##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 (Mark One)
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended June 30, 2008
 Or
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number: 001-32407
 AMERICAN REPROGRAPHICS COMPANY
  Delaware
    
    20-1700361(State or other jurisdiction of
    
    (I.R.S. Employerincorporation or organization)
    
    Identification No.)
 1981 N. Broadway, Suite 385,
Walnut Creek, California 94596
(925) 949-5100
(Address, including zip code, and telephone number, including area code, of
Registrants principal executive offices)
 þ o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended June 30, 2008
Table of Contents
 PART I Financial InformationItem 1. Financial Statements (unaudited)Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Income for the three and six months ended June 30, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the six months ended June 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    27Item 4. Controls and Procedures
    
    
    27PART IIItem 1. Legal Proceedings
    
    
    28Item 1A. Risk Factors
    
    
    28Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 4. Submission of Matters to a Vote of Security Holders
    
    
    28Item 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Index to Exhibits
    
    
    31Exhibit 10.1Exhibit 10.2Exhibit 10.3Exhibit 10.4Exhibit 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
(Dollars in thousands, except per share data)
(Unaudited)
 June 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    16,782
    
    
    $
    24,802Restricted cash
    
    
    13,549
    
    
    
    937Accounts receivable, net of allowances of $6,269 and $5,092
at June 30, 2008 and December 31, 2007, respectively
    
    
    101,754
    
    
    
    97,934Inventories, net
    
    
    10,973
    
    
    
    11,233Deferred income taxes
    
    
    5,792
    
    
    
    5,791Prepaid expenses and other current assets
    
    
    11,782
    
    
    
    10,234Total current assets
    
    
    160,632
    
    
    
    150,931Property and equipment, net
    
    
    87,985
    
    
    
    84,634Goodwill
    
    
    387,862
    
    
    
    382,519Other intangible assets, net
    
    
    81,712
    
    
    
    86,349Deferred financing costs, net
    
    
    4,204
    
    
    
    5,170Deferred income taxes
    
    
    7,319
    
    
    
    10,710Other assets
    
    
    2,193
    
    
    
    2,298Total assets
    
    $
    731,907
    
    
    $
    722,611Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    32,588
    
    
    $
    35,659Accrued payroll and payroll-related expenses
    
    
    20,919
    
    
    
    19,293Accrued expenses
    
    
    20,980
    
    
    
    22,030Current portion of long-term debt and capital leases
    
    
    52,589
    
    
    
    69,254Total current liabilities
    
    
    127,076
    
    
    
    146,236Long-term debt and capital leases
    
    
    310,484
    
    
    
    321,013Other long-term liabilities
    
    
    3,338
    
    
    
    3,711Total liabilities
    
    
    440,898
    
    
    
    470,960Commitments and contingencies (Note 9)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;
45,654,726 and 45,561,773 shares issued and outstanding
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    83,073
    
    
    
    81,153Deferred stock-based compensation
    
    
    (415
    )
    
    
    (673
    )Retained earnings
    
    
    216,466
    
    
    
    179,092Accumulated other comprehensive income
    
    
    (452
    )
    
    
    (258
    )298,718
    
    
    
    259,360Less cost of common stock in treasury, 447,654 shares in 2008
and 2007
    
    
    7,709
    
    
    
    7,709Total stockholders equity
    
    
    291,009
    
    
    
    251,651Total liabilities and stockholders equity
    
    $
    731,907
    
    
    $
    722,611
   3




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Reprographics services
    
    $
    139,211
    
    
    $
    133,257
    
    
    $
    281,707
    
    
    $
    253,035Facilities management
    
    
    31,209
    
    
    
    28,984
    
    
    
    60,760
    
    
    
    55,340Equipment and supplies sales
    
    
    14,521
    
    
    
    15,542
    
    
    
    29,917
    
    
    
    29,621Total net sales
    
    
    184,941
    
    
    
    177,783
    
    
    
