##### 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 March 31, 2007
 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.)
 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
  þ o o
 o þ




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##### 



AMERICAN REPROGRAPHICS COMPANY
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 2007
 Table of Contents
 PART I
    
    Financial InformationItem 1.
    
    Financial Statements (unaudited)Consolidated Balance Sheets as of December 31, 2006 and March 31, 2007
    
    
    3Consolidated Statements of Income for the three months ended March 31, 2006 and 2007
    
    
    4Condensed Consolidated Statement of Changes in Stockholders Equity for the three
months ended
March 31, 2007
    
    
    5Consolidated Statements of Cash Flows for the three months ended March 31, 2006 and 2007
    
    
    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
    
    
    26Item 4.
    
    Controls and Procedures
    
    
    26PART IIItem 1.
    
    Legal Proceedings
    
    
    27Item 1A.
    
    Risk Factors
    
    
    27Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    27Item 5.
    
    Other Information
    
    
    27Item 6.
    
    Exhibits
    
    
    27SIGNATURES
    
    
    
    
    28Index to ExhibitsExhibit 31.1Exhibit 31.2Exhibit 32.1
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PART I. FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED BALANCE SHEETS
 (Dollars in thousands, except per share data)
(Unaudited)
 December 31,
    
    
    March 31,2006
    
    
    2007AssetsCurrent assets:Cash and cash equivalents
    
    $
    11,642
    
    
    $
    12,663Restricted cash
    
    
    8,491
    
    
    
    8,593Accounts receivable, net
    
    
    85,277
    
    
    
    94,413Inventories, net
    
    
    7,899
    
    
    
    9,048Deferred income taxes
    
    
    10,963
    
    
    
    10,964Prepaid expenses and other current assets
    
    
    6,796
    
    
    
    7,090Total current assets
    
    
    131,068
    
    
    
    142,771Property and equipment, net
    
    
    60,138
    
    
    
    63,954Goodwill
    
    
    291,290
    
    
    
    303,107Other intangible assets, net
    
    
    50,971
    
    
    
    56,555Deferred financing costs, net
    
    
    895
    
    
    
    805Deferred income taxes
    
    
    11,245
    
    
    
    7,331Other assets
    
    
    1,974
    
    
    
    2,033Total assets
    
    $
    547,581
    
    
    $
    576,556Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    33,447
    
    
    $
    32,684Accrued payroll and payroll-related expenses
    
    
    15,666
    
    
    
    13,661Accrued expenses
    
    
    25,810
    
    
    
    17,008Accrued litigation charge
    
    
    13,947
    
    
    
    13,950Current portion of long-term debt and capital leases
    
    
    21,048
    
    
    
    41,329Total current liabilities
    
    
    109,918
    
    
    
    118,632Long-term debt and capital leases
    
    
    252,097
    
    
    
    252,288Other long-term liabilities
    
    
    1,322
    
    
    
    2,405Total liabilities
    
    
    363,337
    
    
    
    373,325Commitments and contingencies (Note 7)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;
45,346,099 and 45,490,850 shares issued and outstanding
    
    
    45
    
    
    
    45Additional paid-in capital
    
    
    75,465
    
    
    
    77,582Deferred stock-based compensation
    
    
    (1,224
    )
    
    
    (1,028
)Retained earnings
    
    
    109,955
    
    
    
    126,799Accumulated other comprehensive income
    
    
    3
    
    
    
    (167
)Total stockholders equity
    
    
    184,244
    
    
    
    203,231Total liabilities and stockholders equity
    
    $
    547,581
    
    
    $
    576,556
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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF INCOME
 (Dollars in thousands, except per share data)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2007Reprographics services
    
    $
    104,817
    
    
    $
    119,779Facilities management
    
    
    22,932
    
    
    
    26,356Equipment and supplies sales
    
    
    13,053
    
    
    
    14,079Total net sales
    
    
    140,802
    
    
    
    160,214Cost of sales
    
    
    80,443
    
    
    
    92,435Gross profit
    
    
    60,359
    
    
    
    67,779Selling, general and administrative expenses
    
    
    31,486
    
    
    
    34,234Amortization of intangible assets
    
    
    785
    
    
    
    1,745Income from operations
    
    
    28,088
    
    
    
    31,800Other income, net
    
    
    329
    
    
    
