UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 
Date of Report (Date of earliest event reported): February 23, 2010 

AMERICAN REPROGRAPHICS COMPANY
 (Exact name of registrant as specified in its charter)

STATE OF DELAWARE	 	001-32407	 	20-1700361	
(State or other Jurisdiction of Incorporation)	 	(Commission File Number)	 	(IRS Employer Identification No.)	
 	 	 	
1981 N. Broadway, Suite 385, Walnut Creek, California	 	94596	
(Address of Principal Executive Offices)	 	(Zip Code)	
Registrant’s telephone number, including area code: (925) 949-5100

 	
(Former name or former address if changed since last report.)	
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

Item 2.02. Results of Operations and Financial Condition.
On February 23, 2010, American Reprographics Company (the “Company”) issued a press release reporting its financial results for the fourth quarter of 2009 and for the full year ended December 31, 2009. A copy of the press release is furnished as Exhibit 99.1 and is incorporated by reference herein.
The information contained in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.  
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.

 	 	 	
Exhibit No.	 	Description	
 	 	 	
99.1	 	American Reprographics Company Press Release, dated February 23, 2010	

 
 
SIGNATURES
     Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Dated: February 23, 2010 	 	AMERICAN REPROGRAPHICS COMPANY
	
 	 	By:  	 	/s/ Kumarakulasingam Suriyakumar	
 	 	 	 	 	
 	 	 	 	 Kumarakulasingam Suriyakumar	
 	 	 	 	Chief Executive Officer and President	

 

 
EXHIBIT INDEX

 	 	 	
Exhibit No.	 	Description	
 	 	 	
99.1	 	American Reprographics Company Press Release, dated February 23, 2010	

Exhibit 99.1
AMERICAN REPROGRAPHICS COMPANY REPORTS RESULTS FOR FOURTH QUARTER AND FISCAL YEAR 2009

•	 	Adjusted Annual EPS Fully Diluted: $0.38	

•	 	Annual Cash from Operations: $97.4 million	

•	 	2010 Annual Forecast EPS: $0.15 to $0.30	

•	 	2010 Annual Forecast Cash from Operations: $65 million to $80 million	
WALNUT CREEK, California (February 23, 2010) — American Reprographics Company (NYSE: ARP) (the “Company”), the nation’s leading provider of reprographic services and technology, today reported its financial results for the full year and fourth quarter ended December 31, 2009.
“We are glad to put 2009 behind us. In spite of the challenging conditions the company performed well,” said K. “Suri” Suriyakumar, Chairman, President and CEO. “The extraordinary efforts we made to right size the company and contain costs in late 2008 and early 2009 allowed us to battle through a very difficult year and come out of it vigorous and healthy. We were able to meet our financial obligations comfortably, make investments in several new products and services to enhance our revenue stream, and reduce our debt obligations by more than $85 million despite a decline in annual sales of more than 28%.”
Jonathan Mather, Chief Financial Officer, said, “While we did not see an upturn in construction-related business during the fourth quarter, we were happy to see slightly stronger sales than we anticipated. Aggressively managing the company to control costs provided us the flexibility and focus to ensure we made the most of every bit of activity in the market.”
Revenue for the year ended December 31, 2009 was $501.6 million, compared to $701.0 million for the year ended December 31, 2008, a 28.5% decline year-over-year. The Company’s gross margin for the year ended December 31, 2009 was 35.5%, compared to 40.7% for the year ended December 31, 2008. Adjusted net income for 2009 was $17.2 million, or $0.38 per diluted share, excluding the effects of previously disclosed one-time charges related to the Company’s annual goodwill impairment assessment, an impairment of long-lived assets, and costs associated with an amendment to our credit agreement and interest rate swap transaction. Adjusted net income for 2008 was $59.0 million, or $1.30 per diluted share excluding the goodwill impairment charge in the fourth quarter of 2008. Net cash from operating activities in 2009 was $97.4 million, compared to $127.3 million in 2008.
Net revenue for the fourth quarter of 2009 was $111.7 million, compared to $154.0 million for the fourth quarter of 2008, a decrease of 27.5%. The Company’s gross margin for the fourth quarter of 2009 was 32.2%, compared to 36.7% for the same period in 2008. Adjusted net income for the fourth quarter of 2009 was $0.4 million, or $0.01 per diluted share, adjusted to exclude one-time charges noted above. This compares to adjusted net income for the fourth quarter of 2008 of $6.5 million, or $0.14 per diluted share, excluding the goodwill impairment charge in the fourth quarter of 2008, as noted above.