    372,384
    
    
    
    337,996Cost of sales
    
    
    105,853
    
    
    
    102,967
    
    
    
    213,693
    
    
    
    195,401Gross profit
    
    
    79,088
    
    
    
    74,816
    
    
    
    158,691
    
    
    
    142,595Selling, general and administrative expenses
    
    
    39,499
    
    
    
    34,499
    
    
    
    79,020
    
    
    
    68,733Amortization of intangible assets
    
    
    2,813
    
    
    
    2,451
    
    
    
    6,001
    
    
    
    4,196Income from operations
    
    
    36,776
    
    
    
    37,866
    
    
    
    73,670
    
    
    
    69,666Other income
    
    
    (43
    )
    
    
    
    
    
    
    (245
    )
    
    
    Interest expense, net
    
    
    6,559
    
    
    
    6,642
    
    
    
    13,705
    
    
    
    11,802Income before income tax provision
    
    
    30,260
    
    
    
    31,224
    
    
    
    60,210
    
    
    
    57,864Income tax provision
    
    
    11,384
    
    
    
    11,612
    
    
    
    22,836
    
    
    
    21,407Net income
    
    $
    18,876
    
    
    $
    19,612
    
    
    $
    37,374
    
    
    $
    36,457Earnings per share:Basic
    
    $
    0.42
    
    
    $
    0.43
    
    
    $
    0.83
    
    
    $
    0.80Diluted
    
    $
    0.42
    
    
    $
    0.43
    
    
    $
    0.82
    
    
    $
    0.80Weighted average common shares outstanding:Basic
    
    
    45,051,449
    
    
    
    45,455,828
    
    
    
    45,048,244
    
    
    
    45,400,380Diluted
    
    
    45,441,766
    
    
    
    45,880,187
    
    
    
    45,407,309
    
    
    
    45,832,024
   4




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONDENSED CONSOLIDATED STATEMENT OF
CHANGES IN STOCKHOLDERS EQUITY
(Dollars in thousands, except per share)
(Unaudited)
 AccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    Other
    
    
    
    
    
    
    TotalCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Retained
    
    
    Comprehensive
    
    
    Common Stock in
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income
    
    
    Treasury
    
    
    EquityBalance at December 31, 2007
    
    
    45,561,773
    
    
    $
    46
    
    
    $
    81,153
    
    
    
    ($673
    )
    
    $
    179,092
    
    
    
    ($258
    )
    
    
    ($7,709
    )
    
    $
    251,651Stock-based compensation
    
    
    78,250
    
    
    
    
    
    
    
    1,771
    
    
    
    258
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,029Issuance of common stock under
Employee Stock Purchase Plan
    
    
    1,703
    
    
    
    
    
    
    
    25
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    25Stock Options exercised
    
    
    13,000
    
    
    
    
    
    
    
    70
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    70Tax benefit from exercise of stock options
    
    
    
    
    
    
    
    
    
    
    54
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,374
    
    
    
    
    
    
    
    
    
    
    
    37,374Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (191
    )
    
    
    
    
    
    
    (191
    )Fair value adjustment of
derivatives, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    (3
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,180Balance at June 30, 2008
    
    
    45,654,726
    
    
    $
    46
    
    
    $
    83,073
    
    
    
    ($415
    )
    
    $
    216,466
    
    
    
    ($452
    )
    
    
    ($7,709
    )
    
    $
    291,009
   5




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
 Six Months EndedJune 30,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    37,374
    
    
    $
    36,457Adjustments to reconcile net income to net cash provided by operating activities:Allowance for doubtful accounts
    
    
    1,909
    
    
    
    438Depreciation
    
    
    18,332
    
    
    
    14,191Amortization of intangible assets
    
    
    6,001
    
    
    
    4,196Amortization of deferred financing costs
    
    
    600
    
    
    
    215Stock-based compensation
    
    
    2,029
    
    
    
