##### 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, 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 September 30, 2008
Table of Contents
  
 PART I Financial InformationItem 1. Financial Statements (unaudited)Consolidated Balance Sheets as of September 30, 2008 and December 31, 2007
    
    
    3Consolidated Statements of Income for the three and nine months ended September 30, 2008 and 2007
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the nine months ended September 30, 2008
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 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 6. Exhibits
    
    
    29SIGNATURES
    
    
    30Index 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
 (Dollars in thousands, except per share data)
(Unaudited)
 September 30,
    
    
    December 31,2008
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    34,629
    
    
    $
    24,802Restricted cash
    
    
    1,959
    
    
    
    937Accounts receivable, net of allowances of $5,566 and $5,092
at September 30, 2008 and December 31, 2007, respectively
    
    
    97,179
    
    
    
    97,934Inventories, net
    
    
    12,388
    
    
    
    11,233Deferred income taxes
    
    
    5,793
    
    
    
    5,791Prepaid expenses and other current assets
    
    
    16,156
    
    
    
    10,234Total current assets
    
    
    168,104
    
    
    
    150,931Property and equipment, net
    
    
    89,268
    
    
    
    84,634Goodwill
    
    
    397,188
    
    
    
    382,519Other intangible assets, net
    
    
    87,176
    
    
    
    86,349Deferred financing costs, net
    
    
    3,868
    
    
    
    5,170Deferred income taxes
    
    
    3,488
    
    
    
    10,710Other assets
    
    
    2,156
    
    
    
    2,298Total assets
    
    $
    751,248
    
    
    $
    722,611Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    31,307
    
    
    $
    35,659Accrued payroll and payroll-related expenses
    
    
    17,331
    
    
    
    19,293Accrued expenses
    
    
    22,012
    
    
    
    22,030Current portion of long-term debt and capital leases
    
    
    56,715
    
    
    
    69,254Total current liabilities
    
    
    127,365
    
    
    
    146,236Long-term debt and capital leases
    
    
    307,263
    
    
    
    321,013Other long-term liabilities
    
    
    4,189
    
    
    
    3,711Minority interest (Note 4)
    
    
    6,057
    
    
    
    Total liabilities
    
    
    444,874
    
    
    
    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;
45,673,535 and 45,561,773 shares issued and outstanding
    
    
    46
    
    
    
    46Additional paid-in capital
    
    
    84,231
    
    
    
    81,153Deferred stock-based compensation
    
    
    (302
    )
    
    
    (673
    )Retained earnings
    
    
    231,533
    
    
    
    179,092Accumulated other comprehensive income
    
    
    (1,425
    )
    
    
    (258
    )314,083
    
    
    
    259,360Less cost of common stock in treasury, 447,654 shares in 2008
and 2007
    
    
    7,709
    
    
    
    7,709Total stockholders equity
    
    
    306,374
    
    
    
    251,651Total liabilities and stockholders equity
    
    $
    751,248
    
    
    $
    722,611
   3




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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands, except per share data)
(Unaudited)
 Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Reprographics services
    
    $
    127,455
    
    
    $
    131,655
    
    
    $
    409,162
    
    
    $
    384,690Facilities management
    
    
    30,977
    
    
    
    29,241
    
    
    
    91,737
    
    
    
    84,581Equipment and supplies sales
    
    
    16,153
    
    
    
    15,316
    
    
    
    46,070
    
    
    
    44,937Total net sales
    
    
    174,585
    
    
    
    176,212
    
    
    
    546,969
    
    
    
    514,208Cost of sales
    
    
    104,570
    
    
    
    103,548
    
    
    
    318,263
    
    
    
    298,948Gross profit
    
    
    70,015
    
    
    
    72,664
    
    
    
    228,706
    
    
    
    215,260Selling, general and administrative expenses
    
    
    38,800
    
    
    
    37,175
    
    
    
    117,820
    
    
    
    105,908Amortization of intangible assets
    
    
    2,987
    
    
    
    2,423
    
    
    
    8,988
    
    
    
    6,619Income from operations
    
    
    28,228
    
    
    
    33,066
    
    
    
    101,898
    
    
    
    102,733Other income
    
    
    (55
    )
    
    
    