 

Outlook
American Reprographics Company anticipates annual earnings per share in 2010 to be in the range of $0.15 to $0.30 on a fully-diluted basis, and annual cash flow from operations in the range of $65 million to $80 million.
Teleconference and Webcast
American Reprographics Company will host a conference call and audio webcast today at 2:00 P.M. Pacific Time (5:00 P.M. Eastern Time) to discuss results for the Company’s fourth quarter and full year 2009 and business outlook for the first quarter 2010. The conference call can be accessed by dialing 866-921-3926. The conference call ID number is 53459422.
A replay of this call will be available approximately one hour after the call for seven days following the call’s conclusion. To access the replay, dial 800-642-1687. The conference call ID number to access the phone replay is 53459422.
A Web archive will be made available at http://www.e-arc.com for approximately 90 days following the call’s conclusion.
About American Reprographics Company
American Reprographics Company is the leading reprographics company in the United States providing business-to-business document management technology and services to the architectural, engineering and construction, or AEC industries. The Company provides these services to companies in non-AEC industries, such as technology, financial services, retail, entertainment, and food and hospitality, which also require sophisticated document management services. American Reprographics Company provides its core services through its suite of reprographics technology products, a network of hundreds of locally-branded reprographics service centers across the U.S., Canada and the U.K, on-site at more than 5,600 customer locations, and through UDS, a joint-venture company headquartered in Beijing, China. The Company’s service centers are arranged in a hub and satellite structure and are digitally connected as a cohesive network, allowing the provision of services both locally and nationally to more than 138,000 active customers.

 

Forward-Looking Statements
This press release contains forward-looking statements that are based on current opinions, estimates and assumptions of management regarding future events and the future financial performance of the Company. Words such as “anticipates,” “projects,” “expect” and similar expressions identify forward-looking statements and all statements other than statements of historical fact, including, but not limited to, any projections regarding earnings, revenues and financial performance of the Company, could be deemed forward-looking statements. We caution you that such statements are only predictions and are subject to certain risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statements. Factors that could cause our actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to, the current economic recession and downturn in the architectural, engineering and construction industries specifically; our ability to streamline operations and reduce and/or manage costs; competition in our industry and innovation by our competitors; our failure to anticipate and adapt to future changes in our industry; our failure to take advantage of market opportunities and/or to complete acquisitions; our failure to manage acquisitions, including our inability to integrate and merge the business operations of the acquired companies or failure to retain key personnel and customers of acquired companies; our dependence on certain key vendors for equipment, maintenance services and supplies; damage or disruption to our facilities, our technology centers, our vendors or a majority of our customers; and our failure to continue to develop and introduce new services successfully. The foregoing list of risks and uncertainties is illustrative but is by no means exhaustive. For more information on factors that may affect our future performance, please review our periodic filings with the U.S. Securities and Exchange Commission, and specifically the risk factors set forth in our most recent reports on Form 10-K and Form 10-Q. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law.
Contacts:
 	 	 	
David Stickney	 	Joseph Villalta	
 	 	 	
VP of Corporate Communications	 	The Ruth Group	
 	 	 	
Phone: 925-949-5100	 	Phone: 646-536-7003	
 	 	 	
Email: davidstickney@e-arc.com	 	Email:jvillalta@theruthgroup.com	

 
American Reprographics Company
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(Unaudited)
 	 	 	 	 	 	 	 	 	