    1,569Excess tax benefit related to stock options exercised
    
    
    (54
    )
    
    
    (1,534
    )Deferred income taxes
    
    
    2,239
    
    
    
    1,840Write-off of deferred financing costs
    
    
    313
    
    
    
    Litigation charge
    
    
    
    
    
    
    407Other non-cash items, net
    
    
    (439
    )
    
    
    (292
    )Changes in operating assets and liabilities, net of effect of
business acquisitions:Accounts receivable
    
    
    (5,088
    )
    
    
    (9,775
    )Inventory
    
    
    726
    
    
    
    (362
    )Prepaid expenses and other assets
    
    
    (987
    )
    
    
    (2,583
    )Accounts payable and accrued expenses
    
    
    (1,470
    )
    
    
    598Net cash provided by operating activities
    
    
    61,485
    
    
    
    45,365Cash flows from investing activitiesCapital expenditures
    
    
    (4,332
    )
    
    
    (5,232
    )Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions
    
    
    (5,478
    )
    
    
    (86,546
    )Restricted cash
    
    
    (12,612
    )
    
    
    Other
    
    
    785
    
    
    
    283Net cash used in investing activities
    
    
    (21,637
    )
    
    
    (91,495
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    70
    
    
    
    1,080Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    25
    
    
    
    52Excess tax benefit related to stock options exercised
    
    
    54
    
    
    
    1,534Proceeds from borrowings under debt agreements
    
    
    
    
    
    
    50,000Payments on long-term debt agreements and capital leases
    
    
    (25,254
    )
    
    
    (12,952
    )Net (repayments) borrowings under revolving credit facility
    
    
    (22,000
    )
    
    
    11,629Payment of loan fees
    
    
    (726
    )
    
    
    (429
    )Net cash (used in) provided by financing activities
    
    
    (47,831
    )
    
    
    50,914Effect of foreign currency translation on cash balances
    
    
    (37
    )
    
    
    Net change in cash and cash equivalents
    
    
    (8,020
    )
    
    
    4,784Cash and cash equivalents at beginning of period
    
    
    24,802
    
    
    
    11,642Cash and cash equivalents at end of period
    
    $
    16,782
    
    
    $
    16,426Supplemental disclosure of cash flow informationNoncash investing and financing activitiesCapital lease obligations incurred
    
    $
    18,353
    
    
    $
    19,589Issuance of subordinated notes in connection with the
acquisition of businesses
    
    $
    1,817
    
    
    $
    4,550Change in fair value of derivatives, net of tax effect
    
    $
    (3
    )
    
    $
    66
   6




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##### Table of Contents



AMERICAN REPROGRAPHICS COMPANY
 
 Notes to Consolidated Financial Statements
(Unaudited)
 1. Description of Business and Basis of Presentation
  Basis of Presentation
     Reclassifications
  2. Stock-Based Compensation
    7




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##### Table of Contents



3. Employee Stock Purchase Plan
   4. Acquisitions
   Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2007
    
    
    2007(Dollars in thousands, except per share data)Net sales
    
    $
    197,355
    
    
    $
    387,672Net income
    
    
    20,257
    
    
    
    37,506Earnings per share  basic
    
    $
    0.45
    
    
    $
    0.83Earnings per share  diluted
    
    $
    0.44
    
    
    $
    0.82
  8




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##### Table of Contents



5. Goodwill and Other Intangibles Resulting from Business Acquisitions
 Business Combinations
  Goodwill(Dollars in thousands)Balance at December 31, 2007
    
    $
    382,519Additions
    
    
    5,443Translation adjustment
    
    
    (100
    )Balance at June 30, 2008
    
    $
    387,862
    June 30, 2008
    
    
    December 31, 2007Gross
    
    
    
    
    
    
    Net
    
    
    Gross
    
    
    
    
    
    
    NetCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    Carrying
    
    
    Accumulated
    
    
    CarryingAmount
    
    
    Amortization
    
    
    Amount
    
    
    Amount
    
    
    Amortization
    
    
    Amount(Dollars in thousands)
    