    
    
    
    (300
    )
    
    
    Interest expense, net
    
    
    6,180
    
    
    
    6,872
    
    
    
    19,885
    
    
    
    18,675Income
before minority interest and income tax provision
    
    
    22,103
    
    
    
    26,194
    
    
    
    82,313
    
    
    
    84,058Minority interest
    
    
    (5
    )
    
    
    
    
    
    
    (5
    )
    
    
    Income tax provision
    
    
    7,041
    
    
    
    10,249
    
    
    
    29,877
    
    
    
    31,656Net income
    
    $
    15,067
    
    
    $
    15,945
    
    
    $
    52,441
    
    
    $
    52,402Earnings per share:Basic
    
    $
    0.33
    
    
    $
    0.35
    
    
    $
    1.16
    
    
    $
    1.15Diluted
    
    $
    0.33
    
    
    $
    0.35
    
    
    $
    1.15
    
    
    $
    1.14Weighted average common shares outstanding:Basic
    
    
    45,066,654
    
    
    
    45,486,012
    
    
    
    45,054,425
    
    
    
    45,429,238Diluted
    
    
    45,413,747
    
    
    
    45,865,453
    
    
    
    45,413,948
    
    
    
    45,848,177
   4




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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
    
    
    
    
    
    
    
    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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    102Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,441
    
    
    
    
    
    
    
    
    
    
    
    52,441Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (387
    )
    
    
    
    
    
    
    (387
    )Fair value adjustment of
derivative, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (780
    )
    
    
    
    
    
    
    (780
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,274Balance at September 30, 2008
    
    
    45,673,535
    
    
    $
    46
    
    
    $
    84,231
    
    
    $
    (302
    )
    
    $
    231,533
    
    
    $
    (1,425
    )
    
    $
    (7,709
    )
    
    $
    306,374
   5




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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
(Unaudited)
 Nine Months EndedSeptember 30,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    52,441
    
    
    $
    52,402Adjustments to reconcile net income to net cash provided by operating activities:Allowance for doubtful accounts
    
    
    3,164
    
    
    
    738Depreciation
    
    
    28,193
    
    
    
    22,268Amortization of intangible assets
    
    
    8,988
    
    
    
    6,619Amortization of deferred financing costs
    
    
    936
    
    
    
    357Minority interest
    
    
    (5
    )
    
    
    Stock-based compensation
    
    
    3,143
    
    
    
    2,578Excess tax benefit related to stock options exercised
    
    
    (102
    )
    
    
    (1,541
    )Deferred income taxes
    
    
    6,498
    
    
    
    2,278Write-off of deferred financing costs
    
    
    313
    
    
    
    Litigation charge
    
    
    
    
    
    
    612Other non-cash items, net
    
    
    (401
    )
    
    
    (374
    )Changes in operating assets and liabilities, net of effect of business acquisitions:
    
    
    
    
    
    
    Accounts receivable
    
    
    1,900
    
    
    
    (10,837
    )Inventory
    
    
    1,251
    
    
    
    (488
    )Prepaid expenses and other assets
    
    
    (4,795
    )
    
    
    654Accounts payable and accrued expenses
    
    
    (6,261
    )
    
    
    (4,146
    )Net cash provided by operating activities
    
    
    95,263
    
    
    
    71,120Cash flows from investing activitiesCapital expenditures
    
    
    (6,359
    )
    
    
    (7,112
    )Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions
    
    
    (18,216
    )
    
    
    (97,831
    )Restricted cash
    
    
    (1,022
    )
    
    
    Other
    
    
    946
    
    
    
    345Net cash used in investing activities
    
    
    (24,651
    )
    
    
    (104,598
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    177
    
    
    
    1,098Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    27
    
    
    
    82Excess tax benefit related to stock options exercised
    
    
    102
    
    
    
    1,541Proceeds from borrowings under debt agreements
    
    
    
    
    
    
    50,000Payments on long-term debt agreements and capital leases
    
    
    (38,507
    )
    
    
    (20,154
    )Net (repayments) borrowings under revolving credit facility
    
    
    (22,000
    )
    
    
    9,629Payment of loan fees
    
    
    (726
    )
    