    Interest expense, net
    
    
    (4,459
    )
    
    
    (5,161
)Income before income tax provision
    
    
    23,958
    
    
    
    26,639Income tax provision
    
    
    9,583
    
    
    
    9,795Net income
    
    $
    14,375
    
    
    $
    16,844Earnings per share:Basic
    
    $
    0.32
    
    
    $
    0.37Diluted
    
    $
    0.32
    
    
    $
    0.37Weighted average common shares outstanding:Basic
    
    
    44,624,748
    
    
    
    45,344,317Diluted
    
    
    45,185,691
    
    
    
    45,790,548
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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
    
    
    StockholdersShares
    
    
    Par Value
    
    
    Capital
    
    
    Compensation
    
    
    Earnings
    
    
    Income
    
    
    EquityBalance at December 31, 2006
    
    
    45,346,099
    
    
    $
    45
    
    
    $
    75,465
    
    
    $
    (1,224
    )
    
    $
    109,955
    
    
    $
    3
    
    
    $
    184,244Stock-based compensation
    
    
    31,008
    
    
    
    
    
    
    
    376
    
    
    
    196
    
    
    
    
    
    
    
    
    
    
    
    572Issuance of common stock under
Employee Stock Purchase Plan
    
    
    382
    
    
    
    
    
    
    
    11
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11Stock options exercised
    
    
    113,361
    
    
    
    
    
    
    
    592
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    592Tax benefit from exercise of stock
options
    
    
    
    
    
    
    
    
    
    
    1,138
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,138Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,844
    
    
    
    
    
    
    
    16,844Foreign currency translation
adjustments
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (129
    )
    
    
    (129
    )Fair value
 adjustment of

derivatives, net of tax effects
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (41
    )
    
    
    (41
    )Comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,674Balance at March 31, 2007
    
    
    45,490,850
    
    
    $
    45
    
    
    $
    77,582
    
    
    $
    (1,028
    )
    
    $
    126,799
    
    
    $
    (167
    )
    
    $
    203,231
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AMERICAN REPROGRAPHICS COMPANY
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
 (Dollars in thousands)
(Unaudited)
 Three Months EndedMarch 31,2006
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    14,375
    
    
    $
    16,844Adjustments to reconcile net income to net cash provided by operating activities:Depreciation
    
    
    4,850
    
    
    
    6,613Amortization of intangible assets
    
    
    785
    
    
    
    1,745Amortization of deferred financing costs
    
    
    71
    
    
    
    89Stock-based compensation
    
    
    460
    
    
    
    572Excess tax benefit related to stock options exercised
    
    
    (610
    )
    
    
    (1,138
    )Deferred income taxes
    
    
    926
    
    
    
    1,329Write-off of deferred financing costs
    
    
    38
    
    
    
    Other non-cash items, net
    
    
    92
    
    
    
    185Changes in operating assets and liabilities, net of effect of business acquisitions:Accounts receivable
    
    
    (10,713
    )
    
    
    (7,308
    )Inventory
    
    
    (195
    )
    
    
    (261
    )Prepaid expenses and other assets
    
    
    861
    
    
    
    217Accounts payable and accrued expenses
    
    
    4,238
    
    
    
    (7,481
    )Net cash provided by operating activities
    
    
    15,178
    
    
    
    11,406Cash flows from investing activitiesCapital expenditures
    
    
    (1,489
    )
    
    
    (2,128
    )Payments for businesses acquired, net of cash acquired
and including other cash payments associated with
the acquisitions
    
    
    (7,331
    )
    
    
    (22,044
    )Other
    
    
    (43
    )
    
    
    98Net cash used in investing activities
    
    
    (8,863
    )
    
    
    (24,074
    )Cash flows from financing activitiesProceeds from stock option exercises
    
    
    303
    
    
    
    592Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    190
    
    
    
    11Excess tax benefit related to stock options exercised
    
    
    610
    
    
    
    1,138Proceeds from borrowings under debt agreements
    
    
    5,000
    
    
    
    18,000Payments on debt agreements and capital leases
    
    
    (23,856
    )
    
    
    (6,052
    )Payment of loan fees
    
    
    (127
    )
    
    
    Net cash (used in) provided by financing activities
    
    
    (17,880
    )
    
    
    13,689Net change in cash and cash equivalents
    
    
    (11,565
    )
    