    
    (Dollars in thousands)Amortizable other intangible assets:Customer relationships
    
    $
    88,401
    
    
    $
    24,047
    
    
    $
    64,354
    
    
    $
    87,045
    
    
    $
    19,098
    
    
    $
    67,947Trade names and trademarks
    
    
    18,359
    
    
    
    1,628
    
    
    
    16,731
    
    
    
    18,359
    
    
    
    848
    
    
    
    17,511Non-Compete Agreements
    
    
    1,278
    
    
    
    651
    
    
    
    627
    
    
    
    1,278
    
    
    
    387
    
    
    
    891$
    108,038
    
    
    $
    26,326
    
    
    $
    81,712
    
    
    $
    106,682
    
    
    $
    20,333
    
    
    $
    86,349
  2008
    
    $
    5,4532009
    
    
    10,0832010
    
    
    8,9552011
    
    
    8,1112012
    
    
    7,298Thereafter
    
    
    41,812$
    81,712
  9




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##### Table of Contents



6. Long-Term Debt
  June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)(Dollars in thousands)Borrowings from senior secured First Priority  Revolving Credit
Facility; variable interest payable quarterly (weighted average 7.2%
interest
rate at December 31, 2007); any unpaid principal and interest
due December 6, 2012
    
    $
    
    
    
    $
    22,000Borrowings from senior secured First Priority  Term Loan Credit Facility;
interest payable quarterly (weighted average 5.9% and 6.9%
interest rate at June 30, 2008 and December 31, 2007, respectively);
principal payable in varying quarterly installments;
any unpaid principal and interest due December 6, 2012
    
    
    268,126
    
    
    
    275,000Various subordinated notes payable; weighted average 6.3% interest rate
at June 30, 2008 and December 31, 2007; principal
and interest payable monthly through June 2012
    
    
    33,437
    
    
    
    38,082Various capital leases; weighted average 9.3% and 8.8% interest rate
at June 30, 2008 and December 31, 2007, respectively;
principal and interest payable monthly through March 2014
    
    
    61,510
    
    
    
    55,185363,073
    
    
    
    390,267Less current portion
    
    
    (52,589
    )
    
    
    (69,254
    )$
    310,484
    
    
    $
    321,013
        10




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##### Table of Contents



7. Fair Value Measurements
 Fair Value Measurements Accounting
for Leases
       At Fair Value as of June 30, 2008Quoted Prices inActive Markets for
    
    
    Significant Other
    
    
    SignificantIdentical Liabilities
    
    
    Observable Inputs
    
    
    Unobservable Inputs(Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total(Dollars in thousands)Recurring Fair Value MeasuresInterest rate swap
    
    $
    0
    
    
    $
    1,604
    
    
    $
    0
    
    
    $
    1,604
   8. Income Taxes
    11




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9. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Chinese Joint Venture Agreement.
 FIN 48 Liability.
 10. Comprehensive Income
  Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)
    
    
    (Dollars in thousands)Net income
    
    $
    18,876
    
    
    $
    19,612
    
    
    $
    37,374
    
    
    $
    36,457Foreign currency translation adjustments
    
    
    49
    
    
    
    344
    
    
    
    (191
    )
    
    
    215Decrease in fair value of financial
derivative instruments, net of tax
effects
    
    
    5,418
    
    
    
    107
    
    
    
    (3
    )
    
    
    66Comprehensive income
    
    $
    24,343
    
    
    $
    20,063
    
    
    $
    37,180
    
    
    $
    36,738
  11. Earnings per Share
 Earnings per Share
  12




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Weighted average common shares outstanding during the period  basic
    
    
    45,051,449
    
    
    
    45,455,828
    
    
    
    45,048,244
    
    
    
    45,400,380Effect of dilutive stock options
    
    
    390,317
    
    
    