    
    (433
    )Net cash (used in) provided by financing activities
    
    
    (60,927
    )
    
    
    41,763Effect of foreign currency translation on cash balances
    
    
    142
    
    
    
    230Net change in cash and cash equivalents
    
    
    9,827
    
    
    
    8,515Cash and cash equivalents at beginning of period
    
    
    24,802
    
    
    
    11,642Cash and cash equivalents at end of period
    
    $
    34,629
    
    
    $
    20,157Supplemental disclosure of cash flow informationNoncash investing and financing activitiesCapital lease obligations incurred
    
    $
    26,611
    
    
    $
    28,738Issuance of subordinated notes in connection with the
acquisition of businesses
    
    $
    7,653
    
    
    $
    7,342Change in fair value of derivative, net of tax effect
    
    $
    (780
    )
    
    $
    (95
    )Contribution from minority owner
    
    $
    6,062
    
    
    $
    
   6




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




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##### Table of Contents



2. Stock-Based Compensation
      3. Employee Stock Purchase Plan
   4. Acquisitions
     8




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Business Combinations
   Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands, except per share data)Net sales
    
    $
    175,848
    
    
    $
    197,436
    
    
    $
    561,498
    
    
    $
    603,267Net income
    
    
    15,112
    
    
    
    16,524
    
    
    
    52,943
    
    
    
    54,737Earnings per share  basic
    
    $
    0.34
    
    
    $
    0.36
    
    
    $
    1.18
    
    
    $
    1.20Earnings per share  diluted
    
    $
    0.33
    
    
    $
    0.36
    
    
    $
    1.17
    
    
    $
    1.19
 5. Goodwill and Other Intangibles Resulting from Business Acquisitions
 Business Combinations
 Goodwill(Dollars inthousands)Balance at December 31, 2007
    
    $
    382,519Additions
    
    
    14,884Translation adjustment
    
    
    (215
    )Balance at September 30, 2008
    
    $
    397,188
     9




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September 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
    
    $
    94,965
    
    
    $
    26,643
    
    
    $
    68,322
    
    
    $
    87,045
    
    
    $
    19,098
    
    
    $
    67,947Trade names and trademarks
    
    
    20,235
    
    
    
    1,876
    
    
    
    18,359
    
    
    
    18,359
    
    
    
    848
    
    
    
    17,511Non-Compete Agreements
    
    
    1,278
    
    
    
    783
    
    
    
    495
    
    
    
    1,278
    
    
    
    387
    
    
    
    891$
    116,478
    
    
    $
    29,302
    
    
    $
    87,176
    
    
    $
    106,682
    
    
    $
    20,333
    
    
    $
    86,349
  2008
    
    $
    2,9732009
    
    
    11,1152010
    
    
    9,9072011
    
    
    8,9662012
    
    
    8,084Thereafter
    
    
    46,131$
    87,176
 6. Long-Term Debt
  September 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 5.4% and 6.9%
interest rate at September 30, 2008 and December 31, 2007,
respectively);
principal payable in varying quarterly installments;
any unpaid principal and interest due December 6, 2012
    
    
    264,687
    
    
    
    275,000Various subordinated notes payable; weighted average 6.2% and 6.3%
interest
rate at September 30, 2008 and December 31, 2007, respectively;
principal
and interest payable monthly through June 2012
    
    
    35,847
    
    
    
    38,082Various capital leases; weighted average 9.3% and 8.8% interest rate
at September 30, 2008 and December 31, 2007, respectively;
principal and interest payable monthly through April 2014
    
    
    63,444
    
    
    
    55,185363,978
    
    
    
    390,267Less current portion
    
    
    (56,715
    )
    
    
    (69,254
    )$
    307,263
    
    
    $
    321,013
  10




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7. Fair Value Measurements
 Fair Value Measurements Accounting for Leases
       11




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At Fair Value as of September 30, 2008Quoted Prices in
    
    
    
    
    
    
    SignificantActive Markets for
    
    
    Significant Other
    
    
    UnobservableIdentical Liabilities
    
    
    Observable Inputs
    
    
    InputsRecurring Fair Value Measures
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)
    
    
    Total(Dollars in thousands)Interest rate swap
    
    $
    
    
    