 	 	December 31,	 	 	December 31,	 	
 	 	2009	 	 	2008	 	
Assets	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	$	29,377	 	 	$	46,542	 	
Accounts receivable, net	 	 	53,919	 	 	 	77,216	 	
Inventories, net	 	 	10,605	 	 	 	11,097	 	
Deferred income taxes	 	 	5,568	 	 	 	5,831	 	
Prepaid expenses and other current assets	 	 	7,011	 	 	 	11,976	 	
 	 	 	 	 	 	 	
Total current assets	 	 	106,480	 	 	 	152,662	 	
 	 	 	 	 	 	 	 	 	
Property and equipment, net	 	 	74,568	 	 	 	89,712	 	
Goodwill	 	 	332,518	 	 	 	366,513	 	
Other intangible assets, net	 	 	74,208	 	 	 	85,967	 	
Deferred financing costs, net	 	 	4,082	 	 	 	3,537	 	
Deferred income taxes	 	 	26,987	 	 	 	25,404	 	
Other assets	 	 	2,111	 	 	 	2,136	 	
 	 	 	 	 	 	 	
Total assets	 	$	620,954	 	 	$	725,931	 	

Liabilities and Stockholders’ Equity	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	
Accounts payable	 	$	23,355	 	 	$	25,171	 	
Accrued payroll and payroll-related expenses	 	 	8,804	 	 	 	13,587	 	
Accrued expenses	 	 	24,540	 	 	 	24,913	 	
Current portion of long-term debt and capital leases	 	 	53,520	 	 	 	59,193	 	
 	 	 	 	 	 	 	
Total current liabilities	 	 	110,219	 	 	 	122,864	 	
 	 	 	 	 	 	 	 	 	
Long-term debt and capital leases	 	 	220,711	 	 	 	301,847	 	
Other long-term liabilities	 	 	8,000	 	 	 	13,318	 	
 	 	 	 	 	 	 	
Total liabilities	 	 	338,930	 	 	 	438,029	 	

Commitments and contingencies	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	 	 	 	
Stockholders’ equity:	 	 	 	 	 	 	 	 	
American Reprographics Company stockholders’ equity:	 	 	 	 	 	 	 	 	
Preferred stock, $0.001 par value, 25,000,000 shares authorized; zero and zero shares issued and outstanding	 	 	—	 	 	 	—	 	
Common stock, $0.001 par value, 150,000,000 shares authorized; 46,112,653 and 45,674,810 shares issued and 45,664,999 and 45,227,156 shares outstanding in 2009 and 2008, respectively	 	 	46	 	 	 	46	 	
Additional paid-in capital	 	 	89,982	 	 	 	85,207	 	
Deferred stock-based compensation	 	 	—	 	 	 	(195	)	
Retained earnings	 	 	200,961	 	 	 	215,846	 	
Accumulated other comprehensive loss	 	 	(7,273	)	 	 	(11,414	)	
 	 	 	 	 	 	 	
 	 	 	283,716	 	 	 	289,490	 	
Less cost of common stock in treasury, 447,654 shares in 2009 and 2008	 	 	7,709	 	 	 	7,709	 	
 	 	 	 	 	 	 	
Total American Reprographics Company stockholders’ equity	 	 	276,007	 	 	 	281,781	 	
Noncontrolling interest	 	 	6,017	 	 	 	6,121	 	
 	 	 	 	 	 	 	
Total stockholders’ equity	 	 	282,024	 	 	 	287,902	 	
 	 	 	 	 	 	 	
Total liabilities and stockholders’ equity	 	$	620,954	 	 	$	725,931	 	

   