    424,359
    
    
    
    359,065
    
    
    
    431,644Weighted average common shares outstanding during the period  diluted
    
    
    45,441,766
    
    
    
    45,880,187
    
    
    
    45,407,309
    
    
    
    45,832,024
 12. Recent Accounting Pronouncements
 Fair Value Measurements.
 Effective Date of FASB
Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 Business Combinations
 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 Accounting for Derivative Instruments and
Hedging Activities
  13




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##### Table of Contents



Determination of the Useful
Life of Intangible Assets Goodwill and Other Intangible Assets
 The Hierarchy of Generally Accepted Accounting
Principles The Meaning of Present Fairly in Conformity with Generally Accepted
Accounting Principles.
 Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities. Earnings per Share.
  14




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our consolidated financial
statements and the related notes and other financial information appearing elsewhere in this
report as well as Managements Discussion and Analysis included in our 2007 Annual Report on
Form 10-K and our 2008 first quarter report on Form 10-Q dated May 9, 2008.
 In addition to historical information, this report on Form 10-Q contains certain forward-looking
statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
These statements relate to future events or future financial performance, and include statements
regarding the Companys business strategy, timing of, and plans for, the introduction of new
products and enhancements, future sales, market growth and direction, competition, market share,
revenue growth, operating margins and profitability. All forward-looking statements involve
known and unknown risks, uncertainties and other factors that may cause our actual results,
levels of activity, performance or achievements to be materially different from any future
results, levels of activity, performance or achievements, expressed or implied, by these forward
looking statements. In some cases, you can identify forward-looking statements by terminology
such as may, will, should, expects, intends, plans, anticipates, believes,
estimates, predicts, potential, continue, or the negative of these terms or other
comparable terminology. These statements are only predictions and are based upon information
available to the Company as of the date of this report. We undertake no on-going obligation,
other than that imposed by law, to update these forward-looking statements.
 Actual results could differ materially from our current expectations. Factors that could cause
actual results to differ materially from current expectations, include among others, the
following: (i) general economic conditions, such as changes in construction spending, GDP
growth, interest rates, employment rates, office vacancy rates, and government expenditures;
(ii) a downturn in the architectural, engineering and construction industry; (iii) competition
in our industry and innovation by our competitors; (iv) our failure to anticipate and adapt to
future changes in our industry; (v) failure to continue to develop and introduce new products
and services successfully; (vi) our inability to charge for value-added services we provide our
customers to offset potential declines in print volume; (vii) adverse developments affecting the
State of California, including general and local economic conditions, macroeconomic trends, and
natural disasters; (viii) our inability to successfully complete 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 2007
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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##### Table of Contents



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




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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 are equivalent to our opening a new
or greenfield branch. They support an outlying portion of a larger
market and rely on a larger centralized production facility nearby for
strategic management, load balancing, 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 Measures
      17




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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.
 10-K.
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)
    
    
    (Dollars in thousands)Cash flows provided by operating activities
    
    $
    41,137
    
    
    $
    33,959
    
    
    $
    61,485
    
    
    $
    45,365Changes in operating assets and liabilities
    
    
    (6,096
    )
    
    
    (2,711
    )
    
    
    6,819
    
    
    
    12,121Non-cash (expenses) income, including
depreciation and amortization
    
    
    (16,165
    )
    
    
    (11,636
    )
    
    
    (30,930
    )
    
    
    (21,029
    )Income tax provision
    
    
    11,384
    
    
    
    11,612
    
    
    
    22,836
    
    
    
    21,407Interest expense
    
    
    6,559
    
    
    
    6,642
    
    
    
    13,705
    
    
    
    11,802EBIT
    
    $
    36,819
    
    
    $
    37,866
    
    
    $
    73,915
    
    
    $
    69,666Depreciation and amortization
    
    
    12,216
    
    
    
    10,029
    
    
    
    24,333
    
    
    