    $
    2,848
    
    
    $
    
    
    
    $
    2,848
   8. Income Taxes
    9. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 FIN 48 Liability.
 Legal Proceedings.
  12




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10. Comprehensive Income
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)(Dollars in thousands)
    
    
    (Dollars in thousands)Net income
    
    $
    15,067
    
    
    $
    15,945
    
    
    $
    52,441
    
    
    $
    52,402Foreign currency translation adjustments
    
    
    (196
    )
    
    
    394
    
    
    
    (387
    )
    
    
    609Decrease in fair value of financial
derivative instrument, net of tax
effects
    
    
    (777
    )
    
    
    (161
    )
    
    
    (780
    )
    
    
    (95
    )Comprehensive income
    
    $
    14,094
    
    
    $
    16,178
    
    
    $
    51,274
    
    
    $
    52,916
  11. Earnings per Share
 Earnings per Share
  Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Unaudited)
    
    
    (Unaudited)Weighted average common shares outstanding during the period  basic
    
    
    45,066,654
    
    
    
    45,486,012
    
    
    
    45,054,425
    
    
    
    45,429,238Effect of dilutive stock options
    
    
    347,093
    
    
    
    379,441
    
    
    
    359,523
    
    
    
    418,939Weighted average common shares outstanding during the period 
diluted
    
    
    45,413,747
    
    
    
    45,865,453
    
    
    
    45,413,948
    
    
    
    45,848,177
 12. Recent Accounting Pronouncements
 Fair Value Measurements.
 Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 Accounting
for Leases
  13




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##### Table of Contents



Effective Date of FASB
Statement No. 157
 Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active
 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
 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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##### Table of Contents



Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion should be read in conjunction with our consolidated financial
statements and the related notes 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, and our 2008
second quarter report on Form 10-Q dated August 8, 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, credit availability, 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.
     16




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##### Table of Contents



Acquisitions.
    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.
 Form 10-K.
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)
    
    
    (Dollars in thousands)Cash flows provided by operating activities
    
    $
    33,778
    
    
    $
    25,755
    
    
    $
    95,263
    
    
    $
    71,120Changes in operating assets and liabilities
    
    
    1,086
    
    
    
    2,695
    
    
    
    7,905
    
    
    
    14,817Non-cash (expenses) income, including
depreciation and amortization
    
    
    (19,797
    )
    
    
    (12,505
    )
    
    
    (50,727
    )
    
    
    (33,535
    )Income tax provision
    
    
    7,041
    
    
    
    10,249
    
    
    
    29,877
    
    
    
    31,656Interest expense
    
    
    6,180
    
    
    
    6,872
    
    
    
    19,885
    
    
    
    18,675EBIT
    
    $
    28,288
    
    
    $
    33,066
    
    
    $
    102,203
    
    
    $
    102,733Depreciation and amortization
    
    
    12,848
    
    
    
    10,500
    
    
    
    37,181
    
    
    
    28,887EBITDA
    
    $
    41,136
    
    
    $
    43,566
    
    
    $
    139,384
    
    
    $
    131,620Interest expense
    
    
    (6,180
    )
    
    
    (6,872
    )
    
    
    (19,885
    )
    
    
    (18,675
    )Income tax provision
    
    
    (7,041
    )
    
    
    (10,249
    )
    
    
    (29,877
    )
    
    
    (31,656
    )Depreciation and amortization
    
    
    (12,848
    )
    
    
    (10,500
    )
    
    
    (37,181
    )
    
    
    (28,887
    )Net income
    
    $
    15,067
    
    
    $
    15,945
    
    
    $
    52,441
    
    
    $
    52,402
  18




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##### Table of Contents



Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008
    
    
    2007
    
    
    2008
    
    
    2007(Dollars in thousands)
    
    
    (Dollars in thousands)Net income
    
    $
    15,067
    
    
    $
    15,945
    
    
    $
    52,441
    
    
    $
    52,402Interest expense, net
    
    
    6,180
    
    
    
    6,872
    
    
    
    19,885
    
    
    
    18,675Income tax provision
    
    
    7,041
    
    
    
    10,249
    
    
    
    29,877
    
    
    