 
American Reprographics Company
Consolidated Statements of Operations
(Dollars in thousands, except per share data)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Twelve Months Ended	 	
 	 	December 31,	 	 	December 31,	 	
 	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Reprographics services	 	$	75,828	 	 	$	108,900	 	 	$	350,491	 	 	$	518,062	 	
Facilities management	 	 	22,243	 	 	 	29,246	 	 	 	97,401	 	 	 	120,983	 	
Equipment and supplies sales	 	 	13,591	 	 	 	15,872	 	 	 	53,657	 	 	 	61,942	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Total net sales	 	 	111,662	 	 	 	154,018	 	 	 	501,549	 	 	 	700,987	 	
Cost of sales	 	 	75,738	 	 	 	97,452	 	 	 	323,360	 	 	 	415,715	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Gross profit	 	 	35,924	 	 	 	56,566	 	 	 	178,189	 	 	 	285,272	 	
Selling, general and administrative expenses	 	 	26,685	 	 	 	36,908	 	 	 	115,020	 	 	 	154,728	 	
Amortization of intangible assets	 	 	2,693	 	 	 	3,016	 	 	 	11,367	 	 	 	12,004	 	
Goodwill impairment	 	 	—	 	 	 	35,154	 	 	 	37,382	 	 	 	35,154	 	
Impairment of long-lived assets	 	 	—	 	 	 	—	 	 	 	781	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income (loss) from operations	 	 	6,546	 	 	 	(18,512	)	 	 	13,639	 	 	 	83,386	 	
Other income, net	 	 	(33	)	 	 	(217	)	 	 	(171	)	 	 	(517	)	
Interest expense, net	 	 	7,721	 	 	 	6,005	 	 	 	25,781	 	 	 	25,890	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Income before income tax (benefit) provision	 	 	(1,142	)	 	 	(24,300	)	 	 	(11,971	)	 	 	58,013	 	
Income tax (benefit) provision	 	 	(502	)	 	 	(8,677	)	 	 	3,018	 	 	 	21,200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	 	 	(640	)	 	 	(15,623	)	 	 	(14,989	)	 	 	36,813	 	
Loss (income) attributable to noncontrolling interest	 	 	65	 	 	 	(64	)	 	 	104	 	 	 	(59	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income attributable to American Reprographics Company	 	$	(575	)	 	$	(15,687	)	 	$	(14,885	)	 	$	36,754	 	

Earnings per share attributable to American Reprographics Company shareholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	(0.01	)	 	$	(0.35	)	 	$	(0.33	)	 	$	0.82	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	(0.01	)	 	$	(0.35	)	 	$	(0.33	)	 	$	0.81	 	

Weighted average common shares outstanding:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	45,393,929	 	 	 	45,078,554	 	 	 	45,185,350	 	 	 	45,060,482	 	
Diluted	 	 	45,393,929	 	 	 	45,078,554	 	 	 	45,185,350	 	 	 	45,398,086	 	

 

American Reprographics Company
Non-GAAP Measures
Reconciliation of cash flows provided by operating activities to EBIT and EBITDA
(Dollars in thousands, except per share data)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	 	Twelve Months Ended December 31,	 	
 	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows provided by operating activities	 	$	22,061	 	 	$	32,003	 	 	$	97,425	 	 	$	127,266	 	
Changes in operating assets and liabilities	 	 	(11,068	)	 	 	(12,734	)	 	 	(19,919	)	 	 	(4,829	)	
Non-cash (expenses) income, including depreciation and amortization	 	 	(11,633	)	 	 	(34,892	)	 	 	(92,495	)	 	 	(85,624	)	
Income tax (benefit) provision	 	 	(502	)	 	 	(8,677	)	 	 	3,018	 	 	 	21,200	 	
Interest expense	 	 	7,721	 	 	 	6,005	 	 	 	25,781	 	 	 	25,890	 	
Net loss (income) attributable to noncontrolling interest	 	 	65	 	 	 	(64	)	 	 	104	 	 	 	(59	)	

EBIT	 	 	6,644	 	 	 	(18,359	)	 	 	13,914	 	 	 	83,844	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	11,892	 	 	 	12,940	 	 	 	49,543	 	 	 	50,121	 	