    18,387EBITDA
    
    $
    49,035
    
    
    $
    47,895
    
    
    $
    98,248
    
    
    $
    88,053Interest expense
    
    
    (6,559
    )
    
    
    (6,642
    )
    
    
    (13,705
    )
    
    
    (11,802
    )Income tax provision
    
    
    (11,384
    )
    
    
    (11,612
    )
    
    
    (22,836
    )
    
    
    (21,407
    )Depreciation and amortization
    
    
    (12,216
    )
    
    
    (10,029
    )
    
    
    (24,333
    )
    
    
    (18,387
    )Net income
    
    $
    18,876
    
    
    $
    19,612
    
    
    $
    37,374
    
    
    $
    36,457
  Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)
    
    
    (Dollars in thousands)Net income
    
    $
    18,876
    
    
    $
    19,612
    
    
    $
    37,374
    
    
    $
    36,457Interest expense, net
    
    
    6,559
    
    
    
    6,642
    
    
    
    13,705
    
    
    
    11,802Income tax provision
    
    
    11,384
    
    
    
    11,612
    
    
    
    22,836
    
    
    
    21,407EBIT
    
    $
    36,819
    
    
    $
    37,866
    
    
    $
    73,915
    
    
    $
    69,666Depreciation and amortization
    
    
    12,216
    
    
    
    10,029
    
    
    
    24,333
    
    
    
    18,387EBITDA
    
    $
    49,035
    
    
    $
    47,895
    
    
    $
    98,248
    
    
    $
    88,053
  18




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Three Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007 (1)
    
    
    2008 (1)
    
    
    2007Net income margin
    
    
    10.2
    %
    
    
    11.0
    %
    
    
    10.0
    %
    
    
    10.8
    %Interest expense, net
    
    
    3.5
    
    
    
    3.7
    
    
    
    3.7
    
    
    
    3.5Income tax provision
    
    
    6.2
    
    
    
    6.5
    
    
    
    6.1
    
    
    
    6.3EBIT margin
    
    
    19.9
    
    
    
    21.3
    
    
    
    19.8
    
    
    
    20.6Depreciation and amortization
    
    
    6.6
    
    
    
    5.6
    
    
    
    6.5
    
    
    
    5.5EBITDA margin
    
    
    26.5
    %
    
    
    26.9
    %
    
    
    26.4
    %
    
    
    26.1
    %
 (1)
    
    column does not foot due to rounding Results of Operations for the Three and Six Months Ended June 30, 2008 and 2007
  As Percentage of Net Sales
    
    
    As Percentage of Net SalesThree Months Ended June 30,
    
    
    Six Months Ended June 30,2008
    
    
    2007
    
    

2008
(1)
    
    
    2007Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    57.2
    
    
    
    57.9
    
    
    
    57.4
    
    
    
    57.8Gross profit
    
    
    42.8
    
    
    
    42.1
    
    
    
    42.6
    
    
    
    42.2Selling, general and administrative expenses
    
    
    21.4
    
    
    
    19.4
    
    
    
    21.2
    
    
    
    20.3Amortization of intangibles
    
    
    1.5
    
    
    
    1.4
    
    
    
    1.6
    
    
    
    1.2Income from operations
    
    
    19.9
    
    
    
    21.3
    
    
    
    19.8
    
    
    
    20.6Other income
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    Interest expense, net
    
    
    3.5
    
    
    
    3.7
    
    
    
    3.7
    
    
    
    3.5Income before income tax provision
    
    
    16.4
    
    
    
    17.6
    
    
    
    16.2
    
    
    
    17.1Income tax provision
    
    
    6.2
    
    
    
    6.5
    
    
    
    6.1
    
    
    
    6.3Net income
    
    
    10.2
    %
    
    
    11.0
    %
    
    
    10.0
    %
    
    
    10.8
    %
 (1)
    
    column does not foot due to rounding Three and Six Months Ended June 30, 2008 Compared to Three and Six Months Ended June 30, 2007
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Six Months EndedJune 30,
    