    
    1,021Cash and cash equivalents at beginning of period
    
    
    22,643
    
    
    
    11,642Cash and cash equivalents at end of period
    
    $
    11,078
    
    
    $
    12,663Supplemental disclosure of cash flow informationNoncash investing and financing activitiesNoncash transactions include the following:Capital lease obligations incurred
    
    $
    5,995
    
    
    $
    7,056Issuance of subordinated notes in connection with the
acquisition of businesses
    
    $
    4,585
    
    
    $
    Change in fair value of derivatives
    
    $
    (100
    )
    
    $
    (41
    )
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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
    Reclassifications
  2. Stock-Based Compensation
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3. Employee Stock Purchase Plan
   4. Goodwill and Other Intangibles Resulting from Business Acquisitions
   Goodwill(Dollars in thousands)Balance at December 31, 2006
    
    $
    291,290Additions
    
    $
    11,817Balance at March 31, 2007
    
    $
    303,107
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December 31, 2006
    
    
    March 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
    
    $
    55,685
    
    
    $
    10,799
    
    
    $
    44,886
    
    
    $
    61,764
    
    
    $
    12,361
    
    
    $
    49,403Trade names and trademarks
    
    
    5,886
    
    
    
    566
    
    
    
    5,320
    
    
    
    6,686
    
    
    
    643
    
    
    
    6,043Non-Compete Agreements
    
    
    1,025
    
    
    
    260
    
    
    
    765
    
    
    
    1,475
    
    
    
    366
    
    
    
    1,109$
    62,596
    
    
    $
    11,625
    
    
    $
    50,971
    
    
    $
    69,925
    
    
    $
    13,370
    
    
    $
    56,555
  2007
    
    $
    5,7422008
    
    
    6,8292009
    
    
    6,1232010
    
    
    5,3142011
    
    
    4,744Thereafter
    
    
    27,803$
    56,555
 5. Long-Term Debt
  December 31,
    
    
    March 31,2006
    
    
    2007(Unaudited)(Dollars in thousands)Borrowings from senior secured First Priority  Revolving Credit
Facility; variable interest payable quarterly (7.32% interest rate
at March 31, 2007);any unpaid
principal and interest due December 18, 2008
    
    $
    
    
    
    $
    18,000Borrowings from senior secured First Priority  Term Loan Credit Facility;
variable interest payable quarterly ( weighted average 7.1% interest rate at
December 31, 2006 and March 31, 2007 ); principal payable in varying
quarterly installments; any unpaid principal and interest due June 18, 2009
    
    
    215,651
    
    
    
    215,112Various subordinated notes payable; interest ranging from 5% to 7.5%;
principal and interest payable monthly through January 2012
    
    
    20,103
    
    
    
    19,900Various capital leases; interest rates ranging to 24.5%; principal and
interest payable monthly through February 2013
    
    
    37,391
    
    
    
    40,605273,145
    
    
    
    293,617Less current portion
    
    
    (21,048
    )
    
    
    (41,329
    )$
    252,097
    
    
    $
    252,288
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
    
    Eliminating the aggregate purchase price limitation for business acquisitions in
favor of permitting the Company to incur New Term Loan Commitments at any time,
subject to the achievement of a Leverage Ratio on a pro forma basis after giving
effect to such New Term Loan Commitments of less than 3.00:1.00 (together with certain
existing conditions);
    
    An increase in the threshold for capital lease obligations;
    
    An increase in the threshold for subordinated notes payable;
    
    An increase in the threshold for investments; and
    
    Elimination of capital lease obligations from the definition of Consolidated
Capital Expenditures in conjunction with a reduction of the threshold for Consolidated
Capital Expenditures.
   6. Income Taxes
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7. Commitments and Contingencies
 Operating Leases.
 Contingent Transaction Consideration.
 Louis Frey Case.
 FIN
48 Liability.
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8. Comprehensive Income
  Three Months EndedMarch 31,2006
    
    
    2007(Unaudited)(Dollars in thousands)Net income
    
    $
    14,375
    
    
    $
    16,844Foreign currency translation adjustments
    
    
    
    
    
    
    (129
    )Decrease in fair value of financial derivative instruments, net of tax effects
    
    
    100
    
    
    