EBITDA	 	$	18,536	 	 	$	(5,419	)	 	$	63,457	 	 	$	133,965	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to unaudited adjusted net income attributable to ARC
(Dollars in thousands, except per share data)
(Unaudited)

 	 	Three Months Ended December 31,	 	 	Twelve Months Ended December 31,	 	
 	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income attributable to ARC	 	$	(575	)	 	$	(15,687	)	 	$	(14,885	)	 	$	36,754	 	
Goodwill impairment	 	 	—	 	 	 	35,154	 	 	 	37,382	 	 	 	35,154	 	
Impairment of long-lived assets	 	 	—	 	 	 	—	 	 	 	781	 	 	 	—	 	
Amended Credit Agreement and Swap Transaction costs	 	 	1,672	 	 	 	—	 	 	 	2,632	 	 	 	—	 	
Income tax benefit, related to above items	 	 	(669	)	 	 	(12,932	)	 	 	(8,748	)	 	 	(12,932	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Unaudited adjusted net income attributable to ARC	 	$	428	 	 	$	6,535	 	 	$	17,162	 	 	$	58,976	 	

Earnings per share attributable to ARC shareholders (actual):	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	(0.01	)	 	$	(0.35	)	 	$	(0.33	)	 	$	0.82	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	(0.01	)	 	$	(0.35	)	 	$	(0.33	)	 	$	0.81	 	

Earnings per share attributable to ARC shareholders (adjusted):	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	$	0.01	 	 	$	0.14	 	 	$	0.38	 	 	$	1.31	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Diluted	 	$	0.01	 	 	$	0.14	 	 	$	0.38	 	 	$	1.30	 	

Weighted average common shares outstanding (adjusted):	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic	 	 	45,393,929	 	 	 	45,078,554	 	 	 	45,185,350	 	 	 	45,060,482	 	
Diluted	 	 	45,524,283	 	 	 	45,353,789	 	 	 	45,328,550	 	 	 	45,398,086	 	

 
American Reprographics Company
Non-GAAP Measures
Reconciliation of net (loss) income attributable to ARC to EBIT, EBITDA and adjusted EBITDA
(Dollars in thousands)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended December 31,	 	 	Twelve Months Ended December 31,	 	
 	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income attributable to ARC	 	$	(575	)	 	$	(15,687	)	 	$	(14,885	)	 	$	36,754	 	
Interest expense, net	 	 	7,721	 	 	 	6,005	 	 	 	25,781	 	 	 	25,890	 	
Income tax (benefit) provision	 	 	(502	)	 	 	(8,677	)	 	 	3,018	 	 	 	21,200	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
EBIT	 	 	6,644	 	 	 	(18,359	)	 	 	13,914	 	 	 	83,844	 	
Depreciation and amortization	 	 	11,892	 	 	 	12,940	 	 	 	49,543	 	 	 	50,121	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
EBITDA	 	 	18,536	 	 	 	(5,419	)	 	 	63,457	 	 	 	133,965	 	
Special items:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Goodwill impairment	 	 	—	 	 	 	35,154	 	 	 	37,382	 	 	 	35,154	 	
Impairment of long-lived assets	 	 	—	 	 	 	—	 	 	 	781	 	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Adjusted EBITDA	 	$	18,536	 	 	$	29,735	 	 	$	101,620	 	 	$	169,119	 	

   

 