    
    Increase (decrease)
    
    
    June 30,
    
    
    Increase (decrease)2008
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)
    
    
    2008
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)(In millions)
    
    
    (In millions)Reprographics services
    
    $
    139.2
    
    
    $
    133.3
    
    
    $
    5.9
    
    
    
    4.4
    %
    
    $
    281.7
    
    
    $
    253.0
    
    
    $
    28.7
    
    
    
    11.3
    %Facilities management
    
    
    31.2
    
    
    
    29.0
    
    
    
    2.2
    
    
    
    7.6
    %
    
    
    60.8
    
    
    
    55.3
    
    
    
    5.5
    
    
    
    9.9
    %Equipment and supplies
sales
    
    
    14.5
    
    
    
    15.5
    
    
    
    (1.0
    )
    
    
    -6.5
    %
    
    
    29.9
    
    
    
    29.6
    
    
    
    0.3
    
    
    
    1.0
    %Total net sales
    
    
    184.9
    
    
    
    177.8
    
    
    
    7.1
    
    
    
    4.0
    %
    
    
    372.4
    
    
    
    338.0
    
    
    
    34.4
    
    
    
    10.2
    %Gross profit
    
    
    79.1
    
    
    
    74.8
    
    
    
    4.3
    
    
    
    5.7
    %
    
    
    158.7
    
    
    
    142.6
    
    
    
    16.1
    
    
    
    11.3
    %Selling, general and
administrative expenses
    
    
    39.5
    
    
    
    34.5
    
    
    
    5.0
    
    
    
    14.5
    %
    
    
    79.0
    
    
    
    68.7
    
    
    
    10.3
    
    
    
    15.0
    %Amortization of
intangibles
    
    
    2.8
    
    
    
    2.5
    
    
    
    0.3
    
    
    
    12.0
    %
    
    
    6.0
    
    
    
    4.2
    
    
    
    1.8
    
    
    
    42.9
    %Interest expense, net
    
    
    6.6
    
    
    
    6.6
    
    
    
    0.0
    
    
    
    0.0
    %
    
    
    13.7
    
    
    
    11.8
    
    
    
    1.9
    
    
    
    16.1
    %Income taxes
    
    
    11.4
    
    
    
    11.6
    
    
    
    (0.2
    )
    
    
    -1.7
    %
    
    
    22.8
    
    
    
    21.4
    
    
    
    1.4
    
    
    
    6.5
    %Net Income
    
    
    18.9
    
    
    
    19.6
    
    
    
    (0.7
    )
    
    
    -3.6
    %
    
    
    37.4
    
    
    
    36.5
    
    
    
    0.9
    
    
    
    2.5
    %EBITDA
    
    
    49.0
    
    
    
    47.9
    
    
    
    1.1
    
    
    
    2.3
    %
    
    
    98.2
    
    
    
    88.1
    
    
    
    10.1
    
    
    
    11.5
    %
  19




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##### Table of Contents



Net Sales.
    Reprographics services.
  Facilities management
 Equipment and supplies sales.
 Gross Profit.
    20




---



##### Table of Contents



Selling, General and Administrative Expenses.
     Amortization of Intangibles.
   Other Income.
  Interest Expense, Net.
   21




---



##### Table of Contents



Income Taxes.
  Net Income.
  EBITDA.
  Impact of Inflation
  Liquidity and Capital Resources
  Six Months Ended June 30,2008
    
    
    2007(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    61,485
    
    
    $
    45,365Net cash used in investing activities
    
    $
    (21,637
    )
    
    $
    (91,495
    )Net cash (used in) provided by financing activities
    
    $
    (47,831
    )
    
    $
    50,914
 Operating Activities
   22




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##### Table of Contents



Investing Activities
  Financing Activities
   June 30, 2008
    
    
    December 31, 2007(Unaudited)(Dollars in thousands)Cash and cash equivalents
    
    $
    16,782
    
    
    $
    24,802Working capital
    
    
    33,556
    
    
    