    31,656EBIT
    
    $
    28,288
    
    
    $
    33,066
    
    
    $
    102,203
    
    
    $
    102,733Depreciation and amortization
    
    
    12,848
    
    
    
    10,500
    
    
    
    37,181
    
    
    
    28,887EBITDA
    
    $
    41,136
    
    
    $
    43,566
    
    
    $
    139,384
    
    
    $
    131,620
  Three Months Ended September 30,
    
    
    Nine Months Ended September 30,2008 (1)
    
    
    2007
    
    
    2008
    
    
    2007Net income margin
    
    
    8.6
    %
    
    
    9.1
    %
    
    
    9.6
    %
    
    
    10.2
    %Interest expense, net
    
    
    3.5
    
    
    
    3.9
    
    
    
    3.6
    
    
    
    3.6Income tax provision
    
    
    4.0
    
    
    
    5.8
    
    
    
    5.5
    
    
    
    6.2EBIT margin
    
    
    16.2
    
    
    
    18.8
    
    
    
    18.7
    
    
    
    20.0Depreciation and amortization
    
    
    7.4
    
    
    
    5.9
    
    
    
    6.8
    
    
    
    5.6EBITDA margin
    
    
    23.6
    %
    
    
    24.7
    %
    
    
    25.5
    %
    
    
    25.6
    %
 (1)
    
    column does not foot due to rounding Results of Operations for the Three and Nine Months Ended September 30, 2008 and 2007
  As Percentage of Net Sales
    
    
    As Percentage of Net SalesThree Months Ended September 30,
    
    
    Nine Months Ended September 30,2008 (1)
    
    
    2007
    
    
    2008 (1)
    
    
    2007Net Sales
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    59.9
    
    
    
    58.8
    
    
    
    58.2
    
    
    
    58.1Gross profit
    
    
    40.1
    
    
    
    41.2
    
    
    
    41.8
    
    
    
    41.9Selling, general and administrative
expenses
    
    
    22.2
    
    
    
    21.0
    
    
    
    21.5
    
    
    
    20.6Amortization of intangibles
    
    
    1.7
    
    
    
    1.4
    
    
    
    1.6
    
    
    
    1.3Income from operations
    
    
    16.2
    
    
    
    18.8
    
    
    
    18.6
    
    
    
    20.0Other income
    
    
    
    
    
    
    
    
    
    
    (0.1
    )
    
    
    Interest expense, net
    
    
    3.5
    
    
    
    3.9
    
    
    
    3.6
    
    
    
    3.6Income before minority interest and
income tax provision
    
    
    12.7
    
    
    
    14.9
    
    
    
    15.0
    
    
    
    16.4Minority interest
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Income tax provision
    
    
    4.0
    
    
    
    5.8
    
    
    
    5.5
    
    
    
    6.2Net income
    
    
    8.6
    %
    
    
    9.1
    %
    
    
    9.6
    %
    
    
    10.2
    %
 (1)
    
    column does not foot due to rounding  19




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##### Table of Contents



Three and Nine Months Ended September 30, 2008 Compared to Three and Nine Months Ended
September 30, 2007
 Three Months Ended
    
    
    
    
    
    
    
    
    
    
    Nine Months EndedSeptember 30,
    
    
    Increase (decrease)
    
    
    September 30,
    
    
    Increase (decrease)2008 (1)
    
    
    2007 (1)
    
    
    (In dollars)
    
    
    (Percent)
    
    
    2008 (1)
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)(In millions)

    
    
    
    
    
    
    (In millions)Reprographics services
    
    $
    127.5
    
    
    $
    131.7
    
    
    $
    (4.2
    )
    
    
    -3.2
    %
    
    $
    409.2
    
    
    $
    384.7
    
    
    $
    24.5
    
    
    
    6.4
    %Facilities management
    
    
    31.0
    
    
    
    29.2
    
    
    
    1.8
    
    
    
    6.2
    %
    
    
    91.7
    
    
    
    84.6
    
    
    
    7.1
    
    
    
    8.4
    %Equipment and supplies sales
    
    
    16.2
    
    
    
    15.3
    
    
    
    0.9
    
    
    
    5.9
    %
    
    
    46.1
    
    
    
    44.9
    
    
    
    1.2
    
    
    