Non-GAAP Measures
EBIT, EBITDA and related ratios presented in this report are supplemental measures of our performance that are not required by or presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”). These measures are not measurements of our financial performance under GAAP and should not be considered as alternatives to net income, income from operations, or any other performance measures derived in accordance with GAAP or as an alternative to cash flows from operating, investing or financing activities as a measure of our liquidity.
EBIT represents net income before interest and taxes. EBITDA represents net income before interest, taxes, depreciation and amortization. Amortization does not include $4.9 million, $4.3 million and $3.5 million of stock based compensation expense recorded in selling, general and administrative expenses, for the years ended December 31, 2009, 2008 and 2007, respectively. EBIT margin is a non-GAAP measure calculated by dividing EBIT by net sales. EBITDA margin is a non-GAAP measure calculated by dividing EBITDA by net sales.
We present EBIT, EBITDA and related ratios because we consider them important supplemental measures of our performance and liquidity. We believe investors may also find these measures meaningful, given how our management makes use of them. The following is a discussion of our use of these measures.
We use EBIT and EBITDA to measure and compare the performance of our operating segments. Our operating segments’ financial performance includes all of the operating activities except for debt and taxation which are managed at the corporate level for U.S. operating segments. As a result, EBIT is the best measure of divisional profitability and the most useful metric by which to measure and compare the performance of our operating segments. We also use EBIT to measure performance for determining operating segment-level compensation and use EBITDA to measure performance for determining consolidated-level compensation. We also use EBIT and EBITDA to evaluate potential acquisitions and to evaluate whether to incur capital expenditures.
EBIT, EBITDA and related ratios have limitations as analytical tools, and you should not consider them in isolation, or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are as follows:

 	•	 	They do not reflect our cash expenditures, or future requirements for capital expenditures and contractual commitments;	
 		
 	•	 	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.	
Because of these limitations, EBIT, EBITDA, and related ratios should not be considered as measures of discretionary cash available to us to invest in business growth or to reduce our indebtedness. We compensate for these limitations by relying primarily on our GAAP results and using EBIT, EBITDA and related ratios only as supplements.
We have presented adjusted net income attributable to ARC and adjusted earnings per share attributable to ARC shareholders for the years ended December 31, 2009 and 2008 to reflect the exclusion of the goodwill impairment charge, long-lived assets impairment charge and costs related to the 2009 amendments to the Credit Agreement and Swap Transaction. This presentation facilitates a meaningful comparison of our operating results for the years ended December 31, 2009 and 2008. We presented adjusted EBITDA in 2009 and 2008 to exclude the non-cash impairment charges of $38.2 million and $35.2 million, respectively, as we believe this was a result of the current macroeconomic environment and not indicative of our operations. The exclusion of the goodwill impairment charges and long-lived assets impairment charge, and costs related to the 2009 amendments to the Credit Agreement and Swap Transaction to arrive at adjusted EBITDA is consistent with the definition of adjusted EBITDA in the amendment to the Credit Agreement, therefore we believe this information is useful to investors in assessing our ability to meet our debt covenants.