    4,695Borrowings from senior secured credit facilities
    
    
    268,126
    
    
    
    297,000Other debt obligations
    
    
    94,947
    
    
    
    93,267Total debt obligations
    
    $
    363,073
    
    
    $
    390,267
    Debt Obligations
 Senior Secured Credit Facilities.
   23




---



##### Table of Contents



Seller Notes.
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 Chinese Joint Venture Agreement.
 FIN 48 Liability.
  24




---



##### Table of Contents



Critical Accounting Policies
   Recent Accounting Pronouncements
      25




---



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26




---



##### 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
   27




---



##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 4. Submission of Matters to a Vote of Security Holders
   VOTE FOR
    
    
    VOTE WITHHELDSathiyamurthy Chandramohan
    
    
    42,541,108
    
    
    
    157,724Kumarakulasingam Suriyakumar
    
    
    42,607,241
    
    
    
    91,591Thomas J. Formolo
    
    
    42,523,231
    
    
    
    175,601Dewitt Kerry McCluggage
    
    
    42,608,676
    
    
    
    90,156Mark W. Mealy
    
    
    42,607,472
    
    
    
    91,360Manuel Perez de la Mesa
    
    
    42,608,835
    
    
    
    89,997Eriberto R. Scocimara
    
    
    42,208,805
    
    
    
    490,027
   For:
    
    
    42,677,245Against:
    
    
    17,648Abstain:
    
    
    3,939
    28




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##### Table of Contents



Item 6. Exhibits
  Number
    
    Description10.1
    
    
    First Amendment to Executive
Employment Agreement between
American Reprographics Company
and Mr. Jonathan Mather,
effective April 17, 2008.*10.2
    
    
    First Amendment to Executive
Employment Agreement between
American Reprographics Company
and Mr. Rahul K. Roy, effective
April 17, 2008.*10.3
    
    

Amendment
No. 2 to American
Reprographics Company 2005
Employee Stock Purchase Plan
dated May 2, 2008.*10.4
    
    
    Consulting Agreement between
Sathiyamurthy Chandramohan and
American Reprographics Company,
dated July 24, 2008.*31.1
    
    
    Certification by the Chief
Executive Officer pursuant to
Rules 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934.
*31.2
    
    
    Certification by the Chief
Financial Officer pursuant to
Rules 13a-14(a)/15d-14(a) of the
Securities Exchange Act of 1934.
*32.1
    
    
    Certification by the Chief
Executive Officer and Chief
Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002. *
 *
    
    Filed herewith  29




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##### Table of Contents



SIGNATURE PAGE
  AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Kumarakulasingam SuriyakumarPresident and Chief Executive OfficerBy:
    /s/ Jonathan R. MatherChief Financial Officer and Secretary  30




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##### Table of Contents



EXHIBIT INDEX
 Number
    
    Description10.1
    
    
    First Amendment to Executive Employment Agreement between American
Reprographics Company and Mr. Jonathan Mather, effective April 17,
2008.*10.2
    
    
    First Amendment to Executive Employment Agreement between American
Reprographics Company and Mr. Rahul K. Roy, effective April 17,
2008.*10.3
    
    

Amendment
No. 2 to American Reprographics Company 2005 Employee
Stock Purchase Plan dated May 2, 2008.*10.4
    
    
    Consulting Agreement between Sathiyamurthy Chandramohan and
American Reprographics Company, dated July 24, 2008*31.1
    
    
    Certification by the Chief Executive Officer pursuant to
Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. *31.2
    
    
    Certification by the Chief Financial Officer pursuant to
Rules 13a-14(a)/15d-14(a) of the Securities Exchange Act of 1934. *32.1
    
    
    Certification by the Chief Executive Officer and Chief Financial
Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002. *
 *
    
    Filed herewith  31