    (41
    )Comprehensive income
    
    $
    14,475
    
    
    $
    16,674
  9. Earnings Per Share
   Three Months EndedMarch 31,2006
    
    2007(Unaudited)Weighted average common shares outstanding during the period  basic
    
    
    44,624,748
    
    
    
    45,344,317Effect of dilutive stock options
    
    
    560,943
    
    
    
    446,231Weighted average common shares outstanding during the period 
diluted
    
    
    45,185,691
    
    
    
    45,790,548
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10. Recent Accounting Pronouncements
   Fair Value Measurements.
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
 11. Subsequent Events
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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 2006 Annual Report on Form 10-K ,
our final prospectus for our recent secondary offering, dated March 8, 2007.
 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 2006
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.
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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).
      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.
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Primary Financial Measures
  Other Common Financial Measures .
 
    
    Net income and earnings per share;
    
    EBIT;
    
    EBITDA;
    
    Material costs as a percentage of net sales; and
    
    Days Sales Outstanding/Days Sales Inventory/Days Accounts Payable.
    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, for 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.
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Economic Factors Affecting Financial Performance.
 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.
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Three Months Ended March 31,2006
    
    
    2007(Dollars in thousands)Cash flows provided by operating activities
    
    $
    15,178
    
    
    $
    11,406Changes in operating assets and liabilities
    
    
    5,809
    
    
    
    14,833Non-cash (expenses) income, including
depreciation and amortization
    
    
    (6,612
    )
    
    
    (9,395
    )Income tax provision
    
    
    9,583
    
    
    
    9,795Interest expense
    
    
    4,459
    
    
    
    5,161EBIT
    
    
    28,417
    
    
    
    31,800Depreciation and amortization
    
    
    5,635
    
    
    
    8,358EBITDA
    
    
    34,052
    
    
    
    40,158Interest expense
    
    
    (4,459
    )
    
    
    (5,161
    )Income tax provision
    
    
    (9,583
    )
    
    
    (9,795
    )Depreciation and amortization
    
    
    (5,635
    )
    
    
    (8,358
    )Net income
    
    $
    14,375
    
    
    $
    16,844
  Three Months Ended March 31,2006
    
    
    2007(Dollars in thousands)Net income
    
    $
    14,375
    
    
    $
    16,844Interest expense, net
    
    
    4,459
    
    
    
    5,161Income tax provision
    
    
    9,583
    
    
    
    9,795EBIT
    
    $
    28,417
    
    
    $
    31,800Depreciation and amortization
    
    
    5,635
    
    
    
    8,358EBITDA
    
    $
    34,052
    
    
    $
    40,158
  Three Months Ended March 31,2006
    
    2007Net income margin
    
    
    10.2
    %
    
    
    10.5
    %Interest expense, net
    
    
    3.2
    %
    
    
    3.2
    %Income tax provision
    
    
    6.8
    %
    
    
    6.1
    %EBIT margin
    
    
    20.2
    %
    
    
    19.8
    %Depreciation and amortization
    
    
    4.0
    %
    
    
    5.2
    %EBITDA margin
    
    
    24.2
    %
    
    
    25.0
    %
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##### Table of Contents



Results of Operations for the Three Months Ended March 31, 2007 and 2006
  As Percentage of Net SalesThree Months Ended March 31,2006
    
    2007Net Sales
    
    
    100.0
    %
    
    
    100.0
    %Cost of sales
    
    
    57.1
    
    
    
    57.7Gross profit
    
    
    42.9
    
    
    
    42.3Selling, general and administrative expenses
    
    
    22.4
    
    
    
    21.4Amortization of intangibles
    
    
    0.6
    
    
    
    1.1Income from operations
    
    
    19.9
    
    
    
    19.8Other income
    
    
    0.2
    
    
    
    Interest expense, net
    
    
    (3.1
    )
    
    
    (3.2
    )Income before income tax provision
    
    
    17.0
    
    
    
    16.6Income tax provision
    
    
    6.8
    
    
    
    6.1Net income
    
    
    10.2
    %
    
    
    10.5
    %
 Three Months Ended March 31, 2007 Compared to Three Months Ended March 31, 2006
 Three Months EndedMarch 31,
    
    
    Increase (decrease)2006
    
    
    2007
    
    
    (In dollars)
    
    
    (Percent)(In millions)Reprographics services
    
    $
    104.8
    
    
    $
    119.8
    
    
    $
    15.0
    
    
    