 
American Reprographics Company
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	Three Months Ended	 	 	Twelve Months Ended	 	
 	 	December 31,	 	 	December 31,	 	
 	 	2009	 	 	2008	 	 	2009	 	 	2008	 	
Cash flows from operating activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net (loss) income	 	$	(640	)	 	$	(15,623	)	 	$	(14,989	)	 	$	36,813	 	
Adjustments to reconcile net (loss) income to net cash provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for accounts receivable	 	 	202	 	 	 	1,802	 	 	 	3,044	 	 	 	4,966	 	
Depreciation	 	 	9,199	 	 	 	9,924	 	 	 	38,176	 	 	 	38,117	 	
Amortization of intangible assets	 	 	2,693	 	 	 	3,016	 	 	 	11,367	 	 	 	12,004	 	
Amortization of deferred financing costs	 	 	385	 	 	 	331	 	 	 	1,357	 	 	 	1,267	 	
Goodwill impairment	 	 	—	 	 	 	35,154	 	 	 	37,382	 	 	 	35,154	 	
Impairment of long-lived assets	 	 	—	 	 	 	—	 	 	 	781	 	 	 	—	 	
Stock-based compensation	 	 	1,328	 	 	 	1,146	 	 	 	4,892	 	 	 	4,289	 	
Excess tax benefit related to stock-based compensation	 	 	—	 	 	 	72	 	 	 	(18	)	 	 	(30	)	
Deferred income taxes	 	 	(2,219	)	 	 	(16,670	)	 	 	(4,477	)	 	 	(10,172	)	
Write-off of deferred financing costs	 	 	190	 	 	 	—	 	 	 	190	 	 	 	313	 	
Other noncash items, net	 	 	(145	)	 	 	117	 	 	 	(199	)	 	 	(284	)	
Changes in operating assets and liabilities, net of effect of business acquisitions:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	9,862	 	 	 	19,656	 	 	 	21,099	 	 	 	21,556	 	
Inventory	 	 	989	 	 	 	1,883	 	 	 	1,344	 	 	 	3,134	 	
Prepaid expenses and other assets	 	 	2,627	 	 	 	3,694	 	 	 	6,302	 	 	 	(1,101	)	
Accounts payable and accrued expenses	 	 	(2,410	)	 	 	(12,499	)	 	 	(8,826	)	 	 	(18,760	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash provided by operating activities	 	 	22,061	 	 	 	32,003	 	 	 	97,425	 	 	 	127,266	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital expenditures	 	 	(1,654	)	 	 	(2,674	)	 	 	(7,506	)	 	 	(9,033	)	
Payments for businesses acquired, net of cash acquired and including other cash payments associated with the acquisitions	 	 	(1,504	)	 	 	(5,700	)	 	 	(3,527	)	 	 	(23,916	)	
Restricted cash	 	 	—	 	 	 	1,959	 	 	 	—	 	 	 	937	 	
Other	 	 	968	 	 	 	259	 	 	 	1,684	 	 	 	1,205	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in investing activities	 	 	(2,190	)	 	 	(6,156	)	 	 	(9,349	)	 	 	(30,807	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from stock option exercises	 	 	—	 	 	 	—	 	 	 	63	 	 	 	177	 	
Proceeds from issuance of common stock under Employee Stock Purchase Plan	 	 	48	 	 	 	8	 	 	 	164	 	 	 	35	 	
Excess tax benefit related to stock-based compensation	 	 	—	 	 	 	(72	)	 	 	18	 	 	 	30	 	
Payments on long-term debt agreements and capital leases	 	 	(49,170	)	 	 	(13,343	)	 	 	(105,008	)	 	 	(51,850	)	
Net repayments under revolving credit facility	 	 	1,523	 	 	 	—	 	 	 	1,523	 	 	 	(22,000	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Payment of loan fees	 	 	(2,048	)	 	 	—	 	 	 	(2,092	)	 	 	(726	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net cash used in financing activities	 	 	(49,647	)	 	 	(13,407	)	 	 	(105,332	)	 	 	(74,334	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Effect of foreign currency translation on cash balances	 	 	(26	)	 	 	(527	)	 	 	91	 	 	 	(385	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Net change in cash and cash equivalents	 	 	(29,802	)	 	 	11,913	 	 	 	(17,165	)	 	 	21,740	 	
Cash and cash equivalents at beginning of period	 	 	59,179	 	 	 	34,629	 	 	 	46,542	 	 	 	24,802	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents at end of period	 	$	29,377	 	 	$	46,542	 	 	$	29,377	 	 	$	46,542	 	

Supplemental disclosure of cash flow information	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncash investing and financing activities	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Noncash transactions include the following:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Capital lease obligations incurred	 	$	4,047	 	 	$	7,950	 	 	$	16,181	 	 	$	34,561	 	
Issuance of subordinated notes in connection with the acquisition of businesses	 	$	220	 	 	$	2,761	 	 	$	466	 	 	$	10,414	 	
Accrued liabilities in connection with acquisition of businesses	 	$	—	 	 	$	100	 	 	$	—	 	 	$	100	 	
Net gain (loss) on derivative, net of tax effect	 	$	842	 	 	$	(8,387	)	 	$	3,318	 	 	$	(9,167	)	
Contribution from noncontrolling interest	 	$	—	 	 	$	—	 	 	$	—	 	 	$	6,062