Three Months Ended March 31, 2005
 Three Months EndedMarch 31,
    
    
    Increase (decrease)2005
    
    
    2006
    
    
    (In dollars)
    
    
    (Percent)(In millions)Reprographics services
    
    $
    87.7
    
    
    $
    104.8
    
    
    $
    17.1
    
    
    
    19.5
    %Facilities management
    
    
    19.2
    
    
    
    22.9
    
    
    
    3.7
    
    
    
    19.3Equipment and supplies sales
    
    
    9.6
    
    
    
    13.1
    
    
    
    3.5
    
    
    
    36.5Total net sales
    
    $
    116.5
    
    
    $
    140.8
    
    
    $
    24.3
    
    
    
    20.9
    %Gross profit
    
    $
    48.3
    
    
    $
    60.4
    
    
    $
    12.1
    
    
    
    25.1
    %Selling, general and administrative expenses
    
    $
    26.9
    
    
    $
    31.5
    
    
    $
    4.6
    
    
    
    17.1
    %Amortization of intangibles
    
    $
    0.4
    
    
    $
    0.8
    
    
    $
    0.4
    
    
    
    100.0
    %Interest expense, net
    
    $
    8.3
    
    
    $
    4.5
    
    
    $
    (3.8
    )
    
    
    (45.8
    )%Income taxes
    
    $
    (22.7
    )
    
    $
    9.6
    
    
    $
    32.3
    
    
    
    142.3
    %Net income
    
    $
    35.6
    
    
    $
    14.4
    
    
    $
    (21.2
    )
    
    
    (59.6
    )%EBITDA
    
    $
    25.6
    
    
    $
    34.1
    
    
    $
    8.5
    
    
    
    33.2
    %
 Net Sales.
  Reprographics services.
 Facilities management
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Equipment and supplies sales.
 Gross Profit.
    Selling, General and Administrative Expenses.
  23




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##### Table of Contents



Amortization of Intangibles.
  Interest Expense, Net.
  Income Taxes.
  Net Income.
  EBITDA.
  Impact of Inflation
  Liquidity and Capital Resources
  24




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##### Table of Contents



Three Months Ended March 31,2005
    
    
    2006(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    2,559
    
    
    $
    15,178Net cash used in investing activities
    
    $
    (2,647
    )
    
    $
    (8,863
    )Net cash used in financing activities
    
    $
    (6,019
    )
    
    $
    (17,880
    )
 Operating Activities
  Investing Activities
  Financing Activities
   March 312005
    
    
    2006(Dollars in thousands)Cash and cash equivalents
    
    $
    7,719
    
    
    $
    11,078Working capital
    
    
    28,950
    
    
    
    35,887Borrowings from senior secured credit facilities
    
    
    243,751
    
    
    
    221,472Other debt obligations
    
    
    18,583
    
    
    
    44,661Total debt obligations
    
    $
    262,334
    
    
    $
    266,133
  25




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Debt Obligations
 Senior Secured Credit Facilities.
 The Wall
Street Journal
   26




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##### Table of Contents



Seller Notes.
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
  Nine Months EndingDecember 31,
    
    
    Twelve Months Ending December 31,2006
    
    
    2007
    
    
    2008
    
    
    2009
    
    
    2010
    
    
    Thereafter(Dollars in thousands)Debt obligations
    
    $
    4,310
    
    
    $
    5,271
    
    
    $
    116,425
    
    
    $
    107,474
    
    
    $
    2,380
    
    
    $
    390Capital lease obligations
    
    
    8,341
    
    
    
    9,782
    
    
    
    6,861
    
    
    
    2,932
    
    
    
    1,430
    
    
    
    537Operating lease obligations
    
    
    21,936
    
    
    
    22,019
    
    
    
    15,127
    
    
    
    9,924
    
    
    
    6,908
    
    
    
    16,824Total
    
    $
    34,587
    
    
    $
    37,072
    
    
    $
    138,413
    
    
    $
    120,330
    
    
    $
    10,718
    
    
    $
    17,751
 Operating Leases.
 Contingent Transaction Consideration.
 State Sales Tax.
 Impact of Conversion from an LLC to a Corporation
  27




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##### Table of Contents



Income Taxes
   Three Months Ended March 31,2005
    
    
    2006(In thousands, except per unit amounts)Net income (loss)
    
    $
    35,563
    
    
    $
    14,375Deferred income tax benefit due to Reorganization
    
    
    (27,701
    )
    
    
    Unaudited pro forma incremental income tax
provision
    
    
    (333
    )
    
    
    Unaudited pro forma net income (loss)
    
    $
    7,529
    
    
    $
    14,375Earnings per share:Basic
    
    $
    0.18
    
    
    $
    0.32Diluted
    
    $
    0.18
    
    
    $
    0.32
 Critical Accounting Policies
  Goodwill and Other Intangible Assets
  28




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##### Table of Contents



Allowance for Doubtful Accounts
  Commitments and Contingencies
  Recent Accounting Pronouncements
   29




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosure About Market Risk
     
 Item 4. Controls and Procedures
 Disclosure Controls and Procedures
   Changes in Internal Controls Over Financial Reporting
  30




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##### Table of Contents



PART II
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 6. Exhibits
  Number
    
    Description31.1
    
    Certification by the Chief Executive Officer pursuant to Rules
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. *31.2
    
    Certification by the Chief Financial Officer pursuant to Rules
13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. *32.1
    
    Certification by the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. *
 
 *
    
    Filed herewith 31




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##### Table of Contents



SIGNATURE PAGE
  AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Sathiyamurthy ChandramohanChairman of the Board of Directors andChief Executive OfficerBy:
    /s/ Mark W. LeggChief Financial Officer and Secretary 32