    14.3
    %Facilities management
    
    
    22.9
    
    
    
    26.3
    
    
    
    3.4
    
    
    
    14.8
    %Equipment and supplies sales
    
    
    13.1
    
    
    
    14.1
    
    
    
    1.0
    
    
    
    7.6
    %Total net sales
    
    
    140.8
    
    
    
    160.2
    
    
    
    19.4
    
    
    
    13.8
    %Gross profit
    
    
    60.4
    
    
    
    67.8
    
    
    
    7.4
    
    
    
    12.3
    %Selling, general and
administrative expenses
    
    
    31.5
    
    
    
    34.2
    
    
    
    2.7
    
    
    
    8.6
    %Amortization of intangibles
    
    
    0.8
    
    
    
    1.7
    
    
    
    0.9
    
    
    
    112.5
    %Interest expense, net
    
    
    4.5
    
    
    
    5.2
    
    
    
    0.7
    
    
    
    15.6
    %Income taxes
    
    
    9.6
    
    
    
    9.8
    
    
    
    0.2
    
    
    
    2.1
    %Net Income
    
    
    14.4
    
    
    
    16.8
    
    
    
    2.4
    
    
    
    16.7
    %EBITDA
    
    
    34.1
    
    
    
    40.2
    
    
    
    6.1
    
    
    
    17.9
    %
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##### Table of Contents



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




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##### Table of Contents



Selling, General and Administrative Expenses.
    Amortization of Intangibles.
  Interest Expense, Net.
   Income Taxes.
  Net Income.
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##### Table of Contents



EBITDA.
  Impact of Inflation
  Liquidity and Capital Resources
  Three Months Ended March 31,2006
    
    
    2007(Unaudited)(Dollars in thousands)Net cash provided by operating activities
    
    $
    15,178
    
    
    $
    11,406Net cash used in investing activities
    
    ($
    8,863
    )
    
    ($
    24,074
    )Net cash (used in) and provided by financing activities
    
    ($
    17,880
    )
    
    $
    13,689
 Operating Activities
  Investing Activities
  Financing Activities
   - 22 -




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##### Table of Contents



December 31, 2006
    
    
    March 31, 2007(Unaudited)(Dollars in thousands)Cash and cash equivalents
    
    $
    11,642
    
    
    $
    12,663Working capital
    
    
    21,150
    
    
    
    24,139Borrowings from senior secured credit facilities
    
    
    215,651
    
    
    
    233,112Other debt obligations
    
    
    57,494
    
    
    
    60,505Total debt obligations
    
    $
    273,145
    
    
    $
    293,617
   .
 Debt Obligations
 Senior Secured Credit Facilities.
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##### Table of Contents




    
    Eliminating the aggregate purchase price limitation for business acquisitions in
favor of permitting the Company to incur New Term Loan Commitments at any time,
subject to the achievement of a Leverage Ratio on a pro forma basis after giving
effect to such New Term Loan Commitments of less than 3.00:1.00 (together with certain
existing conditions);
    
    An increase in the threshold for capital lease obligations;
    
    An increase in the threshold for subordinated notes payable;
    
    An increase in the threshold for investments; and
    
    Elimination of capital lease obligations from the definition of Consolidated
Capital Expenditures in conjunction with a reduction of the threshold for Consolidated
Capital Expenditures.
   Seller Notes.
 Off-Balance Sheet Arrangements
  Contractual Obligations and Other Commitments
 Operating Leases.
 Contingent Transaction Consideration.
 FIN 48 Liability.
  - 24 -




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##### Table of Contents



Critical Accounting Policies
   Recent Accounting Pronouncements
   Fair Value
Measurements.
 The Fair Value Option for Financial Assets and
Financial Liabilities  Including an Amendment of FASB Statement No. 115
  - 25 -




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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
   - 26 -




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##### Table of Contents



PART II
 
 Item 1. Legal Proceedings
 Louis Frey Case.
 
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 5. Other Information:
  
 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
  - 27 -




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##### Table of Contents



SIGNATURE PAGE
  AMERICAN REPROGRAPHICS COMPANYBy:
    /s/ Sathiyamurthy ChandramohanChairman of the Board of Directors andChief Executive Officer By:
    /s/ Jonathan R. MatherChief Financial Officer and Secretary  - 28 -