    2.7
    %Total net sales
    
    
    174.6
    
    
    
    176.2
    
    
    
    (1.6
    )
    
    
    -0.9
    %
    
    
    547.0
    
    
    
    514.2
    
    
    
    32.8
    
    
    
    6.4
    %Gross profit
    
    
    70.0
    
    
    
    72.7
    
    
    
    (2.7
    )
    
    
    -3.7
    %
    
    
    228.7
    
    
    
    215.3
    
    
    
    13.4
    
    
    
    6.2
    %Selling, general and
administrative expenses
    
    
    38.8
    
    
    
    37.2
    
    
    
    1.6
    
    
    
    4.3
    %
    
    
    117.8
    
    
    
    105.9
    
    
    
    11.9
    
    
    
    11.2
    %Amortization of intangibles
    
    
    3.0
    
    
    
    2.4
    
    
    
    0.6
    
    
    
    25.0
    %
    
    
    9.0
    
    
    
    6.6
    
    
    
    2.4
    
    
    
    36.4
    %Interest expense, net
    
    
    6.2
    
    
    
    6.9
    
    
    
    (0.7
    )
    
    
    -10.1
    %
    
    
    19.9
    
    
    
    18.7
    
    
    
    1.2
    
    
    
    6.4
    %Income taxes
    
    
    7.0
    
    
    
    10.2
    
    
    
    (3.2
    )
    
    
    -31.4
    %
    
    
    29.9
    
    
    
    31.7
    
    
    
    (1.8
    )
    
    
    -5.7
    %Net Income
    
    
    15.1
    
    
    
    15.9
    
    
    
    (0.8
    )
    
    
    -5.0
    %
    
    
    52.4
    
    
    
    52.4
    
    
    
    0.0
    
    
    
    0.0
    %EBITDA
    
    
    41.1
    
    
    
    43.6
    
    
    
    (2.5
    )
    
    
    -5.7
    %
    
    
    139.4
    
    
    
    131.6
    
    
    
    7.8
    
    
    
    5.9
    %
 (1)
    
    column does not foot due to rounding Net Sales.
    Reprographics services.
     20




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##### Table of Contents



Facilities management
 Equipment and supplies sales.
 Gross Profit.
    Selling, General and Administrative Expenses.
   21




---



##### Table of Contents



Amortization of Intangibles.
   Other Income.
  Minority Interest.
  Interest Expense, Net.
   Income Taxes.
    22




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##### Table of Contents



Net Income.
  EBITDA.
  Impact of Inflation
  Liquidity and Capital Resources
  Nine Months EndedSeptember 30,2008
    
    
    2007(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    95,263
    
    
    $
    71,120Net cash used in investing activities
    
    $
    (24,651
    )
    
    $
    (104,598
    )Net cash (used in) provided by financing activities
    
    $
    (60,927
    )
    
    $
    41,763
 Operating Activities
  Investing Activities
   23




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##### Table of Contents



Financing Activities
   September 30, 2008
    
    
    December 31, 2007(Unaudited)(Dollars in thousands)Cash and cash equivalents
    
    $
    34,629
    
    
    $
    24,802Working capital
    
    
    40,739
    
    
    
    4,695Borrowings from senior
secured credit facilities
    
    
    264,687
    
    
    
    297,000Other debt obligations
    
    
    99,291
    
    
    
    93,267Total debt obligations
    
    $
    363,978
    
    
    $
    390,267
     Debt Obligations
 Senior Secured Credit Facilities.
    24




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##### Table of Contents



Seller Notes.
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 FIN 48 Liability.
 Legal
Proceedings.
 Critical Accounting Policies
   25




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##### Table of Contents



Recent Accounting Pronouncements
  Application of FASB
Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 Accounting
for Leases
  Determining the Fair Value
of a Financial Asset When the Market for That Asset Is Not Active
      26




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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
    27




---



##### Table of Contents



Changes in Internal Controls over Financial Reporting
  
 PART II
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
 Adverse global economic conditions and disruption of financial markets could result in a
negative impact on our business and results of operations.
   
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
   28




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##### Table of Contents



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  29




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##### Table of Contents



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




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##### Table of Contents



EXHIBIT INDEX
 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